Document:

Exhibit 10.4

 

PERFORMANCE UNIT AWARD AGREEMENT

ADDENDUM

(PERFORMANCE METRICS BASED)

 

THIS ADDENDUM TO THE PERFORMANCE UNIT AWARD AGREEMENT provides the rules and procedures relating to the grant of the Performance Unit Award and the operation of the Performance Unit Account.

 

A.                                    Definitions.  Any capitalized terms used, but not defined, in this Addendum shall have the meaning set forth in the Performance Unit Award Agreement (Performance Metrics Based).  Whenever the following terms are used in the Performance Unit Award Agreement or in this Addendum, they shall have the meaning specified below, unless the context clearly indicates to the contrary:

 

1.                                      2008 Agreement means the Employment Agreement, dated as of December22, 2008, by and between Colleague and City National Corporation, as amended.

 

2.                                      2010 Agreement means the Amended and Restated Employment Agreement made as of the 24th day of June, 2010, by and between Colleague, City National Bank and City National Corporation, as amended on March 14, 2012 and July 14, 2014.

 

3.                                      Award Metrics means (1) Growth in Cumulative Actual Diluted Earnings Per Share, (2) Return on Tangible Common Equity, (3) Net Charge-Offs to Total Loans, and (4) Non-Performing Assets to Total Loans and Other Real Estate Owned.

 

4.                                      Change in Control Event shall have the meaning assigned to it in the Plan.

 

5.                                      Disability means Colleague shall become incapable of fulfilling his obligations because of injury or physical or mental illness which shall exist or may reasonably be anticipated to exist for a period of twelve (12) consecutive months or for an aggregate of twelve (12) months during any twenty-four (24) month period.

 

6.                                      Growth in Cumulative Actual Diluted Earnings Per Share means the cumulative growth rate for the Company’s actual diluted earnings per share for each of the calendar years during the Performance Period. The cumulative growth rate is calculated by summing the earnings per share achieved in calendar years 2015, 2016, and 2017 and dividing by 3 times the value of the baseline earnings per share (which is the actual diluted earnings per share reported for calendar year 2014). For example, if earnings per share achieved in calendar years 2015, 2016, and 2017 were $5.50, $6.50, and $7.50, respectively, and the baseline earnings per share value was $4.50 (earnings per share achieved in calendar 2014), then the cumulative growth rate would equal 44.4%. In the event of a partial Performance Period, Growth in Cumulative Actual Diluted Earnings Per Share shall be determined using a weighted average for each calendar quarter included in the applicable Performance Period as reported by SNL Financial. For example, if earnings per share achieved in calendar year 2015 was $5.50 and earnings per share achieved in the first quarter of calendar year 2016 was $1.63, and the baseline earnings per share value was $4.50, then the cumulative growth rate would equal 26.8%.

 

7.                                      Net Charge-Offs to Total Loans means the average of the annualized loans and leases charged off, net of recoveries, as a percent of total loans and leases, excluding covered loans as reported by SNL Financial, for each of the calendar years during the Performance Period.  In the event of a partial Performance Period, Net Charge-Offs to Total Loans shall be determined using a weighted

 

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average for each calendar quarter included in the applicable Performance Period as reported by SNL Financial.

 

8.                                      Non-Performing Assets to Total Loans and Other Real Estate Owned means the average of the annual non-performing assets excluding covered assets as a percent of total loans and other real estate owned, excluding covered assets, as reported by SNL Financial, for each of the calendar years during the Performance Period.  In the event of a partial Performance Period, Non-Performing Assets to Total Loans and Other Real Estate Owned shall be determined using a weighted average for each calendar quarter included in the applicable Performance Period as reported by SNL Financial.

 

9.                                      Peer Banks means the component companies ranked as the 11th through 50th of the largest banks in the SNL Bank Index (but excluding the Company) as measured by assets based on the most recently available public data as of the first day of the Performance Period or if the SNL Bank Index is no longer maintained or is no longer appropriate, in the reasonable judgment of the Committee, the Peer Banks listed in any other reasonably comparable index prepared by a third party or the Committee of publicly-traded financial companies such that the Company falls between the 25th and 75th percentile in terms of size of market capitalization and/or assets.  If on the last day of the Performance Period, a Peer Bank would not otherwise qualify as a “Peer Bank” if the component companies were determined on the last day of the Performance Period, such Peer Bank shall be disregarded and shall not be replaced.

 

10.                               Performance Unit Account means the memorandum account maintained by the Company on behalf of Colleague which is credited with Performance Units.  Each Performance Unit represents the right to receive a distribution of cash in an amount as provided in the Performance Unit Award Agreement and this Addendum.

 

11.                               Return on Tangible Common Equity means the average of the annual return on tangible common equity, which excludes intangible assets and their related amortization expense, as reported by SNL Financial, for each of the calendar years during the Performance Period.  In the event of a partial Performance Period, Return on Tangible Common Equity shall be determined using a weighted average for each calendar quarter included in the applicable Performance Period as reported by SNL Financial.

 

B.                                    Performance Unit Account.  As soon as practicable following the first day of the Performance Period, the Company shall credit Colleague’s Performance Unit Account with the Performance Units.

 

C.                                    Lapse of Forfeiture Restrictions.  The Performance Unit Award is subject to forfeiture based on continued service until the forfeiture restrictions lapse in accordance with Section 2(b) of the Performance Unit Award Agreement.

 

Notwithstanding the forfeiture provision in Section 2(b) of the Performance Unit Award Agreement, the service-based forfeiture restrictions on the Performance Units shall immediately lapse:

 

·                  upon Colleague’s termination of employment by the Company without good cause or by Colleague for good reason (as those terms are defined in the 2010 Agreement) prior to a Change in Control Event;

 

·                  upon Colleague’s voluntary termination of employment for any reason or by the Company without good cause (as such term is defined in the 2010 Agreement) on or after expiration of the 2010 Agreement as provided in Section 10(f) of the 2010 Agreement prior to a Change in Control Event;

 

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·                  upon Colleague’s termination of employment by the Company without cause or by Colleague for good reason (as those terms are defined in the 2008 Agreement) following a Change in Control Event; or

 

·                  upon Colleague’s termination of employment due to death or Disability.

 

D.                                    Payment Date.

 

1.                                      Except as set forth in paragraph 2 of this Section D, the Earned Payout as determined in Section 1(a)(ii) of the Performance Unit Award Agreement, if any, shall be distributed to Colleague (or, in the event of his death, Colleague’s Beneficiary) in cash in a lump sum payment as soon as reasonably practicable following the end of the Performance Period, but no later than seventy-five (75) days thereafter.

 

2.                                      Subject to Section E, upon Colleague’s separation from service (within the meaning of Section 409A of the Code and the Treasury Regulations thereunder) following a Change in Control Event that results in the lapse of forfeiture restrictions as set forth in Section C of this Addendum, the payment shall be paid as soon as reasonably practicable following the date the lapse of forfeiture restrictions occurs, but in no event later than thirty (30) days (or such longer period, not to exceed seventy-five (75) days, as is required in order to determine the Earned Payout pursuant to Section 1(a)(vi) of the Performance Unit Award Agreement) thereafter; provided that if the Performance Units constitute nonqualified deferred compensation within the meaning of Section 409A of the Code, then this sentence shall only apply to the Performance Units if (a) such separation from service occurs within twenty four months following a Change in Control Event and (b) such Change in Control Event constitutes a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5). Except to the extent provided by the preceding sentence, the Earned Payout shall be paid according to the schedule set forth in paragraph 1 of this Section D.

 

E.                                     Plan Construction.  It is the intent of the Company that the Performance Units shall comply with Section 409A of the Code, and the Performance Unit Award Agreement and this Addendum shall be interpreted in a manner which is consistent with the foregoing intent.  Any provisions of the Performance Unit Award Agreement and this Addendum which would not comply with the requirements of Section 409A of the Code and the Treasury Regulations adopted thereunder shall be deemed to be modified or eliminated in order to comply with these requirements.  Sections 10(h) and 24 of the 2010 Employment Agreement addressing the application of Section 409A of the Code are hereby incorporated by reference.  Notwithstanding anything in the Plan, the Performance Unit Award Agreement or the Addendum to the contrary, in the event of a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5), the Company may terminate the Performance Unit Awards granted hereunder in a manner consistent with Section 1.409A-3(j)(ix)(B) of the Treasury Regulations under Section 409A of the Code.

 

F.                                      Unfunded Plan.  The liability of the Company to the Colleague under this Performance Unit Award Agreement shall be that of a debtor only pursuant to such contractual obligations as are created by the Plan, the Performance Unit Award Agreement and this Addendum, and no such obligation of the Company shall be deemed to be secured by any assets, pledges, or other encumbrances on any property of the Company.  The Company has not segregated or earmarked any of the Company’s assets for the benefit of Colleague or his beneficiary or estate, and the Plan does not, and shall not be construed to,

 

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require the Company to do so.  Colleague and his beneficiary or estate shall have only an unsecured, contractual right against the Company with respect to any Performance Unit and such right shall not be deemed superior to the right of any other creditor.

 

G.                                    Clawback.  Section 7(e) of the 2010 Agreement addressing clawback is hereby incorporated by reference.

 

4Exhibit 10.5

 

ANNUAL STOCK UNIT AWARD AGREEMENT

UNDER THE

CITY NATIONAL CORPORATION

2008 OMNIBUS PLAN

 

THIS ANNUAL STOCKUNIT AWARD AGREEMENT is made by and between CITY NATIONAL CORPORATION, a Delaware corporation (the “Company”), and Russell Goldsmith, an employee of the Company or a subsidiary of the Company (“Colleague”), with reference to the following:

 

A.                                    On April 23, 2008 the shareholders of the Company adopted the City National Corporation 2008 Omnibus Plan, as amended from time to time thereafter (the “Plan”), pursuant to which the Compensation, Nominating & Governance Committee of the Board of Directors (the “Committee”) may award selected officers and other Company or Company subsidiary employees Awards, including awards of restricted stock units payable solely in cash, or other deferred Awards of the Company’s common stock.

 

B.                                    The Committee has determined to grant to Colleague an award of restricted stock units payable solely in cash and dividend equivalent units pursuant to the terms and conditions of this Agreement (“Annual Stock Unit Award”).

 

1.                                      Grant of Annual Stock Unit Award.

 

(a)                                 Details of Annual Stock Unit Award.  Pursuant to the Plan, the Company hereby grants an Annual Stock Unit Award with the following terms:

 

(i)                                     On the Award Date, Colleague shall be granted an Annual Stock Unit Award with an aggregate Fair Market Value of $1,225,000 (the “Target Annual Stock Amount”).

 

(ii)                                  The target number of restricted stock units to be awarded pursuant to the Annual Stock Unit Award shall be determined by dividing the Target Annual Stock Amount by the Fair Market Value of a Share on the Award Date (the “Restricted Stock Units”).

 

(iii)                               Except as otherwise provided in Section 1(a)(v) of this Agreement, the Restricted Stock Units shall be earned based on the achievement of the Company’s net income goal (the “Performance Goal”) established by the Committee for the  Performance Period, measured without regard to any costs and expenses associated with any transactions constituting a Change in Control Event or any non-recurring charges that would not reasonably be expected to have been incurred by Company and its subsidiaries had the transactions constituting a Change in Control Event not arose.  The number of earned Restricted Stock Units shall be determined by calculating the

 

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Performance Goal achievement and determining the corresponding percentage of Restricted Stock Units that become earned Restricted Stock Units in accordance with the following table.  The percentage of Restricted Stock Units that become earned if the performance is between the levels specified in the table below will be determined on a straight line basis.  Any Restricted Stock Units that do not become earned will be forfeited.

 

	
Level of Performance Goal
   Achievement 
    	
 
    	
Earned Restricted Stock Units as a
   Percentage of Total Restricted
   Stock Units
    	
 
    
	
75% of target and above
    	
 
    	
100
    	
%
    
	
62.5% of target
    	
 
    	
75
    	
%
    
	
50% of target
    	
 
    	
50
    	
%
    
	
Below 50% of target 
    	
 
    	
0
    	
%
    

 

(iv)                              The Performance Period means the period commencing on January 1, 2015 and ending on December 31, 2015.

 

(v)                                 If Colleague’s employment is terminated during the Performance Period in circumstances that result in a lapse of the service-based forfeiture restrictions applicable to the Restricted Stock Units pursuant to Section D of the Addendum then (A) if no Change in Control Event has occurred during the Performance Period and prior to such termination, the Restricted Stock Units will remain outstanding and the number of earned Performance Units will be determined based on actual achievement of the Performance Goal through the end of the Performance Period or (B) if a Change in Control Event has occurred during the Performance Period and prior to such termination, then one hundred percent (100%) of the Restricted Stock Units will become earned as of the date of termination.

 

(vi)                              The date of the Annual Stock Unit Award (the “Award Date”):  February 25, 2015; and

 

(vii)                           The consideration, if any, for the Annual Stock Unit Award:  Colleague’s Employment with the Company.

 

(b)                                 Restricted Stock Unit Account.  The target number of Restricted Stock Units will be credited to Colleague’s Restricted Stock Unit Account as of the Award Date and upon satisfaction of the conditions of this Agreement.

 

2.                                      Annual Stock Unit Award.  Colleague hereby accepts the Annual Stock Unit Award and agrees with respect thereto as follows:

 

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(a)                                 Forfeiture. In the event of termination of Colleague’s employment with the Company or an employing subsidiary for any reason other than as provided in Section D of the Addendum prior to the last Vesting Date set forth in Section 2(b) of this Agreement, Colleague shall, for no consideration, immediately forfeit to the Company the Restricted Stock Units.

 

(b)                                 Lapse of Forfeiture Restrictions.  All earned Restricted Stock Units are subject to forfeiture based on continued service, as provided in subparagraph (a), until the forfeiture restrictions lapse in accordance with the following schedule provided that Colleague has been continuously employed by the Company from the Award Date through the lapse date:

 

	
Time From
    	
 
    	
Percentage of
    	
 
    	
 
    	
 
    
	
Date of Award
    	
 
    	
Restrictions Which
    	
 
    	
Total Percentage of
    	
 
    
	
(“Vesting Date”)
    	
 
    	
Lapse (Vesting)
    	
 
    	
Restrictions Lapsed
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
After 1 year
    	
 
    	
0
    	
%
    	
0
    	
%
    
	
After 2 years
    	
 
    	
25
    	
%
    	
25
    	
%
    
	
After 3 years
    	
 
    	
25
    	
%
    	
50
    	
%
    
	
After 4 years
    	
 
    	
25
    	
%
    	
75
    	
%
    
	
After 5 years
    	
 
    	
25
    	
%
    	
100
    	
%
    

 

Notwithstanding the foregoing, the forfeiture restrictions shall lapse as to all of the Restricted Stock Units earlier upon the termination and vesting events provided in Section D of the Addendum.  In the event Colleague’s employment is terminated for any reason other than as provided in Section D of the Addendum, the Committee or its delegate, as appropriate, may, in the Committee’s or such delegate’s sole discretion, approve the lapse of forfeiture restrictions as to any or all Restricted Stock Units still subject to such conditions, such lapse to be effective on the date of such approval or Colleague’s termination date, if later.

 

(c)                                  Restricted Stock Unit Account/Dividend Equivalent Unit Accounts.  Colleague’s Restricted Stock Unit Account and Dividend Equivalent Unit Account shall be memorandum accounts on the books of the Company. The Restricted Stock Units credited to the Restricted Stock Unit Account and the Dividend Equivalent Units credited to Colleague’s Dividend Equivalent Unit Account shall be used solely as the basis for the determination of the amount of cash to be eventually distributed to Colleague in accordance with the Addendum to this Agreement. The Restricted Stock Units and the Dividend Equivalent Units shall not be treated as property or as a trust fund of any kind. Colleague shall not be entitled to any voting or other stockholder rights with respect to Restricted Stock Units awarded or credited under the Plan.  The number of Restricted Stock Units credited (and the amount of cash to which Colleague is entitled under the Plan) shall be subject to adjustment in accordance with the terms of the Plan.

 

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(d)                                 Dividend Equivalents.

 

(i)                                     Colleague’s Dividend Equivalent Unit Account shall be credited with Dividend Equivalent Units in an amount equal to the dividend per Share for the applicable dividend payment date (which, in the case of any dividend distributable in property other than Shares, shall be the per Share value of such dividend, as determined by the Company for purposes of income tax reporting) times the number of Restricted Stock Units held by Colleague on the record date for the payment of such dividend.

 

(ii)                                  Colleague’s Dividend Equivalent Unit Account shall be subject to adjustment in the event that Colleague’s Restricted Stock Unit Account is adjusted pursuant to Section 1(a)(iii) or (v) of this Agreement).  In the event that Colleague’s Restricted Stock Unit Account is adjusted pursuant to Section 1(a)(iii) or (v) of this Agreement, the Dividend Equivalent Unit Account shall be adjusted to reflect the Dividend Equivalent Units equal to the dividend per Share for the applicable dividend payment date times the number of Restricted Stock Units earned in accordance with Section 1(a)(iii) or (v) of this Agreement which shall be deemed to have been held by Colleague on the record date for the payment of such dividend.

 

(iii)                               Dividend Equivalent Units credited to Colleague’s Dividend Equivalent Unit Account shall vest and be paid on the same basis and at the same time as the underlying Restricted Stock Units for which such Dividend Equivalent Units were credited vest and are paid, and may be subject to forfeiture in the same manner as the underlying Restricted Stock Units for which such Dividend Equivalent Units were credited, in any case, subject to adjustment as provided herein.

 

(e)                                  Nontransferability.  The Annual Stock Unit Award, the Restricted Stock Units and the Dividend Equivalent Units and the rights and interests of Colleague under this Agreement may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of prior to distribution.

 

3.                                      Withholding of Tax.  The Company is authorized to withhold from any cash remuneration otherwise payable to Colleague pursuant to this Agreement and the Addendum any taxes required to be withheld by applicable law.

 

4.                                      Limitation on Transfer.  Other than upon death or pursuant to a DRO, the Restricted Stock Units and the Dividend Equivalent Units and all rights granted under this Agreement are personal to Colleague and cannot be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to execution, attachment or similar processes.

 

5.                                      Plan and Addendum Incorporated/Availability.  Colleague acknowledges that the Company has made available a copy of the Plan and the Addendum to this Agreement, and agrees that this Annual Stock Unit Award, Restricted Stock Units and

 

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Dividend Equivalent Units award shall be subject to all of the terms and conditions set forth in the Plan and the Addendum, including future amendments thereto, if any, pursuant to the terms thereof, which Plan and Addendum are incorporated herein by reference as a part of this Agreement. In the event of any conflict between the Plan, the Addendum and this Agreement, the provisions of the Plan will prevail.  Colleague’s rights hereunder are subject to modification or termination in certain events, as provided in the Plan, including without limitation such rules and regulations as may from time to time be adopted or promulgated in accordance with paragraph 1.3 of the Plan.  Capitalized terms not defined in this Agreement shall have the meanings set forth in the Plan and the Addendum.

 

6.                                      Employment Relationship.  For purposes of this Agreement, Colleague shall be considered to be in the employment of the Company as long as Colleague remains an employee of either the Company, any successor corporation or a parent or subsidiary corporation (as defined in section 424 of the Internal Revenue Code) of the Company or any successor corporation.  Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee, or its delegate, as appropriate, and its determination shall be final.

 

7.                                      Committee’s Powers.  No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Annual Stock Unit Award, Restricted Stock Units and Dividend Equivalent Units.  All decisions of the Committee (as established pursuant to the Plan) with respect to any questions concerning the application, administration or interpretation of the Plan will be conclusive and binding on the Company and Colleague.

 

8.                                      Binding Effect.  This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Colleague.

 

9.                                      Dispute Resolution.  If a dispute arises between Colleague and Company in connection with the Annual Stock Unit Award, including the Restricted Stock Units and Dividend Equivalent Units, the dispute will be resolved by binding arbitration with the American Arbitration Association (AAA) in accordance with the AAA’s Commercial Arbitration Rules then in effect.

 

10.                               Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of California.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and Colleague has executed this Agreement, all effective as of March 11, 2015.

 

 

	
 
    	
CITY   NATIONAL CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Christopher J. Carey
    
	
 
    	
Christopher   J. Carey, Executive Vice
    
	
 
    	
President,   Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Russell Goldsmith
    
	
 
    	
Russell Goldsmith
    

 

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