<PAGE>
CITY NATIONAL CORPORATION
400 NORTH ROXBURY DRIVE
BEVERLY HILLS, CALIFORNIA 90210
TELEPHONE (310) 888-6000
March 17, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of City National Corporation, which will be held at 4:30 P.M., on Wednesday,
April 16, 1997, at City National Center, 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.
We appreciate your continuing support, and look forward to seeing you on
April 16.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
BRAM GOLDSMITH RUSSELL GOLDSMITH
CHAIRMAN OF THE BOARD VICE CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
</TABLE>
<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
Wednesday, the 16th day of April, 1997, at 4:30 P.M., at City National Center,
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 three directors to hold
office for a term of three years;
2. AMENDMENT TO THE 1995 OMNIBUS PLAN. The amendment to the City
National Corporation 1995 Omnibus Plan, revising the method of awarding
stock options to non-employee Directors; and
3. 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 February 28, 1997,
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 17, 1997
<PAGE>
CITY NATIONAL CORPORATION
400 NORTH ROXBURY DRIVE
BEVERLY HILLS, CALIFORNIA 90210
TELEPHONE (310) 888-6000
ANNUAL MEETING OF STOCKHOLDERS ON APRIL 16, 1997
-----------------
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 Wednesday, April 16, 1997, at 4:30 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 17, 1997.
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
amendment to the City National Corporation 1995 Omnibus Plan. 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 $8,000 in
addition to out-of-pocket expenses.
The Corporation's Annual Report for its fiscal year ended December 31, 1996,
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 46,680,189 shares were
outstanding as of February 28, 1997. 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 three director nominees
receiving the greatest number of votes cast in person or by proxy will be
elected to serve as directors. The proposed amendment to the City National
Corporation 1995 Omnibus Plan 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 February 28, 1997,
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 6,878,899 14.74%
400 North Roxbury Drive
Beverly Hills, CA 90210
Goldsmith Family Partnership(1) 4,120,001 AC
Bram and Elaine Goldsmith, Trustees of 1,979,709 AC
the Bram and Elaine Goldsmith Family
Trust
Elaine and Bram Goldsmith, Trustees of 567,989 AC
the Elaine Goldsmith Revocable Trust
Bram Goldsmith 41,480(2) BDE
Goldsmith Family Foundation 169,720(3) ACE
Mellon Bank Corporation 2,342,000 ABCD(4) 5.02%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
</TABLE>
- ---------
(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)(I)(i) of the Securities
and Exchange Commission.
2
<PAGE>
(1) Limited partnership of which the majority general partner is the Bram and
Elaine Goldsmith Family Trust, and the remaining general partners are the
Russell Goldsmith Trust, of which Mr. Russell Goldsmith is sole trustee, and
Mr. Bruce Goldsmith.
(2) 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, 1996. Fund investments are not allocated to
individual participant accounts, and Mr. Goldsmith disclaims beneficial
ownership thereof.
(3) 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.
(4) According to information contained in Schedule 13G provided to the
Corporation by this shareholder on behalf of itself and various direct and
indirect subsidiaries, all of the shares held at January 24, 1997, the date
of the Schedule 13G, were acquired in the ordinary course of business and
were not acquired for the purpose of and do not have the effect of changing
or influencing the control of the Corporation. All of the shares were owned
in a fiduciary capacity, and, as a result, another entity, in every
instance, is entitled to dividends or proceeds of sale. No individual
account holds an interest of 5% or more.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors of the Corporation currently consists of eleven
members, who are divided into three classes. Directors are elected for terms of
three years. Each of the eleven directors is also a director of City National
Bank (the "Bank"), a wholly owned subsidiary of the Corporation. At the Annual
Meeting, the term of office of the Class I directors will expire and three
directors will be elected to serve for a term of three years and until their
respective successors are elected and qualified.
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 bylaw provision, nominations for the 1997 Annual
Stockholders Meeting by persons other than the Board of Directors should have
been received on or before February 15, 1997. The Corporation did not receive
any such nominations and deems such nominations to be closed.
The three 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. 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.
It is the intention of the persons named in the proxy to vote for the
election of the three recommended nominees for the three Class I director
positions. The names of the nominees for Class I directors, and the Class II and
Class III directors who will continue in office after the annual meeting, until
the expiration of their respective terms, are as follows:
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND DIRECTOR OF
PRINCIPAL OCCUPATION DIRECTOR OF CORPORATION
NAME AGE DURING THE PAST FIVE YEARS BANK SINCE SINCE
- -------------------------------- ----------- -------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
NOMINEES FOR CLASS I DIRECTORS
George H. Benter, Jr. 55 President, City National Corporation, 1993 to 1992 1993
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.
Stuart D. Buchalter(1) 59 Of counsel, Buchalter, Nemer, Fields & Younger, a 1981 1981
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.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND DIRECTOR OF
PRINCIPAL OCCUPATION DIRECTOR OF CORPORATION
NAME AGE DURING THE PAST FIVE YEARS BANK SINCE SINCE
- -------------------------------- ----------- -------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Andrea L. Van De Kamp 53 Chairman, since 1996, previously Senior Vice 1994 1994
President and Managing Director of, West Coast
Operations, Sotheby's, appraisals and auctions;
Director, Jenny Craig, Inc.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS
Mirion P. Bowers, M.D. 61 Physician; President and Chief Executive Officer, 1994 1994
Hospital of the Good Samaritan, acute care
hospital, 1992 to 1996; President, MPB MD, Inc.,
medical corporation, until 1994
Russell Goldsmith(2) 47 Chief Executive Officer and Vice Chairman, City 1978 1979
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 1995;
Consultant, Spelling Entertainment Group, Inc.,
television and home video company, 1994 to 1995;
Chairman of the Board and Chief Executive Officer,
Republic Pictures Corporation, entertainment
company, until 1994.
Burton S. Horwitch 71 Chairman (January 1996 to present), President and 1978 1979
Chief Executive Officer (until January 1996).
Deena, Inc., manufacturer of women's apparel.
Edward Sanders(1) 74 Principal, Sanders, Barnet, Goldman, Simons & 1985 1985
Mosk, a Professional Corporation, law firm;
Director, Wyle Electronics.
CLASS III DIRECTORS
Richard L. Bloch 67 President, Pinon Farm, Inc., equestrian training 1974 1979
facility; Chairman of the Board, Columbus Realty
Trust, real estate investment trust, 1993 to
present; Director, Cantel Industries.
Bram Goldsmith(2) 74 Chief Executive Officer (until October 1995) and 1964 1969
Chairman of the Board, City National Corporation;
Chairman of the Board and Chief Executive Officer,
City National Bank, until October 1995.
Charles E. Rickershauser, Jr. 68 Attorney; Chairman of the Board, PS Group 1982 1982
Holdings, Inc.; Director, Vons Companies, Inc.;
Director, Lee Enterprises, Inc.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND DIRECTOR OF
PRINCIPAL OCCUPATION DIRECTOR OF CORPORATION
NAME AGE DURING THE PAST FIVE YEARS BANK SINCE SINCE
- -------------------------------- ----------- -------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth Ziffren(1) 56 Senior Partner, Ziffren, Brittenham, Branca & 1989 1989
Fischer, law firm; Director, Spectradyne, 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 1996 fiscal
year, no payments were made by the Corporation and its subsidiaries for
legal services rendered by Mr. Ziffren's or Mr. Sanders' law firms and
$18,667 was paid to the firm of which Mr. Buchalter is of counsel.
(2) Mr. Russell Goldsmith is the son of Mr. Bram Goldsmith.
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, Charles E. Rickershauser, Jr. and Edward Sanders.
The Committees, which met jointly 7 times in 1996, 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 14 times in 1996.
During 1996, the Corporation's Board of Directors held 14 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.)
6
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
No direct compensation was paid by the Corporation to any of its executive
officers in 1996, except pursuant to the Profit Sharing Plan and the 1995
Omnibus 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 the chief executive
officer of the Corporation and 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, 1996 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(1)
AWARDS
ANNUAL COMPENSATION -----------------
-------------------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMP. SARS COMP.
- --------------------------------------------- --------- ---------- ---------- ----------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Russell Goldsmith 1996 $ 426,250 $ 272,250 (4) -0- $ 17,776(5)
Vice Chairman and Chief Executive Officer, 1995(2) $ 112,500(3) $ 48,125 (4) 350,324 -0-
City National Corporation; Chairman of the 1994 N/A N/A N/A N/A N/A
Board and Chief Executive Officer,
City National Bank
Bram Goldsmith 1996 $ 540,000 $ 326,700 (4) -0- $ 18,013(5)
Chairman of the Board, 1995 $ 540,000 $ 297,000 (4) -0- $ 17,549(5)
City National Corporation 1994 $ 540,000 $ 270,000 (4) -0- $ 14,176(5)
George H. Benter, Jr. 1996 $ 315,000 $ 190,575 (4) 50,000 $ 17,811(5)
President, City National Corporation; 1995 $ 300,000 $ 168,875 (4) 50,000 $ 17,401(5)
President & Chief Operating Officer, 1994 $ 300,000 $ 150,000 (4) -0- $ 14,003(5)
City National Bank
Frank P. Pekny 1996 $ 280,000 $ 154,000 (4) 50,000 $ 17,811(5)
Executive Vice President, 1995 $ 250,000 $ 145,250 (4) 50,000 $ 17,363(5)
Chief Financial Officer & Treasurer, 1994 $ 240,000 $ 120,000 (4) -0- $ 13,543(5)
City National Corporation;
Vice Chairman, Chief Financial Officer and
Treasurer, City National Bank
Robert A. Moore 1996 $ 166,250 $ 64,500 (4) 12,500 $ 17,811(5)
Executive Vice President, 1995 $ 160,000 $ 67,000 (4) 10,000 $ 16,853(5)
Credit Services, City National Bank 1994 $ 160,000 $ 48,000 (4) -0- $ 13,477(5)
</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) Employment commenced on October 16, 1995. Not employed by the Corporation,
the Bank or any other subsidiary of the Corporation at any time during 1994.
(3) Includes $25,000 accrued as fees for attendance of meetings of the Bank's
Board of Directors and committees before October 16, 1995.
(4) 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.
(5) 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.
7
<PAGE>
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 $540.000, 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 $326,700 was paid
to Mr. Goldsmith in 1997 with respect to 1996. 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 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. See "CHANGE OF CONTROL AGREEMENTS," below for information
relating to change of control arrangements for Mr. Goldsmith.
RUSSELL GOLDSMITH AGREEMENT On October 16, 1995, 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
bonus of $272,250 was paid to Mr. Goldsmith in 1997 with respect to 1996.
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, 1995). The option was immediately exercisable as to
116,667 shares, became exercisable as to an additional 116,667 shares on October
16, 1996, will become exercisable as to the remaining 116,666 shares on October
16, 1997, and will expire on October 15, 2005. 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 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
8
<PAGE>
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 fully exercisable. For this purpose, "good cause" consists
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.
See "CHANGE OF CONTROL AGREEMENTS", below for information relating to change of
control arrangements for Mr. Goldsmith.
CHANGE OF CONTROL AGREEMENTS. The Bank has entered into Change of Control
Agreements (the "Change of Control Agreements") with the 19 officers (the
"Officers") who are members of the Bank's Executive Committee, including each of
the five Named Employees. The Change of Control Agreements are intended to
protect the Officers from a decrease in compensation, benefits, title, or duties
following a change in control of the Corporation. Under such provisions, each
Officer will be entitled to receive an amount equal to such Officer's then
current annual base salary and annual bonus in the event that such Officers
remain employed with the Corporation or its successor through the second
anniversary of the change in control. Such agreements additionally provide that
if there is a decrease in compensation and responsibilities of such Officer or
if such Officer's employment is terminated for any reason other than good cause,
or if such Officer resigns for good reason during the 30 day period commencing
on the first anniversary of the change in control, the Corporation will be
required to pay a lump-sum amount equal to two times (as to Messrs. Russell
Goldsmith, Bram Goldsmith, Benter and Pekny, three times) such Officer's then
current annual base salary and annual bonus, plus the value of certain other
benefits and payments foregone due to the termination, and to continue all
employee benefits through the remaining term of the Change in Control Agreement.
If it is determined that any payments made to an Officer pursuant to the
Agreements would subject such Officer to an excise tax pursuant to Section 4999
of the Internal Revenue Code of 1986, as amended, the Corporation will also be
obligated under certain circumstances to pay to such Officer an additional
amount sufficient to put such Officer in the same tax position as he or she
would have been in had no excise tax been imposed on such payment.
The March 1995 and October 1995 employment agreements between the
Corporation and Bram Goldsmith and Russell Goldsmith, respectively, contained
change of control provisions that are different from those contained in the
Change of Control Agreements. In March 1997, Messrs. Bram and Russell Goldsmith
agreed with the Corporation to be governed by the Change of Control Agreements,
when the Change of Control Agreements are inconsistent with the Bram Goldsmith
Agreement and the Russell Goldsmith Agreement, respectively.
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
9
<PAGE>
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 13 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 any 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 three 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 three 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
Corporations'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 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 its 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
10
<PAGE>
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. For information related to a proposed
amendment to the 1995 Omnibus Plan, see "AMENDMENT TO THE CITY NATIONAL
CORPORATION 1995 OMNIBUS PLAN," below.
11
<PAGE>
OPTION GRANTS, EXERCISES AND HOLDINGS
The following information is furnished with respect to stock options granted
to the named Officers during 1996. No SARs were granted in 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------- GRANT DATE
NUMBER OF % OF TOTAL VALUE
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................... -0- N/A N/A N/A N/A N/A
Bram Goldsmith...................... -0- N/A N/A N/A N/A N/A
George H. Benter, Jr................ 50,000(4) 8% $ 13.50 $ 13.50 2/20/06 $ 205,500
Frank P. Pekny...................... 50,000(4) 8% $ 13.50 $ 13.50 2/20/06 $ 205,500
Robert Moore........................ 12,500(4) 2% $ 13.50 $ 13.50 2/20/06 $ 51,375
</TABLE>
- ---------
(1) All options were granted under the 1995 Omnibus 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 .35, based on changes in the price
of the stock over the past ten years, measured monthly.
b. The risk-free rate of return for options expiring on February 26, 2006
is assumed to be 5.96%, based on the yield on the ten-year U.S. Treasury
Notes on the date of grant.
c. The average annual dividend yield over the term of the option is assumed
to be 3.25%. 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) Exercisable as follows: 25% on February 20, 1997; 25% on February 20, 1998;
25% on February 20, 1999; and 25% on February 20, 2000.
12
<PAGE>
The following information is furnished with respect to stock options and
SARs held by the Named Officers at December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END(1)
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------- --------------- --------------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
Russell Goldsmith....................... 0 0 233,658/116,666 $1,698,354/$845,829
Bram Goldsmith.......................... 0 0 0/0 $0/$0
George H. Benter, Jr.................... 0 0 150,514/106,250 (2) $2,033,205/$1,053,125
Frank P. Pekny.......................... 0 0 70,025/101,590 (3) $988,981/$993,258
Robert A. Moore......................... 0 0 50,327/28,976 (4) $648,452/$317,061
</TABLE>
- ---------
(1) Based upon fair market value of $21.625 per share, the closing price on the
New York Stock Exchange of the Corporation's common stock on December 31,
1996.
(2) Stock options under 1985 Stock Option Plan and 1995 Omnibus Plan, with
exercise prices ranging from $6.43 to $13.50 per share.
(3) Stock options under 1985 Stock Option Plan, and 1995 Omnibus Plan, with
exercise prices ranging from $5.05 to $13.50 per share.
(4) Stock options under 1985 Stock Option Plan, and 1995 Omnibus Plan, with
exercise prices ranging from $6.31 to $13.50 per share.
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 $1,500 to each non-employee director for attendance at each meeting of
the Bank's Board of Directors. The Bank presently pays directors an annual cash
retainer in the amount of $3,000 but see "AMENDMENT TO THE 1995 OMNIBUS PLAN"
for information relating to a change in the annual cash retainer if the proposed
amendment is adopted by shareholders. 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. See "AMENDMENT TO THE 1995 OMNIBUS PLAN" for information related to a
proposed change in the method by which Director Stock Options are issued.
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.
Rickershauser, Jr., Chairman, Stuart D. Buchalter and
13
<PAGE>
Edward Sanders. None of the present committee members 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 1996. In 1996,
the Bank made payments to the firm of $18,667.
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 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.
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 1996, 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.
14
<PAGE>
BASE SALARY
The Compensation Committee considers and approves 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). Such adjustments are
usually effective beginning March 1.
Executive officer base salaries for 1996 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, certain executive officers received salary increases in
1996.
In March 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 its
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 1996 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 Messrs.
Rickershauser and Buchalter, the two Compensation Committee members at that
time, 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.
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, but are not
required to, be paid, in the sole discretion of the Compensation Committee, but
only out of net income in excess of the goal or designated bonus threshold.
After the end of the year, determination of which executive officers will
receive bonuses
15
<PAGE>
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. Not all eligible officers will
necessarily receive a bonus, and not all eligible officers will necessarily
receive the same bonus.
In December 1995, the Compensation Committee established the net income goal
for 1996, 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
1996 net income goal, and bonuses were paid in February and March 1997. 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 1996 these bonuses were based on the degree to which the
Corporation achieved the net income goal established by the Compensation
Committee in 1995.
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.
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 1996, 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 1997.
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.
16
<PAGE>
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 and March
1997, based on their job performance in 1996.
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
EDWARD SANDERS
17
<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
index of selected bank stocks. The graph assumes $100 invested on December 31,
1991, in the Corporation's common stock and each of the indices, and does not
reflect any adjustment for the distribution to stockholders of the Corporation
in 1993 of transferable rights to purchase additional shares of common stock.
CITY NATIONAL CORPORATION
TOTAL CUMULATIVE STOCKHOLDER RETURN FOR
PERIOD ENDING DECEMBER 31, 1996
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CITY NATIONAL CORPORATION S&P 500 WESTERN BANK MONITOR
<S> <C> <C> <C> <C>
12/31/1991 100.00 100.00 100.00
12/31/1992 55.79 107.62 109.63
12/31/1993 63.16 118.47 131.92
12/31/1994 89.87 120.03 136.29
12/31/1995 121.02 165.13 194.63
12/31/1996 191.39 202.89 241.40
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDING
----------------------------------------------------------------------------
INDEX 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ------------------------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
City National Corporation............................. 100.00 55.79 63.16 89.87 121.02 191.39
S&P 500............................................... 100.00 107.62 118.47 120.03 165.13 202.89
Western Bank Monitor.................................. 100.00 109.63 131.92 136.29 194.63 241.40
</TABLE>
18
<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
----------------------------------
NATURE OF
NATURE OF BENEFICIAL OWNER AMOUNT HELD HOLDINGS PERCENT OF CLASS
- ------------------------------------------------------ --------------- ----------------- -----------------
<S> <C> <C> <C>
GEORGE H. BENTER, JR. 10,000(1) BD *
2,745(2) BDE
175,515(3) F
RICHARD L. BLOCH 221,709(4) BD *
2,096(3) F
MIRION P. BOWERS, M.D. 837 AC *
7,330(5) AC *
238(3) F
STUART D. BUCHALTER 10,143 AC *
2,000(6) AC
375(6) E
BRAM GOLDSMITH 6,667,699(7) BD 14.37%
41,480(2) BDE
169,720(8) BDE
RUSSELL GOLDSMITH 1,904 AC 10.88%
4,120,001(9) BD
726,040(9) AC
169,720(8) BDE
73,495(9) BDE
233,658(3) F
BURTON S. HORWITCH 115,775(10) AC *
600(10) BDE
ROBERT A. MOORE 56,179(3) F *
FRANK P. PEKNY 8,000 AC *
2,717(2) BDE
99,115(3) F
CHARLES E. RICKERSHAUSER, JR. 12,262 AC *
562(3)
EDWARD SANDERS 15,280 AC *
1,137(11) BD
238(3) F
ANDREA L. VAN DE KAMP 1,000 AC *
955(3) F
KENNETH ZIFFREN 3,024 AC *
15,786(12) BD
238(3) F
ALL EXECUTIVE OFFICERS and DIRECTORS as a Group 8,574,252(13) 18.36%
</TABLE>
- ----------
* Does not exceed 1% of class.
A Possesses sole voting power.
19
<PAGE>
B Possesses shared voting power.
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, 1996. 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 Plans and the 1995 Omnibus 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) 2,330 shares are owned by The Mirion P. Bowers, M.D. Inc. Pension and
Profit Sharing Plan of which Mr. Bowers is the sole trustee and 5,000 shares
are owned by the Bowers Family Trust of which Mr. Bowers is the sole
trustee.
(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) 4,120,001 shares are owned by the Goldsmith Family Partnership, 1,979,709
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. Shares
owned by the Goldsmith Family Partnership are also shown as beneficially
owned by Mr. Russell Goldsmith. 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) 4,120,001 shares are owned by the Goldsmith Family Partnership, 726,040
shares are owned by trusts of which Mr. Goldsmith is sole trustee and 73,495
shares are owned by B. N. Maltz Foundation, a tax-exempt charitable
foundation of which Mr. Goldsmith is a director. The Russell Goldsmith
Trust, of which Mr. Goldsmith is sole trustee, is one of the general
partners of the Goldsmith Family Partnership. Shares owned by the
Partnership are also shown as beneficially owned by Mr. Bram Goldsmith. Mr.
Goldsmith disclaims beneficial ownership of shares held by the B. N. Maltz
Foundation.
(10) 104,613 shares are owned by the Burton Horwitch Living Trust, of which Mr.
Horwitch is sole trustee; 11,162 shares are held by Schroder Wertheim & Co.
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 jointly by Mr. Ziffren and his wife.
(13) Includes shares held by officers of the Bank who may be deemed to be
executive officers of the Corporation. Of the amount shown, 669,200 shares
represent unexercised stock options granted under the Corporation's 1983 and
1985 Stock Option Plans and 1995 Omnibus Plan, 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
7,557 shares held by the City National Corporation Stock Fund under the City
National Corporation Profit Sharing Plan, representing the proportionate
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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, 1996. Fund investments are not allocated
to individual participant accounts, and the participants disclaim beneficial
ownership of such shares.
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 of the Corporation). 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 a lease signed on March 6,
1997, effective as of September 30, 1996, which expires in 2006. Previously, the
Bank occupied most of the same space under leases signed in 1966, 1985 and 1991,
all of which expired 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 1996 the Bank paid Citinational-Buckeye
Building Co. a total of $865,084 for rent under all leases in the building and
$156,395 for operating expense pass-throughs. Based on existing lease terms,
rentals payable by the Bank to Citinational-Buckeye Building Co. total $80,456
per month for all leases in the building, not including operating expense
pass-throughs.
On January 29, 1997, Citinational Bancorporation advanced $4,625,000 to
Citinational-Buckeye Building Co., of which $4,050,000 was advanced as a capital
contribution, and the remaining $525,000 as a loan, bearing interest at the
Bank's prime rate plus 1% per annum, interest payable quarterly, with principal
and unpaid interest being due and payable on December 31, 1998. In addition,
Citinational Bancorporation committed to make an additional loan of up to
$2,000,000 to Citinational-Buckeye Building Co. to fund improvements to the
building related to a lease with the United States General Services
Administration.
Certain indebtedness of Citinational-Buckeye Building Co. to the Bank is
described below. Between 1991 and 1996, Mr. Goldsmith and the other general
partner of Olive-Sixth Buckeye Co. made unsecured advances to
Citinational-Buckeye Building Co. to cover operating expenses and common area
and tenant improvements. Through December 31, 1996, Mr. Goldsmith advanced a
total of $7,062,500 (of which $1,625,000 was advanced in 1996), all of which
bore interest at the Bank's prime rate plus 1% per annum, interest payable
quarterly. On January 29, 1997, simultaneous with the capital contributions and
loans described in the preceding paragraph, Citinational-Buckeye Building Co.
repaid $4,625,000 of the loans previously made by Mr. Goldsmith. In addition,
Citinational-Buckeye Building Co. converted $2,025,000 of
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such loans into capital contributions by Mr. Goldsmith to Citinational-Buckeye
Building Co. Citinational-Buckeye Building Co. now owes to Mr. Goldsmith the
principal amount of $412,500, which continues to bear 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. Also on
January 29, 1997, Mr. Goldsmith committed to make an additional loan of
$1,000,000 to Citinational-Buckeye Building Co. to fund improvements to the
Building related to the lease with the United States General Services
Administration.
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
interest 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.
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, 1997 was
8.75%. At March 1, 1997, the outstanding balance of the loan was $15,916,390;
the largest amount outstanding since January 1, 1996 was $15,955,046. The loan
matures in 1998, and is, and from its inception has been, current as to required
payments of principal and interest, in part because certain partners voluntarily
made advances to the partnership, most of which have been subsequently repaid as
a result of the January 1997 capital contributions and loans described above.
During 1996 and early 1997, the Bank had an outstanding unsecured loan to
Horwitch Brothers 3, a general partnership of which Mr. Burton Horwitch, a
director of the Corporation, is a partner. The loan was fully repaid on January
19, 1997. The largest amount outstanding since January 1, 1996, was $214,970.
The loan bore interest at the Bank's prime rate plus 1 1/2%, and would have
matured on January 4, 1999. At January 19, 1997, the interest rate on the loan
was 9.75%.
The Bank entered into an unsecured revolving line of credit with Mr. Burton
Horwitch on July 25, 1996. The note provides for a revolving loan in the maximum
amount of $315,000, and bears interest at the Bank's prime rate plus 3/4%. The
loan will mature on June 1, 1997. No advances have been made to Mr. Horwitch
under the line of credit.
SECTION 16(a) REPORTING DELINQUENCIES
Under federal securities laws and rules of the Securities and Exchange
Commission, directors and executive officers and 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 1996, all such reports that were
required were filed on a timely basis.
AMENDMENT TO THE 1995 OMNIBUS PLAN
On February 26, 1997, the Board of Directors approved, subject to the
approval of the Corporation's shareholders, an amendment to the Corporation's
1995 Omnibus Plan eliminating the provisions pursuant
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to which non-employee directors of the Corporation are granted Director Stock
Options ("DSOs") and replacing it with a new method.
At present, each non-employee director is automatically granted on the date
of the Annual Meeting of Stockholders, an option to purchase shares of the
Corporation's common stock, with a valuation on the date of issuance of $3,000.
DSOs have an exercise price of $1.00 per share, payable in cash or cash
equivalents, by surrender of the Corporation's common stock held by the director
for at least a year before exercise, or any combination of the two. The actual
number of DSOs granted to a director in a given year is determined by dividing
$3,000 by the closing price of the common stock on the New York Stock Exchange
on the date of grant.
As a result of the rapid increase in the market price of the Corporation's
common stock over the past several years, the number of DSOs granted has sharply
decreased. In 1995 each eligible director received a DSO of 324 shares and in
1996 each eligible director received a DSO of 238 shares. For purposes of
example only, if DSOs had been awarded on February 24, 1997, when the closing
New York Stock Exchange Price was $24.125, each eligible director would have
received a DSO of 124 shares.
Management believes that establishing a fixed number of DSOs would more
closely align directors with the interests of shareholders as well as assisting
in attracting, motivating, retaining and rewarding directors for improved
financial performance of the Corporation. In addition, management believes that
recent developments in corporate governance show a trend towards decreasing
directors compensation through short-term cash compensation, and increasing such
compensation through long-term stock-based compensation such as DSOs.
The proposed amendment would award each non-employee director a DSO of 500
shares on the date of the Corporation's Annual Meeting of Stockholder's,
commencing April 16, 1997. The exercise price of each DSO will remain at $1.00
per share, payable in cash or cash equivalents, by surrender of the
Corporation's common stock held by the director for at least a year before
exercise, or any combination of the two.
Management has also recommended, subject to ratification by the stockholders
of the proposed amendment to the 1995 Omnibus Plan, the elimination of the
annual cash retainer of $3,000 payable to each non-employee director. See
"Compensation of Directors." Such fee is presently paid in two increments of
$1,500, one at the January meeting of the Board of Directors and one at the July
meeting. Assuming stockholder ratification of the proposed amendment, the July
1997 payment will not be made and there will be no further cash retainers paid
to non-employee directors unless and until further action by the Board of
Directors. Management has no present intention of recommending additional cash
retainers. All other cash payments to non-employee directors will remain
unchanged from those described above in "Compensation of Directors."
The material features of the 1995 Omnibus Plan are described below. However,
this summary is subject to, and qualified in its entirety by, the full text of
the 1995 Omnibus Plan, a copy of which is attached hereto as Exhibit A. Section
2.8, SPECIAL REQUIREMENTS FOR DIRECTOR STOCK OPTIONS, of Exhibit A reflects the
existing provisions relating to DSOs. Exhibit B, attached hereto, reflects the
amended text as described in this proposal.
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE 1995 OMNIBUS PLAN.
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CITINATIONAL CORPORATION 1995 OMNIBUS PLAN
INTRODUCTION
The 1995 Omnibus Plan provides for the award ("Awards") of Incentive Stock
Options, as defined in Section 422 of the Internal Revenue Code and regulations
thereunder ("ISOs"); stock options other than Incentive Stock Options
("Nonqualified Stock Options" or "NSOs"), which include Director Stock Options
("DSOs") (ISOs, NSOs and DSOs are collectively referred to as "stock options" or
"options"); stock appreciation rights ("SARs"), either in tandem with ISOs or
NSOs, or independently ("freestanding SARs"); restricted stock; performance
shares and stock bonuses; and Tax Offset Bonus Rights in tandem with NSOs ("Tax
Offset Bonus Rights"). The 1995 Omnibus Plan will terminate on February 22,
2005, unless terminated sooner by the Compensation and Directors Nominating
Committee (the "Committee") of the Corporation's Board of Directors.
ADMINISTRATION AND ELIGIBILITY
The 1995 Omnibus Plan is administered by the Committee, which also
administers outstanding options issued under the Corporation's 1983 and 1985
Stock Option Plans. Officers at a level of Vice President or the equivalent are
eligible to participate. The Committee determines which key employees will
receive Awards, the nature, price, number of shares and other terms of Awards,
and the form and terms of Award agreements, except that DSOs are awarded
annually on an automatic basis, without action of the Committee. See "Kinds of
Awards--Stock Options," below and AMENDMENT TO THE 1995 OMNIBUS PLAN, above.
Awards may also be granted to other persons (not including non-employee
directors), including significant agents and consultants, who perform
substantial services for the Corporation or the Bank of a nature similar to
those performed by key employees, except that ISOs may be granted only to
employees. The Committee is authorized to interpret the 1995 Omnibus Plan, adopt
rules and regulations, amend outstanding Awards subject to certain limitations
(see "Amendment," below) and make such other determinations and take such other
actions in the administration of the 1995 Omnibus Plan as it shall deem proper.
The Committee has not designated which officers or how many officers will be
selected to participate, the number of shares with respect to which Awards will
be granted, if any, or the price or other terms of any such grant. As of March
1, 1997, approximately 298 officers were eligible for selection to participate
in the 1995 Omnibus Plan, and 8 non-employee directors were eligible only for
DSOs. No determination has been made as to the number of agents, consultants and
other persons who are neither employees nor directors, but who might be eligible
to participate in the 1995 Omnibus Plan.
MAXIMUM SHARES
Under the 1995 Omnibus Plan, Awards may be granted with respect to up to
3,000,000 shares of the Corporation's authorized and unissued (or reacquired)
common stock. The maximum number of shares for which options and freestanding
SARs may be granted to a single employee in any single year is 500,000. Both
limitations are subject to adjustment in the event of changes in the
capitalization or corporate structure of the Corporation. (See "Adjustments and
Extraordinary Events," below). Upon termination, cancellation, forfeiture or
expiration of any unexercised Award, the number of shares with respect to which
Awards may be granted under the 1995 Omnibus Plan will be increased by the
number of shares to which such unexercised Award pertained.
TERMS OF AWARDS
Under the 1995 Omnibus Plan, certain restrictions and limitations are
applicable to more than one type of Award.
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The Committee may determine the vesting and, where applicable, the
expiration date of Awards, but Awards that provide for the right to acquire
stock may not remain outstanding more than 10 years after grant date, and any
ISO Award granted to any eligible employee owning more than 10% of the
Corporation's stock must not be longer than five years. Unless the Committee
determines otherwise, Awards do not vest or become exercisable until 6 months
after the date of grant.
If an Award requires exercise accompanied by payment by the employee,
payment must generally be in cash or cash equivalents, but the Committee may
accept payment by promissory note under certain conditions, including the
requirements that the note mature in not more than 10 years, be full recourse
and bear interest at a rate no less than the applicable imputed interest rate
under the Internal Revenue Code, and that it be due and payable in full within
10 days after termination of the employee's employment, with certain exceptions
for executive officers and directors subject to Section 16(b) of the Securities
Exchange Act of 1934. In addition, payment with respect to the exercise of an
option may be made by the surrender or withholding of the Corporation's common
stock under certain circumstances. See "Kinds of Awards-- Stock Options," below.
Awards may generally be exercised only by the employee to whom they were
granted, and cannot be sold, pledged, assigned or otherwise transferred, except
to the Corporation, by will or the laws of descent and distribution upon the
employee's death or, with respect to Awards other than ISOs, according to the
terms of certain court orders incident to divorce or dissolution of marriage.
However, the Committee may permit other kinds of transfers.
KINDS OF AWARDS--STOCK OPTIONS
Under the 1995 Omnibus Plan, the Committee may from time to time grant stock
options, either ISOs or NSOs (but not including DSOs), to eligible employees. As
required by the Internal Revenue Code and regulations thereunder, ISOs are
subject to certain limitations not applicable to NSOs. The exercise price of all
stock options other than DSOs may not be less than the fair market value of the
Corporation's common stock on the date of grant, except that the exercise price
of any ISO granted to any eligible employee owning more than 10% of the
Corporation's stock may not be less than 110% of the fair market value of the
stock on the date of grant. The exercise price may be adjusted in the event of
changes in the capital or corporate structure of the Corporation. (See
"Adjustments and Extraordinary Events," below.) The aggregate fair market value
(determined at the date of grant) of the stock subject to all ISOs held by an
optionee that vest in any single calendar year cannot exceed $100,000. Options
may not be hypothecated, assigned or transferred other than by will or
inheritance. See "Termination of Employment, Death or Disability," below.
Unlike other NSOs, the 1995 Omnibus Plan provides for the automatic issuance
of DSOs without action of the Committee each year, immediately after the Annual
Meeting of Stockholders, to each non-employee director of the Corporation with a
value on the date of issuance of $3,000, the equivalent of an annual $3,000
director retainer fee. DSOs have an exercise price of $1.00 per share, payable
in cash or cash equivalents, by surrender of the Corporation's common stock held
by the director for at least a year before exercise, or any combination of the
two. This exercise price may be adjusted in the event of changes to the
Corporation's capital or corporate structure. (See "Adjustments and
Extraordinary Events," below.) The actual number of DSOs granted to a director
in a given year is determined according to the following formula, rounded to the
nearest share:
$3,000, divided by the fair market value of a share of the Corporation's
common stock on the day of the Annual Meeting less $1.00.
The fair market value of the Corporation's common stock is the price of the
last transaction of the day, as shown on the New York Stock Exchange. All DSOs
vest six months after the date of issuance or upon the termination of a
director's membership on the Board (otherwise than for cause), whichever occurs
first. Except as set forth above, the terms of DSOs are the same as other NSOs
issued under the
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1995 Omnibus Plan. See AMENDMENT TO THE 1995 OMNIBUS PLAN, above, for a
description of a proposed change to the method by which DSOs are issued.
At the time of granting of an option, the Committee may grant Dividend
Equivalents attributable to the shares subject to the option. A Dividend
Equivalent is the right to receive cash representing all or a portion of the
dividend payable with respect to the number of shares subject to the unexercised
option, and is paid when the corresponding dividend is paid.
In addition to the kinds of payment described above (see "Terms of Awards"),
payment to the Corporation upon exercise of an option may be effected through
delivery of previously acquired Corporation common stock or, if approved by the
Committee or specified in the Award agreement, by deducting shares from the
number of shares for which the option is exercised. Any shares so delivered to
the Corporation or deducted from the exercise for the purchase price shall be
valued at their fair market value on the exercise date.
KINDS OF AWARDS--STOCK APPRECIATION RIGHTS AND TAX OFFSET BONUS RIGHTS
Under the 1995 Omnibus Plan, the Committee may from time to time grant SARs,
either in tandem with stock options or freestanding, or Tax Offset Bonus Rights,
which must be in tandem with NSOs. When these rights are exercised, the holder
receives a specified amount in cash, the Corporation's stock or a combination of
the two.
Each SAR entitles the holder to receive the excess of the fair market value
of a share of the Corporation's common stock on the exercise date over the fair
market value of such share on the date the SAR was awarded, subject to a maximum
determined by the Committee. If SARs are granted in tandem with options, they
may be exercised only during the time and to the extent that the related options
may be exercised, and the number of options held by the optionee is decreased by
the number of SARs exercised by that optionee.
Each Tax Offset Bonus Right entitles the holder to receive an amount
determined by the Committee at the time of grant, which may, but need not, be a
specified percentage of the excess of the fair market value of the Corporation's
common stock acquired upon exercise of the related NSO over the fair market
value of such stock on the date the NSO was awarded. Tax Offset Bonus Rights are
exercised automatically upon the exercise of the corresponding NSOs, and cannot
be exercised independently.
In addition to these general time limitations, all rights may be exercised
only during the period commencing on the third business day after the
Corporation releases certain specified financial data (generally consisting of
quarterly or annual operations and earnings statements) to the press and ending
on the twelfth day after such data is released.
KINDS OF AWARDS--RESTRICTED STOCK
Under the 1995 Omnibus Plan, the Committee may from time to time grant
restricted stock to eligible employees. Restricted stock is common stock issued
by the Corporation, subject to restrictions on sale or transfer and any other
restrictions specified by the Committee in the Award, which continue until such
time, or the satisfaction of such conditions, as the Committee determines.
Unless otherwise provided in the Award agreement, an employee holding restricted
stock is entitled to receive cash dividends and vote the shares. At such time as
the conditions specified by the Committee are satisfied, the restrictions lapse.
If the employee's employment terminates before the restrictions lapse, or if any
conditions specified by the Committee are not fulfilled within the time
specified by the Committee, the restricted stock must be returned to the
Corporation.
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KINDS OF AWARDS--PERFORMANCE SHARES AND STOCK BONUSES
Under the 1995 Omnibus Plan, the Committee may from time to time grant
Awards of performance shares or stock bonuses. Performance share Awards
establish criteria determined by the Committee which, if achieved, result in the
Corporation's issuing to the employee the number of shares of common stock
specified in the Award agreement. The criteria may consist of performance goals
or measures for the employee or the Corporation over a specified period of time,
and the Committee may provide for full or partial credit for the satisfaction of
criteria before the end of the period of time specified or the attainment of the
specified goal, in the event of the employee's death, retirement or disability
or under such other circumstances as the Committee may determine.
To reward exceptional or special services, contributions or achievements,
the Committee may also grant bonuses consisting of such number of shares of the
Corporation's stock on such terms, including restrictions on such shares, as the
Committee may determine. The issuance of either performance or bonus shares may
be deferred by the Committee at the request of the employee on such terms as the
Committee may determine.
TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY
The Committee will determine the effect of the termination of employment on
Awards, which determination may be different depending on the nature of the
termination, such as terminations for cause, terminations resulting from death,
disability or retirement and the like. The Committee may in its complete
discretion change the exercise period or the number of shares for which an award
is vested or exercisable at the time of termination or within a reasonable time
thereafter.
Because of limitations imposed by the Internal Revenue Code, in the event of
a termination of employment for any reason other than for cause or the death,
retirement or disability of the optionee, ISOs must be exercised within three
months after the employment termination date. In the event of the optionee's
death, ISOs must be exercised by the employee's estate within one year. If
employment terminates because of retirement or disability, as defined in the
Internal Revenue Code, ISOs must be exercised within three years after the
termination date; however, any ISOs exercised more than three months after the
date of retirement or more than one year after termination of employment by
reason of disability will be treated as NSOs for tax purposes. (See "Federal
Income Tax Consequences and Accounting Treatment," below.)
Upon termination of employment, SARs granted in tandem with options and Tax
Offset Bonus Rights are exercisable only to the extent that the related options
can be exercised, and expire when the related options expire.
Certain other consequences of the termination of employment are discussed
above. See "Kinds of Awards--Restricted Stock" and "Kinds of Awards--Performance
Shares and Stock Bonuses."
ADJUSTMENTS AND EXTRAORDINARY EVENTS
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
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 shareholders, 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
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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 shareholders 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 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 shareholders 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 shareholders
of the Corporation, and no person or entity other than Bram Goldsmith, the
Corporation, any employee benefit plan of the Corporation or the resulting
company, or 20% shareholder 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 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.
AMENDMENT
The Board of Directors of the Corporation may amend, suspend or discontinue
the 1995 Omnibus Plan in its discretion, except that shareholder approval is
required for any amendment which would materially increase the benefits to
participants under the 1995 Omnibus Plan, materially increase the maximum number
of shares subject to the 1995 Omnibus Plan (otherwise than as a consequence of a
change in the corporate or capital structure, as described in "Adjustments and
Extraordinary Events," above) or materially modify the requirements as to
eligibility to participate in the 1995 Omnibus Plan. The 1995 Omnibus Plan
cannot be amended more frequently than every six months with respect to the
persons eligible to receive DSOs, the purchase price of stock pursuant to DSOs
or the formula that determines the number of DSOs awarded to each director.
Termination of the 1995 Omnibus Plan will not affect any Awards then
outstanding.
The Committee may grant to an employee who holds an Award, if he or she
consents (provided such consent is required), a new or modified Award, or may
amend the existing Award, which new grant or amendment may alter the number of
shares subject to the Award, the exercise price, the term of the Award or any
other term or condition of the existing, subject to the limitations of the 1995
Omnibus Plan and applicable law.
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FEDERAL INCOME TAX CONSEQUENCES AND ACCOUNTING TREATMENT
INCENTIVE STOCK OPTIONS. Under generally accepted accounting principles,
the Corporation does not recognize any compensation expense, and for federal
income tax purposes, the holder of an ISO receives no taxable income at the time
of the grant or exercise of the ISO. If such person retains the stock for a
period of at least two years after the option is granted and one year after the
option is exercised, any gain upon the subsequent sale of the stock will be
taxed as a long-term capital gain. An optionee who disposes of shares acquired
by exercise of an ISO prior to the expiration of two years after the option is
granted or one year after the option is exercised will realize ordinary income
as of the date of exercise equal to the difference between the exercise price
and fair market value of the stock on the date of exercise. To the extent
ordinary income is recognized by the optionee because the optionee's disposition
of the ISO shares does not meet holding period requirements, the Corporation may
deduct a like amount as compensation.
NONQUALIFIED STOCK OPTIONS. Under present Treasury regulations, an optionee
who receives an NSO with an exercise price equal to the fair market value of the
stock on the grant date will not realize taxable income on the grant of such
option, but will realize ordinary income at the time of exercise of the option
equal to the difference between the option exercise price and the fair market
value of the stock on the date of exercise. The Corporation will be eligible for
a concurrent deduction equal to the income realized by the option holder, but
will not recognize any compensation expense for accounting purposes. If an NSO
is granted at an exercise price significantly below the fair market value of the
stock on the grant date (such as DSOs), the holder may have to recognize
ordinary income on the option vesting date equal to the difference between the
exercise price and the fair market value of the stock on the vesting date. The
Corporation will recognize a compensation expense for accounting purposes on the
date the NSO is granted, requiring a charge against earnings, and will be able
to take a deduction equal to the income realized by the holder on the vesting
date.
The recipient of Dividend Equivalents realizes no taxable income at the time
the equivalents are awarded, nor does the Corporation receive any deduction at
that time. When the Dividend Equivalents are paid, it is taxed as ordinary
income on the date of payment, and the Corporation receives a deduction in the
same amount.
STOCK APPRECIATION RIGHTS AND TAX OFFSET BONUS RIGHTS. The recipient of a
SAR or Tax Offset Bonus Right will not be taxed upon the grant of such right,
but will realize ordinary income at the time is right is exercised equal to the
amount of cash and/or the fair market value of the stock received. The
Corporation will be entitled to a deduction at the time of exercise equal to the
income realized by the recipient and recognizes a compensation expense at the
time of grant or, if vesting is delayed, during the period of vesting according
to the rules of the Financial Accounting Standards Board (FASB).
RESTRICTED STOCK. As long as restricted stock remains both nontransferable
and subject to a substantial risk of forfeiture, there are generally no tax
consequences resulting from the Award for either the recipient or the
Corporation. At such time as the restricted stock either becomes transferable or
is no longer subject to a substantial risk of forfeiture, the recipient will
recognize ordinary income in an amount equal to the excess of the fair market
value of the stock over the amount the recipient paid for it, if any. However,
the recipient may elect, within 30 days after receipt of the Award, to report
the fair market value of the restricted stock subject to the Award (valued as if
it were unrestricted) as ordinary income at the time of receipt. The Corporation
will receive a compensation deduction equal to the ordinary income recognized by
the recipient when so recognized. If such an election is made and the
restrictions on the stock fail to lapse for any reason, the recipient will not
be entitled to a deduction. For accounting purposes, the Corporation recognizes
a compensation expense during the period of vesting according to the rules of
FASB.
When stock that was formerly restricted stock is sold or otherwise disposed
of, the tax treatment will depend on whether the recipient made the election
described in the previous paragraph. If the recipient
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did not make the election, disposition of the stock will result in a long- or
short-term capital gain or loss, depending on the length of time from the date
the restrictions lapsed to the date of sale or other disposition, in an amount
equal to the difference between the amount received on disposition and the
greater of the amount the recipient paid for the stock or the fair market value
of the stock on the date the restrictions lapsed. If the recipient made the
election, disposition of the stock will result in a long- or short-term capital
gain or loss, depending on the length of time from the Award to the date of
disposition, in an amount equal to the difference between the amount received on
disposition and the sum of any amount paid by the recipient for the restricted
stock and the amount recognized by the recipient as ordinary income at the time
of the Award.
PERFORMANCE SHARE AWARDS. An employee who has been granted a performance
share Award will not realize taxable income at the time of grant, and the
Corporation will not be entitled to a deduction at that time. When an Award is
paid, the participant will have ordinary income, and the Corporation will have a
corresponding deduction in the amount of the fair market value of the shares.
For accounting purposes, a compensation expense is recognized by the Corporation
as the Award is earned.
STOCK BONUS. The recipient of a stock bonus is taxed on the fair market
value of the stock on the date of award, and the Corporation receives a
deduction and recognizes compensation expense for accounting purposes in the
same amount.
PERSONS SUBJECT TO SECTION 16. Under the Internal Revenue Code, special
rules may apply to executive officers and directors who are subject to the
restrictions on sale of the shares under Section 16(b) of the Securities
Exchange Act of 1934. These rules, which effectively take into account the
restrictions, apply in limited circumstances, and may impact the timing or
amount of income recognized by the individual with respect to certain
stock-based Awards.
EXCESS PARACHUTE PAYMENTS. If, as a result of a Change of Control Event
(see "Adjustments and Extraordinary Events," above), an employee's options, SARs
or Tax Offset Bonus Rights become exercisable, restricted stock vests free of
restrictions or performance shares become immediately issuable, the additional
economic value attributable to the acceleration, if any, may be deemed a
"parachute payment" if such value, when combined with all other payments
resulting from the change of control, equals or exceeds 300% of the employee's
average annual taxable compensation over the five preceding calendar years. In
such case, the excess of the total parachute payments over such average annual
taxable compensation is subject to a 20% non-deductible excise tax, in addition
to any income tax payable, and the Corporation is not entitled to deduct the
portion of the parachute payment that is subject to such excise tax.
SECTION 162(M) LIMITS. Notwithstanding the foregoing discussion, Section
162(m) of the Internal Revenue Code and related Treasury regulations thereunder
render non-deductible to the Corporation certain compensation to certain
executive officers that exceeds $1,000,000 in any year, unless the compensation
is exempt. The Code and the regulations include an exemption for
performance-based compensation plans that includes the requirement, among other
things, that the material terms of the plan be approved by shareholders.
Although the Corporation believes that options, SARs and Tax Offset Bonus Rights
granted under the 1995 Omnibus Plan should be exempt under the Code and
regulations and consequently deductible to the Corporation as discussed above,
other kinds of Awards, such as restricted stock, performance shares and stock
bonuses, may not be exempt, if the aggregate compensation of the executive
officer would exceed such limit.
REQUIRED VOTE
The proposed amendment to the 1995 Omnibus Plan must be approved by the
holders of a majority of the shares of Common Stock of the Corporation
represented at the Annual Meeting in person or by proxy, including abstentions,
but not including broker non-votes. Each shareholder is entitled to one vote for
each
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share held, and abstentions and broker non-votes will not be counted in favor of
approval. The Board of Directors recommends shareholder approval of the
Amendment to the 1995 Omnibus Plan. For more complete information concerning the
1995 Omnibus Plan, reference is made to Exhibit A.
PROPOSALS OF STOCKHOLDERS
All proposals of stockholders intended to be presented at the Corporation's
1998 Annual Meeting of Stockholders must be directed to the attention of the
Secretary of the Corporation, at the address of the Corporation set forth on the
first page of this Proxy Statement, before November 17, 1997, 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 September 30, 1996, 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, 1996. The Audit
Committee has not yet selected independent accountants for the current fiscal
year, which ends on December 31, 1997. 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 1997
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, 1997
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EXHIBIT A
CITY NATIONAL CORPORATION
1995 OMNIBUS PLAN
I. THE PLAN
1.1. PURPOSE
The purpose of this Plan is to promote the success of the Company by
providing an additional means through the grant of Awards to attract, motivate,
retain and reward key employees, including officers, whether or not directors,
of the Company with awards and incentives for high levels of individual
performance and improved financial performance of the Company.
1.2. DEFINITIONS
(a) "AWARD" shall mean an award of any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Stock Bonus, Dividend
Equivalent, Tax Offset Bonus or other right or security that would constitute a
"derivative security" under Rule 16a-1(c) of the Exchange Act, or any
combination thereof, whether alternative or cumulative, authorized by and
granted under this Plan.
(b) "AWARD AGREEMENT" shall mean any writing setting forth the terms of an
Award that has been authorized by the Committee.
(c) "AWARD DATE" shall mean the date upon which the Committee took the
action granting an Award or such later date as the Committee designates as the
Award Date at the time of the Award.
(d) "AWARD PERIOD" shall mean the period beginning on an Award Date and
ending on the expiration date of such Award.
(e) "BENEFICIARY" shall mean the person, persons, trust or trusts entitled
by will or the laws of descent and distribution to receive the benefits
specified in the Award Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's executor or administrator
if no other Beneficiary is identified and able to act under the circumstances.
(f) "BOARD" shall mean the Board of Directors of the Company.
(g) "CHANGE IN CONTROL EVENT" shall mean:
(1) The acquisition by any individual (other than Bram Goldsmith),
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A)
the then outstanding shares of Common Stock (the "Outstanding Common Stock")
or (B) the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); PROVIDED, HOWEVER, that the following
acquisitions shall not constitute a Change in Control Event: (i) any
acquisition directly from the Company (except that an acquisition by virtue
of the exercise of a conversion privilege shall not be considered within
this clause (i) unless the converted security was itself acquired directly
from the Company), (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (A) and (B) of paragraph
(3) below are satisfied;
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; PROVIDED, HOWEVER, that any individual who
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becomes a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board; but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; PROVIDED, HOWEVER, that any transaction which does not
constitute a Change in Control Event by reason of an exception contained in
Section 1.2(g)(1), (3) or (4), shall not constitute a Change in Control
Event by reason of this Section 1.2(g)(2); or
(3) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "transaction"), unless, following such
transaction in each case, (A) more than 80% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
transaction and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such transaction and (B) no Person
(excluding the Company, Bram Goldsmith, any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
transaction and any Person beneficially owning, immediately prior to such
transaction, directly or indirectly, 20% or more of the Outstanding Common
Stock or Outstanding Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
transaction or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors; or
(4) Approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company, unless
such assets are sold to a corporation and following such sale or other
disposition, the conditions described in clauses (A) and (B) or paragraph
(3) above are satisfied with respect to the acquiring corporation.
(h) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(i) "COMMISSION" shall mean the Securities and Exchange Commission.
(j) "COMMITTEE" shall mean the Compensation and Directors Nominating
Committee of the Board, or other Committee, regardless of name, that acts on
matters of compensation for eligible employees, which Committee shall be
comprised only of two or more directors or such greater number of directors as
may be required under applicable law, each of whom, during such time as one or
more Participants may be subject to Section 16 of the Exchange Act, shall be a
Disinterested and Outside director.
(k) "COMMON STOCK" shall mean the common stock of the Company, $1.00 par
value per share, and such other securities or property as may become the subject
of Awards, or become subject to Awards, pursuant to an adjustment made under
Section 6.2 of this Plan.
(l) "COMPANY" shall mean City National Corporation and its Subsidiaries.
(m) "DISINTERESTED AND OUTSIDE" shall mean "disinterested" within the
meaning of any applicable regulatory requirements, including Rule 16b-3, and
"outside" within the meaning of Section 162(m) of the Code.
(n) "DIVIDEND EQUIVALENT" shall mean an amount equal to the amount of cash
dividends or other cash distributions paid (or such portion of such dividend or
other distribution as may be designated by the Committee) with respect to each
Share after the date of an Award of a Dividend Equivalent.
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(o) "ELIGIBLE EMPLOYEE" shall mean an officer at a level of Vice President
or the equivalent (whether or not a director) of the Company, or any Other
Eligible Person, as determined by the Committee in its discretion. In no event
may any member of the Committee or a committee administering any other stock
option, stock appreciation, stock bonus or other stock plan of the Company be an
Eligible Employee.
(p) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
(q) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(r) "FAIR MARKET VALUE" shall mean, with respect to Common Stock, the price
at which the Stock sold on the last normal transaction of the trading day on a
specified date, or if no trading occurs on such specified date, on the most
recent preceding business day on which trading occurred, as quoted on the
National Market System of the National Association of Securities Dealers or on
any exchange upon which the stock may be traded.
(s) "INCENTIVE STOCK OPTION" shall mean an Option which is designated as an
incentive stock option within the meaning of Section 422 of the Code and which
contains such provisions as are necessary to comply with that section.
(t) "NONQUALIFIED STOCK OPTION" shall mean an Option that is designated as a
Nonqualified Stock Option and shall include any Option intended as an Incentive
Stock Option that fails to meet the applicable legal requirements thereof. Any
Option granted hereunder that is not designated as an incentive stock option
shall be deemed to be designated a nonqualified stock option under this Plan and
not an incentive stock option under the Code.
(u) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is not an
officer or employee of the Company.
(v) "OPTION" shall mean an option to purchase Shares under this Plan. The
Committee shall designate any Option granted to an Eligible Employee as a
Nonqualified Stock Option or an Incentive Stock Option.
(w) "OTHER ELIGIBLE PERSON" shall mean any other person (including
significant agents and consultants) who performs substantial services for the
Company of a nature similar to those performed by key employees, selected to
participate in this Plan by the Committee from time to time, PROVIDED that in no
event shall a Non-Employee Director be selected as an Other Eligible Person.
(x) "PARTICIPANT" shall mean an Eligible Employee who has been granted an
Award under this Plan.
(y) "PERFORMANCE SHARE AWARD" shall mean an Award made pursuant to the
provisions, and subject to the terms and conditions, of Article V of the Plan.
(z) "PERSONAL REPRESENTATIVE" shall mean the person or persons who, upon the
Total Disability or incompetence of a Participant, shall have acquired on behalf
of the Participant, by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan and who shall have become the legal
representative of the Participant.
(aa) "PLAN" shall mean this 1995 Omnibus Plan.
(bb) "QDRO" shall mean a qualified domestic relations order as defined in
Section 414 (p) of the Code or Title I, Section 206(d) (3) of ERISA (to the same
extent as if this Plan were subject thereto), or the applicable rules
thereunder.
(cc) "RESTRICTED STOCK" shall mean Shares awarded to a Participant subject
to payment of such consideration, if any, and such conditions on vesting and
such transfer and other restrictions as are established in or pursuant to this
Plan, for so long as such shares remain unvested under the terms of the
applicable Award Agreement.
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(dd) "RETIREMENT" shall mean retirement from active service as an employee
or officer of the Company on or after attaining age 65.
(ee) "RULE 16B-3" shall mean Rule 16b-3, as amended from time to time, as
promulgated by the Commission pursuant to the Exchange Act.
(ff) "SECTION 16 PERSON" shall mean a person subject to Section 16(a) of the
Exchange Act.
(gg) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
(hh) "SHARES" shall mean shares of Common Stock of the Company.
(ii) "STOCK APPRECIATION RIGHT" shall mean a right to receive a number of
Shares or an amount of cash, or a combination of shares and cash, the aggregate
amount or value of which is determined by reference to a change in the Fair
Market Value of the Shares that is authorized under the Plan.
(jj) "SUBSIDIARY" shall mean any corporation or other entity a majority of
whose outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.
(kk) "TOTAL DISABILITY" shall mean a "permanent and total disability" within
the meaning of Section 22(e) (3) of the Code and such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.
1.3. ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE
(a) COMMITTEE. This Plan shall be administered by, and all Awards to
Eligible Employees shall be authorized by, the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by unanimous written consent of its members.
(b) PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the express
provisions of this Plan the Committee shall have the authority:
(i) To determine, from among those persons eligible, the particular
Eligible Employees who will receive any Awards;
(ii) To grant Awards to Eligible Employees, determine the price at which
securities will be offered or awarded and the amount of securities to be
offered or awarded to any of such persons, and determine the other specified
terms and conditions of such Awards consistent with the express limits of
this Plan, and establish the installments (if any) in which such Awards
shall become exercisable or shall vest, or determine that no delayed
exercisability or vesting is required, and establish the events of
termination or reversion (if any) of such Awards;
(iii) To approve the forms of Award Agreements (which need not be
identical either as to type of Award or among Participants);
(iv) To construe and interpret this Plan and any agreements defining the
rights and obligations of the Company and Participants under this Plan,
further define the terms used in this Plan, and prescribe, amend and rescind
rules and regulations relating to the administration of this Plan;
(v) To cancel, modify, or waive the Company's rights with respect to, or
modify, discontinue, suspend, or terminate, any or all outstanding Awards
held by Participants, subject to any required consent under Section 7.6;
(vi) To accelerate or extend the exercisability or vesting extend the
term of any or all such outstanding Awards within the maximum ten-year term
of Awards under Section 1.7; and
(vii) To make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
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(c) BINDING DETERMINATIONS. Any action taken by, or inaction of, the
Company, the Board or the Committee relating or pursuant to this Plan shall be
within the absolute discretion of that entity or body and shall be conclusive
and binding upon all persons. No member of the Board or Committee, or officer of
the Company, shall be liable for any such action or inaction of the entity or
body, of another person or, except in circumstances involving bad faith, of
himself or herself. Subject only to compliance with the express provisions
hereof, the Board and Committee may act in their absolute discretion in matters
within their authority related to this Plan.
(d) RELIANCE ON EXPERTS. In making any determination or in taking or not
taking any action under this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts, including professional
advisors to the Company. No director, officer or agent of the Company shall be
liable for any such action or determination taken or made or omitted in good
faith.
(c) DELEGATION. The Committee may delegate ministerial, non-discretionary
functions to individuals who are officers or employees of the Company.
1.4. PARTICIPATION
Awards may be granted by the Committee only to those persons that the
Committee determines to be Eligible Employees. An Eligible Employee who has been
granted an Award may, if otherwise eligible, be granted additional Awards if the
Committee shall so determine. Non-Employee Directors shall be eligible to
receive Awards under this Plan only as specified in Section 2.8.
1.5. SHARES AVAILABLE FOR AWARDS
Subject to the provisions of Section 7.2, the capital stock that may be
delivered under this Plan shall be shares of the Company's authorized but
unissued Common Stock. The shares may be delivered for any lawful consideration.
(a) NUMBER OF SHARES. The maximum number of shares of Common Stock that may
be delivered pursuant to Awards granted to Eligible Employees under this Plan
shall not exceed 3,000,000 Shares subject to subsection (c) below and the
adjustments contemplated by Section 7.2. The maximum number of Options and Stock
Appreciation Rights (whether payable in Shares, cash or any combination thereof)
that may be granted to an Eligible Employee during any one-year period shall not
exceed 500,000 subject to adjustment as contemplated in Section 7.2.
(b) RESERVATIONS OF SHARES. Common Stock subject to outstanding Awards of
derivative securities (as defined in Rule 16a-(c) under the Exchange Act) shall
be reserved for issuance. If a Stock Appreciation Right or similar right based
on the increased market value of a specified number of Shares is exercised or a
Performance Shares Award is paid, the number of Shares to which such exercise or
payment relates under the applicable Award shall be charged against the maximum
amount of Shares that may be delivered pursuant to Awards under this Plan and,
if applicable, such Award. If the Company withholds Shares pursuant to Section
2.2(b) or 7.5, the number of shares that would have been deliverable with
respect to an Award shall be reduced by the number of shares withheld and such
shares shall not be available for additional Awards under this Plan. To the
extent a Performance Share Award constitutes an equity security (as this phrase
is defined in Rule 16a-1 under the Exchange Act) issued by the Company and is
paid in Shares the number of Shares (if any) subject to such Performance Share
Award shall be charged (but in the case of tandem or substituted Awards, without
duplication) against the maximum number of Shares that may be delivered pursuant
to Awards under this Plan.
(c) CASH ONLY AWARD LIMIT. Awards payable solely in cash under the Plan and
Awards payable either in cash or shares that are actually paid in cash shall
constitute and be referred to as "Cash Only Awards". The number of Cash Only
Awards shall be determined by reference to the number of Shares by which the
Award is measured. The maximum number of Cash Only Awards that may be paid shall
not, together with
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the aggregate number of Shares that may be delivered under subsection (a),
exceed 3,000,000 subject to adjustments under Section 7.2. Awards payable either
in cash or shares shall not be counted against the Cash Only Award limit if
charged against the share limit in subsection (a). Notwithstanding the
foregoing, if an Award paid or payable solely in cash satisfies the requirements
for the exclusion from the definition of a derivative security in Rule 16a-1(c)
that does not require that the award be made under a Rule 16b-3 plan, the Award
shall not be counted against any of the limits of this Section.
(d) REISSUE OF AWARDS. Subject to any restrictions under Rule 16b-3, the
shares which are subject to any unexercised, unconverted, unvested or
undistributed portion of any expired, canceled, terminated or forfeited Award,
or any alternative form of consideration under an Award that is not paid in
connection with the settlement of an Award or any portion of an Award shall
again be available for Award under subsection (a) or (c) above, as applicable,
PROVIDED the Participant has not received dividends or Dividend Equivalents
during the period in which the Participant's ownership was restricted or
otherwise not vested. Shares that are issued pursuant to Awards and subsequently
reacquired by the Company pursuant to the terms and conditions of the Awards
also shall be available for reissuance under the Plan. Nothing in this paragraph
shall be interpreted to allow shares which are in the possession of the Company
pursuant to either Section 2.2(b) or 7.5 to be available for reissuance under
the Plan.
(e) INTERPRETIVE ISSUES. Additional rules for determining the number of
shares or Cash Only Awards authorized under the Plan may be adopted by the
Committee as it deems necessary or appropriate; provided that such rules are
consistent with Rule 16b.
1.6. GRANT OF AWARDS
Subject to the express provisions of this Plan, the Committee shall
determine the number of Shares subject to each Award, and the price (if any) to
be paid for the Shares or the Award and, in the case of Performance Share
Awards, in addition to matters addressed in Section 1.3(b), the specific
objectives, goals and performance criteria (such as an increase in revenues,
market value, earnings or book value over a base period, the years of service
before vesting, the relevant job classification or level of responsibility or
other factors) that further define the terms of the Performance Share Award.
Each Award shall be evidenced by an Award Agreement signed by the Company and,
if required by the Committee, by the Participant.
1.7. AWARD PERIOD
Each Award and all executory rights or obligations under the related Award
Agreement shall expire on such Date (if any) as shall be determined by the
Committee, but, in the case of Options or other rights to acquire Shares, not
later than ten (10) years after the Award Date.
1.8. LIMITATIONS ON EXERCISE AND VESTING OF AWARDS
(a) PROVISIONS FOR EXERCISE. Except as may otherwise be provided in an Award
Agreement or herein, no Award shall be exercisable or shall vest until at least
six months after the initial Award Date. Once exercisable an Award shall remain
exercisable until the expiration or earlier termination of the Award, unless the
Committee otherwise provides.
(b) PROCEDURE. Any exercisable Award shall be deemed to be exercised when
the Secretary of the Company receives written notice of such exercise from the
Participant, together with any required payment made in accordance with Section
2.2(b).
(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interest shall be
disregarded, but may be accumulated. The Committee, however, may determine that
cash, other securities or other property will be paid or transferred in lieu of
any fractional share interests. No fewer than 100 Shares may be purchased on
exercise of any Award at one time unless the number purchased is the total
number at the time available for purchase under the Award.
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1.9. ACCEPTANCE OF NOTES TO FINANCE EXERCISE
The Company may, with the Committee's approval, accept one or more notes
from any Participant in connection with the exercise or receipt of any
outstanding Award; PROVIDED that any such note shall be subject to the following
terms and conditions:
(a) The principal of the note shall not exceed the amount required to be
paid to the Company upon the exercise or receipt of one or more Awards under
the Plan and the note shall be delivered directly to the Company in
consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the Committee;
provided that the term of the note, including extensions, shall not exceed a
period of 10 years.
(c) The note shall provide for full recourse to the Participant and
shall bear interest at a rate determined by the Committee but not less than
the applicable imputed interest rate specified by the Code.
(d) Except as otherwise provided by the Committee, if the employment of
the Participant terminates, the unpaid principal balance of the note shall
become due and payable on the 10th business day after such termination;
PROVIDED, HOWEVER, that if a sale of any Shares acquired by the Participant
in connection with an Award to which the note relates would cause such
Participant to incur liability under Section 16(b) of the Exchange Act, the
unpaid balance shall become due and payable on the 10th business day after
the first day on which a sale of such shares could have been made without
incurring such liability assuming for these purposes that there are no other
transactions by the Participant subsequent to such termination.
(e) If required by the Committee or by applicable law, the note shall be
secured by a pledge of any shares or rights financed thereby or any other
collateral determined by the Committee in compliance with applicable law.
(f) The terms, repayment provisions, and collateral release provisions
of the note and the pledge securing the note shall conform with applicable
rules and regulations of the Federal Reserve Board as then in effect and any
other applicable banking rules and regulations.
1.10. NO TRANSFERABILITY
(a) Awards may be exercised only by the Participant or, if the Participant
has died, the Participant's Beneficiary or, if the Participant has suffered a
Total Disability, the Participant's Personal Representative, if any, or if there
is none, the Participant, or (to the extent permitted by applicable law and Rule
16b-3) a third party pursuant to such conditions and procedures as the Committee
may establish. Other than by will or the laws of descent and distribution or
pursuant to a QDRO or other exception to transfer restrictions under Rule 16b-3
(except to the extent not permitted in the case of an Incentive Stock Option),
no right or benefit under this Plan or any Award, including, without limitation,
any Option or shares of Restricted Stock, that has not vested shall be
transferable by the Participant or shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge (other than to the Company) and any such attempted action shall be void.
The Company shall disregard any attempt at transfer, assignment or other
alienation prohibited by the preceding sentences and shall pay or deliver such
cash or Shares in accordance with the provisions of this Plan.
(b) The restrictions on exercise and transfer above shall not be deemed to
prohibit the authorization by the Committee of "cashless exercise" procedures
with unaffiliated third parties who provide financing for the purpose of (or who
otherwise facilities) the exercise of Awards consistent with applicable legal
restrictions and Rule 16b-3, nor, to the extent permitted by the Committee,
transfers for estate and financial planning purposes, notwithstanding that the
inclusion of such features may render the particular Awards ineligible for the
benefits of Rule 16b-3, nor, in the case of Participants who are not Section 16
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Persons, transfers to such other persons or in such other circumstances as the
Committee may in the Award Agreement or other writing expressly permit.
11. EMPLOYEE OPTIONS
2.1. GRANTS
One or more Options may be granted under this Article to any Eligible
Employee, subject to the provisions of Section 1.5. Each Option granted may be
either an Option intended to be an Incentive Stock Option or an Option not so
intended, and such intent shall be indicated in the applicable Award Agreement.
2.2. OPTION PRICE
(a) PRICING LIMITS. Subject to Section 2.4, the purchase price per share of
the Common Stock covered by each Option shall be determined by the Committee at
the time the Option is granted, but shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of the grant.
(b) PAYMENT PROVISIONS. The purchase price of any shares purchased on
exercise of an Option granted under this Article shall be paid in full at the
time of each purchase in one or a combination of the following methods: (i) in
cash or by electronic funds transfer; (ii) by check payable to the order of the
Company; (iii) if authorized by the Committee or specified in the applicable
Award Agreement, in cash in an amount equal to the par value of the shares being
purchased, and, in the form of a promissory note (consistent with the
requirements of Section 1.9) of the Participant in an amount equal to the
difference between said cash amount and the purchase price of such shares; (iv)
by notice and third party payment in such manner as may be authorized by the
Committee; (v) by the delivery of Shares already owned by the Participant;
PROVIDED, HOWEVER, that the Committee may in its absolute discretion limit the
Participant's ability to exercise an Award by delivering such Shares; or (vi) if
authorized by the Committee or specified in the applicable Award Agreement, by
reduction in the number of Shares otherwise deliverable upon exercise by that
number of Shares which have a then Fair Market Value equal to such purchase
price. Previously owned Shares used to satisfy the exercise price of an Option
under clause (v) shall be valued at their Fair Market Value on the date of
exercise.
2.3. LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS
(a) $100,000 LIMIT. To the extent that the aggregate "fair market value" of
Common Stock with respect to which Incentive Stock Options first become
exercisable by a Participant in any calendar year exceeds $100,000, taking into
account both Common Stock subject to Incentive Stock Options under this Plan and
stock subject to incentive stock options under all other plans of the Company,
such options shall be treated as Nonqualified Stock Options. For this purpose,
the "fair market value" of the Common Stock subject to Options shall be
determined as of the date the Options were awarded. In reducing the number of
Options treated as Incentive Stock Options to meet the $100,000 limit, the most
recently granted Options shall be reduced first. To the extent a reduction of
simultaneously granted Options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate which
shares of Common Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
(b) OPTION PERIOD. Subject to Section 2.4, each Option and all rights
thereunder shall expire no later than ten years after the Award Date.
(c) OTHER CODE LIMITS. There shall be imposed in any Award Agreement
relating to Incentive Stock Options such terms and conditions as from time to
time are required in order that the Option be an "incentive stock option" as
that term is defined in Section 422 of the Code.
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2.4. LIMITS ON 10% HOLDERS
No Incentive Stock Option may be granted to any person who, at the time the
Option is granted, owns (or is deemed to own under Section 424(d) of the Code)
shares of outstanding Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, unless the
exercise price of such Option with respect to the Common Stock covered by the
Option is at least 110% of the Fair Market Value of the Common Stock subject to
the Option and such Option by its terms is not exercisable after the expiration
of five years from the date such Option is granted.
2.5. OPTION REPRICING; CANCELLATION AND REGRANT; WAIVER OF RESTRICTIONS
Subject to Section 1.5 and Section 7.6 and the specific limitations on
Awards contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee,
any adjustment in the exercise or purchase price, the number of shares subject
to, the restrictions upon or the term of, an Award granted under this Article by
cancellation of an outstanding Award and a subsequent regranting of an Award, by
amendment, by substitution of outstanding Award, by waiver or by other legally
valid means. Such amendment or other action may result among other changes in an
exercise or purchase price which is higher or lower than the exercise or
purchase price of the original or prior Award, provide for a greater or lesser
number of shares subject to the Award, or provide for a longer or shorter
vesting or exercise period. Notwithstanding the foregoing, any amendment or
other action must contain terms and provisions permitted under the terms of this
Plan as if the Option were granted on the date of the amendment.
2.6. DIVIDEND EQUIVALENTS
The Committee may, at the time of granting an Option, grant Dividend
Equivalents attributable to Shares subject to the Option. Dividend Equivalents
shall be paid in cash only to the extent the Option is unexercised as of the
dividend record date, as specified in the Award Agreement, as follows: the
Dividend Equivalent per Share shall be multiplied by the number of Shares
subject to Option and an amount equal to the product so derived shall be paid in
cash to the Participant on the dividend payment date. The Committee may, in the
Award, specify that Dividend Equivalents shall be paid only for a specified time
period or only as to that portion of the Option that has vested.
2.7. SURRENDER OF STOCK OPTIONS
The Committee, in its sole discretion, shall have the authority under the
circumstances set forth herein to agree mutually with a Participant to grant
such Participant the right on such terms and conditions as the Committee may
prescribe, to surrender such Participant's Options to the Company for
cancellation and to receive upon such surrender a cash payment equal to the
Spread applicable to such surrendered Option. Such right shall be made available
only in the event of an Offer (as defined in the following paragraph).
The term "Offer" as used in this Section means any tender offer or exchange
offer for Shares, other than one made by the Company, provided that the
corporation, person or other entity making the offer acquires Shares pursuant to
such offer.
The term "Offer Price per Share" as used in this Section means the highest
price per share paid on any Offer which is in effect at any time during the
period beginning on the sixtieth day prior to the date on which the Option is
surrendered pursuant to this Section and ending on such date of surrender. Any
securities or property which are part or all of the consideration paid for
shares in the Offer shall be valued in determining the Offer Price per Share at
the higher of (a) the valuation placed on such securities or property by any
other corporation, person or entity making the Offer or (b) the valuation placed
on such securities or property by the Committee.
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The term "Spread" as used in this Section means with respect to any
surrendered Option and associated right, if any, an amount equal to the product
computed by multiplying (i) the excess of (A) the Offer Price per Share or the
highest market price per share of the Company's Common Stock during the period
beginning on the sixtieth day prior to the date on which the Stock Option is
surrendered pursuant to this Section and ending on such date of surrender over
(B) the purchase price per share at which the surrendered Option is then
exercisable, by (ii) the number of shares subject to such Option with respect to
which it has not theretofore been exercised.
2.8. SPECIAL REQUIREMENTS FOR DIRECTOR STOCK OPTIONS
(a) ELIGIBILITY. All directors of the Company who are not employees of the
Company shall be eligible to receive Director Stock Options, as set forth in
this Section 2.8. Notwithstanding the foregoing, any director who is, or who
during the preceding calendar year was, a member of the Committee or any
committee administering any other stock option, stock appreciation, stock bonus
or other stock plan of the Company or any Subsidiary will not be eligible to
receive Director Stock Options hereunder if, in the opinion of counsel for the
Company, the receipt of Director Stock Options will cause such director to cease
to be a "disinterested person" with respect to the Plan or any other stock
option, stock appreciation, stock bonus or other stock plan of the Company or
any Subsidiary pursuant to Rule 16b-3 of the Securities and Exchange Commission,
or will otherwise disqualify the Plan or any other such plan from compliance
with said rule.
(b) GRANT OF DIRECTOR OPTIONS. Every eligible director will receive Director
Stock Options having a value equal to the Retainer Amount for the year beginning
on the date of each annual meeting of shareholders. Director Stock Options shall
be granted automatically to each such eligible director on the business day
following such annual meeting of shareholders, without further action of the
Committee or the Board. The number of Director Stock Options granted hereunder
shall be determined according to the following formula, rounded to the nearest
share: The Retainer Amount shall be divided by the Fair Market Value of a share
of stock on the date of the annual meeting of shareholders immediately preceding
the grant less $1.00. The "Retainer Amount" shall be $3,000.
(c) STOCK OPTION PRICE. The purchase price of stock pursuant to a Director
Stock Option shall be $1.00 per share.
(d) OTHER TERMS OF DIRECTOR STOCK OPTIONS. Each Director Stock Option shall
become exercisable six (6) months after the date of grant. Unless otherwise
determined by the Committee, if the holder of Director Stock Options ceases to
serve as a director of the Company for any reason other than for cause, the
Director Stock Options shall expire at the end of their fixed term or three
months after the date of such termination, and until then shall be exercisable
in full, regardless of any vesting schedule otherwise applicable. Except as set
forth in Section 2.8, all terms and provisions of the Director Stock Options
shall be as set forth in the Plan with respect to Options which are not Director
Stock Options.
III. STOCK APPRECIATION RIGHTS
3.1. GRANTS
In its discretion, the Committee may grant to any Eligible Employee Stock
Appreciation Rights either concurrently with the grant of another Award or in
respect of an outstanding Award, in whole or in part, or independently of any
other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations promulgated
thereunder.
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3.2. EXERCISE OF STOCK APPRECIATION RIGHTS
(a) EXERCISABILITY. A Stock Appreciation Right related to another Award
shall be exercisable at such time or times, and to the extent, that the related
Award shall be exercisable, PROVIDED, HOWEVER, that any exercise of any Stock
Appreciation Right hereunder shall be made beginning on the third business day
following the date of release of the financial data specified in paragraph
(e)(I)(ii) of Rule 16b-3 of the regulations promulgated under the Securities
Exchange Act of 1934 and ending on the twelfth business day following such date
or at such other time as may be permitted under an agreement or successor rule.
(b) EFFECT ON AVAILABLE SHARES. In the event that a Stock Appreciation Right
is exercised, the number of Shares subject to the Award shall be charged against
the number of Shares subject to the Stock Appreciation Right and the related
Option on the Participant.
(c) STAND-ALONE SARS. A Stock Appreciation Right granted independently of
any other Award shall be exercisable pursuant to the terms of the Award
Agreement but, unless the Committee determines otherwise, in no event earlier
than six months after the Award Date.
3.3. PAYMENT
(a) AMOUNT. Unless the Committee otherwise provides, upon exercise of a
Stock Appreciation Right, the Participant shall be entitled to receive payment
of an amount determined by multiplying
(i) The difference obtained by subtracting the exercise price per Share
under the related Award (if applicable) or the initial share value specified
in the Award from the Fair Market Value of a Share on the date of exercise
of the Stock Appreciation Right, by
(ii) The number of Shares with respect to which the Stock Appreciation
Right shall have been exercised.
Notwithstanding the above, the Committee may place a maximum limitation on
the amount payable upon exercise of a Stock Appreciation Right. Such limitation,
however, must be determined as of the date of the grant and noted on the
instrument evidencing the Stock Appreciation Right granted hereunder.
(b) FORM OF PAYMENT. The Committee, in its sole discretion, shall determine
the form in which payment shall be made of the amount determined under paragraph
(a) above, either solely in cash, solely in Shares (valued at Fair Market Value
on the date of exercise of the Stock Appreciation Right), or partly in such
Shares and partly in cash, PROVIDED that the Committee shall have determined
that such exercise and payment are consistent with applicable law. If the
Committee permits the Participant to elect to receive cash or Shares (or a
combination thereof) on such exercise, any such election shall be subject to
such conditions as the Committee may impose and, in the case of any Section 16
Person, any election to receive cash shall be subject to any applicable
limitations under Rule 16b-3.
IV. RESTRICTED STOCK AWARDS
4.1. GRANTS
The Committee may, in its discretion, grant one or more Restricted Stock
Awards to any Eligible Employee. Each Restricted Stock Award Agreement shall
specify the number of Shares to be issued, the date of such issuance, the
consideration for such Shares (but not less than the minimum lawful
consideration) to be paid, if any, by the Participant and the restrictions
imposed on such Shares and the conditions of release or lapse of such
restrictions. Such restrictions shall not lapse earlier than six months after
the Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("restricted shares") shall bear a legend making appropriate
reference to the restrictions imposed hereunder and shall be held by the Company
or by a third party designated by the Committee until the restrictions on such
shares shall have lapsed and the shares shall have vested in accordance with the
provisions of the Award and Section 1.8. Upon issuance of
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the Restricted Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require to enforce the
restrictions.
4.2. RESTRICTIONS
(a) PRE-VESTING RESTRAINTS. Except as provided in Section 1.10 and 4.1,
restricted shares comprising any Restricted Stock Award may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered either
voluntarily or involuntarily, until such shares have vested.
(b) DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in the applicable
Award Agreement, a Participant receiving a Restricted Stock Award shall be
entitled to cash dividend and voting rights for all shares issued even though
they are not vested, PROVIDED that such rights shall terminate immediately as to
any restricted shares which cease to be eligible for vesting.
(c) CASH PAYMENTS. If the Participant shall have paid or received cash
(including any dividends) in connection with the Restricted Stock Award, the
Award Agreement shall specify whether and to what extent such cash shall be
returned (with or without an earnings factor) as to any restricted shares which
cease to be eligible for vesting.
4.3. RETURN TO THE COMPANY
Unless the Committee otherwise expressly provides, shares of Restricted
Stock that are subject to restrictions at the time of termination of employment
or are subject to other conditions to vest that have not been satisfied by the
time specified in the applicable Award Agreement shall not vest and shall be
returned to the Company in such manner and on such terms as the Committee shall
therein provide.
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES
5.1. GRANTS OF PERFORMANCE SHARE AWARDS
The Committee may, in its discretion, grant one or more Performance Share
Awards to any Eligible Employee based upon such factors, which in the case of
any Award to a Section 16 Person shall include but not be limited to the
contributions, responsibilities and other compensation of the person, as the
Committee shall deem relevant in light of the specific type and terms of the
Award. An Award Agreement shall specify the maximum number of Shares (if any)
subject to the Performance Share Award, the consideration (but not less than the
minimum lawful consideration) to be paid for any such Shares as may be issuable
to the Participant, the duration of the Award and the conditions upon which
delivery of any Shares or cash to the Participant shall be based. The amount of
Shares that may be deliverable pursuant to such Award shall be based upon the
degree of attainment over a specified period (a "performance cycle") as may be
established by the Committee of such measure(s) of the performance of the
Company (or any part thereof) or the Participant as may be established by the
Committee. The Committee may provide for full or partial credit, prior to
completion of such performance cycle or the attainment of the performance
achievement specified in the Award, in the event of the Participant's death,
Retirement, or Total Disability, a Change in Control Event or in such other
circumstances as the Committee, consistent with Section 7.10(c)(2), if
applicable, may determine.
5.2. GRANTS OF STOCK BONUSES
The Committee may grant a stock bonus to any Eligible Employee to reward
exceptional or special services, contributions or achievements in the manner and
on such terms and conditions (including any restrictions on such shares) as
determined from time to time by the Committee.
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The number of Shares so awarded shall be determined by the Committee. The
stock bonus may be granted independently or in lieu of a cash bonus.
5.3. DEFERRED PAYMENTS
The Committee may authorize for the benefit of any Eligible Employee the
deferral of any payment of cash or Shares that may become due or of cash
otherwise payable under this Plan, and provide for accreted benefits thereon
based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
VI. TAX OFFSET BONUS RIGHTS
6.1. GRANTS
The Committee may, in its discretion, grant Tax Offset Bonus Rights to
selected Participants. Such rights shall be evidenced by Tax Offset Bonus Rights
agreements on the terms and conditions set forth in the Plan, which agreements
shall specify the amount or method of calculating the amount of the rights being
granted and may contain such other terms and conditions as are not inconsistent
with the purposes and provisions of the Plan. Each Tax Offset Bonus Right must
relate to a specific Nonqualified Stock Option granted under Section II of the
Plan. Tax Offset Bonus Rights granted in relation to a specific Nonqualified
Stock Option shall be granted either concurrently or at such later time as
determined by the Committee. The amount of any Tax Offset Bonus Right may be,
but is not required to be, calculated as a specified percentage of the excess of
the Fair Market Value of a share of the Company's Common Stock on the date when
the right is exercised over the price per share under the Option exercised
concurrently with the exercise of such right.
6.2. TAX OFFSET BONUS RIGHTS PERIOD
Each Tax Offset Bonus Right and all rights or obligations thereunder shall
expire upon the expiration of the related Nonqualified Stock Option. In no event
may a Tax Offset Bonus Right be exercised later than the tenth anniversary of
the date on which the Tax Offset Bonus Right is granted, and shall be subject to
earlier termination as hereinafter provided.
6.3. EXERCISE OF RIGHTS
Tax Offset Bonus Rights shall be exercisable to the extent, and only to the
extent, the related Nonqualified Stock Option is exercisable. Tax Offset Bonus
Rights shall only be exercisable concurrently with the exercise of the related
Nonqualified Stock Option; any exercise of the Nonqualified Stock Option shall
also be deemed an exercise of the equivalent number of Tax Offset Bonus Rights.
Each holder of a Tax Offset Bonus Right shall agree to give the Committee
prompt written notice of an election made by such holder to exercise said Tax
Offset Bonus Rights subject to the approval of the Committee.
Despite any other provision of the Plan, the Committee may impose such
conditions on exercise of Tax Offset Bonus Rights as may be required to satisfy
the requirements of Rule 16b-3 (or any successor rule), promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934.
Any exercise of a Tax Offset Bonus Right hereunder shall be made beginning
on the third business day following the date of release of the financial data
specified in paragraph (e)(1)(ii) of Rule 16b-3 of the regulations promulgated
under the Securities Exchange Act of 1934 and ending on the twelfth business day
following such date or at such other time as may be permitted under an amendment
or successor rule.
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6.4. PAYMENTS
Upon the exercise of a Tax Offset Bonus Right, the Company shall deliver to
the person exercising such right the amount of the right being exercised,
calculated as specified in the Tax Offset Bonus Right agreement with respect
thereto. Payment shall be in either cash, Common Stock or a combination thereof,
as the Committees shall determine. No fractional shares will be issued.
6.5. TERMINATION OF EMPLOYMENT
Unless otherwise determined by the Committee, in the event a Participant
ceases to be an employee of the Company for any reason, any Tax Offset Bonus
Right will be exercisable only to the extent that any related Nonqualified Stock
Option is exercisable under the applicable provisions of the Plan and related
Award Agreement.
VII. OTHER PROVISIONS
7.1. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES
(a) EMPLOYMENT STATUS. Status as an Eligible Employee shall not be construed
as a commitment that any Award will be made under this Plan to an Eligible
Employee or to Eligible Employees generally.
(b) NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in any other
documents related to this Plan or to any Award) shall confer upon any Eligible
Employee or Participant any right to continue in the employ or other service of
the Company or constitute any contract or agreement of employment or other
service, nor shall interfere in any way with the right of the Company to change
such person's compensation or other benefits or to terminate the employment of
such person, with or without cause, but nothing contained in this Plan or any
document related hereto shall adversely affect any independent contractual right
of such person without his or her consent thereto.
(c) PLAN NOT FUNDED. Awards payable under this Plan shall be payable in
Shares or from the general assets of the Company, and no special or separate
reserve, fund or deposit shall be made to assure payment of such Awards. No
Participant, Beneficiary or other person shall have any right, title or interest
in any fund or in any specific asset (including shares of Common Stock except as
expressly otherwise provided) of the Company by reason of any Award hereunder.
Neither the provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Company and any participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive payment pursuant to any Award
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
7.2. ADJUSTMENTS; ACCELERATION
(a) ADJUSTMENTS. If the outstanding shares of Common Stock are changed into
or exchanged for cash, other property or a different number or kind of shares or
securities of the Company, or if additional shares or new or different
securities are distributed with respect to the outstanding shares of Common
Stock, through a reorganization or merger in which the Company is the surviving
entity, or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split, stock
consolidation, dividend or distribution of cash or property to the shareholders
of the Company or if there shall occur any other extraordinary corporate
transaction or event in respect of the Common Stock or a sale of substantially
all the assets of the Company as an entirety which in the judgment of the
Committee materially affects the Common Stock, then the Committee shall, in such
manner and to such extent (if any) as it deems appropriate and equitable (1)
proportionately adjust any or all terms of outstanding Awards including, but not
limited to (A) the number and kind of shares of Common Stock or other
consideration that is subject to or may be delivered under this Plan and
pursuant to outstanding Awards, (B) the
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consideration payable with respect to Awards granted prior to any such change
and the price, if any, paid in connection with Restricted Stock Awards or (C)
the performance standards appropriate to any outstanding Awards; or (2) in the
case of an extraordinary dividend or other distribution, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin off,
make provision for a cash payment or for the substitution or exchange of any or
all outstanding Awards or the cash, securities or property deliverable to the
holder of any or all outstanding Awards based upon the distribution or
consideration payable to holders of Common Stock upon or in respect of such
event; PROVIDED, HOWEVER, in each case, that with respect to Awards of Incentive
Stock Options, no such adjustment shall be made which would cause the Plan to
violate Section 422 or 424(a) of the Code or any successor provisions thereto.
Corresponding adjustments shall be made with respect to any Stock Appreciation
Rights based upon the adjustments made to the Options to which they are related.
In any of such events, the Committee may take such action sufficiently prior to
such event if necessary to permit the Participant to realize the benefits
intended to be conveyed with respect to the underlying shares in the same manner
as is available to shareholders generally.
(b) ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. As to any or all
Participants, upon the occurrence of a Change in Control Event (i) each Option
and Stock Appreciation Right shall become immediately exercisable, (ii)
Restricted Stock shall immediately vest free of restrictions, and (iii) each
Performance Share Award shall become payable to the Participant; PROVIDED,
HOWEVER, that in no event shall any Award be accelerated as to any Section 16
Person to a date less than six months after the Award Date of such Award.
Notwithstanding the foregoing, prior to a Change in Control Event, the Committee
may determine that, upon its occurrence, there shall be no acceleration of
benefits under Awards or determine that only certain or limited benefits under
Awards shall be accelerated and the extent to which they shall be accelerated,
and/or establish a different time in respect of such event for such
acceleration. In that event, the Committee will make provision in connection
with such transaction for continuance of the Plan and the assumption of Options
and Awards theretofore granted, or the substitution for such with new Options
and Awards covering the stock of a successor employer corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to number and kind of
shares and prices. In addition, the Committee may override the limitations on
acceleration in this Section 7.2(b) by express provision in the Award Agreement
and may accord any Participant a right to refuse any acceleration, whether
pursuant to the Award Agreement or otherwise, in such circumstances as the
Committee may approve. Any acceleration of Awards shall comply with applicable
regulatory requirements including without limitation Section 422 of the Code.
(c) POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any Option or other
right to acquire Shares under this Plan has not been exercised prior to (i) a
dissolution of the Company, (ii) a reorganization event described in Section
7.2(a) that the Company does not survive, or (iii) the consummation of a
reorganization event described in Section 7.2(a) that results in a Change in
Control Event approved by the Board and no provision has been made for the
survival, substitution, exchange or other settlement of such Option or right,
such Option or right shall thereupon terminate.
7.3. EFFECT OF TERMINATION OF EMPLOYMENT
The Committee shall establish in respect of each Award granted to an
Eligible Employee the effect of a termination of employment on the rights and
benefits thereunder and in so doing may make distinctions based upon the cause
of termination, E.G., retirement, early retirement, termination for cause,
disability or death. Notwithstanding any terms to the contrary in an Award
Agreement or this Plan, the Committee may decide in its complete discretion to
extend the exercise period of an Award (although not beyond the period described
in Section 2.3(b)) and the number of shares covered by the Award with respect to
which the Award is exercisable or vested.
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7.4. COMPLIANCE WITH LAWS
This Plan, the granting and vesting of Awards under this Plan and the offer,
issuance and delivery of Shares and/or the payment of money under this Plan or
under Awards granted hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including, but not limited to,
state and federal securities laws and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company, as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements.
7.5. TAX WITHHOLDING
(a) CASH OR SHARES. Upon any exercise, vesting, or payment of any Award, the
Company shall have the right at its option to (i) require the Participant (or
Personal Representative or Beneficiary, as the case may be) to pay or provide
for payment of the amount of any taxes which the Company may be required to
withhold with respect to such transaction or (ii) deduct from any amount payable
in cash the amount of any taxes which the Company may be required to withhold
with respect to such cash amount. In any case where a tax is required to be
withheld in connection with the delivery of Shares under this Plan, the
Committee may grant (either at the time of the Award or thereafter) to the
Participant the right to elect, or the Committee may require (either at the time
of the Award or thereafter), pursuant to such rules and subject to such
conditions as the Committee may establish, to have the Company reduce the number
of shares to be delivered by the appropriate number of shares valued at their
then Fair Market Value, to satisfy such withholding obligation.
(b) TAX LOANS. The Committee may, in its discretion, authorize a loan to an
Eligible Employee in the amount of any taxes which the Company may be required
to withhold with respect to Shares received (or disposed of, as the case may be)
pursuant to a transaction described in subsection (a) above. Such a loan shall
be for a term, at a rate of interest and pursuant to such other terms and
conditions as the Committee, under applicable law, may establish and such loan
need not comply with the provisions of Section 1.9.
7.6. PLAN AMENDMENT, TERMINATION AND SUSPENSION
(a) BOARD AUTHORIZATION. The Board may, at any time, terminate or, from time
to time, amend, modify or suspend this Plan, in whole or in part. No Awards may
be granted during any suspension of this Plan or after termination of this Plan,
but the Committee shall retain jurisdiction as to Awards then outstanding in
accordance with the terms of this Plan. Any suspension will not affect the
expiration of the Plan set forth in Section 7.9.
(b) SHAREHOLDER APPROVAL. If any amendment would (i) materially increase the
benefits accruing to participants under this Plan, (ii) materially increase the
aggregate number of securities that may be issued under this Plan, or (iii)
materially modify the requirements as to eligibility for participation in this
Plan, then to the extent then required by Rule 16b-3 to secure benefits
thereunder or to avoid liability under Section 16 of the Exchange Act (and Rules
thereunder) or required under Section 424 of the Code or any other applicable
law, or deemed necessary or advisable by the Board, such amendment shall be
subject to shareholder approval. Notwithstanding the foregoing, the provisions
of Section 2.8 shall not be amended more than once every six months other than
to comport with changes in the Code, ERISA or the rules thereunder.
(c) AMENDMENTS TO AWARDS. Without limiting any other express authority of
the Committee under, but subject to the express limits of, this Plan, the
Committee by agreement or resolution may waive conditions of or limitations on
Awards that the Committee in the prior exercise of its discretion has imposed,
without the consent of the Participant, and may make other changes to the terms
and conditions of Awards that do
47
<PAGE>
not affect in any manner materially adverse to the Participant his or her rights
and benefits under an Award.
(d) LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment, suspension
or termination of the Plan or change of or affecting any outstanding Award
shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Company under any Award granted under this Plan prior to
the effective date of such change. Changes contemplated by Section 7.2 shall not
be deemed to constitute changes or amendments for purposes of this Section 7.6
7.7. PRIVILEGES OF STOCK OWNERSHIP
Except as otherwise expressly authorized by the Committee or this Plan, a
Participant shall not be entitled to any privilege of stock ownership as to any
Shares not actually delivered to and held of record by him or her. No adjustment
will be made for dividends or other rights as a shareholder for which a record
date is prior to such date of delivery.
7.8. EFFECTIVE DATE OF THIS PLAN
This Plan shall be effective as of February 22, 1995, the date of Board
approval, subject to shareholder approval within 12 months thereafter.
7.9. TERM OF THE PLAN
No Award shall be granted more than ten years after the effective date of
this Plan (the "termination date"). Unless otherwise expressly provided in this
Plan or in an applicable Award Agreement, any Award thereto granted may extend
beyond such date, and all authority of the Committee with respect to Awards
hereunder shall continue during any suspension of this Plan and in respect of
outstanding Awards on such termination date.
7.10. GOVERNING LAW; CONSTRUCTION SEVERABILITY
(a) CHOICE OF LAW. This Plan, the Awards, all documents evidencing Awards
and all other related documents shall be governed by, and construed in
accordance with the laws of the State of California applicable to contracts made
and performed within such State, except as such laws may be supplanted by the
laws of the United States of America, which laws shall then govern its effect
and its construction to the extent they supplant California law.
(b) SEVERABILITY. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.
(c) PLAN CONSTRUCTION.
(1) It is the intent of the Company that this Plan and Awards hereunder
satisfy and be interpreted in a manner that in the case of Participants who
are or may be subject to Section 16 of the Exchange Act satisfies the
applicable requirements of Rule 16b-3 so that such persons will be entitled
to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of
the Exchange Act and will not be subjected to avoidable liability
thereunder. If any provision of this Plan or any Award or any prior action
by the Committee would otherwise frustrate or conflict with the intent
expressed above, that provision to the extent possible shall be interpreted
and deemed amended so as to avoid such conflict, but to the extent of any
remaining irreconcilable conflict with such intent as to such persons in the
circumstances, such provision shall be deemed void.
(2) It is further intent of the Company that options or Stock
Appreciation Rights with an exercise or base price not less than Fair Market
Value on the date of grant, that are granted to or held
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by a Section 16 Person, shall qualify as performance-based compensation
under Section 162(m) of the Code, and this Plan shall be interpreted
consistent with such intent.
7.11. CAPTIONS
Captions and headings are given to the sections and subsections of this Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
7.12. NON-EXCLUSIVITY OF PLAN
Nothing in this Plan shall limit or be deemed to limit the authority of the
Board or the Committee to grant awards or authorize any other compensation, with
or without references to the Common Stock under any other plan or authority.
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EXHIBIT B
AMENDED AND RESTATED SECTION 2.8
OF
CITY NATIONAL CORPORATION 1995 OMNIBUS PLAN
2.8 SPECIAL REQUIREMENTS FOR DIRECTOR STOCK OPTIONS.
(a) ELIGIBILITY. All directors of the Company who are not employees of the
Company shall be eligible to receive Director Stock Options, as set forth in
this Section 2.8. Notwithstanding the foregoing, any director who is, or who
during the preceding calendar year was, a member of the Committee or any
committee administering any other stock option, stock appreciation, stock bonus
or other stock plan of the Company or any Subsidiary will not be eligible to
receive Director Stock Options hereunder if, in the opinion of counsel for the
Company, the receipt of Director Stock Options will cause such director to be a
"disinterested person" with respect to the Plan or any other stock option, stock
appreciation, stock bonus or other stock plan of the Company or any subsidiary
pursuant to Rule 16b-3 of the Securities and Exchange Commission, or will
otherwise disqualify the Plan or any other such Plan from compliance with said
rule.
(b) GRANT OF DIRECTOR OPTIONS. Every eligible director will receive five
hundred (500) Director Stock Options on the date of each annual meeting of
shareholders. Director Stock Options shall be granted automatically to each such
eligible director on the business day following such annual meeting of
stockholders, without further action of the Committee or the Board.
(c) STOCK OPTION PRICE. The purchase price of the stock pursuant to a
Director Stock Option shall be $1.00 per share.
(d) OTHER TERMS OF DIRECTOR STOCK OPTIONS. Each Director Stock Option shall
become exercisable six (6) months after the date of grant. Unless otherwise
determined by the Committee, if the holder of Director Stock Options ceases to
serve as a director of the Company for any reason other than for cause, the
Director Stock Options shall expire at the end of their fixed term, or three
months after the date of such termination, and until then shall be exercisable
in full, regardless of any vesting schedule otherwise applicable. Except as set
forth in this Section 2.8, all terms and provisions of the Director Stock
Options shall be as set forth in the Plan with respect to options which are not
Director Stock Options.
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CITY NATIONAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--APRIL 16, 1997
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 on April 16, 1997, at 4:30 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:
<TABLE>
<S> <C> <C>
(1) ELECTION OF DIRECTORS
/ / FOR all the nominees listed below to / / WITHHOLD AUTHORITY
serve as Class I directors for a term of to vote for all nominees listed below
three years.
(EXCEPT AS MARKED TO THE CONTRARY BELOW)
</TABLE>
George H. Benter, Jr., Stuart D. Buchalter and Andrea L. Van De Kamp.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.
________________________________________
<TABLE>
<S> <C> <C>
(2) AMENDMENT TO THE 1995 OMNIBUS PLAN
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN FROM
<TABLE>
<S> <C> <C>
Approval of the amendment of the City National Corporation 1995 Omnibus Plan to revise the
provision relating to the method of granting non-employee Director Stock Options.
(3) In their discretion, upon all other matters as may properly be brought before the meeting
or any adjournments thereof.
</TABLE>
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED AS
SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR
OF THE ABOVE MATTERS.
Please complete, sign and mail this Proxy promptly in the enclosed addressed
envelope which requires no postage if mailed in the United States.
Dated ______________________, 1997
__________________________________
__________________________________
Signature of Shareholder
(Please sign your name exactly as
it appears hereon. In the case of
stock held in joint tenancy, all
joint tenants must sign.
Fiduciaries should indicate title
and authority.)
