UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-12396
CB BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Hawaii 99-0197163
(State of Incorporation) (IRS Employer Identification No.)
201 Merchant Street Honolulu, Hawaii 96813
(Address of principal executive offices)
(808) 546-2411
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of registrant's common stock at April 30, 1997
was 3,551,228 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CB BANCSHARES, INC. AND SUBSIDIARIES (unaudited)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands, except shares and per share data)
- ------------------------------------------------------------------------------
March 31, December 31, March 31,
1997 1996 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 55,960 $ 56,632 $ 77,806
Federal Funds Sold and securities
purchased - - 605
Investment securities:
Held-to-maturity 95,446 97,831 8,626
Available for sale 125,274 138,199 156,665
Trading - - 82
Restricted investment securities 25,543 25,100 23,647
Loans held for sale 9,488 5,629 2,309
Gross loans 1,040,487 1,031,554 1,110,275
Less allowance for loan losses (16,094) (15,431) (14,528)
Net Loans 1,024,393 1,016,123 1,095,747
Premises and equipment 18,333 18,227 16,660
Other assets 35,687 29,002 32,644
Goodwill 10,213 10,426 11,064
- ------------------------------------------------------------------------------
Total assets $1,400,337 $1,397,169 $1,425,855
==============================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits
Non-interest bearing $ 114,784 $ 113,043 $ 117,727
Interest bearing 831,269 838,867 855,114
- ------------------------------------------------------------------------------
Total deposits 946,053 951,910 972,841
Short-term borrowings 219,356 208,681 197,984
Contingencies (Note B) 446 - -
Other liabilities 24,211 22,342 24,238
Long-term debt 91,102 94,825 115,975
- ------------------------------------------------------------------------------
Total liabilities 1,281,168 1,277,758 1,311,038
Stockholders' equity
$1 par value, 50,000,000 shares
authorized, Issued and
outstanding - 3,551,228 shares 3,551 3,551 3,551
Additional paid-in capital 65,080 65,080 65,080
Retained earnings 50,252 49,878 45,699
Unrealized valuation adjustment 286 902 487
Total stockholders' equity 119,169 119,411 114,817
- ------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $1,400,337 $1,397,169 $1,425,855
==============================================================================
</TABLE>
2
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES
(unaudited)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(in thousands, except per share data) Quarter ended
- ------------------------------------------------------------------------------
March 31, March 31,
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Interest income
Interest and fees on loans $22,565 $23,816
Interest and dividends on investment securities
Taxable 4,148 2,971
Non taxable 51 54
Dividends 444 421
Other interest income 448 507
- ----------------------------------------------------------------------------
Total interest income 27,656 27,769
Interest Expense
Deposits 8,510 9,038
Short-term borrowings 3,072 3,116
Long-term debt 1,341 1,837
- ----------------------------------------------------------------------------
Total interest expense 12,923 13,991
- ----------------------------------------------------------------------------
Net interest income 14,733 13,778
Provision for loan losses 1,050 310
- ----------------------------------------------------------------------------
Net interest income after provision
for loan losses 13,683 13,468
Other income
Service charges and fees 1,044 1,695
Other 1,368 1,265
- ----------------------------------------------------------------------------
Total other income 2,412 2,960
Other expenses
Salaries and employee benefits 4,506 8,690
Net occupancy and equipment expense 2,671 2,378
Provision for loss on lease assignment (Note B) 446 -
Other 5,404 4,409
- ----------------------------------------------------------------------------
Total other expenses 13,027 15,477
- ----------------------------------------------------------------------------
Income before income taxes 3,068 951
Provision for income taxes 1,218 377
- ----------------------------------------------------------------------------
Net income $1,850 $ 574
============================================================================
Per common share:
Net income $ 0.52 $ 0.16
============================================================================
</TABLE>
3
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES (unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(in thousands, except per share data) Quarter ended March 31,
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,850 $ 574
Net adjustments to reconcile net income to
cash (used in) provided by operating activities (8,242) (5,233)
- ------------------------------------------------------------------------------
Net cash (used in) provided by operating
activities (6,392) (4,659)
Cash flows from investing activities:
Net increase in federal funds sold and
securities under resale agreements - (605)
Purchase of available-for-sale securities (7,215) (43,697)
Proceeds from maturities of
available-for-sale securities 20,140 95,512
Proceeds from maturities of
held-to-maturity investment securities 2,385 -
Net decrease (increase) in loans (8,933) 22,952
Capital expenditures (420) (248)
- ------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 5,957 73,914
Cash flows from financing activities:
Net (decrease) increase in deposits (5,857) (38,642)
Net increase (decrease) in short-term borrowings 10,675 (41,376)
Decrease in long-term debt (3,723) 14,604
Cash dividends paid (1,332) (1,154)
- ------------------------------------------------------------------------------
Net cash (used in) provided by
financing activities (237) (66,568)
DECREASE IN CASH (672) 2,687
- ------------------------------------------------------------------------------
Cash and due from banks at beginning of period 56,632 75,119
- ------------------------------------------------------------------------------
Cash and due from banks at end of period $55,960 $77,806
==============================================================================
</TABLE>
4
<PAGE>
CB BANCSHARES, INC. AND SUBSIDIARIES
Note to consolidated Financial Statements
March 31, 1997
NOTE A - BASIS FOR PRESENTATION
The unaudited financial statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all information and footnotes
necessary for a fair presentation of the financial condition, results of
operations, and cash flows of CB Bancshares, Inc., and subsidiaries, in
conformity with generally accepted accounting principles.
The financial statements reflect all adjustments of a normal and recurring
nature which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods.
NOTE B - CONTINGENCIES
On January 30, 1996, a lawsuit was filed against the Association, its
subsidiaries, one of its officers as well as the Company and other entities
and individuals. The lawsuit is an action by the plaintiffs, as purchasers
of the International Savings Building at 1111 Bishop Street in Honolulu,
Hawaii, for recission, special, general and punitive damages. The plaintiffs
seek recission of sale of the ISL building to them (made in May 1998 for
$7,450,000), based on allegations that various parties negligently or
intentionally misrepresented and/or fraudulently failed to disclose
unsuccessful negotiations for a new ground lease with the fee-simple
landowner and the alleged unreasonableness of demands by the fee-simple
owner. The plaintiffs also allege failure to disclose land appraisals
concerning the property and the presence of toxic asbestos in the cooling
system, pipes, walls and ceiling tiles of the building and intentional or
negligent infliction of emotional distress in connection with the vacation of
the ISL Building by the Association as a substantial tenant of the building.
The Company and the Association defendants have answered plaintiffs'
complaint denying any liability in connection with plaintiffs' allegations.
While the Company and the Association defendants believe they have
meritorious defenses in this action, due to the uncertainties inherent in the
early stages of litigation, no assurance can be given as to the ultimate
outcome of the lawsuit at this time.
International Savings and Loan Association, Ltd. (Association) vacated its
leased portion of the 1111 Bishop Street building at the end of March 1997.
The Company was them informed by the landowner in March that the lessee had
failed to make timely payment of the monthly rent and real property taxes. The
consent of the landowner given in 1988 to the assignment by the Association of
the underlying ground lease did not release the Association from ground lease
obligations upon default by the assignee, and thus the Associaiton has a
liability for the ground lease even though it no longer occupies the leased
space. The current monthly ground lease payments of $65,333 are fixed until
July 20, 2001, at which time the monthly ground lease payments will be
renegotiated to July 20, 2011. In 2011, the monthly ground lease payments will
be renegotiated for a final ten year period through July 20, 2021. In no event
would the negotiated lease rent for any period be less than $30,000 per month.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Association intends to resume its position as master tenant under the
ground lease with the Steiner Estate, the ground lease landlord. The Steiner
Estate has indicated to the Association its desire to have the Association
resume its position as master tenant and the Association currently expects to
be able to take such action within six months. Based on the foregoing, the
Company has accrued a liability of $446,000 for the ground lease and property
tax for the first quarter of 1997.
In another matter, a director of the Company and two former executives of the
Association have threatened to file a lawsuit in the First Circuit Court of
the State of Hawaii against the Company, the Bank and the Association to
recover damages, penalties pursuant to Hawaii Revised Statutes Chapter 394B,
attorneys' fees, and the costs related to the termination of their employment.
The Company is negotiating a possible settlement with the group through
outside legal counsel and management is unable to determine the likelihood of
the outcome of this threatened lawsuit.
The Company is a defendant in other various legal proceedings arising from
normal business activities. In the opinion of management, after reviewing
these proceedings with counsel, the aggregate liability, if any, resulting
from these proceedings would not have a material effect on the Company's
financial position or results of operations.
NET INCOME
Consolidated net income for the quarter ended March 31, 1997, totaled
$1.85 million, or $0.52 per share, as compared to $0.57 million, or $0.16
per share for the same quarter last year. The increase in earnings was due
primarily to the accrual of salaries and benefit expenses related to the
Voluntary Separation Program (VSP) in the first quarter of 1996. These
expenses amounted to $3.3 million, or $2.0 million on an after-tax basis.
Excluding the $2.0 million after tax effect for the VSP, the Company's net
earnings for the first quarter of 1996 would have been approximately $2.6
million. See further discussion of the VSP in the section titled, "Other
Expenses".
Somewhat offsetting the increase in earnings due to 1996's VSP accrual, was a
$740,000 increase in the provision for loan losses, and a $350,000 accrual
for a special recognition award granted to Mr. Morita, Chairman and Chief
Executive Officer under the Retirement Agreement dated March 6, 1997. See
further discussion in the section titled, "Other Operating Expenses".
The Company's annualized return on average assets (ROA) for the quarter
ended March 31, 1997 was 0.54%, as compared to 0.16% for the same quarter in
1996. The Company's annualized return on average stockholder's equity (ROE)
was 6.30% for the quarter ended March 31, 1997, as compared to 1.98% for
the same quarter last year. Excluding the aforementioned $2.0 million effect
of the VSP discussed above, ROA and ROE would have been 0.71% and 8.99%,
respectively, for the first quarter of 1996.
6
<PAGE>
NET INTEREST INCOME
A comparison of net interest income for the three months ended March 31, 1997
and 1996 is set forth below on a taxable basis:
<TABLE>
<CAPTION>
Quarter ended March 31,
1997 1996
(dollars in thousands)
<S> <C> <C>
Interest income $27,758 $27,805
Interest Expense 12,923 13,991
------- -------
Net interest income $14,835 $13,814
======= =======
Net interest margin 4.59% 4.08%
======= =======
</TABLE>
Interest income for the three months ended March 31, 1997 remained relatively
unchanged at $27.76 million, a slight decrease of $47,000 from the same period
in 1996. Interest expense also decreased by $1.02 million to $12.92 million
for the quarter ended March 31, 1997.
The weighted average yield on interest-earning assets increased to 8.59% for
the three months ended March 31, 1997, as compared to 8.09% for the respective
1996 period. The weighted average cost of interest-bearing liabilities
decreased to 4.61% for the quarter ended March 31, 1997, in comparison to
4.70% for the respective 1996 period. As a result of the foregoing, the
Company's net interest margin increased by 51 basis points to 4.59% for the
three months ended March 31, 1997.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses at March 31, 1997 was $16.09 million,
and represented 1.55% of total loans. The ratio at December 31, 1996 and
March 31, 1996, was 1.49% and 1.31%, respectively. Although there was a
slight improvement in the level of non-performing loans from December 31,
1996, the continued weakness in the Hawaiian real estate market and continued
concerns of the State's economic health led to an increase in the provision
for loan losses to $1.05 million for the quarter ended March 31, 1997 - see
further discussion below.
Changes in the allowances for loan losses were as follows:
<TABLE>
<CAPTION>
Quarter ended
March 31,
1997 1996
(dollars in thousands)
<S> <C> <C>
Balance at beginning of period $15,431 $14,576
Provision charged to expense 1,050 310
Net recoveries(charge-offs) (387) (358)
-------- --------
Balance at end of period $ 16,094 $14,528
</TABLE>
7
<PAGE>
NON-PERFORMING ASSETS
A summary of non-performing assets follows:
<TABLE>
<CAPTION>
3/31/97 12/31/96 3/31/96
---------------------------------
<S> <C> (dollars in thousands) <C>
Loan accounted for on a
non-accrual basis $21,660 $23,385 $15,295
Loan contractually past due
ninety days or more as to
interest or principal payments 2,852 2,379 4,495
----------------------------------
Total non-performing loans 24,512 25,764 19,790
Other Real Estate Owned 1,894 1,844 985
----------------------------------
Total non-performing assets $26,406 $27,608 $20,775
===================================
</TABLE>
Non-performing assets at March 31, 1997 totaled $26.4 million, a decrease of
$1.2 million from December 31, 1996, and an increase of $5.6 million from
March 31, 1996. The increase from March 31, 1996 was mainly due to a $6.2
million increase in non-accruing real estate loans. These loans consist
primarily of mortgages made by ISL on 1-4 family residential property. In
consideration of the above, a $1.05 million provision for loan losses was
made in the first quarter of 1997.
OTHER OPERATING INCOME
Other operating income totaled $2.41 million for the three month period ended
March 31, 1997, which compares to $2.96 million for the comparable period in
1996. This decline was primarily attributable to the loss of commissions and
fees relating to the Bank's credit card portfolio, which was sold to an
unrelated third party in October 1996.
OTHER OPERATING EXPENSES
Other operating expenses totaled $13.03 million for the three months ended
March 31, 1997, a decrease of $2.45 million over the same period in 1996. The
decline in other operating expenses was due primarily to the accrual of $3.29
million in salary and benefit expenses related to the Voluntary Separation
Program(VSP)in the first quarter of 1996. Excluding the effects of the VSP
accrual in 1996, other operating expenses increased by $840 thousand from the
first quarter of 1996. Contributing to this increase was a $446,000 loss
recognized on the assignment of the lease on the Association's headquarters--
See Note B--Contingencies for further discussion. In addition, $350,000 in
salary expense was recognized in the first quarter of 1997 for the Chairman's
special recognition award, as specified under the Retirement Agreement dated
March 6, 1997. This agreement is filed in its entirety in Exhibit 10.1.
8
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Retirement Agreement between CB Bancshares, Inc. and
James M. Morita, dated March 6, 1997
(10.2) Amendment to Executive Salary Continuation Agreement
between City Bank and James M. Morita, dated March 27,
1997
(10.3) Settlement Agreement and Release of All Claims between
CB Bancshares, Inc. and Ronald K. Migita, dated March
27, 1997
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the quarter ended
March 31, 1997
ITEM REPORTED DATE FILED
------------------------------- --------------
CB Bancshares Chairman James M. Morita
Announces Retirement Plans 2/15/97
Election of Ronald K. Migita as President
and Chief Executive Officer, and
Recommendation to Reduce Quarterly Dividend 3/6/97
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CB BANCSHARES, INC. AND SUBSIDIARIES
May 14, 1997 By /s/ Daniel Motohiro
Daniel Motohiro, Treasurer
and Principal Financial Officer
<PAGE>
EXHIBIT 10.1
RETIREMENT AGREEMENT
This Retirement Agreement is entered into this 6th day of March, 1997, by and
between CB Bancshares, Inc., a Hawaii corporation ("Company"), and James M.
Morita, Chairman and Chief Executive Officer of CB Bancshares, Inc. and its
subsidiaries, City Bank ("Bank") and International Savings and Loan
Association, Limited ("ISL").
WHEREAS, Mr. James M. Morita, ("Morita") has been associated with the Bank
since its formation in 1959, and has acted as Chairman of the Bank since 1961,
and has been an executive officer of the Company since its formation in 1979,
and has acted as Chairman and Chief Executive Officer of ISL since its
acquisition by the Company in 1994, and has had a long and distinguished career
of dedicated service to these institutions, and has substantial good will with
institutional customers, employees, suppliers, shareholders and related
constituencies, which is of considerable value to the institutions; and
WHEREAS, Morita has indicated his desire to retire as Chief Executive Officer
of the Company; and
WHEREAS, Morita has resigned effective February 20, 1997 as Chief Executive
Officer and Chairman of ISL, and
WHEREAS, Morita has indicated his intent to retire as Chairman and Chief
Executive Officer of the Bank no later than the 1997 Annual Meeting of
Shareholders of the Company; and
WHEREAS, Morita has indicated his willingness to voluntarily relinquish certain
rights and benefits which he is currently entitled to, in accordance with the
terms and conditions of this Agreement; and
WHEREAS, it is the desire of Morita and the Company that Morita's retirement
and succession be done in an orderly fashion and in a manner designed to keep
the good will of the institutions' customers and the banking enterprise; and
WHEREAS, it is in the best interest of the institutions to reach an agreement
with Morita concerning the terms and conditions of his retirement, and to
encourage Morita to maintain the good will of the institutions, customers'
employees' suppliers' shareholders and other institutional constituencies.
NOW, THEREFORE, in consideration of the premises, the mutual promises contained
herein, and further other valuable consideration, receipt of which is hereby
acknowledged, the undersigned parties hereby agree as follows:
<PAGE>
I. Agreement Subject to Regulatory Approval.
-----------------------------------------
The Company and Morita hereby agree and acknowledge that this Agreement is
subject in all respects to approval of the Federal Reserve Bank of San
Francisco ("FRB") in accordance with Section 3(c) of the Memorandum of
Understanding between the Company and Federal Reserve Bank of San Francisco
("Regulatory Approval"). The Company shall promptly submit this Agreement for
Regulatory Approval after approval by Morita and the Company Board of Directors
and execution thereof by both parties. In the event all or any portion of this
Agreement is not approved by the FRB, then this Agreement in its entirety shall
be null and void. Any amendment to this Agreement shall be in writing and
effective solely upon approval and execution by Morita, an authorized officer
of the Company after Board of Director approval, and upon Regulatory Approval
of such amendment.
2. Retirement from CB Bancshares.
------------------------------
Morita shall retire as Chief Executive Of ricer of the Company immediately upon
Regulatory Approval of this Agreement. Morita shall remain Chairman of the
Board of Directors, subject to provisions of the Company's Bylaws, through the
1997 Annual Meeting, but if reelected by the Company shareholders to the Board
of Directors for an additional three-year term, shall not submit his name for
consideration as Chairman or Vice Chairman of the Board of Directors after the
1997 Annual Meeting of Shareholders.
3. Stock Options.
--------------
Upon Regulatory Approval of this Agreement, as defined in Section 1 above,
Morita shall cancel and relinquish his Non-Qualified Stock Option Agreement,
dated October 19, 1994, granting him 5,000 Performance Options and 5,000 Index
Options and his Non-Qualified Stock Option Agreement, dated March 29, 1996,
granting him 5,000 Performance Options and 5,000 Index Options (collectively,
the "Stock Option Agreements"). Upon Regulatory Approval of this Agreement,
Morita shall have no further rights, and the Company shall have no further
obligations, under the Stock Option Agreements.
4. Change of Control Agreement.
----------------------------
Upon Regulatory Approval of this Agreement, as defined in Section 1 above,
Morita shall cancel and relinquish his Change of Control Agreement, dated March
28, 1996 ("Change of Control Agreement"). Upon Regulatory Approval of this
Agreement, the Change of Control Agreement shall be null and void, and of no
further effect.
<PAGE>
5. Split-Dollar Life Insurance Policies.
-------------------------------------
Morita hereby agrees that no further payments shall be made by the Company on
the following split-dollar life insurance policies: (i) Policy No. 77-691-638,
issued by Prudential Insurance Company, insuring James M. and Aiko N. Morita,
(ii) Policy No. 9304146L, issued by Sun Life of Canada, insuring James M. and
Aiko N. Morita, and (iii) Policy No. 01000332D issued by Sun Life of Canada,
insuring James M. and Aiko N. Morita (the "Life Insurance Policies"). The
Company and Morita agree that the current cash surrender value of the Life
Insurance Policies life policies is $257,728, and that upon Regulatory Approval
of this Agreement such amount shall be used to convert the Life Insurance
Policies into new single-premium policies ("New Insurance Policies") in
accordance with Life Insurance Agreement in the form of Attachment I hereto and
incorporated herein by reference. The Company agrees that advances of $389,112
made by the Company with respect to the Life Insurance Policies shall be paid
to the Company upon payment of the proceeds under the New Insurance Policies
and such obligation shall be secured by a collateral assignment of the New
Insurance Policies as provided in the Life Insurance Agreement, Attachment I.
6. Reimbursement of Fees.
----------------------
The Company shall reimburse Morita his reasonable legal and accounting fees and
costs relating to this Agreement and related retirement matters.
7. Indemnification.
----------------
The Company shall indemnify Morita in accordance with the indemnification
standards currently provided by Article XVIII, Section 2 of the Company's
Bylaws, a copy of which is attached hereto as Attachment II and incorporated
herein by reference; provided, however, that no indemnification will be
provided to Morita by the Company to the extent such indemnification is
prohibited under Hawaii Business Corporation Act, or state or federal banking
laws and regulations, including without limitation, 12 CFR Section 359.3. In
the event Mr. Morita is involved in any legal proceeding, whether or not as a
party, he shall have the right to obtain independent counsel of his own
choosing and to have said counsel's fees and costs reimbursed, to the extent
permissible under the indemnification standards described above.
8. Special Recognition Award.
--------------------------
The Company hereby agrees to pay to Morita upon Regulatory Approval of this
Agreement, a special recognition award of $350,000, payable in quarterly
installments commencing as of the end of the first full calendar quarter
following Regulatory Approval.
9. Entire Agreement.
-----------------
This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement supersedes all other
agreements and undertakings, oral or written, between the parties hereto with
respect to the subject matter hereof; provided however, that nothing in this
Agreement shall in any manner affect Morita's Executive Salary Continuation
Agreement, as amended, with the Bank.
<PAGE>
10. Applicable Law.
---------------
Except to the extent that the laws of the United States may apply to the terms
hereof, the substantive laws of the State of Hawaii shall govern the validity,
construction, enforcement and interpretation of this Agreement.
11. Waiver of Breach.
-----------------
Any waiver of any breach of this Agreement shall not be construed to be a
continuing waiver or consent to any subsequent breach on the part either of the
Company or of Morita.
12. Assignment.
-----------
Neither party hereto may assign his or its rights or delegate his or its duties
under this Agreement without the prior written consent of the other party;
provided, however, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Company, all as though such successors
and assigns of the Company there the Company.
13. Notices.
--------
Any and all notices, demands, requests or other communications required or
permitted hereunder to be served on, given to or delivered to any party to this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered in person or when dispatched by electronic facsimile transfer
(confirmed in writing by regular mail simultaneously dispatched) or sent by
certified mail, return receipt requested, to the parties at their respective
addresses set forth below:
If to the Company:
CB Bancshares, ins.
Attn: Corporate Secretary
201 Merchant Street
Honolulu, Hawaii 96813
If to Morita:
James M. Morita
4219 Alae Street
Honolulu, Hawaii 96816-4901
or to such other address as may be designated by such addresses by a notice
given in conformity herewith.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
CB BANCSHARES, INC.
By: /s/James H. Kamo
----------------
Its Secretary
/s/James M. Morita
- ------------------
<PAGE>
STATE OF HAWAII )
) ss.
CITY AND COUNTY OF HONOLULU )
On this 6th day of March, 1997, before me personally appeared
James M. Morita, to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free act
and deed.
/s/Raynette R. Fong
-------------------
Notary Public, State of Hawaii
My commission expires: 03-24-99
STATE OF HAWAII )
) ss.
CITY AND COUNTY OF HONOLULU )
On this 6th day of March, 1997, before me personally appeared JAMES H. KAMO to
me known, who, being by me duly sworn, did say that he is the Secretary, of CB
BANCSHARES, INC., a Hawaii corporation, and that the seal affixed to the
foregoing instrument is the corporate seal of said corporation and that said
instrument was signed in behalf of said corporation by authority of its Board
of Directors and said officer acknowledged said instrument to be the free act
and deed of said corporation.
/s/Raynette R. Fong
-------------------
Notary Public, State of Hawaii
My commission expires: 03-24-99
<PAGE>
ATTACHMENT I
LIFE INSURANCE AGREEMENT
THIS AGREEMENT made this 27th day of March 1997, between CB BANCSHARES INC.,
(hereinafter called the Employer), of 201 Merchant Street, Honolulu, Hawaii
96813, and CARYN .S.M. SAHARA, the Trustee of the JAMES M. and AIKO N MORITA
IRREVOCABLE TRUST dated May 18, 1994 of 4300 Waialae Avenue, #B-102, Honolulu,
Hawaii 96816 ("Trustee").
WHEREAS, JAMES M. MORITA has been employed by the Employer since the formation
of Employer in 1979 and has discharged his duties in a capable manner to the
benefit of the Employer; and
WHEREAS, the Employer has previously provided JAMES M. MORITA a life insurance
program for the benefit and protection of his family by the establishment of a
split dollar life insurance plan through three separate life insurance
policies;
WHEREAS, the three life insurance policies acquired by the trustee were not
"modified endowment contracts within the meaning of Section 7702A of the
Internal Revenue Code of 1986, as amended; and
WHEREAS, the Employer and James M. Morita have agreed to use the cash surrender
value of the such life insurance policies to convert such policies into paid-up
single premium policies on the terms and conditions provided for herein; and
WHEREAS, the Trustee agrees to participate in such plan as hereinafter
provided.
NOW' THEREFORE' it is agreed that:
1 Existing Policies
-----------------
Employer and Trustee hereby acknowledge and agree that Schedule A accurately
sets forth information concerning the existing life insurance policies under
the split dollar life insurance plan for James M. Morita (the three life
insurance policies described on Schedule A are referred to herein as the
Existing Policies"). Upon execution of this Agreement Employer shall have no
further obligation to make any additional premium payments on the Existing
Policies.
2. Conversion of Existing Policies: Regulatory Approval
----------------------------------------------------
The Trustee and Employer hereby acknowledge and agree that the current cash
surrender values under the Existing Policies is as set forth on Schedule A (the
"Cash Surrender Value"). The Trustee hereby agrees to apply the Prudential
Insurance Company of America ("Prudential") and Sun Life of Canada ("Sun Life")
for a conversion of the Existing Policies into survivorship whole life (second
to die) single-premium policies on the lives of James M. Morita and Aiko N.
Morita in the reduced face amount (aggregate of $444,550), which policies as
converted shall be owned by the Trustee (and are referred to herein as the
"Converted Policies"). For purposes of this Agreement, Prudential and Sun Life
are referred to herein as collectively the "Insurance Companies," and
individually as the "Insurance Company." The Trustee and Employer agree that
the current cash surrender value of the Existing Policies may be used to make
the respective single premium payment amounts to effect the conversion of the
Existing Policies into the Converted Policies as provided for herein. The
effectiveness of this Agreement and the conversion of the Existing Policies
<PAGE>
into the Converted Policies shall be subject in all respects to the approval of
the Retirement Agreement between Employer and James M. Morita by the Federal
Reserve Bank of San Francisco ("FRB") pursuant to the terms of the Memorandum
of Understanding between CB Bancshares, Inc. and FRB.
3. Collateral Assignment
---------------------
Employer and Trustee hereby acknowledge arid agree that the total amount of all
premium advances (the "Premium Advances") applied to the Existing Policies by
the Employer is $389,112, less the amount of premiums directly or indirectly
paid by James M. Morita. The Trustee hereby agrees to pay Employer the Premium
Advances as provided in Sections 5 and 6 below.
4. Satisfaction of Employers Interest During Employees Life
--------------------------------------------------------
The Employer shall release its interests ire the Converted Policies, cancel the
collateral assignments of said policies, and transfer physical possession of
the Converted Policies to the Trustee Upon payment of the total Premium Advance
indebtedness owed by the Trustee to the Employer. Such release, cancellation
and transfer shall terminate all obligations of the Employer and Trustee under
this Agreement.
5. Satisfaction of Employer's Interest from Death Proceeds
-------------------------------------------------------
The Trustee further agrees that in the event of the death of the last to die of
JAMES M. MORITA or AIKO N. MORITA, the Employer shall receive, as collateral
assignee, directly from the Converted Policies an amount equal to the total
amount of the Trustee's indebtedness to the Employer under this Agreement,
existing as of the date of the death of the last to die of JAMES M. MOR1TA or
AIKO N. MORITA, and that no beneficiary under said policies shall have any
right to the said indebtedness repayment from the policies proceeds or avails.
The Employer agrees that upon the death of the last to die of JAMES M. MORITA
or AIKO N. MORITA it will satisfy the indebtedness to it out of the proceeds of
said policies, and will release all other interests in such proceeds in favor
of the beneficiary or beneficiaries designated in the Converted Policies.
6. Beneficiary Designation
-----------------------
It is intended that Trustee or the Successor Trustee of said irrevocable trust
agreement be the owner of the Converted Policies and the beneficiary under the
Converted Policies at all times. The Employer as holder of the Converted
Policies as collateral assignee, will make the policies available to the
Insurance Companies in order to effectuate any change in the office of Trustee
of said irrevocable trust agreement, subject to the rights of the Employer as
defined In this Agreement. The Trustee or the Successor Trustee may assign the
Converted Policies upon the teens of said irrevocable trust agreement subject
to and subordinate to the rights of the Employer as defined in this Agreement
and that any such assignment shall so provide. The Employer may assign its
interest in the Converted Policies only to the Trustee upon the terms of this
Agreement.
7. Agreement Binding
-----------------
This Agreement shall be binding upon the parties hereto, their heirs, legal
representatives, successors and assigns.
<PAGE>
8. Amendment
---------
This Agreement shall not be modified or amended except by a written Agreement
signed by the parties. This Agreement replaces and supersedes in all respects
any and all prior agreements between the parties hereto with respect to the
subject matter hereof.
9. State Law
---------
This Agreement shall be subject to and governed by the laws of the State of
Hawaii.
10. Insurance Companies Not Party to Agreement
------------------------------------------
Notwithstanding the provisions of this Agreement, the Insurance Companies are
hereby authorized to act in accordance with the terms of any policy issued by
it as if this Agreement did not exist and payment or other performance of its
contract obligation by [the Insurance Companies in accordance with the terms of
any such policy shall completely discharge the Insurance Companies from all
claims, suits and demands of all persons whatsoever.
11. Named Fiduciary and Plan Administrator
--------------------------------------
Employer is hereby designated the "named fiduciary."
Employer shall be responsible for the management, control and administration of
the split dollar insurance policy plan as established herein.
Employer may allocate to others certain aspects of the management and
operational responsibilities of the plan, including the employment of advisors
and the delegation of any ministerial duties to qualified individuals.
12. Claims Procedure
----------------
A. Filing of Benefit Claims
(1) When an Employee, beneficiary, or his or her duly authorized representative
(hereinafter referred to as the "Claimant") has a claim which may be covered
under the provisions of the Converted Policies, the claimant should contact the
Secretary of the Employer or as the Employer otherwise designates in writing.
(2) Claim forms and claim information can be obtained from the above Employer.
(3) The claim must be in writing on an Insurance Company Claim Form as the case
may be and delivered, along with a certified copy of the death certificate, to
the Secretary of the Employer or such other designee of the Employer either in
person or by mail, postage paid. The Secretary or such other designee of the
Employer will forward the claim to the authorized representative of the
Insurance Company.
B. Initial Disposition of Benefit Claims
-------------------------------------
(1) Within ninety (90) days after a receipt of a claim through the Employer,
the Insurance Company shall send to the Claimant, by mail, postage prepaid, a
notice granting or denying, in whole or in part, a claim for benefits.
<PAGE>
(2) If a claim for benefits is denied, the Insurance Company shall provide to
the Claimant written notice setting forth in a manner calculated to be
understood by the Claimant:
a. The specific reason or reasons for the denial;
b. Specific reference to pertinent policy provisions on which the denial is
based;
c. A description of any additional material or information necessary for the
Claimant to perfect the claim and an explanation of why such material or
information is necessary; and
d. Appropriate information as to the steps to be taken if the Claimant wishes
to submit his or her claim for review.
(3) If the claim is payable, a benefit check will be issued to the Claimant.
(4) The ninety (90) day period may be extended if special circumstances require
extension of time to process the claim for benefits.
(5) Written notice of the extension shall be furnished to the Claimant prior to
the termination of the initial 90-day period by the Insurance Company.
(6) The extension notice shall indicate the special circumstances requiring an
extension of time and the date by which the Insurance Company to render the
final decision.
(7) In no event shall such extension exceed a period of 90 days from the end of
the initial 90-day period.
(8) If a notice of denial is not received within 90 days of the claim being
filed the clarion shall be deemed denied and the Claimant shall be permitted to
proceed to the review stage
C. Review Procedure
----------------
(1) Within sixty (60) days of:
a. The receipt by the Claimant of written notification denying, in whole or in
part, his or her claim; or
b. A deemed denial resulting from the Insurance Company's failure to provide
the Claimant with written notice of denial within 90 days of a claim being
filed, the Claimant upon written application to the Insurance Company,
delivered in person or by certified mail, postage prepaid, may request an
opportunity to appeal a denied claim to the Insurance Company or a person
designated by the Insurance Company.
(2) The Claimant may:
a. Request a review upon written application to the Insurance Company;
b. Review pertinent documents; and
c. Submit issues and comments in writing.
<PAGE>
(3) The decision on review shall be made within sixty (60) days of the
Insurance Company's receipt of a request for review.
(4) The sixty (60) day period may be extended if special circumstances require
an extension of time to process the review.
(5) If an extension is required:
a. Written notice of the extension shall be furnished to the Claimant prior to
the commencement of the extension, and
b. A decision shall be rendered as soon as possible but no later than 120 days
after the Insurance Company received the request for review.
(6) The decision on review shall be in writing and shall include specific
reasons for the decisions, written in a manner calculated to be understood by
the Claimant, as well as specific references to the policy provision on which
the decision is based.
(7) If the decision on review is not rendered within sixty (60) days or within
120 days if an extension is granted, then the claim shall be deemed denied on
review.
D. Other Remedies
--------------
(1) After exhaustion of the claims procedures, nothing shall prevent any person
from pursuing any other legal or equitable remedy otherwise available.
IN WITNESS WHEREOF the parties hereto have duly executed this agreement as of
the date first above written.
CB BANCSHARES, INC.
By /s/Robert R. Taira
------------------
Its Vice Chairman of the Board
By /s/James H. Kamo
----------------
Its Secretary
/s/Caryn S.M. Sahara
--------------------
Caryn S.M. Sahara, Trustee of the
James M. and Aiko N. Morita
Irrevocable Trust dated
May 18, 1994
TRUSTEE
<PAGE>
CONSENT OF EMPLOYEE AND SPOUSE TO BE INSURED
--------------------------------------------
We consent to the insuring of our lives.
Employee's Signature: /s/James M. Morita
------------------
Spouse's Signature: /s/Aiko N. Morita
-----------------
<PAGE>
Schedule A
----------
James M. and Aiko N. Morita
Irrevocable Trust
Company Policy No. Premiums Paid Cash Surrender Reduced
Value Paid Up
Sun Life 9304146L $145,878.75 $132,440.38 $224,338
Sun Life 010003320 97,327.50 88,287.24 149,578
Prudential 77 691 638 145,906.00 37,705.21 70,634
----------- ----------- --------
TOTAL $389,112.25 $258,432.83 $444,550
========== =========== ========
<PAGE>
ATTACHMENT II
ARTICLE XVIII OF CB BANCSHARES, INC. BYLAWS
Liability of Officers and Directors
-----------------------------------
SECTION 2. Indemnification. Every director and officer shall be indemnified by
the corporation against all reasonable costs, expenses and liabilities
(including counsel fees) actually and necessarily incurred by or imposed upon
him in connection with or resulting from any claim, action, suit, proceeding,
investigation or inquiry of whatever nature in which he may be involved as a
party or otherwise by reason of his being or having been a director or officer,
whether or not he continues to be such director or officer at the time of the
incurring or imposition of such costs, expenses or liabilities, except in
relation to matters as to which he shall be finally adjudged in such action,
suit, proceeding, investigation or inquiry to be liable for willful misconduct
or willful neglect toward the corporation in the performance of his duties as
such director or officer. As to whether or not a director or officer was liable
by reason of willful misconduct or willful neglect toward the corporation in
the performance of his duties as such director or officer, in the absence of
such final adjudication of the existence of such liability, the Board of
Directors and each director and officer may conclusively rely upon an opinion
of legal counsel selected by or in the manner designated by the Board of
Directors. The foregoing right to indemnification shall be in addition to and
not in limitation of all other rights to which such person may be entitled as a
matter of law, and shall inure to the benefit of the legal representatives of
such person.
<PAGE>
EXHIBIT 10.2
AMENDMENT NO. 2
TO
EXECUTIVE SALARY CONTINUATION AGREEMENT
This Amendment (the "Amendment") to the Executive Salary Continuation
Agreement, dated June 20, 1991, as amended on March 24, 1993 (the "Continuation
Agreement") between City Bank, a Hawaii state banking corporation (the "Bank")
and James M. Morita (the "Executive"), is entered into as of March 27, 1997.
WHEREAS, the Bank and Executive desire to amend the Continuation Agreement
as provided below.
NOW, THEREFORE, in consideration of the mutual promises set forth below, the
Bank and Executive agree to amend the Continuation Agreement as follows:
1. Bank and Executive agree that upon Executive's retirement as Chief
Executive Officer of Bank as of April 15, 1997, the payments required
under the Continuation Agreement shall commence even though Executive
continues to serve as Chairman of the Board through the 1997 annual
meeting of the shareholder of the Bank, which meeting shall be held
no later than May 16, 1997. Bank and Executive also acknowledge and
agree that if Executive continues to serve as a director of Bank,
such position will not affect the Bank's obligations under the
Continuation Agreement.
2. Bank and Executive acknowledge and confirm that Bank will pay
Executive an annual amount equal to $250,000 in accordance with the
terms and conditions of the Continuation Agreement.
3. The Bank and Executive agree that Executive's rights and the Bank's
obligations with respect to the benefits described on Schedule A to
the Continuation Agreement shall be modified as follows:
Bank will reimburse Executive for reasonable out-of-pocket expenses
incurred by Executive in connection with the activities and expenses
designated as Schedule A benefits under the Continuation Agreement, but
only to the extent such expenses can reasonably be deducted by Bank as a
business expense and only to the extent the aggregate amount of such
reimbursable expenses does not exceed $60,000 per calendar year. This cap
will apply to Executive's out-of-pocket business related expenses for
clubs, travel, entertainment, insurance and automobile expenses but not
benefits such as use of an office. Executive will submit expense reports
to obtain reimbursement in accordance with and subject to the Bank's
policies for approval and reimbursement of employees' and directors' for
business expenses. In accordance with the above requirements, Executive
shall be entitled to the following Schedule A benefits:
(a) Medical: Bank will reimburse Executive for reasonable health
insurance costs. Uninsured medical costs or medical-related travel
costs will be reimbursed only to the extent such expenses constitute
a deductible business expense for the Bank.
(b) Club Memberships: The Bark will pay Executive's dues for
membership at the Waialae Country Club and the Plaza Club and
will reimburse Executive for any Bank business-related charges
incurred at such clubs. The Bank will not pay Executive's
membership expenses at the Honolulu Country Club or the Pacific
Club.
<PAGE>
(c) Attendance at Banking Conferences: The Bank will reimburse
Executive for reasonable out-of-pocket expenses related to his
attendance at ABA and WIB conferences, which attendance is
approved in advance by Bank management.
(d) Travel to Japan: The Bank will reimburse Executive for reasonable
out-of-pocket expenses related to travel to Japan for business
purposes of the Bank. Any such travel must be approved in
advance by Bank management.
(e) Automobile Expense: The Bank will continue to pay Executive's
automobile expense and parking, and all such amounts will be
included in calculating the annual $60,000 cap on reimbursement.
If Executive desires to purchase or lease a new automobile, such
request shall be submitted to the Bank's Board of Directors for
approval at its discretion.
(f) Office Expense: The Bank will provide Executive an office and
reasonable secretarial assistance as needed for up to ten years from
the date of Executive's retirement.
The Schedule A benefits are personal to Executive, and the Bank's
obligations with respect thereto will terminate upon Executive's death.
4. To the extent the provisions of this Amendment are inconsistent with
or contrary to provisions of the Continuation Agreement and Schedule A
thereto, this Amendment shall have priority and govern. In all other
respects the Continuation Agreement is hereby ratified and affirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
CITY BANK
/s/ James H. Kamo, Secretary
/s/ James M. Morita
<PAGE>
EXHIBIT 10.3
SETTLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS
THIS SETTLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS ("Agreement") is made
and entered into this 27th day of March, 1997, by and on behalf of RONALD K.
MIGITA (hereafter referred to as "Migita") and CB BANCSHARES, INC., and its
respective owners and subsidiaries, and the officers, directors, employees,
agents, and representatives of CB Bancshares, Inc. and its subsidiaries
(hereafter referred to as "the Company").
DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
1. "Releasee" shall mean and include a) the Company and its owners,
officers, directors, employees, agents, representatives, successors, and
management; and b) all subsidiaries, parent companies, and affiliated entities
of the Company, as well as all owners, officers, directors, employees, agents,
representatives, and successors of any subsidiary, parent company, or
affiliated entity, including but not limited to City Bank.
2. "Releasor" shall mean and refer to Migita, his agents, advisors,
personal representatives, executors, administrators, successors/ survivors,
heirs and assigns.
3. "Parties" shall mean and refer to Releasor and Releasee as defined
above.
4. The "Agreement" shall mean and refer to this Settlement Agreement and
Release of All Claims.
RECITALS
1. On December 31, 1996, Migita asserted various claims ("Claims")
against Releasee arising from his termination of employment by Releasee; and
2. Releasee has denied any liability or responsibility for the Claims;
and
3. Releasor and Releasee, in order to avoid the expense, delay, and loss
of time resulting from potential litigation on the Claims, have agreed to
settle and compromise fully and finally the differences between them. Releasee
upon appropriate regulatory approval of certain conditions and this Agreement
agrees to undertake certain actions and obligations to Releasor in exchange
for a full release of claims from Releasor, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises
herein contained, it is agreed as follows:
FIRST: REGULATORY APPROVAL
It is understood and agreed by the parties that this Agreement is
conditioned upon the Company obtaining the applicable and appropriate
regulatory approval of Mr. James Morita's retirement from the Company
<PAGE>
(including but not limited to his resignation and retirement from his capacity
as both Chairman of the Board and Chief Executive Officer), and approval of
the terms and conditions of this Agreement, specifically including approval of
the Federal Reserve Bank of San Francisco ("FRB") in accordance with Section
3(c) of the Memorandum of Understanding between CB Bancshares, Inc.
and the FRB. The Parties agree to use their best efforts in obtaining the
appropriate regulatory approval. It is further understood and agreed by
the parties that this Agreement is conditioned upon submission by Mr. James
Morita of his resignation and retirement from the Company, (including but
not limited to his resignation and retirement from his capacity as both
Chairman of the Board and Chief Executive Officer) on or before May 16,
1997 and upon the Company thereafter obtaining the applicable and
appropriate regulatory approval of Mr. James Morita's resignation and
retirement from the Company and of the terms and conditions of this
Agreement, specifically including approval of the FRB in accordance with
Section 3(c) of the Memorandum of Understanding between CB Bancshares, Inc.
and the FRB not later than May 30, 1997. The Company agrees that it will
submit all necessary documentation to the regulatory authorities to obtain
the applicable and appropriate regulatory approval within two (2) business
days after Mr. Morita submits the resignation and retirement required
above.
In the event that Mr. Morita does not submit his resignation and
retirement from the Company, (including but not limited to his resignation and
retirement from his capacity as both Chairman of the Board and Chief Executive
Officer) on or before May 16, 1997, the Company does not submit such
resignation and retirement for regulatory approval within two (2) business days
after its submission to the Company, or the Company does not obtain the
applicable and appropriate regulatory approval of Mr. Morita's resignation and
retirement from the Company on or before May 30, 1997, then Releasor, may at
his option and in his sole discretion, declare this Agreement and all releases
herein to be null and void, and will thereafter be restored to all legal and
equitable rights to the same extent as if he had never executed this Agreement.
Releasor may, at his option and in his sole discretion, agree to extend the
deadlines in this Recital for good cause shown by the Company but is under no
obligation to do so and may insist upon the performance and deadlines required
by this Recital.
SECOND: OBLIGATIONS OF RELEASEE
1. Upon the applicable and appropriate regulatory approval described
above, Releasee agrees to the following:
a. Releasee's management agreed to and so designated Migita for the
Company's Board of Directors as part of management's slate of Class
II nominees for the 1997 annual meeting.
b. Releasee agrees to appoint Migita as President and Chief Executive
Officer of the Company.
c. Releasee shall reaffirm Migita's original Employment Contract dated
May 31, 1995, for the remaining term of the original Employment
Contract, i.e., June 4, 2000, and, if needed, modify said
Employment Contract to reflect the terms of this Agreement.
<PAGE>
d. Releasee agrees that Migita shall keep all compensation payments
made to him since his termination on November 15, 1996.
e. Releasee agrees that all employment benefits as provided for in
Migita's original Employment Contract, including but not limited to,
bonus rights, noncash compensation and other employee benefits as
identified in Exhibit A, attached hereto, shall be restored and
Migita shall be made whole retroactive to November 15, 1996. Migita
shall work with Human Resources to resolve any issue related to the
restoration of the employment benefits.
f . Releasee agrees that Ms. Hope Chang shall continue her employment
as Migita's secretary, subject to the employment policies of the
Company.
g. Releasee agrees to reimburse Migita for reasonable legal expenses
and costs incurred as of the date of this Agreement, not to exceed
$8,000.00.
h. Releasee's management shall recommend and support Migita's
appointment as Chief Executive Officer of City Bank.
2. Releasee's agreement to perform the above stated obligations,
conditioned upon the stated appropriate regulatory approval, is made in full,
final and complete settlement of any and all of Releasor's claims against
Releasee, whether known or unknown, including, but not limited to, any actual
damages, compensatory damages, special damages, punitive damages and liquidated
damages which Releasor may have incurred. This Agreement is intended to be a
complete compromise of all claims, causes of action, and disputed issues of law
or fact, and the Parties fully assume the risk that the facts or law may be
other than as they believe.
THIRD: RELEASE AND COVENANT NOT TO SUE
In consideration of the promises contained herein, subject to the
conditions stated in the First Recital above, and upon appropriate regulatory
approval as described herein, Releasor, on behalf of himself and his personal
representatives, executors, administrators, successors, heirs, and assigns,
forever releases Releasee, as well as any persons or entities acting by,
through, under, or in concert with it, from any and all causes of action,
suits, debts, charges, claims, liabilities, obligations, promises, agreements,
damages, and expenses of any nature whatsoever, in law or in equity, which
Releasor, or his heirs, assigns, executors and administrators hereafter may
have now or heretofore have had, whether known or unknown, or discovered or
undiscovered relating to his termination of employment by Releasee.
Releasor does not release Releasee from any cause of action or claim that
he may have against Releasee based upon acts or omissions which occur after the
execution of this Agreement.
Releasor's release of claims and covenant not to sue shall include, but
not be limited to, wrongful termination; breach of contract; or any other claim
or cause of action under state or federal law.
<PAGE>
FOURTH: NO ADMISSION OF WRONGDOING
This Agreement is not and shall not in any way be construed as an
admission by Releasee of any liability to, or any wrongdoing or unlawful act
whatsoever against Releasor, that Releasee violated any federal, state or local
law, rule or regulation, or that Releasee's employment actions were
unwarranted, unjustified, discriminatory, tortious, or otherwise unlawful.
Releasee specifically disclaim any liability to or discrimination against
Releasor or any other person. Instead it is understood and agreed by the
parties that this Agreement constitutes the good faith settlement of contested
and disputed claims.
FIFTH: DISCLOSURE OF SETTLEMENT
The Parties covenant and agree that the terms of this Agreement may be
disclosed by the Company as may be required by the Securities and Exchange
Commission ("SEC") laws and regulations, including disclosure in the Company's
proxy statement to shareholders. The Company agrees to provide Migita prior
review and approval of any press release it may issue concerning the settlement
of claims described hereunder.
SIXTH: AUTHORITY TO EXECUTIVE AGREEMENT
The Parties signing this Agreement each warrant that he or it has the
authority to sign on behalf of himself or the entity represented, and that
this Agreement has been authorized and constitutes a legally binding and
enforceable obligation of each Party.
SEVENTH: NO ASSIGNMENT OF CLAIMS
Releasor warrants and represents that he has not assigned any of his
claims or causes of action against Releasee to any other individual or entity,
and that he is authorized to enter into this release with respect to all of
his claims against Releasee. Releasor further covenants and agrees that if he
is found to have assigned any legal claim(s) against Releasee to a person or
entity which is not a party to this Agreement, he shall indemnify Releasee for
any expenses, including attorneys' fees, which Releasee incurs in defending
against said claim(s).
EIGHTH: CONSULTATION WITH ATTORNEY
The Parties agree that they have had the opportunity to consult with
legal counsel prior to executing this Agreement. The Parties have carefully
read and fully understand all of the provisions and effects of this Agreement.
Releasor agrees that he has voluntarily entered into this Agreement and that
neither Releasee nor any of its agents, representatives, or attorneys, have
made any representations concerning the terms or effects of this Agreement
other than those contained herein.
NINTH: INTERPRETATION UNDER HAWAII LAW
This Agreement is made and entered into in the State of Hawaii, and shall
in all respects be interpreted, enforced and governed under the laws of said
State.
<PAGE>
TENTH: NO INTERPRETATION AGAINST DRAFTER
It is the intent of the Parties that this Agreement be construed
according to the rules of construction generally applicable to contracts
negotiated at arm's length by parties who are each represented by legal
counsel. The language of all parts of this Agreement shall in all cases be
construed as a whole, according to the fair meaning of such language, and
shall not be construed strictly for or against any of the parties.
ELEVENTH: SEVERABILITY OF UNLAWFUL PROVISION
Should any provision of this Agreement be declared or be determined by
any court to be illegal, void, or invalid, such illegal, void, or invalid
provision shall be considered severed, and the validity of the remaining
parts, terms or provisions of this Agreement shall not be affected thereby,
and the remainder of the Agreement is to be construed so as to effectuate the
intent of the Parties.
TWELFTH: NO REPRESENTATIONS OTHER THAN THOSE HEREIN
The Parties acknowledge that no promise, agreement, fact, or opinion
which is not expressed herein has been made by or to them to induce this
Agreement, and that this settlement and release is made with full knowledge of
the facts and circumstances of the subject matter of this Agreement.
THIRTEENTH: EXECUTION IN COUNTERPARTS
This Agreement may be executed in multiple counterparts, and each of them
when executed, regardless of the date of its execution and delivery, shall be
deemed to be an original, and the counterparts taken together shall constitute
one and the same instrument.
FOURTEEN H: NO WAIVER
Waiver of any breach of this Agreement by the Parties shall not be deemed
a waiver by the Parties of any subsequent breach of this Agreement.
FIFTEENTH: AMENDMENT OR MODIFICATION IN WRITING
This Agreement may not be altered, amended, modified, or otherwise
changed except by a written instrument which specifies the date on which such
amendment or modification shall be effective, and which is executed by the
Party or Parties against whom enforcement of any alteration, amendment,
modification, or change is sought.
SIXTEENTH: ARBITRATION OF DISPUTES
The Parties agree that all disputes or claims arising under this
Agreement shall be settled by arbitration in Honolulu, Hawaii, in accordance
with the rules of the American Arbitration Association for settlement of
commercial disputes.
<PAGE>
SEVENTEENTH: ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between the Parties
hereto, and fully supersedes any and all prior agreements or understandings
between them. This Agreement is binding upon the Parties, and is enforceable
by the Parties hereto, as well as their attorneys, successors, assigns,
affiliated entities, and administrators, representatives, and estates.
PLEASE READ THIS DOCUMENT CAREFULLY. THIS SETTLEMENT AGREEMENT AND RELEASE OF
ALL CLAIMS INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS .
IN WITNESS WHEREOF, and intending to be legally bound hereby, Releasor
has executed the foregoing Settlement Agreement and Release of Claims
consisting of ten (10) pages, including the signature pages on the day and
year set forth above.
March 27, 1997 /s/ RONALD K. MIGITA
DATE
March 27, 1997 /s/JAMES M. MORITA
DATE CB BANCSHARES, INC.
BY: JAMES M. MORITA
Its Chairman of the Board and
Chief Executive Officer
APPROVED AS TO FORM:
/s/RONALD H.W. LUM
DAVID J. DEZZANI
Attorneys for Ronald K. Migita
/s/WESLEY M. FUJIMOTO
Attorney for CB Bancshares, Inc.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 55,960
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0
0
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<ALLOWANCE-FOREIGN> 0
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</TABLE>
