Document:

Exhibit 10.49

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made as of the 24th day of June, 2010 by and between RUSSELL
GOLDSMITH (“Goldsmith”), on the one hand, and CITY NATIONAL BANK, a National
Bank (“CNB”), and CITY NATIONAL CORPORATION (“Parent Corporation”), on the
other hand (Goldsmith, CNB and the Parent Corporation, collectively the “Parties”)
and supersedes the Amended and Restated Employment Agreement dated as of December 22,
2008 by and between Goldsmith, CNB and Parent Corporation (the “Prior Agreement”).

 

1.                                       Employment.  CNB and Parent Corporation (collectively the “Employer”)
hereby employ Goldsmith, and Goldsmith hereby accepts employment, under the
terms and conditions hereafter set forth.

 

2.                                       Duties.  Goldsmith shall be employed as the Chairman
of the Board of Directors and Chief Executive Officer of CNB and Chief
Executive Officer and President of the Parent Corporation and his powers and
duties shall be consistent with such offices and positions.  As Chief Executive Officer of Employer,
Goldsmith shall supervise, control and be responsible for all aspects of the
business and affairs of Employer and its subsidiaries.

 

3.                                       Place of
Service.  Substantially all of Goldsmith’s
duties shall be performed in Los Angeles and Beverly Hills, California, and
unless mutually agreed upon by Goldsmith and Employer, Goldsmith shall be
headquartered in Beverly Hills, California.

 

4.                                       Term.  Subject to the provisions for termination as
hereinafter provided, the term of this Agreement shall commence as of July 16,
2010 (the “Start Date”) and shall terminate July 15, 2014, and may be
extended as mutually agreed between Employer and Goldsmith.

 

5.                                       Annual Base
Compensation.  Employer
shall pay Goldsmith as annual base compensation (the “Annual Base Compensation”),
payable in equal semimonthly payments, the sum of Nine Hundred Eighty Thousand
Dollars ($980,000) during the term of this Agreement, which may be increased at
the discretion of the Committee (as defined below), from time to time.

 

6.                                       Bonus
Compensation.

 

(a)                                  Goldsmith shall participate
in the Parent Corporation’s Amended and Restated 1999 Variable Bonus Plan
and/or any other cash bonus or incentive compensation plan of Employer
established for corporate executive officers of Employer, including corporate
officers who are members of the Executive Committee and the Strategy and
Planning Committee, in each case as determined by the Compensation, Nominating
and Governance Committee of the Parent Corporation (or, in the absence of a
Compensation, Nominating and Governance Committee, the Board of Directors or
another committee of directors designated by the Board of Directors as
responsible for matters relating to executive compensation) (such body, whether
a committee or the entire board, is hereinafter referred to as the “Committee”).  The aggregate amount of annual bonus or
incentive compensation (the “Annual Bonus”) paid to Goldsmith pursuant to all
such bonus plans for any year (beginning with the fiscal year ending December 31,
2010 and including the fiscal year during which his employment is terminated)
shall not be less than the Target Bonus Amount for that fiscal year if plan
goals for the year are achieved, scaled up to 200% of the Target Bonus Amount
for each year if 154% of plan goals are achieved and scaled down to 15% of the
Target Bonus Amount for each year if 70% of plan goals are achieved, in
accordance with the methodology established by the Committee and provided to
Goldsmith.

 

(b)                                 For each fiscal year during
the term of this Agreement, the “Target Bonus Amount” shall be equal to the
product of the Target Bonus Percentage for that fiscal year and Goldsmith’s
Annual Base Compensation as of December 31 of the year for which the bonus
is being paid, as calculated below.  The “Target
Bonus Percentage” for each such fiscal year shall not be less than 175%, with a
guaranteed minimum Target Bonus Amount of $1,715,000, which may be increased at
the discretion of the Committee, from time to time. Notwithstanding anything
herein to the contrary, if an Annual Bonus payment is or was based on
materially inaccurate financial statements (whether or not resulting in
restatement) or any other materially inaccurate performance metric criteria,
such Annual Bonus payment shall be subject to (A) forfeiture and
recoupment from 

 

 

Goldsmith to the extent that calculation of
the plan goals is determined to have erroneously increased the amount of the
Annual Bonus or (B) increase to the extent that the plan goals calculation
is determined to have erroneously reduced the amount of the Annual Bonus.

 

(c)                                  In determining the Annual
Bonus payable to Goldsmith for any year in which he was not employed by
Employer for the entire year, the Annual Bonus for the portion of such fiscal
year preceding the termination of his employment shall be an amount equal to (i) the
amount which the Annual Bonus would have been had the plan goals achieved
through the month ending immediately following the date of termination of his
employment been the plan goals for the entire fiscal year, the fiscal year had
ended at the end of such month and Goldsmith’s Annual Base Compensation had
been the Annual Base Compensation payable to him as of the following December 31
had his employment continued through the following December 31, (ii) multiplied
by a fraction, the numerator of which is the number of months in the fiscal
year through the end of the month immediately following the date of termination
of Goldsmith’s employment and the denominator of which is 12.

 

(d)                                 Unless Goldsmith elects to
defer receipt thereof, each Annual Bonus shall be paid no later than March 15
of the fiscal year following the fiscal year for which the bonus is being paid;
provided, however, that if the employment of Goldsmith is
terminated prior to the end of the fiscal year for which the bonus is being
paid, the Annual Bonus for the partial year preceding the termination of his
employment shall be paid no later than March 15 following the termination
of his employment and any amounts payable under any subparagraphs of Paragraph
10 as an Annual Bonus applicable to any portion of a fiscal year of less than
twelve months shall be paid no later than March 15 following the end of
the period for which such amount is payable.

 

7.                                       Stock Awards.

 

(a)                                  Annual Stock Awards.  In each fiscal year beginning in 2011 and
continuing during the employment term, upon the earlier to occur of (i) the
date the Employer generally grants annual stock awards to other corporate
officers who are members of the Employer’s Executive Committee and Strategy and
Planning Committee, and (ii) March 15, the Employer shall grant to
Goldsmith an annual stock award (an “Annual Stock Award”) having an aggregate
Deemed Value, on the grant date, of $2,640,000 (“Target Annual Stock Amount”)
if the level of achievement of the budgeted profit target used for purposes of
determining achievement of Annual Bonus for such fiscal year (the “Performance
Goal”) is achieved at 60% of target, scaled down to 75% of the Target Annual
Stock Amount if 50% of the Performance Goal is achieved and 50% of the Target
Annual Stock Amount if 40% of the Performance Goal is achieved.  The Target Annual Stock Amount may be
increased at the discretion of the Committee, from time to time.  One-half of the Deemed Value of each Annual
Stock Award shall be payable in the form of non-qualified stock options or
stock appreciation rights (collectively, “Stock Options”), as determined by the
Committee on each grant date in accordance with this Agreement, and the other half
shall be payable in the form of restricted stock or restricted stock units, as
determined by the Committee on each grant date in accordance with this
Agreement.  Notwithstanding anything
herein to the contrary, if an Annual Stock Award is or was based on materially
inaccurate financial statements (whether or not resulting in restatement) or
any other materially inaccurate performance metric criteria, such Annual Stock
Award shall be subject to (A) forfeiture and recoupment from Goldsmith to
the extent that calculation of the Performance Goal is determined to have
erroneously increased the amount of the Annual Stock Award or (B) increase to
the extent that the Performance Goal is determined to have erroneously reduced
the amount of the Annual Stock Award.

 

(b)                                 Performance Stock Options.

 

(i)                                     On July 14, 2006, the
Employer granted to Goldsmith non-qualified Stock Options with a Deemed Value
of $500,000 (the “Initial Options”).  No
later than July 31 of 2011 and of each subsequent fiscal year during the
term of this Agreement (including 2014, regardless of whether the grant of the
Stock Options occurs following the expiration of this Agreement by its terms),
if the Parent Corporation’s TSR for the three years ending on the immediately
preceding June 30 is sufficient to place Parent Corporation in at least
the twenty-fifth (25th) percentile of Peer Banks ranked by TSR, the Employer
granted or shall grant to Goldsmith Stock Options having the Deemed Value
corresponding to the Parent Corporation’s TSR percentile for each fiscal year
specified below (it being understood and agreed upon that Performance Stock
Options (which may be granted in the form of non-qualified stock options or
stock appreciation rights, as determined by the Committee) relating to the
three-year period ending June 30, 2010 shall be granted pursuant to the
terms of the Prior Agreement):

 

2

 

	
  Three
  year period Ended June 30,

  	
   

  	
  TSR Percentile

  	
   

  	
  Deemed Value

  	
   

  
	
  2011, 2012, 2013, and 2014

  	
   

  	
  Below
  25

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
  25
  to below 50

  	
   

  	
  450,000

  	
   

  
	
   

  	
   

  	
  50
  to below 75

  	
   

  	
  900,000

  	
   

  
	
   

  	
   

  	
  75
  to below 90

  	
   

  	
  1,200,000

  	
   

  
	
   

  	
   

  	
  90
  and above

  	
   

  	
  1,350,000

  	
   

  
							

 

(ii)                                  “Peer Banks” means, for each
three year measurement period, the component companies included in the KBW Bank
Index during the entire measurement period, or if the KBW Bank Index is no
longer maintained or is no longer appropriate, in the reasonable judgment of
the Committee, the Peer Banks shall instead be the companies included in any
other reasonably comparable index prepared by a third party or the Committee of
publicly-traded financial companies with market capitalizations in the $1.0
billion to $5.0 billion range, or such other range of market capitalizations
such that Employer falls between the 25th and 75th percentile in terms of size
of market capitalization.

 

(iii)                               “Performance Stock Options”
means Stock Options granted pursuant to this subparagraph 7(b).

 

(iv)                              “TSR” shall be determined
for a company, including the Parent Corporation and each of the Peer Banks, as
follows:

 

(Price End – Price Begin) + Dividends

Price Begin

 

with
“Price Begin” equal to the company’s closing price per share of common stock on
its principal exchange or trading market on the first trading day in the three
year measurement period (adjusted to give effect to stock splits and stock
dividends during the measurement period), “Price End” equal to the company’s
closing price per share of common stock on its principal exchange or trading
market on the final trading day in the three year measurement period, and “Dividends”
equal to the aggregate cash dividend per share of common stock paid during the
three year measurement period.

 

(c)                                  Valuation Methodologies.  As used herein, the “Deemed Value” of any
Stock Options shall be as determined by the Committee on the grant date in
accordance with the City National Valuation Methodology for Option Awards in
effect on such grant date and the “Deemed Value” of any restricted stock or
restricted stock unit award shall be the Fair Market Value (as defined in the
Current Plan) of the Parent Corporation’s common stock, $1.00 par value per
share, on the grant date.  The City
National Valuation Methodology for Option Awards in effect as of the date
hereof is attached hereto as Appendix B. 
The City National Valuation Methodology for Option Awards may be changed
from time to time by the Committee, in its sole discretion, provided that no
such change will apply to Stock Options granted to Goldsmith unless such change
generally applies to Stock Options granted to other corporate officers who are
members of the Employer’s Executive Committee and Strategy and Planning
Committee.

 

(d)                                 Stock Option Terms.  Stock Options included in an Annual Stock
Award or Performance Stock Options shall be issued in accordance with the terms
of this Agreement and the Parent Corporation’s Amended and Restated 2002
Omnibus Plan or the Corporation’s 2008 Omnibus Plan, in each case, as amended,
or such other stock plan of the Parent Corporation as may then be in effect and
pursuant to which Goldsmith is then eligible to receive stock awards (such plan
being the “Current Plan”), shall, subject to the other terms of this Agreement:

 

(i)                                     vest twenty-five percent
(25%) each year, commencing on the first anniversary of the grant; provided
that the Initial Options shall vest twenty-five percent (25%) each July 14,
commencing on July 14, 2007;

 

3

 

(ii)           have an
exercise price equal to the Fair Market Value (as defined in the Current Plan)
on the grant date;

 

(iii)          be non-qualified
stock options or stock appreciation rights;

 

(iv)          not be entitled
to any Dividend Equivalents (as defined in the Current Plan); and

 

(v)           expire ten (10) years
following the grant date, and

 

shall
otherwise be issued on terms and conditions consistent with Stock Options then
being issued by the Committee to other corporate officers who are members of
Employer’s Executive Committee and Strategy and Planning Committee.

 

All
Stock Options which are granted to Goldsmith on or after July 24, 2002, and
which are vested at the time of termination of Goldsmith’s employment with the
Employer, will remain outstanding until the expiration of their terms, (i) if
Goldsmith’s employment is terminated (A) on account of retirement after
Goldsmith has attained age sixty-two (62), (B) pursuant to subparagraphs
10(b) (without good cause), 10(c) (disability) or 10(d) (death)
hereof, or (C) pursuant to Sections 5(a) and 6(b) and (c) (death
or disability), 5(c) and 6(a) (Good Reason), or 6(a) (without
Cause) of the Amended Employment Agreement (as defined in subparagraph 10(e))
after a Change of Control (as defined in Section 2 of the Amended
Employment Agreement); or (ii) upon the occurrence of a Change of Control
Event as defined in the Current Plan, subject in the case of this clause (ii) to
any provisions of the Current Plan and its Stock Option agreements regarding
acceleration or termination of Stock Options upon a Change of Control Event.

 

All
Stock Options which are granted to Goldsmith and are not vested at the time of
termination of Goldsmith’s employment with the Employer will expire upon
termination of Goldsmith’s employment except: 
(1) any Stock Options included in the Initial Awards (as defined in
subparagraph 7(f)) will vest on the terms specified in subparagraph 7(f), and (2) all
other Stock Options will vest and will remain outstanding until the expiration
of their terms if Goldsmith’s employment is terminated pursuant to subparagraph
10(b) hereof (without good cause) or Sections 5(c) and 6(a) (Good
Reason), or 6(a) (without Cause) of the Amended Employment Agreement after
a Change of Control and will otherwise immediately vest on the terms specified
in Goldsmith’s Stock Option award agreements and the Current Plan, as each may
be amended and revised from time to time on terms consistent with other Stock
Options then being issued by the Committee to other corporate officers who are
members of Employer’s Executive Committee and Strategy and Planning
Committee.  As of the date hereof, such
terms would permit immediate vesting only on the earlier of (i) the
occurrence of a Change of Control Event (as such term is defined in the Current
Plan) subject in the case of this clause (i) to any provisions of the
Current Plan and its Stock Option agreements regarding acceleration or
termination of Stock Options upon a Change of Control Event, or (ii) the
date Goldsmith’s employment is terminated by reason of subparagraphs 10(c) (disability)
or 10(d) (death).  Further, Stock
Option grants made prior to the date hereof which have not vested at the time
of Goldsmith’s retirement at age sixty-two (62) will immediately vest in full
upon Goldsmith’s retirement at age sixty-two (62).  Except as provided in Section 10(f), all
Stock Option grants after the date hereof that are not vested at the time of
termination due to retirement at age sixty-two (62) will expire.

 

(e)                                  Restricted Stock Terms.  Restricted stock and restricted stock unit
awards included in an Annual Stock Award shall be issued in accordance with the
terms of this Agreement and the Current Plan, shall:

 

(i)                                     be subject to forfeiture
restrictions that lapse twenty-five percent (25%) each year, commencing on the
second anniversary of the grant;

 

(ii)                                  be in the form of Restricted
Stock Awards or restricted stock units treated as “Share Awards” (each within
the meaning of the Current Plan), at the discretion of the Committee; and

 

(iii)                               if restricted stock, be
entitled to Dividend Equivalents (as defined in the Current Plan) or if
restricted stock units, be entitled to dividend equivalent units, and

 

4

 

shall
otherwise be issued on terms and conditions consistent with restricted stock
and restricted stock unit awards then being issued by the Committee to other
corporate officers who are members of Employer’s Executive Committee and
Strategy and Planning Committee.

 

Upon
the termination of Goldsmith’s employment with Employer, all restricted stock
and restricted stock units granted to Goldsmith for which forfeiture
restrictions have not yet lapsed will, for no consideration, be forfeited to
the Parent Corporation, except:  (1) any
forfeiture restrictions on shares of restricted stock or restricted stock units
included in the Initial Awards (as defined in subparagraph 7(f)) will lapse on
the terms specified in subparagraph 7(f), and (2) forfeiture restrictions
on all other shares of restricted stock and all other restricted stock units
shall immediately lapse if Goldsmith’s employment is terminated pursuant to
subparagraph 10(b) hereof (without good cause) or Sections 5(c) and 6(a) (Good
Reason), or 6(a) (without Cause) of the Amended Employment Agreement after
a Change of Control and will otherwise lapse on the terms specified in
Goldsmith’s restricted stock award and restricted stock unit award agreements
and the Current Plan, as each may be amended and revised from time to time on
terms consistent with other shares of restricted stock and restricted stock
units then being issued by the Committee to other corporate officers who are
members of Employer’s Executive Committee and Strategy and Planning
Committee.  As of the date hereof, such
terms would permit the immediate lapse of forfeiture restrictions only on the
earlier of (i) subject to the discretion of the Committee, the occurrence
of a Change of Control Event (as such term is defined in the Current Plan), or (ii) the
date Goldsmith’s employment is terminated by reason of subparagraphs 10(c) (disability)
or 10(d) (death).  Further, grants
of restricted stock and restricted stock units made prior to the date hereof
for which forfeiture restrictions have not yet lapsed at the time of Goldsmith’s
retirement at age sixty-two (62) will immediately lapse upon retirement after
Goldsmith has attained age sixty-two (62); provided, however,
that with respect to any such restricted stock units that constitute a “deferred
compensation plan” within the meaning of Section 409A of the Code, the
settlement of such restricted stock units shall be delayed until the earlier of
(A) the first day of the seventh month following the termination of
Goldsmith’s employment if Goldsmith is a “specified employee” within the
meaning of Section 409A of the Code and (B) Goldsmith’s death.  Except as provided in Section 10(f), all
grants of restricted stock and restricted stock units after the date hereof for
which forfeiture restrictions have not yet lapsed at the time of termination
due to retirement at age sixty-two (62) will, for no consideration, be
forfeited to the Parent Corporation.

 

(f)                                    Vesting of Initial Awards.

 

(i)                                     “Initial Awards” means the
Initial Options and those other Annual Stock Awards and Performance Stock
Options awarded to Goldsmith from June 30, 2006 until the aggregate Deemed
Value of all such Initial Options, Annual Stock Awards and Performance Stock
Options, at the time each is granted, equals $4,200,000.  Initial Awards shall not include any Annual
Stock Awards or Performance Stock Options, or other Stock Options, shares of
restricted stock and restricted stock units, awarded to Goldsmith either before
the date of this Agreement (other than the Initial Options) or after the Deemed
Value of the Annual Stock Awards and Performance Stock Options, at the time
each is granted, equals $4,200,000.

 

(ii)                                  All Initial Awards which, at
the time of termination of Goldsmith’s employment with the Employer, are not
vested or for which forfeiture restrictions have not lapsed, shall immediately
vest, and forfeiture restrictions shall immediately lapse, (A) if
Goldsmith’s employment is terminated (I) on account of retirement after
Goldsmith has attained age sixty-two (62), (II) pursuant to subparagraphs
10(b) (without good cause or by Goldsmith for good reason), 10(c) (disability)
or 10(d) (death) hereof, or (III) pursuant to Sections 5(a) and
6(b) and (c) (death or disability), 5(c) and 6(a) (Good
Reason), or 6(a) (without Cause) of the Amended Employment Agreement (as
defined in subparagraph 10(e)) after a Change of Control (as defined in Section 2
of the Amended Employment Agreement); or (B) upon the occurrence of a
Change of Control Event as defined in the Current Plan, subject in the case of
this clause (B) to any provisions of the Current Plan and its Stock Option
agreements regarding acceleration or termination of Stock Options upon a Change
of Control Event.

 

8.                                       Fringe Benefits
and Reimbursement of Expenses.  Employer shall provide Goldsmith with such
medical and other health, dental, accidental life and disability insurance, and
he shall be entitled to all employee and fringe benefits and reimbursement of
expenses and to participate in all benefit plans (including stock plans) as are
consistent with his position and duties and those previously provided to the
Chief Executive Officer of Employer; provided, however, that
future stock awards and Stock Option grants to Goldsmith shall be on the terms
specified in 

 

5

 

Paragraph 7 of this Agreement.  Goldsmith shall also be entitled to receive a
supplemental retirement benefit as set forth in Appendix A to this Agreement
(the “SERP Agreement”).

 

9.                                       Extent of
Service.  Goldsmith shall devote his
time, attention and energies to the business of Employer and shall not, during
the term of this Agreement, be engaged in any other activity which will
materially interfere with the performance of his duties hereunder.  Time expended by Goldsmith on philanthropic
activities, as a member of the board of directors of Wynn Resorts, Ltd.,
as a passive investor in real estate ventures and other investments, or in
managing the existing properties of Goldsmith Entertainment Corporation shall
be deemed not to interfere with the performance of his duties hereunder.

 

10.                                 Termination of Employment.

 

(a)                                  Termination by Employer for
Good Cause.  Employer
may terminate the employment of Goldsmith for “good cause” by written notice to
Goldsmith.  For purposes of this
Agreement, “good cause” shall mean only (i) conviction of a crime directly
related to his employment hereunder, (ii) conviction of a felony involving
moral turpitude, (iii) willful and gross mismanagement of the business and
affairs of Employer, or (iv) willful and material breach of any material
provision of this Agreement.  In the
event the employment of Goldsmith is terminated pursuant to this subparagraph
10(a), Employer shall have no further liability to Goldsmith other than for
compensation accrued through the date of termination but not yet paid.

 

In
the event Employer contends that it has good cause to terminate Goldsmith
pursuant to clause (iii) or (iv) of the second sentence of this
subparagraph 10(a), Employer shall provide Goldsmith with written notice
specifying in reasonable detail the services or matters which it contends
Goldsmith has not been adequately performing, or the material provisions of
this Agreement of which Goldsmith is in violation and the acts constituting
such violation, why Employer has good cause to terminate this Agreement, and
what Goldsmith should do to adequately perform his obligations hereunder.  If within thirty (30) days of receipt of the
notice Goldsmith performs the required services or modifies his performance to
correct the matters complained of, Goldsmith’s breach will be deemed cured, and
Goldsmith’s employment shall not be terminated. 
However, if the nature of the service not performed by Goldsmith or the
matters complained of are such that more than thirty (30) days are reasonably
required to perform the required service or to correct the matters complained
of, then his breach will be deemed cured if he commences to perform such service
or to correct such matters within the thirty (30) day period and thereafter
diligently prosecutes such performance or correction to completion.  If Goldsmith does not perform the required
services or modify his performance to correct the matter complained of within
the thirty (30) day period or the extension thereof, Employer shall have the
right to terminate this Agreement at the end of the thirty (30) day period or
extension thereof.  It is understood that
Goldsmith’s performance hereunder shall not be deemed unsatisfactory solely on
the basis of any economic performance of Employer because this performance will
depend in part on a variety of factors over which Goldsmith has little control.

 

(b)                                 Termination by Employer
Without Good Cause or by Goldsmith for Good Reason.  Employer may terminate the employment of
Goldsmith without “good cause” (as defined in subparagraph 10(a) above) at
any time during the term hereof by giving written notice to Goldsmith
specifying therein the effective date of termination.  Upon such notice being given, Goldsmith’s
Stock Options, restricted stock and restricted stock units shall be treated as
provided in Paragraph 7.  In the event
the employment of Goldsmith is terminated pursuant to this subparagraph 10(b) without
good cause, Employer shall be obligated to pay to Goldsmith (which shall be in
lieu of any other amounts which would be payable to Goldsmith on account of
such termination pursuant to any separation pay plan or policy of Employer) (i) in
a lump sum within 30 days of the effective date of termination, the Annual Base
Compensation and Annual Bonus he would have been paid had he remained in the
employ of the Employer hereunder, and had the term hereof extended, for a
period of three years from the effective date of termination, provided that (x) the
Annual Bonus for any fiscal year ending after the date of termination
(including the fiscal year during which the termination of employment occurs
and any portion of a fiscal year for which he is entitled to an Annual Bonus under
this subparagraph) shall be computed by multiplying Goldsmith’s Annual Base
Compensation (in case of an Annual Bonus for a partial year, the amount which
the Annual Base Compensation would have been as of the following December 31
had his employment continued through such December 31) by the Target Bonus
Percentage as set forth in Paragraph 6(b) above , (y) the Annual
Bonus applicable to any portion of a fiscal year of less than twelve months
shall be an amount determined as provided in the preceding subclause (x) multiplied
by a fraction, the numerator of which is the number of months of the fiscal
year with respect to which Goldsmith is 

 

6

 

entitled to the Annual Bonus pursuant to this
subparagraph (with each partial month being deemed a whole month) and the
denominator of which is 12, and (z) subparagraph 6(c) shall be
disregarded and have no force or effect, (ii) in a lump sum within 30 days
of the effective date of termination, an amount equal to the contributions to
Goldsmith’s account in the Employer’s Profit Sharing Plan which Goldsmith would
receive if Goldsmith’s employment continued for three years after the effective
date of termination assuming for this purpose that (A) all such
contributions are fully vested, (B) the Executive’s compensation is
Goldsmith’s compensation for the year immediately preceding the year in which
the effective date of termination occurs, and, (C) the Company’s
contribution to the Profit Sharing Plan in each such year is in an amount equal
to the greatest amount contributed by the Company in any of the three years
ending prior to the effective date of termination and (iii) for three
years following the effective date of termination (the “Benefits Period”),
Employer shall provide Goldsmith, his spouse and eligible dependents with
medical, prescription, vision and dental insurance coverage (the “Health Care
Benefits”), life insurance and long-term disability coverage no less favorable
to those which Goldsmith and his spouse and eligible dependents were receiving
immediately prior to the effective date of termination; provided, however,
that the Health Care Benefits shall be provided during the Benefits Period in
such a manner that such benefits are excluded from Goldsmith’s income for
federal income tax purposes. 
Notwithstanding the foregoing clause (iii) of the immediately
preceding sentence, if long-term disability insurance coverage is an employee
benefit which Goldsmith would have received had he remained in the employ of
Employer, Employer’s obligation to provide Goldsmith with comparable long-term
disability insurance coverage for such three-year period shall be subject to
Goldsmith being insurable at the effective date of termination of his
employment.  Goldsmith shall have no duty
to mitigate damages, and Employer shall have no right to offset any
compensation paid to Goldsmith for services rendered as an employee of a third
party or independent contractor after the termination of his employment against
any amounts which are payable under this Agreement or the Amended Employment
Agreement.

 

If
Goldsmith terminates employment at any time within six (6) months after,
without his consent, either (i) he is removed as Chief Executive Officer
of either CNB or Parent Corporation or as Chairman of the Board of Directors of
CNB, or any of these titles is removed from him, (ii) there is any
material reduction in his Annual Base Compensation, (iii) the Employer
requires him to be based at any office other than the corporate headquarters or
moves the corporate headquarters to any location which is more than 35 miles
from the location where it was based immediately prior thereto, or (iv) there
is a Material Breach by Employer (as defined below), such termination by
Goldsmith shall for purposes of this Agreement be treated in the same manner as
a termination by the Employer of his employment without good cause and shall be
deemed to be a termination of employment pursuant to this subparagraph 10(b).

 

A
“Material Breach by Employer” shall be deemed to exist if:

 

(i)                                     there is a material breach
of this Agreement by Employer;

 

(ii)                                  within thirty (30) days
following the material breach Goldsmith provides Employer with written notice
specifying in reasonable detail the basis for his belief that there has been a
material breach of this Agreement; and

 

(iii)                               within thirty (30) days of
receipt of the notice Employer has not cured the material breach or, if the
nature of the material breach is such that more than thirty (30) days are
reasonably required to cure the material breach, then the Employer has not
commenced performance of a cure within the thirty (30) day period or has not
thereafter diligently prosecuted such performance to completion.

 

(c)                                  Termination by Disability.  Employer may terminate the employment of
Goldsmith during the term hereof or the term of the Amended Employment
Agreement (as hereinafter defined) by written notice to Goldsmith if Goldsmith
shall become incapable of fulfilling his obligations hereunder 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.  In the event the employment of Goldsmith is
terminated by Employer pursuant to this subparagraph 10(c) because of
injury or physical or mental illness, Employer shall be obligated to pay
Goldsmith (or his personal representatives) from and after the termination of
his employment the same amounts and provide him with the same benefits for the
same periods it would have paid or provided him had his employment been
terminated without cause pursuant to subparagraph 10(b) as of the date his
employment is terminated pursuant to this subparagraph 10(c).  If the 

 

7

 

employment of Goldsmith is terminated
pursuant to this subparagraph 10(c), Goldsmith’s Stock Options, restricted
stock and restricted stock units will be treated as provided in Paragraph 7.

 

(d)                                 Termination by Death.  Except for compensation accrued but not paid
at the date of death and as provided in this subparagraph 10(d), the death of
Goldsmith during the term of this Agreement shall terminate this Agreement and
the Amended Employment Agreement (as hereinafter defined).  In the event of the death of Goldsmith during
the term hereof or the term of the Amended Employment Agreement (as hereinafter
defined), Employer shall be obligated to pay to whomever he shall have
designated in writing to Employer, or if no designation has been made by him,
to Goldsmith’s wife, if she is then living, or if she is not then living, to
his estate, the same amounts and provide the same benefits Employer would have
paid or provided Goldsmith pursuant to subparagraph 10(b) had his
employment been terminated without cause on the date of his death.  If the employment of Goldsmith is terminated
pursuant to this subparagraph 10(d), Goldsmith’s Stock Options, restricted
stock and restricted stock units will be treated as provided in Paragraph 7.

 

(e)                                  Change of Control.  Attached to this Agreement as Annex A
is a copy of an Employment Agreement dated as December 22, 2008 between
Parent Corporation and Goldsmith (the “Amended Employment Agreement”).  Upon the Effective Date (as defined in the
Amended Employment Agreement) during the term of Goldsmith’s employment with
Employer, the Amended Employment Agreement shall become effective with
(notwithstanding the provisions of the Amended Employment Agreement to the
contrary) the following modifications:  (i) the
“Change of Control Period” as defined in the Amended Employment Agreement shall
not terminate prior to the end of the term of this Agreement; (ii) the
term thereof (referred to therein as the “Employment Period”) shall be the
greater of three years, as provided therein, or the then remaining term of this
Agreement; (iii) Paragraphs 3, 5 and 11 and subparagraphs 7(d), 7(e) and
10(g) of this Agreement shall remain in full force and effect; (iv) clause
(B) of Section 4(a)(i) and all of Section 4(b)(i) (except
for the last sentence thereof) of the Amended Employment Agreement shall be of
no force or effect, all direct or indirect references in the Amended Employment
Agreement to Annual Base Salary or base salary (including, without limitation,
references to Section 4(b) in clause (ii) of Section 5(c) of
the Amended Employment Agreement) shall be deemed to refer to the Annual Base
Compensation described and determined and computed in accordance with Paragraph
5 hereof and the reference in clause (iii) of Section 5(c) of
the Amended Employment Agreement shall be deemed a reference to Paragraph 3
hereof; (v) termination of employment on account of the death or disability of
Goldsmith as provided in subparagraphs 10(c) and 10(d) hereof,
respectively, shall remain in full force and effect and the provisions of the
Amended Employment Agreement dealing with termination of employment on account
of Goldsmith’s death or disability and the effects thereof shall be of no force
or effect; (vi) clause (2)(y) of Section 6(a)(i)(B) of the
Amended Employment Agreement shall be deemed to refer to the Target Bonus
Amount set forth in Paragraph (6)(b) hereof; (vii) the last sentence
in the first flush paragraph after Section 5(c)(v) of the Amended Employment
Agreement is hereby deleted and shall be of no force or effect; and (viii) clause
(2) of Section 6(a)(i)(A) of the Amended Employment Agreement
shall be of no force or effect and such “Pro Rata Bonus” shall be the product
of (1) the Target Bonus Amount set forth in subparagraph 6(b) hereof
and (2) a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the denominator of
which is 365.  In all other respects, the
terms of the Amended Employment Agreement will thereafter govern the employment
of Goldsmith, and subparagraphs 10(a), 10(b) and 10(f) hereof shall
be of no further force or effect (except to the extent subparagraph 10(b) is
incorporated into subparagraphs 10(c) and 10(d) for determining
amounts payable or benefits to be provided pursuant to subparagraphs 10(c) and
10(d)).

 

(f)                                    Termination Upon Expiration.  In the event Goldsmith’s employment is
terminated by Goldsmith for any reason, or by Employer other than for good
cause, in each case on or after the expiration of the term hereof, Employer
shall pay to Goldsmith in a lump sum within 30 days after the effective date of
termination, the sum of (i) the Annual Base Compensation he would have
been paid hereunder if the term of this Agreement was extended for twelve
months and (ii) the Annual Bonus he would have been paid hereunder if the
term of this Agreement was extended for twelve months, provided that the Annual
Bonus shall be computed by multiplying Goldsmith’s Annual Base Compensation by
the Target Bonus Percentage set forth in Paragraph 6(b).  Upon such termination, (i) all
outstanding Stock Options granted to Goldsmith prior to the date of termination
of his employment will vest (to the extent not already vested) (including, without
limitation, the Performance Stock Options relating to the three-year period
ending June 30, 2014) and will remain outstanding until the expiration of
their terms and (ii) forfeiture restrictions on all shares of restricted
stock and all restricted stock units shall immediately lapse; provided, however,
that with respect to any such restricted stock units that constitute a “deferred

 

8

 

compensation plan” within the meaning of Section 409A
of the Code, the settlement of such restricted stock units shall be delayed
until the earlier of (A) the first day of the seventh month following the
termination of Goldsmith’s employment if Goldsmith is a “specified employee”
within the meaning of Section 409A of the Code and (B) Goldsmith’s
death.

 

(g)                                 Office Space and Secretarial
Support.  From and after the expiration
of the term of this Agreement or the Amended Employment Agreement or if
Goldsmith’s employment is terminated other than pursuant to subparagraph 10(a) (or
Section 5(a) of the Amended Employment Agreement if it is then in
effect) for cause or other than pursuant to subparagraph 10(d) on account
of his death, Employer shall provide Goldsmith (at no cost or expense to
Goldsmith) for a period of five years with (i) an office in his current
office site in Beverly Hills, California or nearby of size, furnishings and
other appointments and (ii) exclusive personal secretarial support of one
secretary, as each of (i) and (ii) are selected by Goldsmith.

 

(h)                                 Section 409A.  Notwithstanding the foregoing provisions of
this Agreement, in the event that Goldsmith is a “specified employee” within
the meaning of Section 409A of the Code (as determined in accordance with
the methodology established by the Company as in effect on the effective date
of termination), amounts that constitute “nonqualified deferred compensation”
within the meaning of Section 409A of the Code that would otherwise be
payable during the six-month period immediately following the effective date of
termination (including the supplemental retirement benefit set forth in Appendix A
to this Agreement) shall instead be paid, with interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code, on the first business day after the date that is six months following
the Executive’s “separation from service” within the meaning of Section 409A;
provided that no such interest shall accrue with respect to any equity
awards not settled during such six month period or with respect to any
severance pay that would have been paid in installments under Section 10
of the Employment Agreement dated June 30, 2006 between Goldsmith CNB and
Parent Corporation.

 

11.                                Supplemental
Retirement Benefits.  The Parties
hereby agree that upon the Start Date, (i) clause 2.3 in the SERP
Agreement shall be of no force or effect, (ii) the definition of “Final
Average Compensation” shall be hereby amended to read as follows:  “Final Average Compensation” shall mean the
average of the sum of the Annual Base Compensation and Annual Bonus which
Goldsmith earns during the highest three out of his last five calendar years of
employment with the Employer, provided, that solely for purposes of this
definition and to the extent applicable, in determining the amount of Annual
Bonus for 2009, such Annual Bonus shall include $500,000 relating to the grant
date fair value of the portion of the equity award granted to Goldsmith on March 4,
2010 that was in excess of the Annual Stock Award under the Prior Agreement, (iii) the
definition of “Years of Service” shall be hereby amended to read as
follows:  “Years of Service” shall mean
complete and partial years of service with the Employer, measured from
Goldsmith’s commencement date on October 15, 1995 to the most recent
anniversary of his commencement date that occurs prior to July 15, 2014,
and (iv) the last two lines of Section 2.1 in the SERP Agreement
shall hereby be amended to read as follows: “1.5432% multiplied times Years of
Service multiplied times Final Average Compensation.”

 

12.                                Section 280G
of the Code.

 

The
Parties hereby agree that upon the Start Date and through the remainder of
Goldsmith’s term with the Employer, Sections 9(c),(d) and (e) of the
Amended Employment Agreement shall be deleted in its entirety, the current Section 9(f) shall
be renumbered as Section 9(c) and Sections 9 (a) and (b) of
the Amended Employment Agreements shall be replaced with the following:

 

9.                                       SAFE HARBOR
VALLEY CUT-BACK

 

(a)  Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that (i) any Payment would be subject
to the Excise Tax, and (ii) the reduction of the Payments to the Safe
Harbor Amount would provide Goldsmith with a greater after tax amount than if
such amounts were not reduced, then the Payments shall be reduced to an amount
that does not exceed the Safe Harbor Amount. 
The reduction of the amounts payable hereunder, if applicable, shall be
made by reducing the payments and benefits under the following sections in the
following order:  (i) Section 6(a)(i)(B),
(ii) Section 6(a)(i)(C), and (iii) subparagraphs 7(d), (e) and
(f) (in that order) of the Employment Agreement between the Company and
the Executive, dated June 24, 2010 (the “Amended and Restated Employment
Agreement”).  If the reductions

 

9

 

described
in the preceding sentence are not sufficient to reduce the Parachute Value of
the Payments to the Safe Harbor Amount, further reduction of the Parachute
Value of the Payments shall be made in the manner which has the least economic
cost to the Executive.  For purposes of
reducing the Payments to the Safe Harbor Amount, only amounts payable under this
Agreement or subparagraphs 7(d), (e) and (f) of the Amended and
Restated Employment Agreement (and no other Payments) shall be reduced.

 

(b)  All determinations required to be made under this Section 9,
including whether and when a reduction of a Payment to the Safe Harbor Amount
and the assumptions to be utilized in arriving at such determination, shall be
made by Ernst & Young LLP, or such other nationally recognized
certified public accounting firm as may be designated by the Executive (the “Accounting
Firm”).  The Accounting Firm shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company.  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive may appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm
shall be borne solely by the Company. 
Any determination by the Accounting Firm shall be binding upon the Company
and the Executive.

 

13.                                 Entire Agreement;
Modification; Waiver.  This
Agreement constitutes the entire agreement between the parties pertaining to
the subject matter contained therein and supersedes all prior and
contemporaneous agreements, representations and understandings of the
parties.  No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
parties.  No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver.  No waiver shall be
binding unless executed in writing by the party making the waiver.  Notwithstanding the foregoing, this Agreement
shall not supersede and shall be subject to the Waiver and Amendment Agreement
letter dated as of November 14, 2008 by and between the Employer and
Goldsmith.

 

14.                                 Separability Clause.  The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof.

 

15.                                 Benefit.  Except as herein and otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
parties, their personal representatives, heirs, administrators, executors,
successors, and permitted assigns.

 

16.                                 Notices.  Any notice, request, or other communication
required to be given pursuant to the provisions of this Agreement shall be in
writing and shall be deemed to be duly given if delivered in person or mailed
by registered or certified United States mail, postage prepaid, and mailed to
the parties at the following addresses:

 

	
  EMPLOYER

  	
  RUSSELL
  GOLDSMITH

  
	
  City
  National Bank

  	
  Mr. Russell
  Goldsmith

  
	
  City
  National Plaza

  	
  400
  N. Roxbury Drive

  
	
  555
  South Flower Street

  	
  Beverly
  Hills, CA 90210

  
	
  Los
  Angeles, CA 90071

  	
   

  
	
  Attn:
  Michael B. Cahill

  	
  with
  copy to:

  
	
  General
  Counsel

  	
  Jeannemarie
  O’Brien

  
	
   

  	
  Jeremy
  L. Goldstein

  
	
   

  	
  Wachtell,
  Lipton, Rosen & Katz

  
	
   

  	
  51
  West 52nd Street

  
	
   

  	
  New
  York, New York 10019-6150

  

 

10

 

The
parties hereto may change the above addresses from time to time by giving
notice thereof to each other in conformity with this Paragraph 16.

 

17.                                 Confidentiality.  Goldsmith covenants and agrees with Employer
that Goldsmith shall not, during or after the term of this Agreement, disclose
to anyone any confidential information concerning the business or operations of
Employer which Goldsmith may acquire in the course of or incident to the
performance of his duties hereunder, including, without limitation, processes,
customer lists, business or trade secrets, or methods or techniques used by
Employer in its business or operations.

 

18.                                 Construction.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.

 

19.                                 Captions.  The paragraph headings and captions contained
herein are for reference purposes and convenience only and shall not in any way
affect the meaning or interpretation of this Agreement.

 

20.                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

21.                                 Amendments.  This Agreement shall not be modified,
amended, or in any way altered except by an instrument in writing and signed by
both of the parties hereto.

 

22.                                 Mandatory Arbitration.  At the request of Goldsmith or Employer, any
dispute, claim, controversy of any kind (whether in contract or tort, statutory
or common law, legal or equitable) now existing or hereafter arising out of,
pertaining to or in connection with this Agreement and/or any renewals,
extensions, or amendments thereto, shall be resolved through final and binding
arbitration conducted by a single arbitrator at a location determined by the
arbitrator in Los Angeles or Beverly Hills, California, and administered by the
American Arbitration Association (“AAA”) in accordance with the Federal
Arbitration Act, 9 U.S.C. §1, et seq., and the then existing Commercial
Arbitration Rules of the AAA.  The
Parties agree to treat any such arbitration proceeding, including the existence
of such proceeding and any information related thereto (including, without
limitation, any claims, defenses, supporting documentation, content of any
written or oral testimony and any award or determination related thereto) as
strictly confidential.  Notwithstanding
the foregoing, judgment upon any award rendered by the arbitrator may be
entered in any State or Federal courts having jurisdiction thereof.

 

23.                                 Incentive Compensation
Guidance. On June 21, 2010, the Office of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation and the Office of Thrift
Supervision issued final Guidance on Sound Incentive Compensation Policies (the
“Guidance”), which has not yet been published in the Federal Register as of the
date hereof.  To the extent determined
necessary to comply with the Guidance as may be interpreted from time to time,
the Parties mutually agree to amend the incentive compensation provisions of
this Agreement and to cooperate in good faith with respect thereto (it being
understood that any agreed upon amendment will not decrease in any material
manner the economic value of the incentive compensation opportunities currently
provided for in this Agreement).

 

24.                                 Section 409A.  The Agreement is intended to comply with the
requirements of Section 409A of the Code or an exemption or exclusion
therefrom and, with respect to amounts that are subject to Section 409A of
the Code, shall in all respects be administered in accordance with Section 409A
of the Code.  Each payment under this
Agreement shall be treated as a separate payment for purposes of Section 409A
of the Code.  In no event may Goldsmith,
directly or indirectly, designate the calendar year of any payment to be made
under this Agreement.  If Goldsmith dies
following the effective date of termination and prior to the payment of the any
amounts delayed on account of Section 409A of the Code, such amounts shall
be paid to the personal representative of Goldsmith’s estate within 30 days
after the date of Goldsmith’s death.  All
reimbursements and in-kind benefits provided under this Agreement that
constitute deferred compensation within the meaning of Section 409A of the
Code shall be made or provided in accordance with the requirements of Section 409A
of the Code, including, without limitation, that (i) in no event shall
reimbursements by Employer under this Agreement be made later than the end of
the calendar year next following the calendar year in which the applicable fees
and expenses were incurred, provided, that Goldsmith shall have submitted an
invoice for such fees and expenses at least 10 days before the end of the
calendar year next following the calendar year in which such fees and expenses
were incurred; (ii) the amount of in-

 

11

 

kind benefits that Employer is obligated to
pay or provide in any given calendar year shall not affect the in-kind benefits
that Employer is obligated to pay or provide in any other calendar year; (iii) Goldsmith’s
right to have Employer pay or provide such reimbursements and in-kind benefits
may not be liquidated or exchanged for any other benefit; and (iv) in no
event shall Employer’s obligations to make such reimbursements or to provide
such in-kind benefits apply later than Goldsmith’s remaining lifetime (or if
longer, through the 20th anniversary of the Start Date).  Notwithstanding the foregoing, in no event
shall the effective date of termination occur until Goldsmith experiences a “separation
from service” within the meaning of Section 409A of the Code, and the date
on which such separation from service takes place shall be the “effective date
of termination.” “Separation from Service” shall mean a “separation from
service” within the meaning of Section 409A of the Code, as determined by
the Committee in accordance with Section 1.409A-1(h) of the Treasury
Regulations.  For purposes of determining
whether a Separation from Service has occurred, Goldsmith shall be considered
to have separated from service as an employee when the facts and circumstances
indicate that Goldsmith and the Employer reasonably anticipate that either (i) no
further services will be performed for the Employer (including any affiliates)
after a certain date, or (ii) that the level of bona fide services
Goldsmith will perform for the Employer (including any affiliates) after such
date (whether as an employee or as an independent contractor) will permanently
decrease to no more than 20% of the average level of bona fide services
performed by Goldsmith (whether as an employee or an independent contractor)
over the immediately preceding 36-month period (or the full period of services
to the Employer if Goldsmith has been providing services to the Employer less
than 36 months).  Within the time period
permitted by the applicable treasury regulations (or such later time as may be permitted
under Section 409A or any IRS or Department of Treasury rules or
other guidance issued thereunder), Employer may, in consultation with
Goldsmith, modify the Agreement in the least restrictive manner necessary in
order to exclude such compensation from the definition of “deferred compensation”
within the meaning of such Section 409A or in order to comply with the
provisions of Section 409A, other applicable provisions(s) of the
Code and/or any rules, regulations or other regulatory guidance issued under
such statutory provisions and without any diminution in the value of the
payments to Goldsmith.  CNB and Parent
Corporation are not providing any tax advice to Goldsmith.

 

12

 

IN
WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as
of the date first above written at Beverly Hills, California.

 

	
   

  	
   

  	
  CITY
  NATIONAL BANK

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/
  Russell Goldsmith

  	
   

  	
  By:

  	
  /s/
  Michael B. Cahill

  
	
  RUSSELL
  GOLDSMITH

  	
   

  	
   

  	
  MICHAEL
  B. CAHILL

  
	
   

  	
   

  	
   

  	
  Executive
  Vice President and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CITY
  NATIONAL CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael B. Cahill

  
	
   

  	
   

  	
   

  	
  MICHAEL
  B. CAHILL

  
	
   

  	
   

  	
   

  	
  Executive
  Vice President and General Counsel

  

 

13

 

APPENDIX A TO EMPLOYMENT
AGREEMENT

FOR RUSSELL GOLDSMITH

 

SUPPLEMENTAL RETIREMENT BENEFIT

 

The
purpose of this Appendix A to the Employment Agreement is to provide a
supplemental retirement benefit for Russell Goldsmith (“Goldsmith”), which
shall be in addition to any benefits which he may be entitled to receive under
qualified retirement plans of the Employer.

 

ARTICLE I

 

DEFINITIONS

 

All
capitalized terms used herein which are defined in the Employment Agreement
shall have the meaning set forth therein.  In addition, the following terms shall have
the meaning set forth below:

 

“Change
of Control” shall have the meaning set forth in Annex A to the Employment
Agreement.

 

“Final
Average Compensation” shall mean the average of the sum of the Annual Base
Compensation and Annual Bonus which Goldsmith earns during the highest three
out of his last five calendar years of employment with the Employer.

 

“Normal
Retirement Date” shall mean the date on which Goldsmith attains age 62, which
will be February 14, 2012.  Goldsmith
was born on February 14, 1950.

 

“Surviving
Spouse” shall mean Goldsmith’s spouse at the time of his termination of
employment with the Employer, if she remains alive after Goldsmith’s death.

 

“Years
of Service” shall mean complete and partial years of service with the Employer,
measured from Goldsmith’s commencement date on October 15, 1995 to the
most recent anniversary of his commencement date.

 

ARTICLE II

 

ACCRUAL AND VESTING OF
SUPPLEMENTAL RETIREMENT BENEFIT

 

2.1           Goldsmith shall accrue the right to receive an annual
supplemental retirement benefit in the form of a single life annuity for his
lifetime commencing at his Normal Retirement Date based on the following
formula:

 

1.5432%
multiplied times Years of Service (up to a maximum of 25.2% after 16.33 Years
of Service) multiplied times Final Average Compensation

 

2.2           Under the formula set forth in Section 2.1, if
Goldsmith retires on his Normal Retirement Date, he will be entitled to receive
the maximum annual supplemental retirement 

 

A-1

 

benefit in the form of a single life annuity
equal to 25.2% multiplied times his Final Average Compensation.

 

2.3           In the event of a Change of Control, Goldsmith shall
receive credit for five additional Years of Service, but there will be no
change in the maximum supplemental retirement benefit.

 

2.4           Goldsmith will have a fully vested right to his accrued
supplemental retirement benefit after eight Years of Service (including his
past service).  There will be no partial
vesting prior to completion of eight Years of Service.

 

ARTICLE III

 

PAYMENT OF SUPPLEMENTAL
RETIREMENT BENEFIT

 

3.1           Goldsmith’s accrued annual supplemental retirement benefit
shall be paid in equal monthly installments commencing on the first day of the
month following his termination of employment with the Employer for any reason
other than his death.

 

3.2           If Goldsmith is married when he terminates employment with
the Employer, the normal form of payment of his supplemental retirement benefit
will be an actuarially reduced 100% joint and survivor annuity payable to
Goldsmith during his lifetime and continuing thereafter during the lifetime of
his Surviving Spouse.

 

3.3           If Goldsmith is not married when he terminates employment
with the Employer, the normal form of payment of his supplemental retirement
benefit will be a single life annuity payable to Goldsmith during his lifetime
with payments terminating upon his death.

 

3.4           Goldsmith shall be entitled to elect an optional form of
payment of his supplemental retirement benefit, and to change any such
election, upon written notice filed with the Employer at any time up to six
months preceding his termination of employment, or in the event of a separation
or divorce from his spouse or the death of his spouse at any time up to the
date of his termination of employment. 
Any new election or change of election which is made after the date
provided herein shall have no force or effect. 
No change in the form of payment will be permitted for any reason after
commencement of supplemental retirement benefit payments.  The optional forms of payment which Goldsmith
may elect within the times specified above are a lump sum payment to be paid on
the first day of the month following his termination of employment, a single
life annuity payable during his lifetime with no payments to his Surviving
Spouse after his death, and any other optional form of payment which the
Employer may permit in its discretion.

 

3.5           There shall be an actuarial reduction in Goldsmith’s supplemental
retirement benefit in the event that he terminates employment with the Employer
prior to his Normal Retirement Date and an actuarial increase in his
supplemental retirement benefit in the event that he terminates employment with
the Employer after his Normal Retirement Date. 
In either event, the payment of his supplemental retirement benefit
shall commence on the first day of the month following his termination of
employment.

 

A-2

 

3.6           If Goldsmith retires prior to his Normal Retirement Date,
and his supplemental retirement benefit is paid in the form of a 100% joint and
survivor annuity, there would be actuarial reductions for both early retirement
and the 100% joint and survivor annuity.

 

3.7           The actuarial reduction and actuarial equivalence factors
are set forth in Schedule 1 hereto.

 

ARTICLE IV

 

PRE-RETIREMENT SPOUSAL DEATH
BENEFIT

 

4.1           If Goldsmith dies while he remains employed with the
Employer and has a Surviving Spouse, his Surviving Spouse will be entitled to
receive a benefit in the form of a single life annuity payable for her lifetime
which is the actuarial equivalent of the single life annuity for his lifetime
which Goldsmith would have been entitled to receive if he had terminated employment
with the Employer in the month before he died. 
This benefit shall be payable to Goldsmith’s Surviving Spouse in equal
monthly payments commencing on the first day of the month following his death.

 

4.2           Goldsmith shall be entitled to elect, upon written notice
filed with the Employer at any time before his death, that his Surviving Spouse
shall receive a lump sum payment to be paid on the first day of the month
following his death which is the actuarial equivalent of the single life
annuity which would otherwise be paid to her pursuant to Section 4.1,
using the actuarial reduction and actuarial equivalence factors set forth in
Schedule 1 hereto.

 

ARTICLE V

 

SECTION 409A

 

5.1           The Agreement is intended to comply with the requirements
of Section 409A of the Code or an exemption or exclusion therefrom and,
with respect to amounts that are subject to Section 409A of the Code,
shall in all respects be administered in accordance with Section 409A of
the Code except for amounts payable under this Agreement that are “grandfathered”
amounts within the meaning of Section 409A of the Code.  “Grandfathered” amounts are amounts that were
earned and vested by Goldsmith within the meaning of Section 409A prior to
December 31, 2004.  No modification
to this Agreement as set forth in Section 5.2 shall apply to any “grandfathered”
amounts and the payments of any “grandfathered” amounts to Goldsmith under this
Agreement shall be made without regard to such modifications.

 

5.2           Any election of an optional form of benefit under this
Agreement shall comply with the requirements of Section 409A of the Code,
which shall generally include the following: (a) the election shall not
take effect until at least 12 months after the date on which the election is
made; (b) the new benefit commencement date shall be at least five years
after the benefit commencement date that otherwise would have applied; and (c) the
election must be made at least 12 months prior to the benefit commencement date
that would otherwise have applied.  Each
payment under this Agreement shall be treated as a separate payment for
purposes of Section 409A of the Code to the extent permitted
thereunder.  In no event may Goldsmith,
directly or indirectly, designate the calendar year of any payment to be made
under this 

 

A-3

 

Agreement. 
Notwithstanding the foregoing provisions of this Agreement, in the event
that Goldsmith is a “specified employee” within the meaning of Section 409A
of the Code (as determined in accordance with the methodology established by
the Company as in effect on the date of termination), amounts that constitute “nonqualified
deferred compensation” within the meaning of Section 409A of the Code that
would otherwise be payable during the six-month period immediately following
the effective date of termination shall instead be paid, with interest on any
delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code, on the first business day after the date that is six months following
Goldsmith’s “separation from service” within the meaning of Section 409A.  If Goldsmith dies following the date of
termination and prior to the payment of the any amounts delayed on account of Section 409A
of the Code, such amounts shall be paid to the personal representative of
Goldsmith’s estate on the first day of the month following his death.  In no event shall the effective date of
termination occur until Goldsmith experiences a “separation from service”
within the meaning of Section 409A of the Code, and the date on which such
separation from service takes place shall be the effective date of termination
for purposes of this Agreement.  “Separation
from Service” shall mean a “separation from service” within the meaning of Section 409A
of the Code, as determined by the Committee in accordance with Section 1.409A-1(h) of
the Treasury Regulations.  For purposes of determining whether a
Separation from Service has occurred, Goldsmith shall be considered to have
separated from service as an employee when the facts and circumstances indicate
that Goldsmith and the Employer reasonably anticipate that either (i) no
further services will be performed for the Employer (including any affiliates)
after a certain date, or (ii) that the level of bona fide services
Goldsmith will perform for the Employer (including any affiliates) after such
date (whether as an employee or as an independent contractor) will permanently
decrease to no more than 20% of the average level of bona fide services
performed by Goldsmith (whether as an employee or an independent contractor)
over the immediately preceding 36-month period (or the full period of services
to the Employer if Goldsmith has been providing services to the Employer less
than 36 months).  Within the time period permitted by
the applicable treasury regulations (or such later time as may be permitted
under Section 409A or any IRS or Department of Treasury rules or
other guidance issued thereunder), Employer may, in consultation with
Goldsmith, modify the Agreement in the least restrictive manner necessary in
order to exclude such compensation from the definition of “deferred
compensation” within the meaning of such Section 409A or in order to
comply with the provisions of Section 409A, other applicable provisions(s) of
the Code and/or any rules, regulations or other regulatory guidance issued
under such statutory provisions and without any diminution in the value of the
payments to Goldsmith.

 

5.3           Pursuant to the limited transition relief made available
in accordance with Notice 2007-86 and subsequent guidance, Goldsmith may make
an election in writing filed with the Employer to receive payments of the
supplemental retirement benefit and/or the pre-retirement spousal death benefit
in a lump sum or other optional form of payment without being subject to the
requirements under Section 409A described in the first sentence of Section 5.2.  Any such election for amounts subject to Section 409A
shall become effective on January 1, 2009 and shall not apply with respect
to amounts that would otherwise be payable in 2008.

 

A-4

 

SCHEDULE 1

 

Supplemental Retirement Benefit

for Russell Goldsmith

 

Actuarial Reduction Factors

 

Early
Retirement Reduction Factors

 

	
  Years
  of Age Prior to

  Normal Retirement Date

  	
   

  	
  Reduction Factor

  	
   

  
	
  1

  	
   

  	
  93

  	
  %

  
	
  2

  	
   

  	
  86

  	
  %

  
	
  3

  	
   

  	
  79

  	
  %

  
	
  4

  	
   

  	
  72

  	
  %

  
	
  5

  	
   

  	
  65

  	
  %

  
	
  6

  	
   

  	
  58

  	
  %

  
	
  7

  	
   

  	
  51

  	
  %

  
	
  8

  	
   

  	
  48

  	
  %

  
	
  9

  	
   

  	
  45

  	
  %

  

 

A-5

 

100%
Joint & Survivor Annuity Reduction Factors at Normal Retirement Date

 

	
  Spouse
  Years of Age Younger

  	
   

  	
  Reduction Factor

  	
   

  
	
  0

  	
   

  	
  85.75

  	
  %

  
	
  1

  	
   

  	
  84.97

  	
  %

  
	
  2

  	
   

  	
  84.26

  	
  %

  
	
  3

  	
   

  	
  83.45

  	
  %

  
	
  4

  	
   

  	
  82.71

  	
  %

  
	
  5

  	
   

  	
  82.04

  	
  %

  
	
  6

  	
   

  	
  81.32

  	
  %

  
	
  7

  	
   

  	
  80.56

  	
  %

  
	
  8

  	
   

  	
  79.87

  	
  %

  
	
  9

  	
   

  	
  79.19

  	
  %

  
	
  10

  	
   

  	
  78.53

  	
  %

  

 

Actuarial
Equivalence

 

Mortality

 

	
  Prior to Normal
  Retirement Age:

  	
   

  	
  1983 Group Annuity
  Mortality for males or females

  
	
  After
  Normal Retirement Age:

  	
   

  	
  1983
  Group Annuity Mortality for males or females

  

 

Interest:
To Calculate Lump Sum Payment or Actuarial Increase for Late Retirement

 

	
  Prior
  to Normal Retirement Date:

  	
   

  	
  6.0%
  per annum

  
	
  After
  Normal Retirement Date:

  	
   

  	
  6.0%
  per annum

  

 

A-6

 

APPENDIX B TO EMPLOYMENT AGREEMENT

FOR RUSSELL GOLDSMITH

 

CITY NATIONAL VALUATION METHODOLOGY FOR OPTION AWARDS

 

The
City National Valuation Methodology for Option Awards is used to calculate the “Deemed
Value” of each stock option award on the grant date.  As of the date hereof, the City National
Valuation Methodology uses the Black-Scholes Model to value the options
granted.  The assumptions input into the
model include expected term, volatility, grant date, grant price, risk-free
interest rate, and dividend yield. 
Option awards shall be granted with an exercise price not less than the
fair market value of the Parent Corporation’s stock (within the meaning of the
applicable stock option plan) on the date of grant.  The other inputs have the following terms:

 

Expected Term:  The
expected term of the option in years (i.e., the number of years that the
company estimates that options will be outstanding prior to exercise or
forfeiture) is based on the expected term analysis done by the Parent
Corporation for other corporate officers who are members of the Employer’s
Executive Committee and Strategy and Planning Committee (“Executives”)(1).  This analysis is currently based on guidance
from PriceWaterhouseCoopers.  Based on a
total of ten years of stock option grants from any given year of grant and
updated on a quarterly basis, the Parent Corporation calculates the total
options granted for each period less those forfeited prior to vesting.  For each year after vesting, the number of
options exercised is calculated and any remaining unexercised options are
assumed to have been exercised evenly over the remaining periods.  The total of all options exercised for each
period is multiplied by the number of years after grant.  The sum of these totals is divided by the
number of options granted for the average number of years to exercise.

 

Volatility: 
Expected volatility is based on the historical volatility of the Parent
Corporation’s stock price, over a period equal to the “expected term of the
option” (as calculated in the “expected term” analysis) on a monthly
basis.  Historical volatility data is
obtained from Bloomberg.  The Parent
Corporation believes the most recent historical stock activity is most representative
of future activity.

 

Dividend Yield:  Dividend yield is an assumed dividend yield
rate of the Parent Corporation at the time of grant obtained from Bloomberg
based on the expected life calculated. 
Actual dividend payments will depend upon a number of factors, including
future financial results, and may differ substantially from the assumption.

 

Risk-free interest rate:  Risk-free investment rate for the weighted
average life of the outstanding option is interpolated based on the U.S.
Treasury Note yield curve in effect at the time of grant.  Data is obtained from Bloomberg.

 

(1)  For valuation purposes, the Parent
Corporation has divided colleagues into two groups that have different exercise
and forfeiture behavior.  Colleagues who
are past or current members of the Executive Committee comprise one group.  All remaining colleagues make up the other
group.

 

B-1

 

ANNEX A

EMPLOYMENT AGREEMENT

 

AGREEMENT
by and between City National Corporation, a Delaware corporation (the “Company”)
and Russell Goldsmith (the “Executive”), dated as of December 22, 2008.

 

The
Board of Directors of the Company (the “Board”), has determined that it is in
the best interest of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company.  The Board believes it is
imperative to diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or threatened Change
of Control and to encourage the Executive’s full attention and dedication to
the Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control which ensure that the compensation and
benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations. 
Therefore, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement.

 

NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

1.                                       CERTAIN
DEFINITIONS.  (a) 
The “Effective Date” shall mean the first date during the Change of Control
Period (as defined in Section 1(b)) on which a Change of Control (as
defined in Section 2) occurs. 
Anything in this Agreement to the contrary notwithstanding, if the
Executive’s employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or anticipation of a
Change of Control, then for all purposes of this Agreement the “Effective Date”
shall mean the date immediately prior to the date of such termination of
employment.

 

(b)                                 The “Change of
Control Period” shall mean the period commencing on the date hereof and ending
on the second anniversary of the date hereof; provided, however that commencing
on the date one year after the hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof shall be hereinafter
referred to as the “Renewal Date”), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate two years
from such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.

 

2.                                       CHANGE OF
CONTROL.  For the purpose of this
Agreement, a “Change of Control” shall mean:

 

(a)                                  The acquisition
by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) or the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated 

 

1

 

under the Exchange Act) of 30% or more of
either (i) the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:  (i) any acquisition 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, (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 2, or (v) any
acquisition by the Goldsmith family or any trust or partnership for the benefit
of any member of the Goldsmith family; or

 

(b)                                 Individuals
who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease
or any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming 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 an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or

 

(c)                                  Consummation of
a reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a “Business Combination”),
in each case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company of all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 30% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or 

 

2

 

(d)                                 Approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.

 

3.                                       EMPLOYMENT
PERIOD.  The Company hereby agrees to
continue the Executive in its employ, and the executive hereby agrees to remain
in the employ of the Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of such date (the “Employment Period”).

 

4.                                       TERMS OF
EMPLOYMENT.  (a) 
POSITION AND DUTIES.

 

(i)                                     During the
Employment Period, (A) the Executive’s position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive’s services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or location
less than 35 miles from such location.

 

(ii)                                  During the
Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such responsibilities.  During the Employment Period it shall not be
a violation of this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive’s responsibilities as an employee of the
Company in accordance with this Agreement.

 

It
is expressly understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive’s responsibilities to the
Company.

 

(b)                                 COMPENSATION.  (i)  BASE SALARY.  During the Employment Period, the Executive
shall receive an annual base salary (“Annual Base Salary”) at least equal to
twelve times the highest monthly base salary paid or payable, including any
base salary which has been earned but deferred, to the Executive by the Company
and its affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs.  The Annual Base Salary shall be paid at such
intervals as the Company pays executive salaries generally.  During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the last salary increase
awarded to the Executive prior to the Effective Date and thereafter at least
annually.  Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement.  Annual Base Salary
shall not be reduced after any such increase and the term Annual Base Salary as
utilized in this 

 

3

 

Agreement shall refer to Annual Base Salary
as so increased.  As used in this
Agreement, the term “affiliated companies” shall include any company controlled
by, controlling or under common control with the Company.

 

(ii)                                  ANNUAL BONUS.  In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the
Executive’s highest bonus under the Company’s annual incentive plans for the
last three full fiscal years prior to the Effective Date (annualized in the
event that the Executive was not employed by the Company for the whole of such
fiscal year) (the “Recent Annual Bonus”). 
Each such Annual Bonus shall be paid no later than two and a half months
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.

 

(iii)                               INCENTIVE,
SAVINGS AND RETIREMENT PLANS.  During the Employment Period, the Executive
shall be entitled to participate in all incentive, savings and retirement
plans, practices, policies and programs applicable generally to other peer
executive of the Company and its affiliated companies, but in no event shall
such plans, practice, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during
the 120-day period immediately preceding the Effective Date or if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.

 

(iv)                              WELFARE BENEFIT
PLANS.  During the employment Period,
the Executive and/or the Executive’s family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to the other peer executive of the Company
and its affiliated companies.

 

(v)                                 EXPENSES.  During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.

 

4

 

(vi)                              FRINGE BENEFITS.  During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and if applicable,
automobile allowance and/or use of an automobile and payment of related
expenses, in a accordance with the most favorable plans, practices, programs
and policies of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company and
it’s affiliated companies.

 

(vii)                           OFFICE AND
SUPPORT STAFF.  During the
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.

 

(viii)                        VACATION.  During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.

 

5.                                       TERMINATION OF
EMPLOYMENT.  (a) 
DEATH OR DISABILITY.  The Executive’s
employment shall terminated automatically upon the Executive’s death during the
Employment Period.  If the Company
determines in good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of Disability set
forth below), it may give to the Executive written notice in accordance with Section 12(b) of
this Agreement of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment
with the Company shall terminate effective on the 30th day after receipt of
such notice by the Executive (the “Disability Effective Date”), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from the Executive’s duties with the
Company on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company of its insurers and
acceptable to the Executive or the Executive’s legal representative.

 

(b)                                 CAUSE.  The Company may terminate the Executive’s
employment during the Employment Period for Cause.  For purposes of this Agreement, “Cause” shall
mean:

 

(i)                                     the willful and
continued failure of the Executive to perform substantially the Executive’s
duties with the Company or one of its affiliated (other than any such failure
resulting from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the Board
or the Chief Executive Officer of the Company which specifically identifies the
manner in 

 

5

 

which the Board or Chief
Executive Officer believes that the Executive has not substantially performed
the Executive’s duties, or

 

(ii)                                  the willful
engaging by the Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company.

 

For
purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer or a senior officer of the Company
or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. 
The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.

 

(c)                                  GOOD REASON.  The Executive’s employment may be terminated
By the Executive for Good Reason.  For
purpose of this Agreement, “Good Reason” shall mean:

 

(i)                                     the assignment
to the Executive of any duties inconsistent in any respect with the Executive’s
position (including status, offices, titles and reporting requirement),
authority, duties or responsibilities as contemplated by Section 4(a) of
this Agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;

 

(ii)                                  any failure by
the Company to comply with any of the provisions of Section 4(b) of
this Agreement, other than in isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;

 

(iii)                               the Company’s
requiring the Executive to be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company’s requiring the
Executive to travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date;

 

(iv)                              any purported
termination by the Company of the Executive’s employment otherwise than as
expressly permitted by this Agreement; or

 

(v)                                 any failure by
the Company to comply with and satisfy Section 11(c) of this
Agreement.

 

6

 

For
purposes of this Section 5(c), any good faith determination of “Good
Reason” made by the Executive shall be conclusive.  Anything in the Agreement to the Contrary
notwithstanding, a termination by the Executive for any reason during the
30-day period immediately following the first anniversary of the Effective Date
shall be deemed to be a termination for Good Reason for all purposes of this
Agreement.

 

(d)                                 NOTICE OF
TERMINATION.  Any
termination by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 12(b) of this Agreement.  For purposes of this Agreement, a “Notice of
Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the
provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies that
termination date (which date shall be not more than thirty days after the
giving of such notice).  The failure by
the Executive or the Company to set forth in the notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(e)                                  DATE OF
TERMINATION.  “Date of
Termination” means (i) if the Executive’s employment is terminated by the
Company for Cause, or by the Executive for Good Reason, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive employment is terminated by the Company other
than for Cause or Disability, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination and (iii) if
the Executive’s employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be. 
Notwithstanding the foregoing, in no event shall the Date of Termination
occur until the Executive experiences a “separation from service” within the
meaning of Section 409A of the Code, and the date on which such separation
from service takes place shall be the “Date of Termination.”  “Separation from Service” shall mean a “separation
from service” within the meaning of Section 409A of the Code, as
determined by the Company in accordance with Section 1.409A-1(h) of
the Treasury Regulations.  For purposes of determining whether a
Separation from Service has occurred, the Executive shall be considered to have
separated from service as an employee when the facts and circumstances indicate
that the Executive and the Company reasonably anticipate that either (i) no
further services will be performed for the Company (including any affiliates)
after a certain date, or (ii) that the level of bona fide services the
Executive will perform for the Company (including any affiliates) after such
date (whether as an employee or as an independent contractor) will permanently
decrease to no more than 20% of the average level of bona fide services
performed by the Executive (whether as an employee or an independent
contractor) over the immediately preceding 36-month period (or the full period
of services to the Company if the Executive has been providing services to the
Company less than 36 months).

 

6.                                       OBLIGATIONS OF
THE COMPANY UPON TERMINATION.  (a)  GOOD REASON; OTHER THAN FOR CAUSE,
DEATH OR DISABILITY.  If, during the 

 

7

 

Employment Period, the Company shall terminate the
Executive’s employment other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:

 

(i)                                     the Company
shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination the aggregate of the following amounts:

 

A.                                   the sum of (1) the
Executive’s Annual Base Salary through the Date of Termination to the extent
not theretofore paid, (2) the product of (x) the higher of (i) the
Recent Annual Bonus and (ii) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned but deferred (and annualized
for any fiscal year consisting of less than twelve full months or during which
the Executive was employed for less than twelve full months), for the most
recently completed fiscal year during the Employment Period, if any (such
higher amount being referred to as the “Highest Annual Bonus”) and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365 (the “Pro
Rata Bonus”) and (3) any accrued vacation pay, in each case to the extent
not theretofore paid (the sum of the amounts described in clauses (1)  and
(3) shall be hereinafter referred to as the “Accrued Obligations”);
provided, that notwithstanding the foregoing, if the Executive has made an
irrevocable election under any deferred compensation arrangement subject to Section 409A
of the Code to defer any portion of the Annual Base Salary described in clause (1) above,
then for all purposes of this Section 6 (including, without limitation,
Sections 6(b) through 6(d)), such deferral election, and the terms of the
applicable arrangement shall apply to the same portion of the amount described
in such clause (1), and such portion shall not be considered as part of the “Accrued
Obligations” but shall instead be an “Other Benefit” (as defined below); and

 

B.                                     the amount
equal to the product of (1) three and (2) the sum of (x) the
Executive’s Annual Base Salary and (y) the Highest Annual Bonus; and

 

C.                                     an amount equal
to the contributions to the Executive’s account in the Company’s Profit Sharing
Plan which the Executive would receive if the Executive’s employment continued
for three years after the Date of Termination assuming for this purpose that (1) all
such contributions are fully vested, (2) the Executive’s compensation is
that required by Sections 4(b)(i) and 4(b)(ii), and, (3) the Company’s
contribution to the Profit Sharing Plan in each such year is in an amount equal
to the greatest amount contributed by the Company in any of the three years
ending prior to the Effective Date.

 

(ii)                                  for three years
after the Executive’s Date of Termination, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or policy (the
“Benefits Period”), the Company shall continue medical, prescription, vision
and dental insurance benefits (“Health Care Benefits”) and life insurance
benefits to the Executive and/or the Executive’s family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of the Agreement
if the Executive’s employment has not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other welfare benefits

 

8

 

described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility; provided, however, that
the Health Care Benefits shall be provided during the Benefits Period in such a
manner that such benefits are excluded from the Executive’s income for federal
income tax purposes.

 

(iii)                               the Company
shall, at its sole expense as incurred, provide the Executive with reasonable
outplacement services the scope and provider of which shall be selected by the
Executive in his sole discretion, provided that such outplacement benefits
shall end not later than the last day of the second calendar year that begins
after the Date of Termination; and

 

(iv)                              to the extent
not theretofore paid or provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to be paid or provided or
which the Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the “Other
Benefits”).

 

Notwithstanding
the foregoing provisions of this Section 6, in the event that the
Executive is a “specified employee” within the meaning of Section 409A of
the Code (as determined in accordance with the methodology established by the
Company as in effect on the Date of Termination) (a “Specified Employee”),
amounts that constitute “nonqualified deferred compensation” within the meaning
of Section 409A of the Code that would otherwise be payable or provided
under Section 6 during the six-month period immediately following the Date
of Termination shall instead be paid, with interest on any delayed payment at
the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code (“Interest”) determined as of the Date of Termination, or provided on
the first business day after the date that is six months following the
Executive’s Date of Termination (the “Delayed Payment Date”) ; provided that no
such interest shall accrue with respect to any equity awards not settled during
such six month period.

 

(b)                                 DEATH.  If the Executive’s employment is terminated
by reason of the Executive’s death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive’s legal
representatives under this Agreement, other than for payment of Accrued
Obligations (subject to the proviso set forth in Section 6(a)(1)(A) to
the extent applicable), the Pro Rata Bonus and the timely payment or provision of
Other Benefits.  Accrued Obligations and
the Pro Rata Bonus shall be paid to the Executive’s estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of
Termination.  With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive’s estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their beneficiaries
at any time during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive’s estate and/or the Executive’s
beneficiaries, as in effect on the date of Executive’s death with respect to
other peer executive of the Company and its affiliated companies and their
beneficiaries.

 

9

 

(c)                                  DISABILITY.  If the Executive’s employment is terminated
by reason of the Executive’s Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations (subject to the proviso set forth in Section 6(a)(1)(A) to
the extent applicable), the Pro Rata Bonus and the timely payment or provision
of Other Benefits.  Accrued Obligations
and Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination; provided that in the event that the
Executive is a Specified Employee, the Pro Rata Bonus shall be paid, with
Interest, on the Delayed Payment Date. 
With respect to the provision of Other Benefits, the term Other Benefits
as utilized in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date to receive, disability
and other benefits at least equal to the most favorable of those generally
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive’s family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its affiliated
companies and their families.

 

(d)                                 CAUSE; OTHER
THAN FOR GOOD REASON.  If the
Executive’s employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x) his Annual
Base Salary through the Date of Termination, (y) the timely delivery of
the Other Benefits, in each case to the extent theretofore unpaid.  If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations (subject to the proviso set forth
in Section 6(a)(1)(A) to the extent applicable), the Pro Rata Bonus
and the timely payment or provision of Other Benefits.  In such case, timely payment or provision of
Other Benefits.  In such case, all
Accrued Obligations and the Pro Rata Bonus shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination; provided that in
the event that the Executive is a Specified Employee, the Pro Rata Bonus shall
be paid, with Interest, on the Delayed Payment Date.

 

7.                                       NON-EXCLUSIVITY
OF RIGHTS.  Nothing in
this Agreement shall prevent or limit the Executive’s continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify,
nor, subject to Section 12(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies.  Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.

 

8.                                       FULL SETTLEMENT.  The Company’s obligation to make the payment
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others.  In no event shall
the Executive be 

 

10

 

obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and such amounts shall not be
reduced whether or not the Executive obtains other employment.  The Company agrees to pay as incurred (within
10 days following the Company’s receipt of an invoice from the Executive), at
any time from the Change of Control through the Executive’s remaining lifetime
(or, if longer, through the 20th anniversary
of the Change of Control), to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case Interest determined as of the date such
legal fees and expenses were incurred. 
In order to comply with Section 409A of the Code, in no event shall
the payments by the Company under this Section 8 be made later than the
end of the calendar year next following the calendar year in which such fees
and expenses were incurred, provided, that
the Executive shall have submitted an invoice for such fees and expenses at
least 10 days before the end of the calendar year next following the calendar
year in which such fees and expenses were incurred.  The amount of such legal fees and expenses
that the Company is obligated to pay in any given calendar year shall not
affect the legal fees and expenses that the Company is obligated to pay in any
other calendar year, and the Executive’s right to have the Company pay such
legal fees and expenses may not be liquidated or exchanged for any other
benefit.

 

9.                                       CERTAIN
ADDITIONAL PAYMENTS BY THE COMPANY.

 

(a)                                  Anything in
this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any Payment would be subject to the
Excise Tax, then the Executive shall be entitled to receive an additional
payment (the “Gross-Up Payment”) in an amount such that, after payment by the
Executive of all taxes (and any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, but excluding any income taxes, interest and penalties
imposed pursuant to Section 409A of the Code, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.  Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that the
Executive is entitled to the Gross-Up Payment, but that the Parachute Value of
all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up
Payment shall be made to the Executive and the amounts payable under this
Agreement shall be reduced so that the Parachute Value of all Payments, in the
aggregate, equals the Safe Harbor Amount. 
The reduction of the amounts payable hereunder, if applicable, shall be
made by reducing the payments and benefits under the following sections in the
following order: (i) Section 6(a)(i)(B) and (ii) Section 6(a)(i)(C).  For purposes of reducing the Payments to the
Safe Harbor Amount, only amounts payable under this Agreement (and no other
Payments) shall be reduced.  If the
reduction of the amount payable under this Agreement would not result in a
reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no
amounts payable under the Agreement shall be reduced pursuant to this Section 9(a) and
the Executive shall be entitled to the Gross-Up Payment.  The Company’s obligation to make Gross-Up
Payments under this Section 9 shall not be conditioned upon the Executive’s
termination of employment.

 

11

 

(b)                                 Subject to the
provisions of Section 9(c), all determinations required to be made under
this Section 9, including whether and when a Gross-Up Payment is required,
the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Ernst & Young LLP, or
such other nationally recognized certified public accounting firm as may be
designated by the Executive (the “Accounting Firm”).  The Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment or such
earlier time as is requested by the Company. 
In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive may appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). 
All fees and expenses of the Accounting Firm shall be borne solely by
the Company.  Any determination by the
Accounting Firm shall be binding upon the Company and the Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments that will not have been made by the Company should have been made (the
“Underpayment”), consistent with the calculations required to be made
hereunder.  In the event the Company
exhausts its remedies pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

 

(c)                                  The Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the
Gross-Up Payment.  Such notification
shall be given as soon as practicable, but no later than 10 business days after
the Executive is informed in writing of such claim.  The Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid.  The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
the Executive gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:

 

(i)                                    give the
Company any information reasonably requested by the Company relating to such
claim,

 

(ii)                                 take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company,

 

(iii)                             cooperate with
the Company in good faith in order effectively to contest such claim, and

 

(iv)                             permit the
Company to participate in any proceedings relating to such claim;

 

12

 

provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest, and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties) imposed as a result of such representation and payment
of costs and expenses.  Without limitation
on the foregoing provisions of this Section 9(c), the Company shall
control all proceedings taken in connection with such contest, and, at its sole
discretion, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the applicable taxing authority in
respect of such claim and may, at its sole discretion, either pay the tax
claimed to the appropriate taxing authority on behalf of the Executive and
direct the Executive to sue for a refund or to contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however,
that, if the Company pays such claim and directs the Executive to sue for a
refund, the Company shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties) imposed with respect to such payment or with respect to any imputed
income in connection with such payment; and provided, further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount.  Furthermore, the
Company’s control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.

 

(d)                                 If, after the
receipt by the Executive of a Gross-Up Payment or payment by the Company of an
amount on the Executive’s behalf pursuant to Section 9(c), the Executive
becomes entitled to receive any refund with respect to the Excise Tax to which
such Gross-Up Payment relates or with respect to such claim, the Executive
shall (subject to the Company’s complying with the requirements of
Section 9(c), if applicable) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto).  If, after payment
by the Company of an amount on the Executive’s behalf pursuant to Section 9(c),
a determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then the amount of such payment shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.

 

(e)                                  Any Gross-Up
Payment, as determined pursuant to this Section 9, shall be paid by the Company
to the Executive within five days of the receipt of the Accounting Firm’s
determination; provided that, the Gross-Up
Payment shall in all events be paid no later than the end of the Executive’s
taxable year next following the Executive’s taxable year in which the Excise
Tax (and any income or other related taxes or interest or penalties thereon) on
a Payment are remitted to the Internal Revenue Service or any other applicable
taxing authority or, in the case of amounts relating to a claim described in Section 9(c) that
does not result in the remittance of any federal, state, local and foreign
income, excise, social security and other taxes, the calendar year in which the
claim is finally settled or otherwise resolved. 
Notwithstanding any other provision of this Section 9, the Company
may, in its sole discretion, withhold and pay over 

 

13

 

to the Internal Revenue Service or any other
applicable taxing authority, for the benefit of the Executive, all or any
portion of any Gross-Up Payment, and the Executive hereby consents to such
withholding.

 

(f)                                    Definitions.  The following terms shall have the following
meanings for purposes of this Section 9.

 

(i)                                     “Excise Tax”
shall mean the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to such excise tax.

 

(ii)                                  “Parachute
Value” of a Payment shall mean the present value as of the date of the change
of control for purposes of Section 280G of the Code of the portion of such
Payment that constitutes a “parachute payment” under Section 280G(b)(2),
as determined by the Accounting Firm for purposes of determining whether and to
what extent the Excise Tax will apply to such Payment.

 

(iii)                               A “Payment”
shall mean any payment or distribution in the nature of compensation (within
the meaning of Section 280G(b)(2) of the Code) to or for the benefit
of the Executive, whether paid or payable pursuant to this Agreement or
otherwise.

 

(iv)                              The “Safe
Harbor Amount” means 2.99 times the Executive’s “base amount,” within the
meaning of Section 280G(b)(3) of the Code.

 

.

 

10.                                 CONFIDENTIAL
INFORMATION.  The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company
or any of its affiliated companies, and their respective businesses, which
shall have been obtained by the Executive during the Executive’s employment by
the Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or representative of the
Executive in violation of this Agreement). 
After termination of the Executive’s employment with the Company, the
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.  In no event shall an
asserted violation of the provisions of this Section 10 constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this Agreement.

 

11.                                 SUCCESSORS.  (a)  This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution.  This Agreement shall inure
to the benefit of and be enforceable by the Executive’s legal representative.

 

(b)                                 This Agreement
shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

 

(c)                                  The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or 

 

14

 

assets of the Company to assume expressly and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place.  As used in this Agreement, “Company”
shall mean the Company as hereinbefore defined and any successor to its
business and /or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.

 

12.                                 MISCELLANEOUS.  (a)  This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. 
The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect.  This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

 

(b)                                 All notices and
other communications hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

 

	
  IF
  TO THE EXECUTIVE:

  	
   

  	
  Russell
  Goldsmith

  
	
   

  	
   

  	
  400
  North Roxbury Drive

  
	
   

  	
   

  	
  Beverly
  Hills, CA 90210

  
	
   

  	
   

  	
   

  
	
  IF
  TO THE COMPANY:

  	
   

  	
  City
  National Bank 

  
	
   

  	
   

  	
  400
  North Roxbury Drive 

  
	
   

  	
   

  	
  Beverly
  Hills, CA 90210 

  
	
   

  	
   

  	
  Attention:
  General Counsel

  

 

or
to such other address as either party shall have furnished to the other in
writing in accordance herewith.  Notice
and communications shall be effective when actually received by the addressee.

 

(c)                                  The invalidity
or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.

 

(d)                                 The Company may
withhold from any amounts payable under this Agreement such Federal, state,
local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.

 

(e)                                  The Executive’s
or the Company’s failure to insist upon strict compliance with any provision of
this Agreement or the failure to assert any right the Executive or the Company
may have hereunder, including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to Section 5(c)(l)-(v)of
this Agreement, shall not be deemed to be a waiver of such provision or right
or any other provision or right of the Agreement.

 

(f)                                    The Executive
and the Company acknowledge that, except as may otherwise be provided under any
other written agreement between the Executive and the Company, the employment
of the Executive by the Company is “at will” and, subject to Section 1(a) hereof,
prior to the Effective Date, the Executive’s employment and/or this Agreement
may 

 

15

 

be terminated by either the Executive or the
Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement.  From and after the Effective Date this Agreement
shall supersede any other agreement between the parties with respect to the
subject matter hereof.  From and after
the date hereof, this Agreement shall supersede the Employment Agreement by and
between City National Corporation, a Delaware corporation (the “Company”) and
Russell Goldsmith (the “Executive”), dated as of the 31st day of March,
1997.  Notwithstanding the foregoing,
this Agreement shall not supersede and shall be subject to the Waiver and
Amendment Agreement letter dated as of November 14, 2008 by and between
the Employer and Goldsmith.

 

(g)                                 The Agreement
is intended to comply with the requirements of Section 409A of the Code or
an exemption or exclusion therefrom and, with respect to amounts that are
subject to Section 409A of the Code, shall in all respects be administered
in accordance with Section 409A of the Code.  Each payment under this Agreement shall be
treated as a separate payment for purposes of Section 409A of the
Code.  In no event may the Executive,
directly or indirectly, designate the calendar year of any payment to be made
under this Agreement.  If the Executive
dies following the Date of Termination and prior to the payment of the any
amounts delayed on account of Section 409A of the Code, such amounts shall
be paid to the personal representative of the Executive’s estate within 30 days
after the date of the Executive’s death. 
All reimbursements and in-kind benefits provided under this Agreement
that constitute deferred compensation within the meaning of Section 409A
of the Code shall be made or provided in accordance with the requirements of Section 409A
of the Code, including, without limitation, that (i) in no event shall
reimbursements by the Company under this Agreement be made later than the end
of the calendar year next following the calendar year in which the applicable
fees and expenses were incurred, provided, that the Executive shall have
submitted an invoice for such fees and expenses at least 10 days before the end
of the calendar year next following the calendar year in which such fees and expenses
were incurred; (ii) the amount of in-kind benefits that the Company is
obligated to pay or provide in any given calendar year shall not affect the
in-kind benefits that the Company is obligated to pay or provide in any other
calendar year; (iii) the Executive’s right to have the Company pay or
provide such reimbursements and in-kind benefits may not be liquidated or
exchanged for any other benefit; and (iv) in no event shall the Company’s
obligations to make such reimbursements or to provide such in-kind benefits
apply later than the Executive’s remaining lifetime (or if longer, through the
20th anniversary of the Effective Date). 
Prior to the Effective Date but within the time period permitted by the
applicable Treasury Regulations (or such later time as may be permitted under Section 409A
or any IRS or Department of Treasury rules or other guidance issued
thereunder), the Company may, in consultation with the Executive, modify the
Agreement, in the least restrictive manner necessary and without any diminution
in the value of the payments to the Executive, in order to cause the provisions
of the Agreement to comply with the requirements of Section 409A of the
Code, so as to avoid the imposition of taxes and penalties on the Executive
pursuant to Section 409A of the Code.

 

16

 

IN
WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

 

 

	
   

  	
   

  
	
   

  	
  Russell
  Goldsmith

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CITY
  NATIONAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Michael
  B. Cahill

  
	
   

  	
   

  	
  Executive
  Vice President and General Counsel

  

 

17exh_4-1.htm

Exhibit 4.1

 

AVISTAR COMMUNICATIONS CORPORATION

 

2010 EMPLOYEE STOCK PURCHASE PLAN

 

1. Purpose.  The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock through accumulated Contributions (as defined in Section 2(j) below).  The Company’s intention is to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code.  The provisions of the Plan, accordingly, will be construed so as to extend and limit Plan participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code.

 

2. Definitions.

 

(a) “Administrator” means the Board or any Committee designated by the Board to administer the Plan pursuant to Section 14.

 

(b) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where options are, or will be, granted under the Plan.

 

(c) “Board” means the Board of Directors of the Company.

 

(d) “Change in Control” means the occurrence of any of the following events:

 

(i) Change in Ownership of the Company.  A change in the ownership of the Company which occurs on the date that any one person (other than Gerald J. Burnett and his affiliates) or more than one person acting as a group, (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company, except that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the Board will not be considered a Change in Control; or

 

(ii) Change in Effective Control of the Company.  If the Company has a class of securities registered pursuant to Section 12 of the Exchange Act, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.  For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or

 

(iii) Change in Ownership of a Substantial Portion of the Company’s Assets.  A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions, provided that the sale or grant of an exclusive license to the Company’s patent portfolio alone will not be considered a Change in Control.  For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

  

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For purposes of this Section 2(d), persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

 

Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.

 

Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the state of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

 

(e) “Code” means the U.S. Internal Revenue Code of 1986, as amended.  Reference to a specific section of the Code or Treasury Regulation thereunder will include such section or regulation, any valid regulation or other official applicable guidance promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.

 

(f) “Committee” means a committee of the Board appointed in accordance with Section 14 hereof.

 

(g) “Common Stock” means the common stock of the Company.

 

(h) “Company” means Avistar Communication Corporation, a Delaware corporation, or any successor thereto.

 

(i) “Compensation” means all cash compensation reportable on Form W-2, including without limitation base straight time gross earnings, sales commissions, payments for overtime, shift premiums, incentive compensation, incentive payments and bonuses, plus any amounts contributed by the Employee to the Company’s 401(k) Plan from compensation paid to the Employee by the Company.

 

(j) “Contributions” means the payroll deductions and other additional payments that the Company may permit to be made by a Participant to fund the exercise of options granted pursuant to the Plan.

 

(k) “Designated Subsidiary” means any Subsidiary that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the Plan.

 

(l) “Director” means a member of the Board.

 

(m) “Eligible Employee” means any individual who is a common law employee of the Company or a Designated Subsidiary and is customarily employed for at least twenty (20) hours per week and more than five (5) months in any calendar year by the Employer, or any lesser number of hours per week and/or number of months in any calendar year established by the Administrator (if required under applicable local law) for purposes of any separate Offering.  For purposes of the Plan, the employment relationship will be treated as continuing intact while the individual is on sick leave or other leave of absence that the Employer approves.  Where the period of leave exceeds three (3) months and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated three (3) months and one (1) day following the commencement of such leave.  The Administrator, in its discretion, from time to time may, prior to an Enrollment Date for all options to be granted on such Enrollment Date, determine (on a uniform and nondiscriminatory basis) that the definition of

  

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(n) Eligible Employee will or will not include an individual if he or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the Administrator in its discretion), (ii) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Administrator in its discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion), (iv) is a highly compensated employee within the meaning of Section 414(q) of the Code with compensation above a certain level or is an officer or subject to the disclosure requirements of Section 16(a) of the Exchange Act, provided the exclusion is applied with respect to each Offering in an identical manner to all highly compensated individuals of the Employer whose Employees are participating in that Offering.

 

(o) “Employer” means the employer of the applicable Eligible Employee(s).

 

(p) “Enrollment Date” means the first Trading Day of each Offering Period.

 

(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

 

(r) “Exercise Date” means the first Trading Day on or after February 1 and August 1 of each year.

 

(s) “Fair Market Value” means, as of any date and unless the Administrator determines otherwise, the value of Common Stock determined as follows:

 

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market of The NASDAQ Stock Market, its Fair Market Value will be the closing sales price for such stock as quoted on such exchange or system on the date of determination (or on the last preceding Trading Day for which such quotation exists if the date of determination is not a Trading Day), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value will be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or on the last preceding Trading Day if the date of determination is not a Trading Day), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof will be determined in good faith by the Administrator.

 

(t) “New Exercise Date” means a new Exercise Date if the Administrator shortens any Offering Period then in progress.

 

(u) “Offering” means an offer under the Plan of an option that may be exercised during an Offering Period as further described in Section 4.  For purposes of this Plan, the Administrator may designate separate Offerings under the Plan (the terms of which need not be identical) in which Employees of one or more Employers will participate, even if the dates of the applicable Offering Periods of each such Offering are identical.

 

(v) “Offering Periods” means the periods of approximately six (6) months during which an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day on or after

  

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(w) February 1 and August 1 of each year and terminating on the Exercise Date approximately six (6) months later.  The duration and timing of Offering Periods may be changed pursuant to Sections 4 and 20.

 

(x) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(y) “Participant” means an Eligible Employee that participates in the Plan.

 

(z) “Plan” means this Avistar Communication Corporation 2010 Employee Stock Purchase Plan.

 

(aa) “Purchase Price” means an amount equal to eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be determined for subsequent Offering Periods by the Administrator subject to compliance with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule) or pursuant to Section 20.

 

(bb) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

(cc) “Trading Day” means a day on which the national stock exchange upon which the Common Stock is listed is open for trading.

 

3. Eligibility.

 

(a) Offering Periods.  Any Eligible Employee on a given Enrollment Date will be eligible to participate in the Plan, subject to the requirements of Section 5.  Employees who are citizens or residents of a non-U.S. jurisdiction may be excluded from participation in the Plan or an Offering if the participation of such Employees is prohibited under the laws of the applicable jurisdiction or if complying with the laws of the applicable jurisdiction would cause the Plan or an Offering to violate Section 423 of the Code.

 

(b) Limitations.  Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee will be granted an option under the Plan (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company or any Parent or Subsidiary of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the Company, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company or any Parent or Subsidiary of the Company accrues at a rate, which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined at the Fair Market Value of the stock at the time such option is granted) for each calendar year in which such option is outstanding at any time, as determined in accordance with Section 423 of the Code and the regulations thereunder.

 

4. Offering Periods.  The Plan will be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day on or after February 1 and August 1 each year, or on such other date as the Administrator will determine.  The Administrator will have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future Offerings without stockholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.

  

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5. Participation.  An Eligible Employee may participate in the Plan by (i) submitting to the Company’s stock administration office (or its designee), on or before a date determined by the Administrator prior to an applicable Enrollment Date, a properly completed subscription agreement authorizing Contributions in the form provided by the Administrator for such purpose, or (ii) following an electronic or other enrollment procedure determined by the Administrator.

 

6. Contributions.

 

(a) At the time a Participant enrolls in the Plan pursuant to Section 5, he or she will elect to have payroll deductions made on each pay day or other Contributions (to the extent permitted by the Administrator) made during the Offering Period in an amount not exceeding fifteen percent (15%) of the Compensation, which he or she receives on each pay day during the Offering Period; provided, however, that should a pay day occur on an Exercise Date, a Participant will have any payroll deductions made on such day applied to his or her account under the subsequent Offering Period.  The Administrator, in its sole discretion, may permit all Participants in a specified Offering to contribute amounts to the Plan through payment by cash, check or other means set forth in the subscription agreement prior to each Exercise Date of each Offering Period, provided that payment through means other than payroll deductions shall be permitted only if the Participant has not already had the maximum permitted amount withheld through payroll deductions during the Offering Period.  A Participant’s subscription agreement will remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.

 

(b) Payroll deductions for a Participant will commence on the first pay day following the Enrollment Date and will end on the last pay day prior to the Exercise Date of such Offering Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 10 hereof.

 

(c) All Contributions made for a Participant will be credited to his or her account under the Plan and payroll deductions will be made in whole percentages only.  A Participant may not make any additional payments into such account.

 

(d) A Participant may discontinue his or her participation in the Plan as provided in Section 10, or may increase or decrease the rate of his or her Contributions during the Offering Period by (i) properly completing and submitting to the Company’s stock administration office (or its designee), on or before a date determined by the Administrator prior to an applicable Exercise Date, a new subscription agreement authorizing the change in Contribution rate in the form provided by the Administrator for such purpose, or (ii) following an electronic or other procedure prescribed by the Administrator.  If a Participant has not followed such procedures to change the rate of Contributions, the rate of his or her Contributions will continue at the originally elected rate throughout the Offering Period and future Offering Periods (unless terminated as provided in Section 10).  The Administrator may, in its sole discretion, limit the nature and/or number of Contribution rate changes that may be made by Participants during any Offering Period, and may establish such other conditions or limitations as it deems appropriate for Plan administration.  Any change in payroll deduction rate made pursuant to this Section 6(d) will be effective as of the first full payroll period following five (5) business days after the date on which the change is made by the Participant (unless the Administrator, in its sole discretion, elects to process a given change in payroll deduction rate more quickly).

 

(e) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b), a Participant’s Contributions may be decreased to zero percent (0%) at any time during an Offering Period.  Subject to Section 423(b)(8) of the Code and Section 3(b) hereof, Contributions will recommence at the rate originally elected by the Participant effective as of the beginning of the first Offering Period scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 10.

 

  

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(f) Notwithstanding any provisions to the contrary in the Plan, the Administrator may allow Eligible Employees to participate in the Plan via cash contributions instead of payroll deductions if (i) payroll deductions are not permitted under applicable local law, and (ii) the Administrator determines that cash contributions are permissible under Section 423 of the Code.

 

(g) At the time the option is exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of (or any other time that a taxable event related to the Plan occurs), the Participant must make adequate provision for the Company’s or Employer’s federal, state, local or any other tax liability payable to any authority including taxes imposed by jurisdictions outside of the U.S., national insurance, social security or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock (or any other time that a taxable event related to the Plan occurs).  At any time, the Company or the Employer may, but will not be obligated to, withhold from the Participant’s Compensation the amount necessary for the Company or the Employer to meet applicable withholding obligations, including any withholding required to make available to the Company or the Employer any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee. In addition, the Company or the Employer may, but will not be obligated to, withhold from the proceeds of the sale of Common Stock or any other method of withholding the Company or the Employer deems appropriate to the extent permitted by U.S. Treasury Regulation Section 1.423-2(f).

 

7. Grant of Option.  On the Enrollment Date of each Offering Period, each Eligible Employee participating in such Offering Period will be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined by dividing such Eligible Employee’s Contributions accumulated prior to such Exercise Date and retained in the Eligible Employee’s account as of the Exercise Date by the applicable Purchase Price; provided that in no event will an Eligible Employee be permitted to purchase during each Offering Period more than 25,000 shares of the Company’s Common Stock (subject to: (i) the limitations set forth in Section 3(b), (ii) the limitations set forth in Section 13 and (iii) any adjustment pursuant to Section 19).  The Eligible Employee may accept the grant of such option with respect to an Offering Period by electing to participate in the Plan in accordance with the requirements of Section 5.  The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of Common Stock that an Eligible Employee may purchase during each Offering Period.  Exercise of the option will occur as provided in Section 8, unless the Participant has withdrawn pursuant to Section 10.  The option will expire on the last day of the Offering Period.

 

8. Exercise of Option.

 

(a) Unless a Participant withdraws from the Plan as provided in Section 10, his or her option for the purchase of shares of Common Stock will be exercised automatically on the Exercise Date, and the maximum number of full shares subject to the option will be purchased for such Participant at the applicable Purchase Price with the accumulated Contributions from his or her account.  No fractional shares of Common Stock will be purchased; any Contributions accumulated in a Participant’s account, which are not sufficient to purchase a full share will be retained in the Participant’s account for the subsequent Offering Period, subject to earlier withdrawal by the Participant as provided in Section 10.  Any other funds left over in a Participant’s account after the Exercise Date will be returned to the Participant.  During a Participant’s lifetime, a Participant’s option to purchase shares hereunder is exercisable only by him or her.

 

  

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(b) If the Administrator determines that, on a given Exercise Date, the number of shares of Common Stock with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii) the number of shares of Common Stock available for sale under the Plan on such Exercise Date, the Administrator may in its sole discretion (x) provide that the Company will make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as will be practicable and as it will determine in its sole discretion to be equitable among all Participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect or (y) provide that the Company will make a pro rata allocation of the shares available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as will be practicable and as it will determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 20.  The Company may make a pro rata allocation of the shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company’s stockholders subsequent to such Enrollment Date.

 

9. Delivery.  As soon as reasonably practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company will arrange the delivery to each Participant the shares purchased upon exercise of his or her option in a form determined by the Administrator (in its sole discretion) and pursuant to rules established by the Administrator.  The Company may permit or require that shares be deposited directly with a broker designated by the Company or to a designated agent of the Company, and the Company may utilize electronic or automated methods of share transfer.  The Company may require that shares be retained with such broker or agent for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares.  No Participant will have any voting, dividend, or other stockholder rights with respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and delivered to the Participant as provided in this Section 9.

 

10. Withdrawal.

 

(a) A Participant may withdraw all but not less than all the Contributions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by (i) submitting to the Company’s stock administration office (or its designee) a written notice of withdrawal in the form determined by the Administrator for such purpose, or (ii) following an electronic or other withdrawal procedure determined by the Administrator.  All of the Participant’s Contributions credited to his or her account will be paid to such Participant promptly after receipt of notice of withdrawal and such Participant’s option for the Offering Period will be automatically terminated, and no further Contributions for the purchase of shares will be made for such Offering Period.  If a Participant withdraws from an Offering Period, Contributions will not resume at the beginning of the succeeding Offering Period, unless the Participant re-enrolls in the Plan in accordance with the provisions of Section 5.

 

(b) A Participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or in succeeding Offering Periods that commence after the termination of the Offering Period from which the Participant withdraws.

 

11. Termination of Employment.  Upon a Participant’s ceasing to be an Eligible Employee, for any reason, he or she will be deemed to have elected to withdraw from the Plan and the Contributions credited to such Participant’s account during the Offering Period but not yet used to purchase shares of Common Stock under the Plan will be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15, and such Participant’s option will be automatically terminated.

 

  

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12. Interest.  No interest will accrue on the Contributions of a participant in the Plan, except as may be required by applicable law, as determined by the Company, and if so required by the laws of a particular jurisdiction, shall apply to all Participants in the relevant Offering except to the extent otherwise permitted by U.S. Treasury Regulation Section 1.423-2(f).

 

13. Stock.

 

(a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of shares of Common Stock that will be made available for sale under the Plan will be 1,148,660 shares of Common Stock.

 

(b) Until the shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), a Participant will only have the rights of an unsecured creditor with respect to such shares, and no right to vote or receive dividends or any other rights as a stockholder will exist with respect to such shares.

 

(c) Shares of Common Stock to be delivered to a Participant under the Plan will be registered in the name of the Participant or in the name of the Participant and his or her spouse.

 

14. Administration.  The Plan will be administered by the Board or a Committee appointed by the Board, which Committee will be constituted to comply with Applicable Laws.  The Administrator will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to designate separate Offerings under the Plan, to determine eligibility, to adjudicate all disputed claims filed under the Plan and to establish such procedures that it deems necessary for the administration of the Plan (including, without limitation, to adopt such procedures and sub-plans as are necessary or appropriate to permit the participation in the Plan by employees who are foreign nationals or employed outside the U.S.).  Unless otherwise determined by the Administrator, the Employees eligible to participate in each sub-plan will participate in a separate Offering.  Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding eligibility to participate, the definition of Compensation, handling of Contributions, making of Contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates that vary with applicable local requirements.  Every finding, decision and determination made by the Administrator will, to the full extent permitted by law, be final and binding upon all parties.

 

  

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15. Designation of Beneficiary.

 

(a) If permitted by the Administrator, a Participant may file a designation of a beneficiary who is to receive any shares of Common Stock and cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such Participant of such shares and cash.  In addition, if permitted by the Administrator, a Participant may file a designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in the event of such Participant’s death prior to exercise of the option.  If a Participant is married and the designated beneficiary is not the spouse, spousal consent will be required for such designation to be effective.

 

(b) Such designation of beneficiary may be changed by the Participant at any time by notice in a form determined by the Administrator.  In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company will deliver such shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

 

(c) All beneficiary designations will be in such form and manner as the Administrator may designate from time to time.  Notwithstanding Sections 15(a) and (b) above, the Company and/or the Administrator may decide not to permit such designations by Participants in non-U.S. jurisdictions to the extent permitted by U.S. Treasury Regulation Section 1.423-2(f).

 

16. Transferability.  Neither Contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the Participant.  Any such attempt at assignment, transfer, pledge or other disposition will be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.

 

17. Use of Funds.  The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be obligated to segregate such Contributions except under Offerings in which applicable local law requires that Contributions to the Plan by Participants be segregated from the Company’s general corporate funds and/or deposited with an independent third party for Participants in non-U.S. jurisdictions.  Until shares of Common Stock are issued, Participants will only have the rights of an unsecured creditor with respect to such shares.

 

18. Reports.  Individual accounts will be maintained for each Participant in the Plan.  Statements of account will be given to participating Eligible Employees at least annually, which statements will set forth the amounts of Contributions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, if any.

 

19.  Adjustments, Dissolution, Liquidation, Merger or Change in Control.

 

(a) Adjustments.  In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other securities of the Company, or other change in the corporate structure of the Company affecting the Common Stock occurs, the Administrator, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will, in such manner as it may deem equitable, adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan that has not yet been exercised, and the numerical limits of Sections 7 and 13.

 

  

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(b) Dissolution or Liquidation.  In the event of the proposed dissolution or liquidation of the Company, any Offering Period then in progress will be shortened by setting a New Exercise Date, and will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator.  The New Exercise Date will be before the date of the Company’s proposed dissolution or liquidation.  The Administrator will notify each Participant in writing or electronically, prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10 hereof.

 

(c) Merger or Change in Control.  In the event of a merger or Change in Control, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation.  In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period with respect to which such option relates will be shortened by setting a New Exercise Date on which such Offering Period shall end.  The New Exercise Date will occur before the date of the Company’s proposed merger or Change in Control.  The Administrator will notify each Participant in writing or electronically prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10 hereof.

 

20. Amendment or Termination.

 

(a) The Administrator, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason.  If the Plan is terminated, the Administrator, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Exercise Date (which may be sooner than originally scheduled, if determined by the Administrator in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 19).  If the Offering Periods are terminated prior to expiration, all amounts then credited to Participants’ accounts that have not been used to purchase shares of Common Stock will be returned to the Participants (without interest thereon, except as otherwise required under local laws, as further set forth in Section 12 hereof) as soon as administratively practicable.

 

(b) Without stockholder consent and without limiting Section 20(a), the Administrator will be entitled to change the Offering Periods, designate separate Offerings, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with Contribution amounts, and establish such other limitations or procedures as the Administrator determines in its sole discretion advisable that are consistent with the Plan.

 

  

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(c) In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequence including, but not limited to:

 

(i) amending the Plan to conform with the safe harbor definition under Statement of Financial Accounting Standards Codification Topic 718 (or any successor thereto), including with respect to an Offering Period underway at the time;

 

(ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;

 

(iii) shortening any Offering Period by setting a New Exercise Date, including an Offering Period underway at the time of the Administrator action;

 

(iv) reducing the maximum percentage of Compensation a Participant may elect to set aside as Contributions; and

 

(v) reducing the maximum number of Shares a Participant may purchase during any Offering Period.

 

Such modifications or amendments will not require stockholder approval or the consent of any Plan Participants.

 

21. Notices.  All notices or other communications by a Participant to the Company under or in connection with the Plan will be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

22. Conditions Upon Issuance of Shares.  Shares of Common Stock will not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and will be further subject to the approval of counsel for the Company with respect to such compliance.

 

As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

 

23. Code Section 409A.  The Plan is exempt from the application of Code Section 409A and any ambiguities herein will be interpreted to so be exempt from Code Section 409A.  In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Administrator determines that an option granted under the Plan may be subject to Code Section 409A or that any provision in the Plan would cause an option under the Plan to be subject to Code Section 409A, the Administrator may amend the terms of the Plan and/or of an outstanding option granted under the Plan, or take such other action the Administrator determines is necessary or appropriate, in each case, without the Participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Code Section 409A, but only to the extent any such amendments or action by the Administrator would not violate Code Section 409A.  Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option to purchase Common Stock under the Plan that is intended to be exempt from or compliant with Code Section 409A is not so exempt or compliant or for any action taken by the Administrator with respect thereto.  The Company makes no representation that the option to purchase Common Stock under the Plan is compliant with Code Section 409A.

 

  

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24. Stockholder Approval.  The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board.  Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.

 

25. Term of Plan.  The Plan will become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company.  It will continue in effect for a term of ten (10) years, unless sooner terminated under Section 20.

 

26. Governing Law. The Plan shall be governed by, and construed in accordance with, the laws of the State of California (except its choice-of-law provisions).

 

27. Severability.  If any provision of the Plan is or becomes or is deemed to be invalid, illegal, or unenforceable for any reason in any jurisdiction or as to any Participant, such invalidity, illegality or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as to such jurisdiction or Participant as if the invalid, illegal or unenforceable provision had not been included.

  

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