<PAGE>
[BANCORP HAWAII, INC. LOGO]
130 MERCHANT STREET
HONOLULU, HAWAII 96813
March 10, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Bancorp Hawaii, Inc. to be held at 8:30 a.m. on Wednesday, April 27, 1994, on
the Sixth Floor of the Bank of Hawaii Building, 111 South King Street, Honolulu,
Hawaii.
The accompanying Notice of Meeting and Proxy Statement describe the matters
to be considered and voted upon at the meeting. In addition to consideration of
these matters, a report to stockholders on the affairs of the Company will be
given and stockholders will have the opportunity to discuss matters of interest
concerning the Company.
Regardless of the number of shares you own and whether or not you plan to
attend, it is important that your shares be represented and voted at the
meeting. In the event you are unable to attend the meeting, your shares may
still be voted if you complete, sign, and return the enclosed Proxy Card.
Please complete the Proxy Card and mail it promptly in the enclosed postage-paid
return envelope to insure that your shares are voted in the manner you desire.
If you wish to do so, your proxy may be revoked at any time prior to its use.
On behalf of the Board of Directors, thank you for your cooperation and
support.
Sincerely,
[SIGNATURE OF H. HOWARD STEPHENSON]
H. Howard Stephenson
Chairman of the Board and
Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 1994
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Bancorp
Hawaii, Inc. ("Bancorp") will be held on Wednesday, April 27, 1994, at 8:30 a.m.
on the sixth floor of the Bank of Hawaii Building, 111 South King Street,
Honolulu, Hawaii, for the following purposes:
1. To elect four Class II Directors for terms expiring in 1997, and
successors to fill the unexpired terms of two retiring Class III Directors.
2. To approve an amendment to the Restated Articles of Incorporation to
increase the authorized number of shares of common stock, $2 par value, from
50,000,000 shares to 100,000,000 shares.
3. To approve the Bancorp Hawaii, Inc. Stock Option Plan of 1994 under
which an aggregate of up to 1,250,000 shares of common stock (to be adjusted to
1,875,000 shares as a result of the 50% stock dividend declared on January 26,
1994 and payable on March 15, 1994) may be issued pursuant to the exercise of
options to purchase common stock that may be granted to officers and key
employees.
4. To approve the Bancorp Hawaii, Inc. Executive Officer One-Year
Incentive Plan.
5. To approve the Bancorp Hawaii, Inc. Sustained Profit Growth Plan.
6. To elect an Auditor.
7. To transact any other business that may be properly brought before the
meeting.
Only owners of record of Bancorp Hawaii, Inc. common stock at the close of
business February 17, 1994 are entitled to attend the meeting and vote on the
business brought before it.
You are urged to attend the meeting in person. However, in the event you
are unable to attend the meeting, your shares may still be voted if you fill in,
sign, and return the enclosed Proxy Card in the attached postage prepaid
envelope. The Proxy Statement, to which your attention is now invited, is
intended to provide certain background information that will be helpful in
deciding how to cast your vote on business transacted at the meeting.
Please complete the Proxy Card and mail it promptly in the enclosed postage-
paid envelope to insure that your shares are voted in the manner you desire. If
you wish to do so, your proxy may be revoked at any time prior to its use.
BY ORDER OF THE BOARD OF DIRECTORS
RUTH E. MIYASHIRO
Vice President and Secretary
Bancorp Hawaii, Inc.
Honolulu, Hawaii
Dated: March 10, 1994
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY
AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THIS WILL SAVE
BANCORP THE EXPENSE OF A SUPPLEMENTARY SOLICITATION.
THANK YOU FOR ACTING PROMPTLY.
- --------------------------------------------------------------------------------
<PAGE>
BANCORP HAWAII, INC.
130 MERCHANT STREET
HONOLULU, HAWAII 96813
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 27, 1994
(Approximate Mailing Date: March 10, 1994)
The accompanying proxy is solicited by order of the Board of Directors of
Bancorp Hawaii, Inc. ("Bancorp"). Any proxy submitted as a result of this
solicitation may be revoked by the stockholder by giving notice of revocation to
Bancorp in writing or in person at any time prior to its use. Attendance at the
Annual Meeting will not in itself constitute revocation of a proxy.
The expense of this mail solicitation will be paid by Bancorp. In addition
to using the mails, proxies may be solicited by officers, directors, and regular
employees of Bancorp or its subsidiaries, in person, or by telephone, telefax or
telegram without additional compensation for such services. Bancorp will also
request brokers or nominees who hold Bancorp's common stock in their names to
forward proxy material at Bancorp's expense to the beneficial owners of such
stock. Bancorp has retained D. F. King & Co., Inc., a firm of professional
proxy solicitors, to aid in the solicitation of such proxies at an estimated fee
of $7,500 plus reimbursement of out-of-pocket expenses.
VOTING SECURITIES, VOTES REQUIRED,
AND PRINCIPAL HOLDERS THEREOF
As of February 17, 1994 (the "record date"), Bancorp had outstanding
28,_______ shares of common stock. If holders of more than 50% of those shares
are represented at the meeting, either in person or by proxy, a quorum will
exist for conducting business. Each share of common stock is entitled to one
vote; cumulative voting is not permitted under the By-Laws of Bancorp. All
matters that will be submitted to the stockholders at the meeting will require
an affirmative vote of a majority of shares present in order to be valid and
binding. Under Hawaii law and Bancorp's Restated Articles of Incorporation and
By-Laws, abstentions and broker nonvotes are not voted in favor of or against
any matter that may come before the Annual Meeting. Such abstentions and broker
nonvotes will, however, have the effect of a negative vote if an item requires
the approval of a specified percentage of all issued and outstanding shares of
Bancorp's common stock.
At the close of business on December 31, 1993, Bancorp had 28,425,039 shares
of common stock outstanding, and no stockholder was known to Bancorp to own
beneficially 5% or more of Bancorp's common stock.
ELECTION OF DIRECTORS
The Restated Articles of Incorporation of Bancorp provide that the Board of
Directors shall consist of not less than 3 nor more than 15 persons who shall be
elected for such terms as may be prescribed in the By-Laws of Bancorp. The By-
Laws of Bancorp provide for a Board of Directors consisting of 11 persons
divided into 3 classes, with the terms of office of one class expiring each
year. Directors to succeed the class of directors whose terms expire will be
elected for terms of 3 years at Bancorp's annual meetings.
Listed below are the four persons who have been nominated as Class II
directors to serve 3-year terms to expire in 1997, and the persons who have been
nominated as Class III directors to fill the unexpired terms of two Class III
directors who have reached mandatory retirement age. All of the nominees,
except Mary G. F. Bitterman and Herbert M. Richards, Jr., are currently serving
as directors of Bancorp. Mrs. Bitterman and Mr. Richards have been nominated as
Class III directors to succeed Messrs. Sidney Hashimoto and Frank Manaut, who
have reached mandatory retirement age. Should any of these nominees become
unable to serve, an event which is not anticipated by Bancorp, the proxies,
except those from stockholders who have given instruction to withhold voting
1
<PAGE>
for the following nominees, will be voted for such other persons as management
may nominate. Certain information concerning each of the nominees, and each of
the continuing directors, is set forth after his/her name.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS - TERM EXPIRES IN 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIP(S) OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David A. Heenan; Chairman, President and Chief Aloha Airgroup, Inc., 215
54; 1993 Executive Officer of Theo H. Davies Aloha Airlines, Inc.,
& Co., Ltd. (the North American C. Brewer Homes, Inc.,
subsidiary of Hong Kong-based Jardine Kennedy-Wilson, Inc.,
Matheson Holdings Ltd., a diversified Bank of Hawaii
multi-national corporation) since July International, Inc.
1982. a subsidiary of
Bank of Hawaii
- ---------------------------------------------------------------------------------------------------------
Stuart T. K. Ho; Chairman of the Board and President, Aloha Airgroup, Inc., 10,752(1)
58; 1987 Capital Investment of Hawaii, Inc. Aloha Airlines, Inc.,
(diversified real estate development Bishop Insurance of
and management company) since January Hawaii, Inc.,
1982; Chairman, Gannett Pacific Corp. Capital Investment of
(newspaper publishing company) since Hawaii, Inc.,
1987. Gannett Co., Inc.,
College Retirement
Equities Fund,
Various subsidiaries
and affiliates of
Bancorp
- ---------------------------------------------------------------------------------------------------------
Lawrence M. President of Bancorp and Bank of Hawaii Various subsidiaries 152,674(2)
Johnson; since March 1989; Executive Vice and affiliates of
53; 1989 President of Bancorp August 1980 to Bancorp
February 1989; Vice Chairman of Bank
of Hawaii December 1984 to February
1989.
- ---------------------------------------------------------------------------------------------------------
Fred E. Trotter; President of F. E. Trotter, Inc. since Longs Drug Stores, 5,179(3)
63; 1978 January 1970. Maui Land &
Pineapple Co., Inc.,
Bancorp Leasing of
Hawaii Inc., a
subsidiary of Bank
of Hawaii
- ---------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
NOMINEES FOR ELECTION AS CLASS III DIRECTORS - TERM EXPIRES IN 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mary G. F. Bitterman; President and Chief Executive Officer, Various subsidiaries 2,872(4)
49 KQED, Inc. (public broadcasting and affiliates of
center) since November 1993; Bancorp
Consultant (telecommunications,
investments, and Asian-Pacific affairs)
November 1988 to October 1993.
- ------------------------------------------------------------------------------------------------
Herbert M. Richards, President and Manager, Kahua Ranch Various subsidiaries 1,039
Jr.; Ltd. (cattle and sheep ranching and and affiliates of
64 diversified agricultural business since Bancorp
December 1953.
- ------------------------------------------------------------------------------------------------
</TABLE>
Each nominee or director continuing in office is also currently a director
of Bank of Hawaii (hereinafter the "Bank"), Bancorp's major subsidiary.
These persons will be placed in nomination for election as Class II and
Class III directors, as above indicated. The shares represented by the proxy
cards returned will be voted FOR the election of these nominees unless you
specify otherwise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE ABOVE
NOMINEES AS DIRECTORS.
A stockholder may nominate a particular individual to serve as a director,
provided notice of such nomination together with the written consent of such
individual to serve as a director is given at least 14 days prior to the annual
meeting. The notice of nomination must be made in writing, delivered or mailed
by first class mail to the Secretary of Bancorp, and must set forth (i) the
name, age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of the
nominee, and (iii) the number of shares of Bancorp stock beneficially owned by
the nominee.
DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS - TERMS EXPIRE IN 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
H. Howard Stephenson; Chairman and Chief Executive Officer Various subsidiaries 187,639(5)(9)
64; 1980 of Bancorp and Bank of Hawaii since and affiliates of
March 1989; President of Bancorp and Bancorp
Bank of Hawaii August 1980 to
February 1989.
- ------------------------------------------------------------------------------------------------
Charles R. Wichman; Attorney at Law, Partner of Carlsmith Various subsidiaries 20,906(6)
68; 1989 Ball Wichman Murray Case & Ichiki and affiliates of
(now retired) since 1957. Bancorp
- ------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS -- TERMS EXPIRE IN 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SHARES OF BANCORP
NOMINEE, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1993
- ------------------------- ------------------------------------- ------------- ----------------------------
<C> <S> <C> <C>
Peter D. Baldwin; President of Baldwin Pacific Maui Land & 2,475(7)
56; 1991 Corporation (diversified foods Pineapple Co., Inc.
distribution, milk and juice
processing/packaging company, and
orchard farming in California) since
1965; President of Baldwin Pacific
Properties, Inc. (real estate
development company) since 1988;
President of Orchards Hawaii, Inc.
(fruit juice processing plant) since
1986; President of Haleakala Ranch
Company (cattle ranching) since 1979.
- ---------------------------------------------------------------------------------------------------------------------
*Thomas B. Hayward; President, Thomas B. Hayward Litton Industries, 489
69; 1992 Associates, (consulting firm engaged Maxwell Laboratories,
in technology related business Bank of Hawaii
development in the Asia-Pacific Basin) International, Inc., a
since 1982. subsidiary of Bank of
Hawaii
- ---------------------------------------------------------------------------------------------------------------------
K. Tim Yee; President, Queen's International Hawaiian Trust Com- 2,638(8)
67; 1984 Corporation since April 1993; Presi- pany, Limited, a
dent, The Queen Emma Foundation subsidiary of Bank
(engaged in healthcare alliances and of Hawaii
partnerships with other healthcare
companies) May 1988 to March 1993.
- ---------------------------------------------------------------------------------------------------------------------
All Directors and Executive Officers of
Bancorp as a Group 651,553(9)(10)
</TABLE>
*Thomas B. Hayward's term of office will expire on the day of the annual
meeting of stockholders to be held in 1995, as he will have reached mandatory
retirement age. His successor will be elected by the stockholders at the annual
meeting in 1995 to serve for the remainder of the Class I director's term
expiring in 1996.
__________
(1) Includes 247 shares owned by spouse in an individual retirement account;
and, indirectly, 10,258 shares as co-trustee for the Chinn Ho Trust under
Trust Agreement dated February 6, 1987.
(2) Includes 11,352 shares held in trust for Mr. Johnson under the Bank of
Hawaii Profit Sharing Plan, and 105,117 shares that Mr. Johnson has the
right to acquire within 60 days through the exercise of stock options.
(3) Includes 3,385 shares owned by spouse; 645 shares owned by the F. E.
Trotter, Inc. Pension Plan, of which Mr. Trotter is the sole participant,
and 13 shares owned by daughter, Brooke Trotter.
4
<PAGE>
(4) Includes 1,061 shares owned jointly with spouse, 580 shares owned by spouse,
and 651 shares owned by spouse as custodian for daughter, Sarah.
(5) Includes 112,509 shares owned jointly with spouse, and 65,317 shares that
Mr. Stephenson has the right to acquire within 60 days through the exercise
of stock options.
(6) Includes 1,222 shares owned by spouse, and 3,742 shares owned by self in
individual retirement account.
(7) Shares owned by Baldwin Pacific Corporation, of which Mr. Baldwin is
President and owner of all of the outstanding shares of stock.
(8) Includes 150 shares owned by self in Individual Retirement Account, 225
shares owned by spouse in Individual Retirement Account, and 2,263 shares
held in trust for family. Mr. Yee disclaims beneficial ownership,
investment, and voting power over the shares held in trust for family.
(9) Excludes 32,175 shares owned by the Bancorp Hawaii Charitable Foundation
(the "Foundation"). The Board of Directors of the Foundation has appointed
Mr. Stephenson President of the Foundation. Mr. Stephenson, as President,
has the authority to direct the disposition and to vote and execute proxies
of such shares on behalf of the Foundation. Because Mr. Stephenson
possesses shared voting and investment power with respect to such shares, he
may be deemed to have incidents of beneficial ownership thereof for certain
purposes within the meaning of the applicable regulations of the Securities
and Exchange Commission. If the total number of shares beneficially owned
by (i) Mr. Stephenson included such shares held in trust for the Foundation,
and (ii) directors and executive officers as a group included such shares
held in trust for the Foundation, the percentages of shares of common stock
owned by Mr. Stephenson and the group would be 0.77% and 2.41%,
respectively. Mr. Stephenson has advised Bancorp that he disclaims
beneficial ownership of such shares of Bancorp's common stock.
(10) Includes 369,777 shares that may be acquired within 60 days through the
exercise of stock options, and 18,915 shares held in trust under the Bank
of Hawaii Profit Sharing Plan pursuant to elections by executive officers.
If such shares are included, all directors and executive officers of
Bancorp as a group owned 2.29% of Bancorp's common stock on December 31,
1993 and no one director or executive officer owned more than 1% of such
stock.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Bancorp's directors and executive officers and persons who own more than ten
percent of Bancorp's common stock to report their ownership and changes in their
ownership of Bancorp's common stock to the Securities and Exchange Commission
and the New York Stock Exchange. Specific due dates for these reports have been
established by the Securities and Exchange Commission and Bancorp is required to
report in this proxy statement any failure of its directors and executive (and
certain other) officers to file by these dates.
To Bancorp's knowledge, based solely on review of the copies of such reports
received by Bancorp and the written representations of its directors and
officers, Bancorp believes that all such filing requirements were satisfied by
its directors and officers, except that the initial Form 3 report filed by
David A. Heenan for month-end April, upon being elected a director, failed to
include an aggregate total of 70 shares which were acquired in December 1992 and
January 1993. The Form 4 to report the beneficial ownership of the additional
70 shares was filed in June 1993.
DUTIES AND COMPENSATION OF DIRECTORS
Bancorp's Board of Directors met a total of 8 times during 1993. Each of
the directors attended 75% or more of the aggregate total number of meetings of
the Board of Directors and the total number of meetings held by the committees
on which he served in 1993.
5
<PAGE>
With the exception of Messrs. Stephenson and Johnson, who are not
compensated for serving on the Board of Directors, each director was paid an
annual retainer of $8,000, plus $750 for each Board meeting attended.
The Board of Directors has 3 committees -- Nominating Committee, Audit
Committee, and Compensation Committee. Directors serving as members of the
Audit Committee and Compensation Committee receive $600 for each meeting
attended. The chairman of the Audit Committee also receives an annual retainer
of $2,500.
Bancorp maintains a Directors' Deferred Compensation Plan under which each
director may elect to defer all of his annual retainer and meeting fees or all
of his annual retainer. Under the Plan the rate of interest paid on the
deferred amounts is the average cost of time deposits of the prior year,
compounded and credited quarterly. The rate of interest paid on the deferred
amounts for the year 1993 was 4.13%. Distribution of the deferred amounts will
commence as of the first day of the first calendar month after the participating
director ceases being a director of Bancorp. Distribution will be made in a
lump sum or in approximately equal annual installments over such period of years
(not exceeding 10 years) as the director elects.
NOMINATING COMMITTEE
The Nominating Committee, composed of Messrs. Trotter (Chairman), Baldwin,
Hashimoto, Hayward, Heenan, Ho, Manaut, Wichman, and Yee, met once during 1993.
This Committee has the responsibility of recommending nominees to fill Board
vacancies. In addition to the nomination procedure discussed on page __, this
Committee will consider stockholders' recommendations for nominees if such
recommendations are received in writing, prior to the first day in January
preceding the next Annual Meeting, addressed to Bancorp's Nominating Committee
in care of Ruth E. Miyashiro, Vice President and Secretary, Bancorp Hawaii,
Inc., 130 Merchant Street, Honolulu, Hawaii 96813.
AUDIT COMMITTEE
The Audit Committee, composed of Messrs. Ho (Chairman), Hashimoto, and Yee,
met 4 times during 1993. This Committee has the responsibility of reviewing
Bancorp's filings with the Securities and Exchange Commission, reviewing tax
matters of consequence to Bancorp and its subsidiaries, reviewing the internal
financial controls of Bancorp and its subsidiaries, reviewing the scope of
auditing activity performed by Bancorp's independent and internal auditors, and
recommending the nomination of independent auditors for Bancorp.
COMPENSATION COMMITTEE
The Compensation Committee, composed of Messrs. Trotter (Chairman), Ho, and
Wichman, met 4 times during 1993. This Committee has the responsibility of
approving and reporting to the full Board of Directors the compensation
arrangements and plans for senior management of Bancorp and its subsidiaries.
The Report of the Compensation Committee, which begins on page ____, describes
the responsibilities of that committee, and discloses the bases for the
compensation of the Chief Executive Officer, including the factors and criteria
upon which that compensation was based; compensation policies applicable to
Bancorp's executive officers; and the specific relationship of corporate
performance to executive compensation for the last fiscal year.
6
<PAGE>
EXECUTIVE COMPENSATION
The following tables summarize the compensation of the Chief Executive
Officer and the four other most highly compensated executive officers of Bancorp
for the fiscal year 1993:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM
COMPENSATION
AWARDS PAYOUTS
- ---------------------------------------------------------------------------------------------------------------
OTHER
ANNUAL LONG TERM ALL OTHER
NAME AND COMPEN- INCENTIVE COMPEN-
PRINCIPAL BONUS SATION OPTIONS/ PAYOUTS SATION
POSITION YEAR SALARY($) ($)[1] ($)[2] SARS (#)[3] ($)[4] ($)[5]
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
H. Howard Stephenson 1993 $591,865 $344,324 --- 0 $454,127 $ 55,830
Chmn. of Bd. & CEO of Bancorp & Bank 1992 569,100 421,703 --- 17,500 368,223 140,721
1991 542,000 348,777 --- 15,000 323,606 23,162
- ---------------------------------------------------------------------------------------------------------------
Lawrence M. Johnson 1993 411,685 191,603 --- 20,000 276,394 38,834
Pres. & Dir. of Bancorp & Bank 1992 395,850 234,660 --- 10,000 219,970 77,954
1991 377,000 194,080 --- 10,000 194,800 23,162
- ---------------------------------------------------------------------------------------------------------------
Richard J. Dahl 1993 251,160 116,890 --- 12,500 168,621 23,691
Exec. Vice Pres. of Bancorp & Vice 1992 241,500 143,161 --- 7,500 134,300 26,612
Chmn. of Bank 1991 230,000 118,404 --- 7,500 120,000 23,162
- ---------------------------------------------------------------------------------------------------------------
Thomas J. Kappock 1993 251,160 116,890 --- 12,500 168,621 23,691
Exec. Vice Pres. of Bancorp & Vice 1992 241,500 143,161 --- 7,500 134,300 26,612
Chmn. of Bank 1991 230,000 118,404 --- 7,500 120,000 23,162
- ---------------------------------------------------------------------------------------------------------------
John K. Tsui 1993 262,080 121,972 --- 12,500 175,952 24,721
Exec. Vice Pres. of Bancorp & Vice 1992 252,000 149,386 --- 7,500 140,400 28,805
Chmn. of Bank 1991 240,000 123,552 --- 7,500 126,000 23,162
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
[1] "Bonus" consists of cash awards under Bancorp's One-Year Incentive Plan.
The material terms of this plan are described in the Compensation
Committee's Report in the section entitled "One-Year Incentive Plan for
1993" on pages ____ and ____.
[2] The named executive officers of Bancorp receive certain perquisites, such as
participation in group medical, dental, disability, and life insurance
programs that are available to all employees on a nondiscriminatory basis.
Perquisites did not exceed $50,000 or 10% of the total of annual salaries
and bonuses reported for any such executive for 1993.
[3] Each stock option was in tandem with a stock appreciation right ("SAR").
A SAR entitles the optionee, in lieu of exercising the stock option, to
receive cash equal to the excess of the value of one share over the option
price times the number of shares as to which the option is exercised. There
were no restricted stock awards to the named executive officers of Bancorp
for the years 1991, 1992, or 1993. All stock option awards were granted
with an exercise price that is equal to the fair market value of Bancorp's
common stock on the date of grant. The number and exercise price of the
stock options awarded to the named executive officers were not adjusted or
amended for the years 1991, 1992 and 1993.
[4] Represents amounts paid under Bancorp's Sustained Profit Growth Plan for the
three-year incentive period from January 1, 1991 through December 31, 1993.
The material terms of this plan are described in the Compensation
Committee's Report in the section entitled "Sustained Profit Growth Plan" on
pages ___ and ____.
7
<PAGE>
[5] This column includes allocations for 1993 under the Bank of Hawaii Profit
Sharing Plan (the "Profit Sharing Plan") and the Bank of Hawaii Profit
Sharing Excess Plan (the "Excess Profit Sharing Plan"). The Profit Sharing
Plan is a tax-qualified, defined contribution plan with features meeting the
requirements of Section 401(k) of the Internal Revenue Code. The Internal
Revenue Code limits the annual amounts that any participant may be allocated
under the Profit Sharing Plan. The Excess Profit Sharing Plan, which was
adopted effective as of January 1, 1992, establishes an account on the books
of Bancorp or a subsidiary to which is credited the amount of any reduction
in a participant's allocation under the Profit Sharing Plan. The amounts so
allocated under the Excess Profit Sharing Plan will be paid from the general
assets of Bancorp or a subsidiary at the same time the participant receives
a distribution of his accounts in the Profit Sharing Plan.
For 1993 Mr. Stephenson received an allocation of $22,372 under the Profit
Sharing Plan and $33,458 under the Excess Profit Sharing Plan. Mr. Johnson
received an allocation of $22,372 under the Profit Sharing Plan for 1993 and
$16,462 under the Excess Profit Sharing Plan. Mr. Dahl received an
allocation of $22,372 under the Profit Sharing Plan for 1993 and $1,319
under the Excess Profit Sharing Plan. Mr. Kappock received an allocation of
$22,372 under the Profit Sharing Plan for 1993 and $1,319 under the Excess
Profit Sharing Plan. Mr. Tsui received an allocation of $22,372 under the
Profit Sharing Plan for 1993 and $2,349 under the Excess Profit Sharing
Plan.
<TABLE>
<CAPTION>
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM[1]
- ---------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/ EMPLOYEES PRICE EXPIRATION
NAME SARS GRANTED IN FISCAL YEAR $/SHARE DATE 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. Howard Stephenson 0 0 $ 0 --- $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------
Lawrence M. Johnson 20,000[2] 7.4%/32.0% 42.25 11-21-2003 531,000 1,347,000
- ---------------------------------------------------------------------------------------------------------
Richard J. Dahl 12,500[2] 4.65%/20.0% 42.25 11-21-2003 332,000 842,000
- ---------------------------------------------------------------------------------------------------------
Thomas J. Kappock 12,500[2] 4.65%/20.0% 42.25 11-21-2003 332,000 842,000
- ---------------------------------------------------------------------------------------------------------
John K. Tsui 12,500[2] 4.65%/20.0% 42.25 11-21-2003 332,000 842,000
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[1] These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises or stock holdings are dependent on
the future performance of the stock and overall market conditions. There
can be no assurance that the amounts reflected in this table will be
achieved.
[2] Stock options in tandem with SARs granted on November 22, 1993 become
exercisable on November 22, 1994 for a nine year period ending November 21,
2003. The exercise or base price of the stock options and tandem SARs was
the fair market value of Bancorp's common stock on date of grant.
8
<PAGE>
The stock options and stock appreciation rights exercised by the Executive
officers during fiscal 1993, as well as the number and total value of
unexercised in-the-money options as of December 31, 1993, are shown in the
following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------
NUMBER OF UNEXER- VALUE OF UNEXERCISED,
CISED OPTION AT IN-THE-MONEY OPTION
FISCAL YEAR-END(#) AT FISCAL YEAR-END($) [2]
SHARES VALUE
ACQUIRED ON REALIZED EXER- UNEXER-
NAME EXERCISE (#) ($) [1] CISABLE CISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. Howard Stephenson 6,357 $162,473 65,317 0 $ 371,267 $ 0
- ---------------------------------------------------------------------------------------------------------------
Lawrence M. Johnson 12,386 481,148 101,783 23,334 1,653,113 0
- ---------------------------------------------------------------------------------------------------------------
Richard J. Dahl 2,000 197,886 87,827 15,000 1,041,432 0
- ---------------------------------------------------------------------------------------------------------------
Thomas J. Kappock 4,250 128,072 91,658 15,000 1,154,415 0
- ---------------------------------------------------------------------------------------------------------------
John K. Tsui -0- 132,987 48,908 15,000 262,639 0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
[1] Includes exercise of stock appreciation rights.
[2] The fair market value of Bancorp's stock at fiscal year-end was $41.00.
<TABLE>
- ------------------------------------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR[1]
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
TARGET PAYOUT PERFORMANCE ESTIMATED FUTURE PAYOUT UNDER
AS A % OF OR OTHER LONG-TERM INCENTIVE PLAN
FY 94-96 PERIOD UNTIL -------------------------------------------------
NAME AVERAGE MATURATION THRESHOLD TARGET MAXIMUM
ANNUAL SALARY OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Howard Stephenson 8% 3 years ending
12-31-96 $ 6,000[2] $ 46,000[2] $ 92,000[2]
- ------------------------------------------------------------------------------------------------------------
Lawrence M. Johnson 35% 3 years ending
12-31-96 19,000 151,000 303,000
- ------------------------------------------------------------------------------------------------------------
Richard J. Dahl 35% 3 years ending
12-31-96 12,000 92,000 185,000
- ------------------------------------------------------------------------------------------------------------
Thomas J. Kappock 35% 3 years ending
12-31-96 12,000 92,000 185,000
- ------------------------------------------------------------------------------------------------------------
John K. Tsui 35% 3 years ending
12-31-96 12,000 92,000 185,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
[1] Represents contingent awards under Bancorp's Sustained Profit Growth Plan
for the three-year incentive period from January 1, 1994 through December
31, 1996. Under this Plan each executive received a contingent award of a
specified percentage of his average annual base salary for the three-year
period. The maximum cash award payable under the plan is two times the
contingent award. The amount of the cash awards will depend upon Bancorp's
performance as measured by the growth in net income per employee and
earnings per share growth. Maximum payout, which is two times the
contingent award, can occur only if growth in net income per employee during
the three-year period is 26% or more and growth in earnings per share is 28%
or more. No payments will be made if growth in net income per employee
during such period is 8% or less and growth in earnings is 12% or less. If
growth in net income per employee during such period is 20% and growth in
earnings is 20%, then one times the contingent awards would be payable
("Target",
9
<PAGE>
above). After the earnings growth rate and net income per
employee growth have been ascertained, the Chairman and the President of
Bancorp will prepare recommendations for all participants (excluding
themselves) for the Compensation Committee. The Compensation Committee will
then make the final determination of cash awards.
[2] Amounts reflect the prorated estimated future payout to Mr. Stephenson who
will retire as Chairman and Chief Executive Officer of Bancorp effective
August 1, 1994.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
ESTIMATED MAXIMUM ANNUAL RETIREMENT
AVERAGE ANNUAL BENEFIT BASED UPON YEARS OF SERVICE
SALARY IN CONSECUTIVE _________________________________________________________________________
HIGHEST PAID YEARS 15 20 25 30 35*
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 75,000 $ 20,435 $ 27,247 $ 34,059 $ 40,871 $ 47,683
- --------------------------------------------------------------------------------------------------
100,000 27,935 37,247 46,559 55,871 65,183
- --------------------------------------------------------------------------------------------------
125,000 35,435 47,247 59,059 70,871 82,683
- --------------------------------------------------------------------------------------------------
150,000 42,935 57,247 71,559 85,871 100,183
- --------------------------------------------------------------------------------------------------
200,000 57,935 77,247 96,559 115,871 135,183
- --------------------------------------------------------------------------------------------------
250,000 72,935 97,247 121,559 145,871 170,183
- --------------------------------------------------------------------------------------------------
300,000 87,935 117,247 146,559 175,871 205,183
- --------------------------------------------------------------------------------------------------
350,000 102,935 137,247 171,559 205,871 240,183
- --------------------------------------------------------------------------------------------------
400,000 117,935 157,247 196,559 235,871 275,183
- --------------------------------------------------------------------------------------------------
450,000 132,935 177,247 221,559 265,871 310,183
- --------------------------------------------------------------------------------------------------
500,000 147,935 197,247 246,559 295,871 345,183
- --------------------------------------------------------------------------------------------------
550,000 162,935 217,247 271,559 325,871 380,183
- --------------------------------------------------------------------------------------------------
600,000 177,935 237,247 296,559 355,871 415,183
- --------------------------------------------------------------------------------------------------
650,000 192,935 257,247 321,559 385,871 450,183
- --------------------------------------------------------------------------------------------------
700,000 207,935 277,247 346,559 415,871 485,183
- --------------------------------------------------------------------------------------------------
</TABLE>
*Applies only to individuals hired before November 1, 1969.
The Employees' Retirement Plan of Bank of Hawaii (the "Retirement Plan")
provides retirement benefits for employees of participating employers who have
completed certain age and service requirements. "Participating employers" means
the Bank, Hawaiian Trust Company, Limited, Building Services, Inc., First
Federal Savings and Loan Association of America, First Savings and Loan
Association of America, First National Bank of Arizona, and any associated
company that have adopted the Retirement Plan. Although retirement generally
occurs at age 65, employees may retire at or after age 62 with unreduced
benefits. The amount of benefits payable to employees who retire prior to age
62 is subject to specified adjustments. Benefits paid under the Retirement Plan
are primarily determined by (1) the number of months a participant has worked,
and (2) a participant's average annual salary during the 60 consecutive months
in his or her last 120 months of service affording the highest average,
excluding overtime, premium pay, incentive plan payouts, or discretionary
bonuses.
The normal retirement benefit shown above assumes payment in the form of a
single life annuity commencing at age 65, and is not subject to any deduction
for Social Security or other offset amounts. The Internal Revenue Code
generally limits the maximum annual benefit which can be paid under the
Retirement Plan to the lesser of $118,800 or 100% of the participant's average
compensation for the highest three consecutive calendar years during which he or
she was a participant. Accordingly, if at retirement the annual benefit of any
participant should exceed this limit, the individual's benefit from the
Retirement Plan will be reduced to the permissible maximum. The amount of this
reduction will be paid to the participant from an unfunded excess benefit plan
designed for this purpose.
10
<PAGE>
The credited years of service and the 1993 compensation covered by the
Retirement Plan of the individuals named in the Summary Compensation Table on
page __ of this Proxy Statement are as follows: Mr. Stephenson, 34 years and
$591,865; Mr. Johnson, 30 years and $411,685; Mr. Dahl, 11 years and $251,160;
Mr. Kappock, 21 years and $251,160; and Mr. Tsui, 8 years and $262,080.
CHANGE-IN-CONTROL ARRANGEMENTS
Bancorp's Key Executive Severance Plan provides for severance benefits to a
participant if the participant's employment is terminated within 2 years of a
change of control. A "change of control" will be deemed to have occurred if (i)
any person or group becomes the beneficial owner of 25% or more of the total
number of voting securities of Bancorp, (ii) the persons who were directors of
Bancorp before a cash tender or exchange offer, merger or other business
combination, sale of assets, or contested election cease to constitute a
majority of the Board of Directors of Bancorp or any successor to Bancorp, or
(iii) a majority of the Board of Directors determines in good faith that a
change of control is imminent. The severance benefits include (i) payment of a
lump sum amount equal to 3 years of compensation (consisting of salary, bonuses,
and incentive compensation); (ii) special supplemental retirement payments equal
to the retirement benefits the participant would have received had he continued
in the employ of Bancorp and the Bank for 3 years following his termination of
employment (or until his normal retirement date, if earlier); and (iii)
continuation of all other benefits he would have received had he continued in
the employ of Bancorp and the Bank for 3 years following his termination of
employment (or until his normal retirement date, if earlier), such as hospital,
medical-surgical, major medical, and group life insurance. Messrs. Stephenson,
Johnson, Dahl, Kappock, and Tsui are covered by the Key Executive Severance
Plan.
REPORT OF THE COMPENSATION COMMITTEE
The Committee, composed entirely of independent nonemployee directors, sets
and administers the policies which govern Bancorp's executive compensation
program, and various incentive and stock option programs. The Committee reviews
compensation levels of members of management, evaluates the performance of
management, considers management succession and related matters. All decisions
relating to the compensation of Bancorp's officers are reviewed by the full
Board, except for decisions about awards under Bancorp's stock option plans,
which must be made solely by the Committee in order for the grants under such
plans to satisfy Securities Exchange Act Rule 16b-3. Pursuant to recently
adopted rules designed to enhance disclosure of companies' policies toward
executive compensation, set forth below is a report addressing Bancorp's
compensation policies as they affect all executive officers in general, and
specifically as they affect Mr. Stephenson, the Chairman and Chief Executive
Officer; and Messrs. Johnson, Dahl, Kappock, and Tsui, the four executive
officers other than Mr. Stephenson who, for 1993, were Bancorp's most highly
paid executives (collectively with Mr. Stephenson, the "Executive Officers").
The policies and underlying philosophy governing Bancorp's executive
compensation program, which are endorsed by the Committee and the Board of
Directors, are designed to (i) maintain a compensation program that is equitable
in a competitive marketplace, (ii) provide opportunities that integrate pay with
Bancorp's annual and long-term performance goals, (iii) recognize and reward
individual initiative and achievements, and (iv) allow Bancorp to compete for,
retain, and motivate talented executives who are critical to Bancorp's success.
Executive compensation is targeted at levels that the Committee believes to
be consistent with others in Bancorp's industry, with the Executive Officers'
compensation weighted toward programs contingent upon Bancorp's level of annual
and long-term performance. As a result, the Executive Officers' actual
compensation levels in any particular year may be above or below those of
Bancorp's competitors, depending upon Bancorp's performance. The following are
Bancorp's competitive targets:
In general, Bancorp will provide total compensation that is at the 50th
percentile (median) among bank of comparable size and performance.
11
<PAGE>
Bancorp will provide 75th percentile awards if Bancorp's performance
significantly exceeds expectations.
Goals for specific components are as follows:
Base salaries for executives generally are targeted at the 50th
percentile of their comparator group.
The short-term (one-year) incentive plan will provide 50th percentile
awards if annual goals are achieved. The plan will pay higher awards if
annual performance goals are exceeded.
Under long-term incentive plans, Bancorp will provide to participants a
consistent 50th percentile opportunity from year-to-year, with possiblities
of earning substantially higher levels if long-term performance goals are
exceeded.
For competitive compensation purposes, Bancorp uses a group of 13 Bank
Corporations chosen because they generally are comparable to Bancorp in terms of
overall size, business mix and geographic scope. This group of 13 banks differs
from the group of banks used in the line of business index for the performance
graph. The organizations used in the performance graph are the 27 bank
corporations of the Montgomery Securities Regional Bank Group. Overall, the 13
Bank Corporations used for compensation comparisons better reflect Bancorp's
size, business mix and geographic scope than the full Montgomery Securities
Regional Bank Group. Eight of the thirteen are in the Montgomery Securities
Regional Bank Group.
Bancorp has retained the services of a nationally recognized consulting firm
to assist the Committee in connection with the performance of its various duties
since 1982.
The consulting firm provides advice to the Committee with respect to
executive compensation programs for officers of Bancorp. In doing so, Bancorp
is able to take into account how the compensation paid to its executives
compares to compensation paid by the 13 Bank Corporations, as well as how
Bancorp's performance compares to such companies. The consulting firm has
reviewed Bancorp's compensation program for the five highest paid officers for
1993, and has reported to Bancorp that, in its opinion, the compensation of all
such officers falls within the range of competitive practices in view of
Bancorp's consolidated performance and the contribution of those officers to
that performance.
RELATIONSHIP OF PERFORMANCE UNDER COMPENSATION PLANS
Compensation paid the Executive Officers in 1993, as reflected in the
Summary Compensation Table on page ____, consisted of the following elements:
base salary, profit sharing, One-Year Incentive Plan cash award for 1993, and
cash awards earned under Bancorp's Sustained Profit Growth Plan for the 1991
through 1993 performance cycle. In addition, as indicated in the Summary
Compensation Table and the table entitled "Stock Option/SAR Grants in Last
Fiscal Year" on page ____, in 1993 the Committee awarded stock options under the
Bancorp Hawaii, Inc. Stock Option Plan of 1988.
The Committee's emphasis on tying pay to annual and long-term performance
criteria is reflected in the compensation paid to Executive Officers for 1993.
Approximately fifty percent of the amount paid to Executive Officers for 1993
arose from performance based compensation arrangements; and approximately
thirty-two percent arose from arrangements tied to Bancorp's performance over a
three-year period.
BASE SALARIES
Base salaries for Executive Officers are determined by evaluating the
responsibilities of the position held, the experience of the individual, the
competitive marketplace, and the individual's performance of his
responsibilities. Adjustments to salary also reflect new responsibilities
assigned or assumed by the individual. In setting salaries, the focus is
generally on median competitive data. However, also taken into account are key
12
<PAGE>
differences in responsibilities between the executives of Bancorp and those
found at other banks when using competitive market data in the salary process.
The largest salary adjustment among the top five named executive officers
was 4%. Salary adjustments reflect the criteria that are described above,
namely competitive information on salary increases, and the overall economic
environment. The other factors considered were position responsibilities and
individual performance.
ONE-YEAR INCENTIVE PLAN FOR 1993
The awards under Bancorp's One-Year Incentive Plan (the "Incentive Plan") to
its Executive Officers reported in the "Bonus" column of the Summary
Compensation Table on page ____ were determined by a two-step process that
considered both the performance of Bancorp as a whole during the year and the
individual performance of each Executive Officer. The first step established a
financial performance factor that was determined by Bancorp's (i) return on
average equity ("ROAE") and (ii) earnings growth. The maximum financial
performance factor of 1.4 would be attained if the earnings growth was 12.0% or
more and ROAE was 18% or more. For purposes of the Incentive Plan, "ROAE" is
defined as Bancorp's net income for 1993 divided by Bancorp's average total
equity (as reported in its annual report to stockholders) for 1993, and
"earnings growth" is defined as the percentage growth in Bancorp's fully-diluted
earnings per share (subject to certain adjustments such as unusual gains or loss
transactions), comparing 1993 with 1992. After this performance factor was
determined, a second step evaluated the individual participant's job performance
against his responsibilities and the economic and other circumstances with which
he had to cope during the year. An individual performance factor ranging from 0
to 1.4 was assigned. These two factors were multiplied by each other by the
contingent award and by base salary to determine the award payable, if any.
Bancorp's performance for purposes of compensation decisions was measured under
the Incentive Plan against goals established prior to the start of the fiscal
year and reviewed and approved by the Committee.
The Committee regards total shareholder return as the key measure of
financial success. "Total shareholder return" consists of dividends paid and
share price appreciation. The Committee believes that some of the most
important factors driving share price appreciation are the general state of the
stock market, the worldwide and national economic environment and investor
sentiment regarding the financial services industry in general and regional
banks in particular. None of these factors are within the control of Bancorp
management. However, of those factors within management's control, earnings per
share is regarded by the Committee as an effective factor because of the
emphasis within the stock markets on price/earnings multiples. Over the long-
term, the expectation is that growth in earnings per share will be roughly
matched by growth in share prices, given a stable price - earnings multiple.
Also, given the expectation that Bancorp's dividend tends to remain at a level
of 25% - 35% of earnings, growth in dividends per share should, over the long
term, mirror earnings per share growth.
Of course, movements in the other factors cited above (overall stock market
direction, economic environment, etc.) could overwhelm the effects of earnings
per share growth. However, over the long term, the Committee believes that
earnings per share growth is the single factor (within management's control)
most likely to influence total shareholder return.
The Committee regards ROAE as a very good measure of how Bancorp's profit
compares to returns available to shareholders in the overall investment
marketplace. This measure is not unique to banks, but is a common measure of
investment return. Also, the measure of ROAE ties in to total shareholder value
in that it is the percentage growth rate which should roughly be reflected in
dividends growth and share price growth, as discussed above.
Under the Incentive Plan, each Executive Officer received a contingent
incentive award of a specified percentage of his annual base salary (Mr.
Stephenson - 50%, Messrs. Johnson, Dahl, Kappock, and Tsui - 40%). The total
awards were based on a financial performance factor for the year of 0.895. This
performance factor was then adjusted for individual performance in each case,
resulting in awards that, on average, were 97.5% of contingent cash awards. The
maximum bonus payable to any participant under this plan is 200% of the
contingent award.
13
<PAGE>
SUSTAINED PROFIT GROWTH PLAN
The Committee determines which, and to what extent, selected senior officers
will participate in the Sustained Profit Growth Plan (the "Growth Plan") on the
basis of their ability to make substantial contributions to the long-term
success, growth, and profitability of Bancorp. Under this plan each executive
received a contingent award of a specified percentage of his average annual base
salary for the three-year period (Mr. Stephenson - 40%, Messrs. Johnson, Dahl,
Kappock, and Tsui - 35%). The maximum cash award payable under the plan was two
times the contingent award. Bancorp's performance was measured by the growth
in net income per employee and growth in earnings per share, weighted equally in
determining awards under the Growth Plan. The payout under the 1991 - 1993
Growth Plan was based on a financial performance factor in excess of the Growth
Plan maximum of 2.0 times the contingent award as of December 31, 1993.
The Committee regards consistent growth in earnings per share as one of the
most important single factors within management's control for influencing long-
term stockholder value and net income per employee as the best measure of
efficient management of personnel and resources. The reasons the Committee
emphasizes growth in earnings per share as important to enhance shareholder
value are described above ("One-Year Incentive Plan for 1993"). Indeed, the
importance placed on this factor is indicated by the fact that it is included in
both the One-Year Incentive and Sustained Profit Growth Plans.
The Committee also feels the need to measure efficiency of operations, which
is difficult to do in a multi-product service industry because of the inability
to precisely allocate overhead costs. Therefore, some indirect measure of
efficiency is required.
The Committee has chosen to focus on staff expense, Bancorp's largest
expense category, other than interest. Rather than simply restrict the growth
of this expense, which might inhibit otherwise profitable expansion, the Growth
Plan measures net income per employee (NIPE) as a means of quantifying the
profit realized on the staff expense incurred. While other factors, such as
interest rate levels and the growth of the economy, will influence Bancorp's net
income, the Committee believes that NIPE growth, over a three-year period, is a
reasonable proxy for measuring whether staff expense is being appropriately
managed.
STOCK OPTION PLANS
The Committee considers stock option grants under the Bancorp Hawaii, Inc.
Stock Option Plan, the Bancorp Hawaii, Inc. Stock Option Plan of 1983, and the
Bancorp Hawaii, Inc. Stock Option Plan of 1988 (collectively, the "Plans") for
key employees, including key executive officers of Bancorp and its subsidiaries.
Stock options are granted by the Compensation Committee ("Committee") to those
key employees whose management responsibilities place them in a position to make
substantial contributions to the financial success of Bancorp. Directors who
are not also employees may not participate in the Plans. Stock options are
granted at a price equal to the fair market value of the stock on the date the
options are granted. The Committee, which administers the Plans, determines
whether the options are incentive stock options or nonqualified stock options.
The Committee reviewed employee stock option programs of the 13 Bank
Corporations that comprise Bancorp's competitive group for compensation
purposes, prior to determining the grant of options to the Executive Officers in
1993. While the value realizable from exercisable options is dependent upon the
extent to which Bancorp's performance is reflected in the market price of
Bancorp's common stock at any particular point in time, the decision as to
whether such value will be realized in any particular year is primarily
determined by each individual executive and not by the Committee.
The Committee considered several factors in the granting of stock options in
November 1993. Anticipating a change in Bancorp's executive leadership in 1994,
the Committee desired to retain each member of the Managing Committee. The
Committee increased long-term stock option grants in an effort to improve
retention of each member of senior management. The Committee determined the
performance of the five named executive officers throughout 1993 to be
outstanding in producing well above average financial results in a demanding and
challenging Hawaii economy. During May of 1993, as a result of the efforts of
the executive officers and staff of
14
<PAGE>
Bancorp, the Bank of Hawaii, the largest subsidiary of Bancorp, completed its
acquisition of American Financial Services of Hawaii, Inc. ("AFS") and the
integration of AFS is progressing well and ahead of schedule. Other significant
accomplishments include the: (i) acquisition by Bank of Hawaii International,
Inc., a subsidiary of the Bank, of an equity interest in Banque Indosuez
Vanuatu, Ltd. (renamed Banque d'Hawaii Vanuatu, Ltd.), (ii) establishment of
branches of the Bank in Suva and Nadi, Fiji, which expands Bancorp's market
presence in the growing economy of the South Pacific. The Committee believes
that the performance level of each individual warranted an increase in stock
option grants over previous years. In the case of Mr. Stephenson, who will be
retiring as Chairman and Chief Executive Officer effective August 1, 1994, the
Committee elected to examine the possibility of a stock option grant to him
during January 1994 after the final financial results were made public. The
performance of Bancorp was such that the Committee on January 27, 1994 granted
Mr. Stephenson a stock option for 21,000 shares at an option price of $45.00 per
share out of the Bancorp Stock Option Plan of 1994, which would be exercisable
after July 27, 1994. This stock option grant is subject to approval of the 1994
Plan by the stockholders at the annual meeting of stockholders to be held on
April 27, 1994.
The Committee believes that stock options are an integral part of its
executive compensation package since options align the interests of management
with stockholders and focus the attention of management on the long-term success
of Bancorp.
CEO COMPENSATION
The Committee's general approach in setting Mr. Stephenson's target annual
compensation is to provide levels that are competitive among the 13 Bank
Corporations that comprise Bancorp Hawaii's competitive group for compensation
purposes. In addition, the Committee intends to have a significant percentage
(over 20%) of each executive officer's target compensation based upon objective
long-term performance criteria. On average, Mr. Stephenson's long-term
incentive compensation opportunity is approximately 30 percent of his total
compensation. This compares with the aforementioned 13 Bank Corporations'
average of approximately 26 percent.
Mr. Stephenson has held the position of Chairman and Chief Executive Officer
since March 1989. Bancorp's performance throughout the last five fiscal years
enabled stockholders to realize a total return of 102.6% (or an annual
compounded return of 15.2%). "Total return" is defined as cumulative stock
price appreciation including the reinvestment of dividends. This total return
compares to a 5-year return of 95.3% (or an annual compounded return of 14.3%)
for the Standard & Poors' 500 Index.
This performance resulted in increased compensation paid to Mr. Stephenson
over the past three years. The Committee in late 1992 approved a four percent
increase in Mr. Stephenson's base salary for the year 1993. Mr. Stephenson's
1994 base salary will be reviewed by the Committee in February 1994 and any
salary adjustment will be effective April 1, 1994. Mr. Stephenson's 1993 salary
and incentive plan compensation increased 4.0% over his 1992 compensation in
recognition of Bancorp's 13.2% earnings improvement in 1992 under his
leadership. Of the 1993 compensation, 57.4% was represented by incentive plan
compensation, compared to 58.1% in 1992, and 55.4% in 1991. Base salary
represented only 42.6% of 1993 salary and incentive plan compensation. A
significant portion of the increased compensation was represented by incentive
payments under Bancorp's plans.
Mr. Stephenson's award under the One-Year Incentive Plan for 1993 was based
on both corporate financial and individual performance. Two financial
performance factors were used, weighted equally: growth in earnings per share
and return on average equity. These measures are explained in more detail under
the section entitled "One-Year Incentive Plan". Other factors include
individual performance in assigned responsibilities, leadership and management
skills, strategic decision making, and the economic and other challenges that
were present during the course of the year. The performance factors, as
described in the section entitled "One Year Incentive Plan for 1993" on page
____, were achieved. The cash award for the one-year incentive period ended
December 31, 1993 for Mr. Stephenson was equal to about 58% of his annual base
salary.
Mr. Stephenson's award under the Sustained Profit Growth Plan for the years
1991 to 1993 is based on two measures of corporate performance weighted equally:
earnings per share growth and net income per employee.
15
<PAGE>
These measures and the actual performance goals are described in detail in the
footnote to the table entitled "Long-Term Incentive Plans-Awards in Last Fiscal
Year". The performance factors, as described in the section entitled "Sustained
Profit Growth Plan" on page ____, were achieved.
REVENUE RECONCILIATION ACT OF 1993
In 1993, Congress adopted the Revenue Reconciliation Act of 1993 (the "1993
Act"), certain provisions of which limit the ability of publicly-held companies
to deduct for taxation purposes the compensation paid to individual employees in
excess of $1 million in any fiscal year. The 1993 Act affords certain
exemptions to the deductibility limitation, generally requiring that
compensation be closely tied to objective performance criteria.
In general, Bancorp intends to maintain deductibility for all compensation
paid to covered employees, and will comply with the required terms of the
specified exemptions under the 1993 Act, except in circumstances under which
such compliance would unduly interfere with the incentive goals of Bancorp's
executive compensation program and when the loss of deductibility would not be
materially adverse to Bancorp's overall financial position.
Compensation Committee
Fred E. Trotter, Chairman
Stuart T. K. Ho
Charles R. Wichman
March 10, 1994
NO COMPENSATION COMMITTEE INTERLOCKS
OR INSIDER PARTICIPATION
During 1993 no Executive Officer of Bancorp served as a member of a
compensation committee (or Board of Directors serving as such) of any entity of
which any member of the Compensation Committee was an Executive Officer.
No member of the Compensation Committee was an employee or former employee
of Bancorp or its subsidiaries or had any relationships with Bancorp required to
be disclosed in this Proxy Statement pursuant to Item 404 of Regulation S-K
under the 1934 Act, other than as noted under the heading "Sale of Commercial
Paper" on page ______, and page ____ under the heading "Certain Business
Relationships".
16
<PAGE>
PERFORMANCE GRAPH
The following performance graph, which shows a five-year comparison of
cumulative total returns for Bancorp, the S&P 500 Composite Index, and the
Montgomery Securities Regional Bank Median, shall not be deemed to be
incorporated by reference into any filing under the 1933 Act or the 1934 Act,
except to the extent Bancorp specifically incorporates it by reference into a
filing under the 1933 Act or the 1934 Act; nor shall it be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulation 14A or 14C under the 1934 Act or to the
liabilities of Section 18 of the 1934 Act, except to the extent that Bancorp
specifically requests that such information be treated as soliciting material or
specifically incorporates it by reference into a filing under the 1933 Act or
the 1934 Act. As of the date of this Proxy Statement, Bancorp has made no such
incorporation by reference or request.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG BANCORP HAWAII, INC, S&P 500 INDEX AND
MONTGOMERY SECURITIES REGIONAL BANK MEDIAN*
<TABLE>
<CAPTION>
MONTGOMERY
SECURITIES
Measurement Period BANCORP S&P REGIONAL
(Fiscal Year Covered) HAWAII, INC. 500 INDEX BANK MEDIAN
- ------------------- ---------- --------- -----------
<S> <C> <C> <C>
Measurement Pt- 12/31/1988 $100 $100 $100
FYE 12/31/1989 $144 $131 $120
FYE 12/31/1990 $131 $127 $94
FYE 12/31/1991 $209 $165 $164
FYE 12/31/1992 $210 $178 $220
FYE 12/31/1993 $203 $195 $231
</TABLE>
*Assumes $100 invested on December 31, 1988 in Bancorp Hawaii stock, S&P 500
Index and the Montgomery Securities Regional Bank Median.
The above graph compares the performance of Bancorp Hawaii, Inc. with that of
the S&P 500 Index and a peer group defined in the Montgomery Securities Regional
Bank Median. The chart assumes that $100 was invested on December 31, 1988, in
Bancorp Hawaii stock, S&P 500 Index and the Montgomery Securities Regional Bank
Median. The total return on each investment is as of December 31 of each of
the subsequent 5 years and assumes reinvested dividends.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
With the exception of preferential interest rates on the personal, non-
business loans described below, the terms and conditions of the following
transactions were no less favorable to Bancorp and its subsidiaries than those
on comparable transactions with unaffiliated parties.
17
<PAGE>
LOANS
In the ordinary course of business Bancorp and its subsidiaries make loans
to employees, directors, and officers of Bancorp and the Bank as well as to
associates of such directors and officers. For personal, non-business loans
made by the Bank, employees and officers of Bancorp and the Bank (other than
executive officers of Bancorp and the Bank) pay preferential interest rates and
to the extent permitted by law, the Bank expects to continue making preferential
rates available to these individuals on personal, non-business loans.
Directors and executive officers of Bancorp and the Bank, including Messrs.
Stephenson, Johnson, Dahl, Kappock, and Tsui, were made ineligible for
preferential rates on loans made by the Bank after March 10, 1979. Since that
date all outstanding loans and commitments by the Bank to directors, executive
officers, and their associates were made in the ordinary course of business,
were made on substantially the same terms (including interest rates and
collateral) as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risk of collectibility or
present other unfavorable features. The total amount of loans and leases
outstanding from Bancorp and its subsidiaries to directors, executive officers
(and their associates) of Bancorp and the Bank aggregated $83,710,486 as of
December 31, 1993.
Bancorp offers preferential rate loans to directors and executive officers
of Bancorp and its subsidiaries for primary residences under policies, terms,
and conditions applicable to all other employees at rates no lower than 1% below
the prevailing market rates.
The following schedule shows detailed information on preferential rate loans
made by Bancorp to those directors and executive officers of Bancorp whose
aggregate indebtedness exceeded $60,000 at any time during 1993:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
LARGEST LOAN AVERAGE
AMOUNT(S) LOAN AMOUNT(S) TYPE
OUTSTANDING OUTSTANDING TYPE OF RATE
DIRCTORS DURING 1993 ON 12/31/93 TRANSACTION(S) CHARGED
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter D. Baldwin $ 366,394 $ 360,120 Real Estate 5.650%(1)
- --------------------------------------------------------------------
Stuart T. K. Ho 392,520 384,127 Real Estate 6.000%(1)
- --------------------------------------------------------------------
Lawrence M. Johnson 327,896 0 Real Estate 7.750%(2)
570,000 570,000 Real Estate 5.000%(1)
- --------------------------------------------------------------------
Frank J. Manaut 97,231 93,039 Real Estate 7.000%(2)
- --------------------------------------------------------------------
Fred E. Trotter 320,000 319,579 Real Estate 4.500%(1)
- --------------------------------------------------------------------
K. Tim Yee 84,646 78,935 Real Estate 7.000%(2)
- --------------------------------------------------------------------
EXECUTIVE OFFICERS
(EXCLUDING THOSE WHO
ARE ALSO DIRECTORS)
- --------------------------------------------------------------------
Richard J. Dahl 1,176,137 1,093,374 Real Estate 5.375%(1)
- --------------------------------------------------------------------
Thomas J. Kappock 325,245 306,606 Real Estate 5.031%(1)
- --------------------------------------------------------------------
John K. Tsui 470,759 463,914 Real Estate 5.375%(1)
- --------------------------------------------------------------------
</TABLE>
(1) Primary residence adjustable rate mortgage loans.
(2) Includes a primary residence mortgage loan made during the period June 1976
to March 5, 1978 when the preferential interest rate was 7%.
18
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
Bancorp and its subsidiaries, in the ordinary course of business, have
occasion to utilize the products or services of a number of organizations with
which directors of Bancorp are or were affiliated as officers or directors.
Carlsmith Ball Wichman Murray Case and Ichiki (of which, Mr. Wichman, a director
of Bancorp, is a retired partner), provided legal services amounting to
$2,740,018 to Bancorp and its subsidiaries in 1993, which represented more than
5% of its gross revenues for the calendar year 1993. Management believes that
such transactions were on terms that were at least as favorable to Bancorp or
the subsidiaries of Bancorp involved as would have been available from
unaffiliated parties. In addition, the Bank has made loans to Carlsmith Ball
Wichman Murray Case and Ichiki. Such loans were made in the ordinary course of
business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features.
SALE OF COMMERCIAL PAPER
As a means to borrow funds on a short-term basis, Bancorp issues commercial
paper that matures in 1 to 269 days. The interest rates paid are determined by
prevailing money market conditions. Among those who purchased Bancorp's
commercial paper during 1993 were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AMOUNT OR AVERAGE AMOUNT
RANGE OF INTEREST OUTSTANDING
PURCHASER PURCHASES RATE 12/31/93
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Investment of Hawaii, Inc.(of which $1,250,000 to
Mr. Ho, a director of Bancorp, is 1,250,247 2.625% $ 0
Chairman and President)
Carlsmith Ball Wichman Murray Case and 400,000 to
Ichiki (of which Mr. Wichman, a director of 3,009,920 3.125% 0
Bancorp, is a retired partner)
Kahua Ranch, Ltd. (of which Mr. Richards, a nominee
for director of Bancorp, is president) 2,200,000 2.750% 2,200,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
PROPOSAL TO AMEND THE RESTATED ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Board of Directors recommends that the stockholders approve a proposed
amendment to Article III of the Restated Articles of Incorporation to increase
the authorized number of shares of common stock, $2 par value, from 50,000,000
shares to 100,000,000 shares.
Article III of Bancorp's present Restated Articles of Incorporation
authorizes Bancorp to issue an aggregate of 50,000,000 shares of common stock,
$2 par value, of which 28,425,039 were issued and outstanding as of December 31,
1993; and 20,000,000 shares of preferred stock, $1 par value, none of which is
issued and outstanding. The Board of Directors believes that the proposed
amendment is in the best interests of Bancorp and its stockholders and will
provide Bancorp with flexibility of action in the future by assuring there will
be sufficient authorized but unissued shares of common stock for possible
acquisitions, stock dividends or stock splits, financing requirements, and other
corporate purposes.
19
<PAGE>
On January 26, 1994, the Board of Directors declared a 50% stock dividend to
be payable on March 15, 1994 to stockholders as of record date February 17,
1994. In connection with this distribution, Bancorp will be issuing
approximately 14,200,000 new shares of common stock, which would reduce the
approximate number of authorized shares of common stock available for future
issuance from 21,575,000 to 7,375,000.
There are no commitments or understandings at the present time for the
issuance of any shares of the common stock other than for issuance of shares
under various employee benefit plans, and Bancorp's Dividend Reinvestment and
Stock Purchase Plan. It is believed that the authority to issue such shares
will enable the Board of Directors at any time to act without delay in a manner
that is in the best interests of Bancorp and its stockholders.
Shares to be issued by Bancorp in the future may be issued for such
consideration, cash or otherwise, at such times and in such amounts as the Board
of Directors, in its discretion, may determine, without further action by the
stockholders unless required by applicable law.
VOTE REQUIRED
The affirmative vote of two-thirds of the outstanding shares entitled to
vote is necessary for the adoption of this proposal. Shares represented by the
proxies received will be voted "For" the proposed amendment unless stockholders
otherwise specify in their proxies.
STOCKHOLDER RESOLUTION
For the purpose of so amending Bancorp's Restated Articles of Incorporation,
the following resolution will be presented:
"RESOLVED, that the authorized capital stock of Bancorp Hawaii, Inc.
(hereinafter the "Corporation") be increased to $220,000,000 consisting of
120,000,000 shares , of which 100,000,000 shares shall be common stock of the
par value of $2 per share and 20,000,000 shares shall be preferred stock of
the par value of $1 per share.
FURTHER RESOLVED, that the first paragraph of Article III of the
Restated Articles of Incorporation of the Corporation., which states the
authorized capital stock, be amended to read as follows:
The capital stock of the Corporation shall be $220,000,000. The number
of shares of stock that the Corporation is authorized to issue shall be
120,000,000 shares, of which 100,000,000 shares shall be common stock of
the par value of $2 per share and 20,000,000 shares shall be preferred
stock of the par value of $1 per share."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
FOREGOING RESOLUTION.
PROPOSAL TO ADOPT THE BANCORP HAWAII, INC. STOCK OPTION PLAN OF 1994
Bancorp's Board of Directors has approved and recommended for submission to
the stockholders for approval the Bancorp Hawaii, Inc. Stock Option Plan of 1994
(the "1994 Plan"), a copy of which is attached as Exhibit A, pursuant to which a
maximum of 1,250,000 shares of common stock (to be adjusted to 1,875,000 shares
as a result of a 50 percent stock dividend declared on January 26, 1994 and
payable on March 15, 1994) of Bancorp may be issued.
The purpose of the 1994 Plan is to attract, retain and motivate high quality
personnel and to provide incentives for the promotion of business and the
financial success of the Company by providing them with an equity participation
in Bancorp. The Board of Directors believes that the adoption of the 1994 Plan
is desirable
20
<PAGE>
since it will promote and closely align the interest of employees
of Bancorp and its shareholders by providing stock- based compensation.
SUMMARY OF THE 1994 PLAN
The 1994 Plan is designed to advance the interests of Bancorp and its
subsidiaries by assuring the continued service of key employees and by
attracting other able personnel. "Key employees" are those employees who may
from time to time be deemed by the Compensation Committee of Bancorp's Board of
Directors (the "Committee") as being capable because of their management
responsibility of making substantial contributions to the financial success of
Bancorp. It is not anticipated that more than approximately 300 employees will
participate in the Plans at any one time.
The 1994 Plan provides for the granting of options to purchase shares of the
common stock of Bancorp at an exercise price that will be at least 100% of the
fair market value of the stock on the date an option is granted. An option may
be either an incentive stock option as defined in the Internal Revenue Code or a
nonqualified stock option. In the case of an incentive stock option, the
aggregate fair market value (determined at the time the option is granted) of
the stock with respect to which incentive stock options are exercisable for the
first time by such individual during any calendar year (under this and all other
plans of Bancorp and its subsidiary corporations) cannot exceed $100,000.
Subject to any specific plan rules that may apply to particular option types,
the Committee may also grant premium options, performance-based options, options
issued in tandem with SARs, reload options, and various combinations of the
above.
Options granted under the 1994 Plan will be exercisable during a term of not
more than ten years from the date the option was granted. An option is
exercisable by notice of an election to exercise the option, given in writing to
the Committee, designating the number of shares that the optionee has elected to
purchase. Unless the option involves a stock appreciation right (hereinafter
described) the optionee must, at the time he or she exercises his or her option,
tender the full purchase price for the shares he or she has elected to purchase.
The purchase price may be paid in full or in part by tendering cash, or by
delivery of common stock of Bancorp that has been owned by the participant for
at least one year, and valued at its fair market value on the exercise date
("stock swap"). By use of stock swaps, an optionee may exercise an option using
common stock of Bancorp to pay the option price and then to use the common stock
received to pay the option price for additional option shares in successive
transactions.
Options are nontransferable (except by will or the laws of descent and
distribution) and may be exercised only by the holder after the holder has
completed one year of continuous employment with Bancorp or its subsidiaries
after the date of the granting of the option. An option will terminate and may
no longer be exercised if the optionee ceases to be an employee of Bancorp or
any of its subsidiaries, except that (1) an incentive stock option granted under
the 1994 Plan may be exercised within the 90-day period following termination of
employment for reasons other than death or disability, and (2) a nonqualified
stock option granted under the 1994 Plan may be exercised within five years
following termination of employment for reasons other than death or disability,
or until its expiration date, whichever is shorter. In the event of an
optionee's death or disability while in the employ of Bancorp or any of its
subsidiaries, an unexpired option may be exercised by the optionee or, in the
case of death, the optionee's estate, within five years following the optionee's
death or disability or until the expiration date, whichever is shorter.
Stock appreciation rights are granted either by themselves ("freestanding")
or in connection with stock options whereby an option holder is granted the
right to elect to receive the appreciation on his or her stock option in lieu of
exercising the option in the usual manner. The Committee may grant stock
appreciation rights with respect to options to be issued and also with respect
to options theretofore issued, whereby the optionee may surrender all or part of
such option and exercise the stock appreciation right (the "call") and thereby
obtain payment of an amount equal to the difference between the aggregate option
price of such shares surrendered and the market value of those shares on the day
surrendered. The call of such stock appreciation rights will be subject to such
limitations (including, but not limited to, limitations as to time and amount)
as the Committee may deem appropriate, and payment may be made in shares of
common stock (at its fair market value on the date of the call)
21
<PAGE>
or in cash, or partly in such shares and partly in cash, at the discretion of
the Committee as provided in the stock appreciation rights so granted.
Subject to the terms and conditions of the 1994 Plan, the Committee may also
grant shares of restricted stock or restricted stock units to eligible employees
in such amounts, and with such restrictions upon transfer as the Committee may
determine. Restricted stock may not be sold or encumbered until all
restrictions terminate or expire, or until earlier satisfaction of any other
conditions that are specified by the Committee.
Restricted stock which is then subject to restrictions shall be forfeited to
Bancorp by a holder of restricted stock upon termination of his/her employment;
provided, however, that no such forfeiture shall occur because of death, or
total disability, in which case all outstanding shares of restricted stock will
vest 100 percent as of the date of employment termination. In all other cases,
the Committee shall have discretion to vest any or all shares 100 percent upon
termination of employment.
Under the 1994 Plan, the Committee may also allow participants to receive
settlement in shares of Bancorp stock in lieu of any or all cash payments they
might receive under the One-Year Incentive Plan or the Sustained Profit Growth
Plan.
The shares under the 1994 Plan may be modified to prevent dilution of their
value due to changes in the financial structure of Bancorp. The 1994 Plan also
provide that if at any time there is a successor to Bancorp due to corporate
merger, consolidation, acquisitions of property or stock, reorganization, or
liquidation, the successor must assume the outstanding options. In such an
event, the options will become fully exercisable notwithstanding any other terms
of the Plans or the option. Additionally, if there is a change of control, all
options are immediately exercisable and all restricted shares would immediately
vest.
ADMINISTRATION OF THE PLAN
The 1994 Plan shall be administered by the Committee, members of whom must
be nonemployee directors. The Committee has full power to administer the 1994
Plan, including the authority to designate recipients, determine whether stock
appreciation rights are to be granted to the recipient, and specify the terms
and conditions of each option subject to the minimum exercise prices provided
for under the 1994 Plan.
The Board of Directors may amend the 1994 Plan, except that no amendment may
affect any options previously granted and the Board may not without the approval
of the stockholders change the maximum number of shares as to which options may
be granted under the 1994 Plan except to prevent dilution.
CERTAIN TAX ASPECTS OF THE PLAN
The tax consequences of the 1994 Plan are complex and the following
discussion deals only with general tax principles applicable to the Plans under
federal law.
Stock Options
An incentive stock option issued will not result in any taxable income to
the optionee or deduction to Bancorp or subsidiaries at the time it is granted
or exercised, provided that the option is exercised no later than three months
after termination of employment for reasons other than death or disability (one
year after termination of employment because of death or disability) and the
stock is held for a period of at least two years after the date of grant and one
year after date of exercise. However, any appreciation in share value from the
date of grant to the date of exercise will be an item of tax preference at the
time of exercise in determining liability for the alternative minimum tax. The
subsequent sale of the stock will result in long-term capital gain to the
optionee on the excess of the sale price over the exercise price. If, however,
the optionee disposes of his or her shares within two years from the date of
grant or one year from the date of exercise, the difference between the fair
market value of the stock at the date of exercise and the cost of such stock
will be taxed as ordinary income (and Bancorp will receive a corresponding
deduction) in the year the shares are sold. Any additional gain will be taxed
as a capital gain. The
22
<PAGE>
amount of ordinary income is limited to the excess of the selling price over the
amount paid for the stock if the selling price is less than the fair market
value of the stock at the date of exercise. If the shares are disposed of at a
loss (sale price is less than amount paid for the stock), the loss will be a
capital loss.
Recipients of nonqualified options will not be deemed to have received any
income for federal income tax purposes as a result of the granting of options.
Taxable income will be realized at ordinary rates by the optionee upon the
exercise of such an option in the amount that the fair market value of the
shares acquired at the time of exercise exceeds the option price, and Bancorp
will be entitled to a deduction for income tax purposes in an equivalent amount
at that time.
Stock Appreciation Rights (SARs)
An optionee will not realize income at the time of the grant of stock
appreciation rights, but upon the exercise of such rights and the receipt of
cash in lieu of stock he or she will realize ordinary income equal to the amount
of cash received and Bancorp will be entitled to a deduction in an equivalent
amount at that time.
All optionees may elect to satisfy applicable federal and state tax
withholding requirements resulting from the exercise of a nonqualified stock
option by the following methods: (1) have Bancorp withhold the applicable taxes
from the person's salary or other cash compensation; (2) have Bancorp withhold
from common stock that is subject to exercise of the option shares having a fair
market value equal to the amount required to satisfy tax withholding
requirements, but only if the election is made pursuant to rules governing such
elections under section 16(b) of the Securities and Exchange Act of 1934; (3)
have Bancorp accept from the optionee cash in an amount required to satisfy the
withholding requirements; or (4) any combination of items (1) through (3) that
will provide Bancorp with cash or common stock in value equal to the amount
required to satisfy the withholding requirements.
Restricted Stock
Upon receipt of restricted stock, the participant will generally recognize
taxable ordinary income when the shares cease to be subject to restrictions
under the 1994 Plan equal to the excess of the fair market value of the shares
at that time over the amount, if any, paid for such shares.
However, within 30 days after the date the shares are received, the
participant may elect under section 83(b) of the Code to recognize taxable
ordinary income at the time of transfer in an amount equal to the excess of the
fair market value (determined without regard to applicable restrictions) of the
shares at such time over the amount, if any, paid for such shares. If an
election is made, no additional income will be recognized upon lapse of
restrictions on the shares, but, if the shares are subsequently forfeited, the
participant may not deduct the income that was recognized at the time of receipt
of the shares and the participant will have a capital loss equal to the amount,
if any, paid for the shares. The participant's holding period for the shares
will begin at the time taxable income is recognized under these rules, and the
tax basis of the shares will be that amount of income so recognized plus the
amount, if any, paid for the shares.
Any dividends received on the restricted shares prior to the date the
participant recognizes income as described above, will be taxable compensation
income when received. Bancorp will be entitled to a deduction at the same time
and in the same amount as the participant recognizes ordinary income, provided
Bancorp has satisfied any applicable withholding obligations under the Code.
23
<PAGE>
POTENTIAL REALIZABLE DOLLAR VALUE OF AWARDS UNDER THE 1994 PLAN
The Committee granted stock options for 21,000 shares (on a pre-stock
dividend basis) to Mr. Stephenson from the 1994 Plan on January 27, 1994, at an
option price of $45.00, subject to approval of the 1994 Plan by the
stockholders. An estimation of benefits or amounts that may be received or
allocated to each of the following groups under the 1994 Plan, based on the
number of options granted in 1993, are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
NUMBER OF STOCK PRICE APPRECIATION
SECURITIES EXERCISE OR FOR OPTION TERM[1]
UNDERLYING BASE PRICE ----------------------------------
NAME OPTIONS/SARs $/SHARE 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Howard Stephenson 21,000 $45.00 $ 520,200 $1,283,000
- ---------------------------------------------------------------------------------------------------------------
Lawrence M. Johnson 20,000 42.25 531,000 1,347,000
- ---------------------------------------------------------------------------------------------------------------
Richard J. Dahl 12,500 42.25 332,000 842,000
- ---------------------------------------------------------------------------------------------------------------
Thomas J. Kappock 12,500 42.25 332,000 842,000
- ---------------------------------------------------------------------------------------------------------------
John K. Tsui 12,500 42.25 332,000 842,000
- ---------------------------------------------------------------------------------------------------------------
Executive Group 67,500 42.25 1,793,000 4,545,000
- ---------------------------------------------------------------------------------------------------------------
Nonexecutive Director Group 0 0 0 0
- ---------------------------------------------------------------------------------------------------------------
Nonexecutive Officer Employee Group 139,000 42.25 3,693,000 9,360,260
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
[1] These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises or stock holdings are dependent on
the future performance of the stock and overall market conditions. There
can be no assurance that the amounts reflected in this table will be
achieved. The 1994 Plan benefits related to restricted stock grants cannot
be determined at this time.
VOTE REQUIRED
Approval of the 1994 Plan requires the affirmative vote of the holders of a
majority of the stock present or represented at the meeting. In the absence of
such approval, the 1994 Plan shall automatically be canceled and terminated.
STOCKHOLDER RESOLUTION
For purposes of approving the 1994 Plan and providing 1,250,000 shares (or
1,875,000 shares resulting from the 50 percent stock dividend to be paid on
March 15, 1994) of common stock for stock options, the following resolution will
be presented:
RESOLVED, that the Bancorp Hawaii, Inc. Stock Option Plan of 1994 described
in the Proxy Statement and presented to this meeting and the provision of
1,250,000 authorized but unissued shares of common stock (to be adjusted to
1,875,000 shares as a result of the 50 percent stock dividend payable on
March 15, 1994) of Bancorp Hawaii, Inc., are hereby approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE FOREGOING
RESOLUTION.
24
<PAGE>
SHAREHOLDER APPROVAL OF INCENTIVE PLANS
In 1993, Congress adopted the Revenue Reconciliation Act of 1993 (the "1993
Act"), certain provisions of which limit the ability of publicly-held companies
to deduct for taxation purposes the compensation paid to individual employees in
excess of $1 million in any fiscal year. The 1993 Act affords certain
exemptions to the deductibility limitation for plans that are qualified as
performance based and conform to specific rules governing disclosure, approval,
and design.
Pursuant to the rules governing performance based compensation under the
1993 Act, Bancorp provides the following information regarding the Executive
Officer One-Year Incentive Plan and the Sustained Profit Growth Plan, and seeks
shareholder approval for the material terms of these plans, as well as approval
for the eligible class of employees and maximum allowable awards.
PROPOSAL TO APPROVE THE BANCORP HAWAII, INC.
EXECUTIVE OFFICER ONE-YEAR INCENTIVE PLAN
On January 26, 1994, the Board of Directors adopted and approved the
submission of the Bancorp Hawaii, Inc. Executive Officer One-Year Incentive Plan
(the "Executive Incentive Plan") to the stockholders for approval. A summary of
the principal provisions of the Executive Incentive Plan is set forth below.
The full text of the Executive Incentive Plan is attached to this Proxy
Statement as Exhibit B.
SUMMARY OF THE EXECUTIVE INCENTIVE PLAN
Bancorp's Executive Incentive Plan provides contingent cash awards to
eligible employees, based upon Bancorp performance and other factors.
Generally, selected key employees are eligible for participation. "Key
employees" are those employees who may, from time to time, be deemed by the
Compensation Committee (the "Committee") of Bancorp's Board of Directors as
being capable because of their management responsibility of making substantial
contributions to the financial success of Bancorp. It is not anticipated that
more than approximately 145 employees will participate in the Executive
Incentive Plan at any one time.
Under the Executive Incentive Plan, each participant receives a contingent
cash award of a specified percentage of his or her annual base salary. For the
named executive officers, these percentages are 50% (for the Chief Executive
Officer) and 40% (for the President and Vice Chairmen). Maximum awards under
the Incentive Plan are 200% of the contingent awards.
Actual awards are determined by a two-step process that considers both the
performance of Bancorp as a whole during the year and the individual performance
of each participant. To measure Bancorp performance, the Committee may, before
the beginning of the Plan year, select from among a number of business criteria
or measures, and establish specific objective numeric goals relating to those
measures. The measures may include return on average equity or year-end equity,
return on average or year-end assets, earnings per share, growth in earnings per
share, increase in Bancorp's Common Stock price, total return to shareholders,
growth in net income per employee, growth in noninterest income, control of net
overhead expense, control of nonperforming loans, capital adequacy, or adequacy
of loan loss reserves.
Bancorp performance currently is assessed using two measures that are
weighted equally: return on average equity ("ROAE") and earnings growth. For
the purposes of the Executive Incentive Plan, ROAE is defined as Bancorp's net
income for the fiscal year-end covered under the Executive Incentive Plan,
divided by Bancorp's total average equity (as reported in its annual report to
shareholders) for that same fiscal year-end. "Earnings growth" is calculated as
the percentage growth in Bancorp's fully-diluted earnings per share (as defined
in the Executive Incentive Plan), comparing the fiscal year in question with the
previous year. The Committee establishes specific performance goals relating to
each of these measures before the beginning of each fiscal year.
25
<PAGE>
After Bancorp performance has been assessed against these measures,
individual participant's performance is evaluated relative to his or her job
responsibilities, and the economic and other factors encountered during the
year. For the named executive officers, assessment of individual performance
may result in a downward adjustment of the maximum award, or the entire
elimination of this award. No upward adjustments based on discretion are
permitted beyond the maximum award for the named executive officers.
The Board or Committee may amend or modify certain features of the Executive
Incentive Plan at any time, without approval of stockholders. These features
include the specific performance criteria used to measure Bancorp performance,
the specific mechanism for calculating awards, and the level of contingent
awards under the Executive Incentive Plan.
An estimation of benefits that may be received by the named Executive
Officers under the Executive Incentive Plan for 1994 is shown below. Because
specific benefits for 1994 are not determinable at this time, the amounts shown
below reflect actual awards paid for 1993 performance.
<TABLE>
<CAPTION>
- -------------------------------------------------
ESTIMATED
PARTICIPANTS CONTINGENT AWARD
- -------------------------------------------------
<S> <C>
H. Howard Stephenson $344,324
- -------------------------------------------------
Lawrence M. Johnson 191,603
- -------------------------------------------------
Richard J. Dahl 116,890
- -------------------------------------------------
Thomas J. Kappock 116,890
- -------------------------------------------------
John K. Tsui 121,972
- -------------------------------------------------
</TABLE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy is required to approve the Executive
Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE FOREGOING
PROPOSAL.
PROPOSAL TO APPROVE THE BANCORP HAWAII, INC.
SUSTAINED PROFIT GROWTH PLAN
On January 26, 1994, the Board of Directors approved the submission to a
vote of the stockholders, the Bancorp Hawaii, Inc. Sustained Profit Growth Plan
(the "Growth Plan"). A summary of the principal provisions of the Growth Plan
is set forth below. The entire text of the Growth Plan is attached to this
Proxy Statement as Exhibit C.
SUMMARY OF THE GROWTH PLAN
Bancorp's Growth Plan provides contingent cash awards to eligible employees,
based upon Bancorp performance over a three-year period. New performance cycles
start annually.
Officer employees of the level of Senior Vice President and above are
eligible for participation in the Growth Plan. It is anticipated that the
number of eligible employees will not exceed approximately 56 employees at any
one time.
Under the Growth Plan, each participant receives a contingent cash award of
a specified percentage of his or her annual base salary. For the five named
executive officers, these percentages are 40% (for the Chief
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Executive Officer) and 35% (for the President and Vice Chairmen). Maximum
awards under the Growth Plan are 200% of the contingent awards.
Actual awards are determined by measuring Bancorp performance over the three
year performance period. To measure Bancorp performance, the Committee may
before the beginning of the Growth Plan year, select from among a number of
business criteria or measures, and establish specific objective numeric goals
relating to those measures. The measures may include return on average or year-
end equity, return on average or year-end assets, earnings per share, growth in
earnings per share, increase in Bancorp's common stock price, total return to
shareholders, growth in net income per employee, growth in noninterest income,
control of net overhead expense, control of nonperforming loans, capital
adequacy, adequacy of loan loss reserves.
Two performance measures currently are used, weighted equally: Growth in
earnings per share ("EPS") and growth in net income per employee ("NIPE"). For
purposes of the Growth Plan, EPS growth is defined as the growth in EPS during
the incentive period, measured by dividing EPS during the third calendar year of
the performance cycle by the EPS in the base year (i.e., the year before the
beginning of the performance cycle). Growth in NIPE is defined as the increase
in NIPE for the third year of the incentive program as compared to the NIPE for
the base year. The Compensation Committee of the Board establishes specific
performance goals relating to each of these measures before the beginning of
each performance cycle.
Individual awards are determined based solely on these measures of Bancorp
performance. No upward adjustments based on discretion are permitted for any
participant.
The Board or Committee may amend or modify certain features of the Growth
Plan at any time, without approval of stockholders. These features include the
specific performance criteria used to measure Bancorp performance, the specific
mechanism for calculating awards, and the level of contingent awards under the
Growth Plan.
An estimation of benefits or amounts that may be received or allocated to
the named five executives appears on page ____ in the table entitled "Long-Term
Incentive Plans - Awards in Last Fiscal Year". An estimation of benefits or
amounts that may be received or allocated to each of the following groups under
the Growth Plan, based on awards paid in 1993, are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------
PARTICIPANT GROUP ESTIMATED TARGET
<S> <C>
- -------------------------------------------------------
Executive Group $545,000
- -------------------------------------------------------
Nonexecutive Group 0
- -------------------------------------------------------
Nonexecutive Officer Employee Group 515,000
- -------------------------------------------------------
</TABLE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy is required to approve the Growth Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE FOREGOING
PROPOSAL.
ELECTION OF AN AUDITOR
The Board of Directors, on recommendation of the Audit Committee, recommends
the reelection of Ernst & Young as Bancorp's Auditor for 1994 and thereafter,
until its successor is elected. Ernst & Young has been Bancorp's Auditor since
its incorporation in 1971 and also serves as Auditor for the Bank.
Representatives of Ernst & Young are expected to attend the Annual Meeting and
have indicated that they will have no statement to make but will be available to
respond to questions.
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OTHER MATTERS
Bancorp knows of no other matter to come before the meeting. However, if
any other matter properly comes before the meeting, the persons named in the
enclosed proxy will vote in accordance with their judgment upon any such
matters.
Section 2.06 of Bancorp's By-Laws provides that for business to be properly
brought before the meeting by a stockholder, the stockholder must give written
notice thereof to the Secretary of Bancorp no later than ten days following the
day notice of the stockholders meeting was mailed to stockholders. Such written
notice must set forth as to each matter that the stockholder proposes to bring
before the meeting (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at such meeting,
(ii) the name and address, as they appear on Bancorp's books, of the stockholder
proposing such business, (iii) the class and number of shares of securities of
Bancorp beneficially owned by such stockholder, and (iv) any material interest
of such stockholder in such business.
Any such notice must be delivered or mailed to Ruth E. Miyashiro, Vice
President and Secretary, Bancorp Hawaii, Inc., 130 Merchant Street, Honolulu,
Hawaii 96813.
STOCKHOLDER PROPOSALS FOR 1995 MEETING
Proposals of stockholders to be presented at and included in Bancorp's
Proxy Statement and proxy for the 1995 Annual Meeting of Stockholders must be
received by Bancorp (at 130 Merchant Street, Honolulu, Hawaii 96813) on or
before November 17, 1994.
BY ORDER OF THE BOARD OF DIRECTORS
RUTH E. MIYASHIRO
Vice President and Secretary
Honolulu, Hawaii
March 10, 1994
A COPY OF BANCORP'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE RELATED
FINANCIAL STATEMENTS AND SCHEDULES FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, IS AVAILABLE WITHOUT CHARGE TO ANY STOCKHOLDER WHO REQUESTS A COPY
IN WRITING. THE FORM 10-K CONSISTS ENTIRELY OF INCORPORATION BY REFERENCE OF
INFORMATION CONTAINED IN THE ANNUAL REPORT TO STOCKHOLDERS. REQUESTS FOR COPIES
SHOULD BE MAILED TO RUTH E. MIYASHIRO, VICE PRESIDENT AND SECRETARY, BANCORP
HAWAII, INC., 130 MERCHANT STREET, HONOLULU, HAWAII 96813.
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EXHIBIT A
BANCORP HAWAII, INC.
STOCK OPTION PLAN OF 1994
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Bancorp Hawaii, Inc., a Hawaii corporation
(hereinafter referred to as the "Company"), hereby establishes an incentive
compensation plan to be known as the "Bancorp Hawaii, Inc. Stock Option Plan of
1994" (hereinafter referred to as the "Plan"), as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options, Incentive Stock
Options, SARs, Restricted Stock, Restricted Stock Units, and other similar
Awards; and it offers flexibility in determining the time of payment and whether
Awards will be conditioned on the attainment of performance goals and whether
they will be settled in cash.
Subject to ratification by an affirmative vote of a majority of Shares, the
Plan shall become effective as of January 1, 1994 (the "Effective Date"), and
shall remain in effect as provided in Section 1.3 herein.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of
Participants to those of Company shareholders, and by providing Participants
with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants upon whose
judgment, interest, and special effort the successful conduct of its operation
largely is dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date,
as described in Section 1.1 herein, and shall remain in effect, subject to the
right of the Board of Directors to terminate the Plan at any time pursuant to
Article 13 herein, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event may an Award
be granted under the Plan on or after January 1, 2004.
ARTICLE 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
(a) "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Restricted Stock Unit, or other vehicles described in the Plan.
(b) "Award Agreement" means an agreement entered into by each Participant
and the Company, setting forth the terms and provisions applicable to Awards
granted to Participants under this Plan.
(c) "Beneficial Owner" shall have the meaning ascribed to such term in rule
13d-3 of the General Rules and Regulations under the Exchange Act.
(d) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(e) "Cause" means (i) willful misconduct on the part of a Participant that
is detrimental to the Company; or (ii) the conviction of a Participant for the
commission of a felony or crime involving turpitude. "Cause" under either (i)
or (ii) shall be determined in good faith by the Committee.
(f) "Change in Control" shall be deemed to have occurred if:
(1) Any person [other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation
owned directly or indirectly by the shareowners of the
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Company in substantially the same proportions as their ownership of stock
of the Company], including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, is or becomes the beneficial owner
of shares of stock of the Company having 25% or more of the total number
of votes that may be cast for the election of directors of the Company;
or
(2) As a result of, or in connection with, any cash tender or exchange
offer, merger or other business combination, sale of assets, contested
election, or any combination of the foregoing transactions, the persons
who were directors of the Company before the transaction shall cease to
constitute a majority of the Board of Directors of the Company or any
successor of the Company; or
(3) A majority of the Board of Directors determines in good faith that a
"Change in Control" is imminent.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(h) "Committee" means the committee, as specified in Article 3, appointed
by the Board to administer the Plan with respect to grants of Awards.
(i) "Company" means Bancorp Hawaii, Inc., a Hawaii corporation, or any
successor thereto as provided in Article 15 herein.
(j) "Director" means any individual who is a member of the Board of
Directors of the Company.
(k) "Disability" means a disability as defined in the then existing insured
disability income benefit program maintained by the Bank of Hawaii (regardless
of whether the Participant is covered under that program.)
(l) "Employee" means any full-time, nonunion employee of the Company or of
the Company's Subsidiaries. Directors who are not otherwise employed by the
Company shall not be considered Employees under this Plan. Individuals
described in the first sentence of this definition who are foreign nationals or
are employed outside of the United States, or both, are considered to be
"Employees" and may be granted Awards on the terms and conditions set forth in
the Plan or on such terms and conditions different from those specified in the
Plan as may, in the judgment of the Committee, be necessary or desirable to
further the purpose of the Plan, provided that any maximum amount for an
individual Award that is provided in the Plan shall continue to apply to such
Employees in the same manner as with respect to other Employees.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor Act thereto.
(n) "Fair Market Value" means
(1) When Shares are not listed on an established stock exchange, the
mean between the closing dealer "bid" and "ask" prices for the
Shares as quoted by NASDAQ on the date of the determination, and if
no "bid" and "ask" prices are quoted for such date, "Fair Market
Value" shall be determined by reference to such prices on the next
preceding date on which such prices were quoted; or
(2) When Shares are listed on an established stock exchange (or
exchanges), "Fair Market Value" shall be deemed to be the highest
closing price of a Share on such stock exchange, and if no sale of
Shares shall have been made on any stock exchange on that day, "Fair
Market Value" shall be determined by reference to such price for the
next preceding day on which a sale shall have occurred; or
(3) If Shares are not traded on an established stock exchange and no
closing dealer "bid" and "ask" prices are available, "Fair Market
Value" shall be determined by the
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Committee based on objective criteria.
(o) "Freestanding SAR" means a SAR that is granted independently of any
Options.
(p) "Incentive Stock Option" or "ISO" means an option to purchase Shares,
granted under Article 6 herein, which is designated as an Incentive Stock Option
and is intended to meet the requirements of Section 422 of the Code.
(q) "Insider" shall mean an Employee who is, on the relevant date, a
specifically identified officer, director, or ten percent (10%) beneficial owner
of the Company, as defined under Section 16 of the Exchange Act.
(r) "Nonqualified Stock Option:" or "NQSO" means an option to purchase
Shares, granted under Article 6 herein, which is not intended to be an Incentive
Stock Option.
(s) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
(t) "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option as determined by the Committee.
(u) "Participant" means an Employee of the Company who has outstanding an
Award granted under the Plan.
(v) "Performance-Based Compensation" means compensation under an Award that
is granted in order to provide remuneration solely on account of the attainment
of one or more preestablished, objective performance goals under circumstances
that satisfy the requirements of Code Section 162(m)(4)(C).
(w) "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 8 herein.
(x) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).
(y) "Reload Option" means a NQSO that allows the holder to receive a new
Option for the same or some other specified number of Shares if he or she
exercises the NQSO by tender previously owned Shares.
(z) "Restricted Stock" means an Award of Shares subject to restrictions
that include a requirement to complete a specified period of employment in order
to avoid forfeiture of such Shares.
(aa) "Restricted Stock Unit" means a unit representing a Share that is
subject to restrictions like those applicable to Restricted Stock and that,
depending on its terms, may be settled either in cash or by the issuance of an
unrestricted Share upon the lapse of the restrictions.
(ab) "Retirement" means termination of employment after attainment of both
age 62 and entitlement to an unreduced retirement allowance under the Employees'
Retirement Plan of Bank of Hawaii.
(ac) "Shares" means the shares of common stock of the Company.
(ad) "Stock Appreciation Right" or "SAR" means an Award pursuant to the
terms of Article 7 herein.
(ae) "Subsidiary" means any corporation in which the Company has at least a
50-percent direct or indirect ownership interest.
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(af) "Tandem SAR" means a SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
a Share under the related Option (and when a Share is purchased under the
Option, the Tandem SAR shall similarly be canceled).
(ag) "Window Period" means the period beginning on the third business day
following the date of public release of the Company's quarterly sales and
earnings information, and ending on the twelfth business day following such
date.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by a compensation
committee of the Board consisting of two or more outside Directors who meet the
requirements of this section. The members of the Committee shall be appointed
from time to time by, and shall serve at the discretion of the Board of
Directors.
The Committee shall be comprised solely of Directors who are eligible to
administer the Plan pursuant to Rule 16b-3(c)(2) under the Exchange Act and
whose status allows the Plan to meet the requirement of Code Section
162(m)(4)(C)(i) that performance goals under the Plan must be determined by a
compensation committee of the Board comprised solely of two or more outside
Directors. If for any reason the existing Committee does not qualify to
administer the Plan under these criteria, the Board of Directors may appoint a
new Committee so as to comply with Rule 16b-3(c)(2) and Code Section
162(m)(4)(C)(i).
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power except
as limited by law or by the Articles of Incorporation or Bylaws of the Company,
and subject to the provisions herein, to determine the participants, the size
and types of Awards; to determine the terms and conditions of such Awards in a
manner consistent with the Plan; to construe and interpret the Plan and any
agreement or instrument entered into under the Plan; to establish, amend, or
waive rules and regulations for the Plan's administration; and (subject to the
provisions of Article 13 herein) to amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may delegate its
authorities as identified hereunder.
All Participants under the Plan are eligible to receive Awards that may
provide Performance-Based Compensation. The Committee shall determine when
granting each Award whether or not it is intended to provide Performance-Based
Compensation, and shall cause the agreement covering any Award that is so
intended to indicate this fact and to include such other information as may be
necessary to satisfy the requirements for treatment as compensation described in
Code Section 162(m)(4)(C). Until the maximum dollar Award is changed and
approved by the Company's stockholders, the maximum dollar amount that will be
paid in settlement of any Award that provides Performance-Based Compensation is
the Fair Market Value (determined on the date the Award is exercised or
otherwise settled) of 20 percent of the total authorized pool of Shares
specified in Section 4.1. Notwithstanding the foregoing, if an initial dollar
maximum is specifically provided for a particular type of Award elsewhere in
this Plan, that specific maximum shall be substituted in place of the maximum in
the preceding sentence. A change in the foregoing maximum may be made by Plan
amendment or other means, provided that it is made and approved by the Company's
stockholders in a manner that satisfies regulatory guidance under Code Section
162(m)(4)(C). Once made, the changed maximum dollar amount(s) shall apply to
Awards providing Performance-Based Compensation, and the maximum specified in
this section shall cease to apply.
The terms and conditions of any Award (other than an Award of an Option
and the related Tandem SAR, if any) that is intended to provide Performance-
Based Compensation shall include the requirement that such Award shall be
payable only on account of the attainment of one or more preestablished
performance goals. The agreement covering the Award shall specify the
performance goals to which payment under the Award is subject and shall state,
in terms of an objective formula or standard, the method for computing the
amount of compensation payable to the Participant if the goal is obtained. In
addition, before the payment of any such Award, the Committee shall certify that
the performance goals and any other material terms of the Award have in fact
been satisfied.
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For purposes of the foregoing, the Committee shall specify the
performance goals and certify the attainment of such goals with respect to
performance-related Awards in accordance with Code section 162(m) and related
rules and regulations followed by the Internal Revenue Service. Except as
otherwise permitted or required by such authorities, the performance goals
applicable to each Award subject to this paragraph shall be determined by the
Committee in a manner such that any compensation of a Participant under the
Award is paid pursuant to a preestablished objective performance formula or
standard that precludes discretion and generally allows a third party with
knowledge of the relevant performance results to calculate the amount to be paid
to the Participant.
In general, the reservation of a right to reduce or eliminate the
compensation or other economic benefit that was due upon attainment of the
performance goal shall not be considered to constitute impermissible discretion,
but the choice to pay upon the attainment of either of two performance goals
shall not be allowed under the rules precluding Committee discretion. The
performance goals applicable to each Award intended to provide Performance-Based
Compensation award may be based on but not limited to the following business
criteria: control of net overhead expenses, control of nonperforming loans,
adequacy of loan loss reserves, control of noninterest expenses, control of
interest margins, increase in the Company's common stock price, increase in
earnings per share, growth in net income per employee, return on equity,
increase in bank deposit levels, return on average equity, return on assets,
increase in capitalization levels, increase in noninterest income and growth in
earnings.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive, and binding on all persons,
including the Company, its stockholders, Employees, Participants, and their
estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3
herein, the total number of Shares available for grant under the Plan shall be
1,250,000. These Shares may be either authorized but unissued or reacquired
Shares.
The following rules will apply for purposes of the determination of the
number of Shares available for grant under the Plan:
(a) While an Award is outstanding, it shall be counted against the
authorized pool of Shares, regardless of its vested status.
(b) The grant of an Option or Freestanding SAR shall reduce the Shares
available for grant under the Plan by the number of Shares subject to such
Award.
(c) The grant of a Tandem SAR shall reduce the number of Shares
available for grant by the number of Shares subject to the related Option (i.e.,
there is no double counting of Options and their related Tandem SARs).
(d) To the extent that an Award is settled in cash rather than in
Shares, the authorized Share pool shall be credited with the appropriate number
of Shares represented by the cash settlement of the Award, as determined at the
sole discretion of the Committee (subject to the limitation set forth in Section
4.2 herein).
4.2 LAPSED AWARDS. If any Award granted under the Plan is canceled,
terminates, expires, or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan. However, in the event that prior to the Award's
cancellation, termination, expiration, or lapse, the holder of the Award at any
time received one or more "benefits of ownership" pursuant to such Award (as
defined by the Securities and Exchange Commission, pursuant to any rule or
interpretation promulgated under Section 16 of the Exchange Act), the Shares
subject to such Award shall not be made available for regrant under the Plan.
Further, any Award of an Option or Freestanding Option that is canceled,
terminated, expires, or lapses, shall continue to be counted against the maximum
number of Shares for which an Option may be granted to an Employee under
Article 6 or Article 7.
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4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the shares, such adjustment shall be made in
the number and class of Shares which may be delivered under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Awards granted
under the Plan, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights;
and provided that the number of Shares subject to any Award shall always be a
whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
full-time, active, salaried Employees of the Company and its subsidiaries, as
determined by the Committee, including Employees who are members of the Board,
but excluding Directors who are not Employees.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may from time to time, select from all eligible employees, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as shall
be determined by the Committee. The Committee shall have discretion in
determining the number of Shares subject to Options granted to each Participant;
provided, however, that the maximum number of Shares subject to Options which
may be granted to any single Participant during the term of the Plan is 20
percent of the total authorized pool of Shares specified in Section 4.1. The
Committee may grant ISOs, NQSOs, or a combination thereof. Subject to any
specific Plan rules that may apply to particular Option types, the NQSOs that
may be granted include premium Options as well as performance-based Options,
Options issued in tandem with SARs, Reload Options, and various combinations of
the foregoing.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions
(including performance-based goals, if applicable) as the Committee shall
determine. The Option Agreement also shall specify whether the Option is
intended to be an ISO within the meaning of Section 422 of the Code, or a NQSO
whose grant is intended not to fall under the Code provisions of Section 422.
6.3 OPTION PRICE. The Option Price for each Option (except a premium
Option described in the next following sentence) shall be equal to 100 percent
of the Fair Market Value of a Share on the date the Option is granted. The
Option Price for each grant of a premium Option shall be a price determined by
the Committee that, expressed as a percentage of the Fair Market Value of a
Share on the date the Option is granted, shall not be less than 101 percent.
The Option Price shall in all cases be determined as of the date on which the
Option is granted, and shall in no event reflect a discount from the Fair Market
Value of a Share on such date. Accordingly, the Option Price of an ISO shall
never be less than 100 percent of the Fair Market Value of a Share on the date
the ISO is granted. Except in the case of an equitable adjustment pursuant to
Section 4.3, the Option Price of an outstanding Option shall not be changed by
means of repricing or other means after the date of the Option grant.
6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth anniversary date of its grant.
6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant. However, in no event may any Option granted
under this Plan become exercisable prior to six months following the date of its
grant.
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6.6 PAYMENT. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company n full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the Option Price (provided that the Shares which are tendered
must have been held by the Participant for at least six months prior to their
tender to satisfy the Option Price if NQSOs, and one year prior to tender if
ISOs), or (c) by a combination of (a) and (b).
The Committee also may allow cashless exercise for NQSOs as permitted
under Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant one or
more Share certificates or other appropriate evidence of ownership indicating
the number of Shares purchased under the Option(s).
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan as it may deem advisable, including, without limitation, restrictions
under applicable federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT.
(a) Termination by Death. In the event the employment of a Participant
is terminated by reason of death after becoming eligible for Retirement, all
outstanding Options granted to that Participant shall remain exercisable at any
time prior to their original expiration date, or for five years after the date
of death, whichever period is shorter, by such person or persons as shall have
been named as the Participant's Beneficiary, or by such persons that have
acquired the Participant's rights under the Option by will or by the laws of
descent and distribution.
(b) Termination by Disability. In the event the employment of a
Participant is terminated by reason of Disability after becoming eligible for
Retirement, all outstanding Options granted to that Participant shall remain
exercisable at any time prior to their original expiration date, or for five
years after the date that the Committee determines the definition of Disability
to have been satisfied, whichever period is shorter.
(c) Termination by Retirement. In the event the employment of a
Participant is terminated by reason of Retirement, all outstanding Options
granted to that Participant shall remain exercisable at any time prior to their
original expiration date, or for five years after the effective date of
Retirement, whichever period is shorter.
(d) Employment Termination Followed by Death. In the event that a
Participant's employment terminates by reason of Disability or Retirement, and
within the exercise period following such termination the Participant dies, then
the remaining exercise period under outstanding Options shall equal the longer
of: (i) one year following death; or (ii) the remaining portion of the exercise
period which was triggered by the employment termination; but in no event shall
such remaining exercise period extend beyond the original expiration date. Such
Options shall be exercisable by such person or persons who shall have been named
as the Participant's Beneficiary, or by such persons who have acquired the
Participant's rights under the Option by will or by the laws of descent and
distribution.
(e) Exercise Limitations on ISOs. The time limit for exercising an ISO
is subject to the limits in Code Section 422(a)(2) (as modified by Section
421(c)(1)(A) and 422(c)(6)). In general, these sections provide that an Option,
in order to be treated as an ISO, must be exercised within three months after a
Participant ceases to be an Employee, except that this three-month period does
not apply if the Option is exercised after the Employee's death and it is
changed to one year in the case of an Employee who is permanently and totally
disabled (within the meaning of Code Section 22(e)(3)). Accordingly, if an
Option intended to qualify as an ISO is not exercised within the applicable ISO
time limit, it will be treated as an NQSO instead of an ISO.
35
<PAGE>
6.9 TERMINATION OF EMPLOYMENT FOR CAUSE. If the employment of a
Participant shall be terminated by the Company for Cause, all outstanding
Options held by the Participant shall be forfeited to the Company immediately
and no additional exercise period shall be allowed, regardless of the vested
status of the Options.
6.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of a
Participant shall be terminated by the Company for any reason other than the
reasons set forth in Section 6.8 or 6.9, all Options held by the Participant
which are not vested as of the effective date of employment termination shall be
forfeited to the Company immediately.
Options which are vested as of the effective date of employment
termination may be exercised by the Participant within the period beginning on
the effective date of employment termination, and ending three months after such
date.
6.11 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
Options granted to a Participant under the Plan shall be exercisable during his
or her lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan,
a SAR may be granted to an Employee at any time and from time to time as
shall be determined by the Committee. The Committee may grant Freestanding
SARs, Tandem SARs or any combination of these forms of SARs. Other SARs such as
limited SARs may not be granted under this Plan.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs; provided, however, that the maximum number
of SARs which may be granted to any single Participant during the term of the
Plan is 20 percent of the total authorized pool of Shares specified in section
4.1.
The grant price of a Freestanding SAR shall equal the Fair Market Value
of a Share on the date of grant of the SAR. The grant price shall in all cases
be determined when the SAR is granted. Except in the case of an equitable
adjustment pursuant to Section 4.3, the grant price of an outstanding SAR shall
not be changed by means of repricing or other means after the date of the SAR
grant. In no event shall any SAR granted hereunder become exercisable within
the first six months of its grant.
7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO, (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than 100 percent
of the difference between the Option Price of the underlying ISO and the Fair
Market Value of the Shares subject to the underlying ISO at the time the Tandem
SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair
Market Value of the Shares subject to the ISO exceeds the Option Price of the
ISO.
7.3 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes on
them.
7.4 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.
36
<PAGE>
7.5 TERM OF SARS. The term of a SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
the term of a Tandem SAR shall not exceed the term of the related Option, and
the term of a Freestanding SAR shall not exceed ten years.
7.6 PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date
of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be
in cash, in Shares of equivalent value, or in some combination thereof.
7.7 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of a SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Section 16
(or any successor rule) of the Exchange Act.
For example, if the Participant is an Insider, the ability of the
Participant to exercise SARs for cash will be limited to Window Periods.
However, if the Committee determines that the Participant is not an Insider, or
if the securities laws change to permit greater freedom of exercise of SARs,
then the committee may permit exercise at any point in time, to the extent the
SARs are otherwise exercisable under the Plan.
7.8 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. In
the event the employment of a Participant is terminated by reason of death,
Disability, or Retirement; (i) the forfeiture or vesting and continued
exercisability of all outstanding Tandem SARs granted to that Participant shall
be the same as the forfeiture, vesting and continued exercisability, if any, of
the related Options, as determined under Section 6.8 of this Plan, and (ii) the
forfeiture or vesting and continued exercisability of all outstanding
Freestanding SARs shall be the same as if each Freestanding SAR were an Option
subject to the rules of Section 6.8.
7.9 TERMINATION OF EMPLOYMENT FOR CAUSE. If the employment of a
Participant shall be terminated by the Company for Cause, all outstanding SARs
held by the Participant shall be forfeited to the Company immediately and no
additional exercise period shall be allowed, regardless of the vested status of
the SARs.
7.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of a
Participant shall terminate for any reason other than the reasons set forth in
Section 7.8 or 7.9: (i) the forfeiture or vesting and continued exercisability
of all outstanding Tandem SARs granted to that Participant shall be the same as
the forfeiture vesting and continued exercisability, if any, of the related
Options, as determined under Section 6.10 of this Plan, and (ii) the forfeiture
or vesting and continued exercisability of all outstanding Freestanding SARs
shall be the same as if each Freestanding SAR were an Option subject to the
rules of Section 6.10.
7.11 NONTRANSFERABILITY OF SARS. No SAR granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
SARs granted to a Participant under the Plan shall be exercisable during his or
her lifetime only by such Participant.
ARTICLE 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1 GRANT OF RESTRICTED STOCK/RESTRICTED STOCK UNITS. Subject to the terms
and provisions of the Plan, the Committee, at any time and from time to time,
may grant Shares of Restricted Stock and/or Restricted Stock Units to eligible
Employees in such amounts as the Committee shall determine.
8.2 RESTRICTED STOCK/RESTRICTED STOCK UNIT AGREEMENT. Each Restricted
Stock or Restricted Stock Unit grant shall be evidenced by an Agreement that
shall specify the Period of Restriction, or Periods, the number of Restricted
Stock Shares (or Restricted Stock Units) granted, and such other provisions as
the Committee shall determine.
37
<PAGE>
8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of
Restricted Stock and Restricted Stock Units granted herein may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction established by the Committee and
specified in the governing Agreement. However, in no event may any Restricted
Stock or Restricted Stock Unit granted under the Plan become vested in a
Participant prior to six months following the date of its grant. All rights
with respect to any Restricted Stock or Restricted Stock Unit granted to a
Participant under the Plan shall be available during his or her lifetime only to
such Participant.
8.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units
granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock or each Share provided in settlement of a
Restricted Stock Unit, restrictions based upon the achievement of specific
performance goals (Company-wide, divisional, and/or individual), and/or
restrictions under applicable federal or state securities laws; and may legend
the certificates representing Restricted Stock or Restricted Stock Units to give
appropriate notice of such restrictions.
8.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to Section 8.4 herein, each certificate representing Shares of
Restricted Stock granted pursuant to the Plan may bear a legend such as the
following:
"The sale or other transfer of the Shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the Company's
Stock Plan of 1994, and in a Restricted Stock Agreement. A copy of the
Plan and such Restricted Stock Agreement may be obtained from Bancorp
Hawaii, Inc."
The Company shall have the right to retain the certificates representing
Shares of Restricted Stock in the Company's possession until such time as all
conditions and/or restrictions applicable to such Shares have been satisfied.
8.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article
8, Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan shall become freely transferable by the Participant after the last day
of the Period of Restriction. Once the Shares are released from the
restrictions, the Participant shall be entitled to have the legend required by
Section 8.5 removed from his or her Share certificate.
8.7 VOTING RIGHTS. During the Period of Restriction, Participants holding
Shares of Restricted stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder shall be
entitled to receive all regular cash dividends paid with respect to all Shares
while they are so held. Except as provided in the succeeding sentence, in the
sole discretion of the Committee, other cash dividends and other distributions
paid with respect to Shares of Restricted Stock may be paid to Participants or
may be subjected to the same restrictions on transferability and forfeitability
as the Shares of Restricted Stock with respect to which they were paid. If any
such dividends or distributions are paid in Shares, the Shares shall be subject
to the same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid.
In the event that any dividend constitutes a "derivative security" or an
"equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend
shall be subject to a vesting period equal to the longer of: (i) the remaining
vesting period of the Shares of Restricted Stock with respect to which the
dividend is paid; or (ii) six months. The Committee shall establish procedures
for the application of this provision.
38
<PAGE>
8.9 TERMINATION OF EMPLOYMENT DUE TO DEATH OR DISABILITY. In the event the
employment of a Participant is terminated by reason of death or Disability, all
outstanding Shares of restricted Stock shall immediately vest 100 percent as of
the date of employment termination (in the case of Disability, the date
employment terminates shall be deemed to be the date that the Committee
determines the definition of Disability to have been satisfied). The holder of
the certificates of Restricted Stock shall be entitled to have any
nontransferability legends required under Sections 8.4 and 8.5 of this Plan
removed from the Share certificates.
8.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of a
Participant shall terminate for any reason other than those specifically set
forth in section 8.9 herein, all Shares of Restricted Stock held by the
Participant which are not vested as of the effective date of employment
termination shall be forfeited immediately and returned to the Company;
provided, however, that in the case of termination of employment by reason of
retirement, the Committee may provide for accelerated vesting of some or all
such Shares upon such terms as the Committee, in its sole discretion, deems
appropriate.
ARTICLE 9. BENEFICIARY DESIGNATION. A Participant's "Beneficiary" is the
person or persons entitled to receive payments or other benefits or exercise
rights that are available under the Plan in the event of the Participant's
death. A Participant may designate a Beneficiary or change a previous
Beneficiary designation at any time by using forms and following procedures
approved by the Committee for that purpose. If no Beneficiary designated by the
Participant is eligible to receive payments or other benefits or exercise rights
that are available under the Plan at the Participant's death, the Beneficiary
shall be the Participant's estate. Notwithstanding the provisions above, the
Committee may in its discretion, after notifying the affected Participants,
modify the foregoing requirements, institute additional requirements for
Beneficiary designations, or suspend the existing Beneficiary designations of
living Participants or the process of determining Beneficiaries under this
section, or both. If the Committee suspends the process of designating
Beneficiaries on forms and in accordance with procedures it has approved
pursuant to this section, the determination of who is a Participant's
Beneficiary shall be made under the Participant's will and applicable state law.
ARTICLE 10. DEFERRALS AND SHARE SETTLEMENTS. The Committee may permit a
Participant to defer such Participant's receipt of the payment of cash or the
delivery of Shares that would otherwise be due to such Participant by virtue of
the exercise of an Option or SAR, or with respect to the lapse or waiver of
restrictions with respect to Restricted Stock or Restricted Stock Units. If any
such deferral election is required or permitted, the Committee shall, in its
sole discretion, establish rules and procedures for such payment deferrals. In
addition, the Committee may require or permit a Participant to receive
settlement in the form of Shares of equal or greater Fair Market Value that are
provided under this Plan in lieu of any cash payment that the Participant would
otherwise receive under the Company's One-Year Incentive Plan and/or Sustained
Profit Growth Plan, or under any successor to either or both of these cash
incentive plans.
ARTICLE 11. RIGHTS OF EMPLOYEES
11.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
For purposes of the Plan, transfer of employment of a Participant between
the Company and any one of its Subsidiaries (or between Subsidiaries) shall not
be deemed a termination of employment.
11.2 PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or having been so selected, to be selected to
receive a future Award.
ARTICLE 12. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Article 16 herein:
(a) Any and all Options and SARs granted hereunder shall become immediately
exercisable;
39
<PAGE>
(b) Any period of restriction for Restricted Stock and Restricted Stock
Units granted hereunder that have not previously vested shall end, and such
Restricted Stock and Restricted Stock Units shall become fully vested;
(c) Subject to Article 13 herein, the Committee shall have the authority to
make any modifications to the Awards as determined by the Committee to be
appropriate before the effective date of the Change in Control.
ARTICLE 13. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, that no amendment which requires shareholder approval in
order for the Plan to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such amendment
shall be approved by the requisite vote of shareholders of the Company entitled
to vote thereon. Further, no amendment, modification, suspension, or
termination of the Plan shall in any material manner affect any Award
theretofore granted under the Plan without the written consent of the affected
Participant or any person validly claiming under or through such Participant.
ARTICLE 14. WITHHOLDING
14.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising or as a result of this Plan.
14.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs upon the lapse of restrictions on Restricted Stock
or Restricted Stock Units, or upon any other taxable event hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All elections shall be irrevocable, made in writing, signed by the Participant,
and elections by Insiders shall additionally comply with the applicable
requirement set forth in (a) or (b) of this section 14.2.
(a) AWARDS HAVING EXERCISE TIMING WITHIN PARTICIPANTS' DISCRETION. The
Insider must either:
(1) Deliver written notice of the stock withholding election to the
Committee at least six months prior to the date specified by the
Insider on which the exercise of the Award is to occur; or
(2) Make the stock withholding election in connection with an exercise
of an Award which occurs during a Window Period.
(b) AWARDS HAVING A FIXED EXERCISE/PAYOUT SCHEDULE WHICH IS OUTSIDE
INSIDER'S CONTROL. The Insider must either:
(1) Deliver written notice of the stock withholding election to the
Committee at least six months prior to the date on which the taxable
event (e.g., exercise or payout) relating to the Award is scheduled
to occur; or
(2) Make the stock withholding election during a Window Period which
occurs prior to the scheduled taxable event relating to the Award
(for this purpose, an election may be made prior to such a Window
Period, provided that it becomes effective during a Window Period
occurring prior to the applicable taxable event).
ARTICLE 15. SUCCESSORS All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result
40
<PAGE>
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
ARTICLE 16. LEGAL CONSTRUCTION
16.1 GENDER AND NUMBER. Except where otherwise indicated by the context
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
16.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
16.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
Notwithstanding any other provision set forth in the Plan, if required by
the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant to the Plan to any Insider may not be sold or
transferred for at least six months after the date of grant of such Award. The
terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current Rule 16(a) under the Exchange Act.
16.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
16.5 GOVERNING LAW. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Hawaii.
41
<PAGE>
EXHIBIT B
BANCORP HAWAII, INC.
EXECUTIVE OFFICER ONE-YEAR INCENTIVE PLAN
-----------------------------------------
Effective January 1, 1994
-------------------------
SECTION 1. ESTABLISHMENT AND PURPOSES.
1.01 Bancorp Hawaii, Inc. hereby establishes the Executive Officer One-Year
Incentive Plan.
1.02 The purpose of this Plan is to advance the interests of Bancorp
Hawaii, Inc. by (i) motivating special achievement by Eligible Employees upon
whose judgment, initiative and efforts Bancorp Hawaii, Inc. is largely dependent
for the successful conduct of its business through a compensation program
emphasizing performance objectives; (ii) supplementing other compensation plans;
and (iii) assisting Bancorp Hawaii, Inc. in retaining and attracting such
employees.
SECTION 2. DEFINITIONS.
As used herein, the following terms shall have the following meanings unless
a different meaning is plainly required in the context:
2.01 "Board" shall mean the Board of Directors of the Holding Company.
2.02 "Committee" shall mean the Compensation Committee of the Holding
Company.
2.03 "Contingent Award" shall mean an award to an Eligible Employee
expressed as a percentage of Salary for the Incentive Period.
2.04 "Earnings Growth" shall mean the percentage change in Earnings Per
Share for the Incentive Period as compared to the year immediately prior to the
Incentive Period.
2.05 "Earnings Per Share" (EPS) shall mean fully diluted Earnings Per Share
as reported by the Holding Company in its annual report (or as otherwise
reported to shareholders) adjusted as described in this Section 2.05. The
Holding Company's reported net income shall be adjusted for the following in
computing EPS:
(a) Any extraordinary or unusual gain or loss transactions,
(b) Securities gains or losses,
(c) Incentive Salary Expense, and
(d) Dividends on preferred shares, if any, of the Holding Company.
The Committee will, in its sole discretion, determine any adjustments to
be made pursuant to this Section 2.05. In the event of a stock dividend or
stock split during the Incentive Period, Earnings Growth shall be recomputed to
take into account the effects of such stock dividend or stock split.
2.06 "Eligible Employees" shall mean Key Employees of the Holding Company
or of a Subsidiary who, in the opinion of the Committee, are or give promise of
becoming of exceptional importance to the Holding Company or any Subsidiary, and
of making substantial contributions to the success, growth and profit of the
Holding Company and its Subsidiaries.
2.07 "Ending Value Multiplier", with respect to any Contingent Award, shall
mean an amount determined by the Financial Performance Factor.
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<PAGE>
2.08 "Financial Performance Factor" shall mean an amount ranging from zero
to 2.0 as determined by applying the Performance Matrix as described in Section
6 (or, in certain events, of Section 8.02) of the Plan.
2.09 "Holding Company" shall mean Bancorp Hawaii, Inc.
2.10 "Incentive Period", with respect to any Contingent Award, shall mean
the Holding Company's fiscal year.
2.11 "Incentive Salary Expense" shall mean the pre-tax amount accrued for
this Plan during the Incentive Period.
2.12 "Key Employees" shall mean officers or other employees of the Holding
Company or any Subsidiary, including directors who are also officers or other
employees of the Holding Company or of a Subsidiary.
2.13 "Net Income" shall mean the Holding Company's consolidated net income
for the Incentive Period, as reported in the annual report to shareholders (or
as otherwise reported to shareholders) adjusted in the same manner as EPS.
2.14 "Participant" shall mean a person that the Committee, in its sole
discretion, selects from among the Eligible Employees to be awarded a Contingent
Award.
2.15 "Performance Matrix" shall mean the matrix shown in Section 6 by which
the Financial Performance Factor under this Plan is calculated.
2.16 "Plan" shall mean this Executive Officer One-Year Incentive Plan, as
it may be amended from time to time.
2.17 "Return on Average Equity" (ROAE) shall mean Net Income of the Holding
Company for the Incentive Period divided by Average Total Equity for the
Incentive Period. Average Total Equity shall be as reported in the Holding
Company's annual report to shareholders (or as otherwise reported to
shareholders) less the average amount of any preferred stock.
2.18 "Salary" shall mean actual base salary for the Incentive Period.
2.19 "Subsidiary" or "Subsidiaries" shall mean any corporation(s) in which
the Holding Company or any Subsidiary (as defined hereby) owns, at the time of
making a Contingent Award hereunder, stock possessing 50% or more of the total
combined voting power of all classes of stock in such corporation.
SECTION 3. ELIGIBILITY
3.01 Contingent Awards may be made only to Eligible Employees.
3.02 Neither members of the Committee nor any member of the Board who is
not an employee of the Holding Company or of a Subsidiary shall be an Eligible
Employee.
SECTION 4. ADMINISTRATION
4.01 The Plan shall be administered by the Committee.
4.02 The Committee shall be vested with full authority to make such rules
and regulations as it deems necessary to administer the Plan and to interpret
the provisions of the Plan. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration or
application of the Plan shall be final, conclusive and binding upon all Eligible
Employees, Participants and any and all persons claiming under or through any
Eligible Employee or Participant, unless otherwise determined by the Board.
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<PAGE>
4.03 Any determination, decision or action of the Committee provided for in
this Plan may be made or taken by action of the Board if the Board so determines
with the same force and effect as if such determination, decision or action had
been made or taken by the Committee. No member of the Committee or Board shall
be liable for any determination, decision or action made in good faith with
respect to the Plan or any Contingent Award. The fact that a member of the
Board shall at the time be, or shall theretofore have been or thereafter may be,
an Eligible Employee or a Participant shall not disqualify him or her from
taking part in and voting at any time as a member of the Board in favor of or
against any amendment of the Plan.
SECTION 5. CONTINGENT AWARDS
5.01 The Committee may, from time to time, in its sole discretion, award to
each Participant a Contingent Award. The Committee shall cause notice to be
given to each Participant of his or her selection as soon as practicable
following the making of a Contingent Award.
5.02 The Contingent Award that may be awarded to any Participant shall be a
percentage of his or her Salary, which percentage shall be no greater than the
amounts set out in the table below.
<TABLE>
<CAPTION>
Contingent Award
Bank of Hawaii Officers As a % of Salary
- ----------------------- -----------------
<S> <C>
Chairman of the Board/CEO 50%
President or Vice Chairman 40%
</TABLE>
5.03 The Contingent Award shall be determined by multiplying the
Participant's Salary times the percentage specified for him or her by the
Committee. In any event, the maximum payout under this Plan shall be two times
the Contingent Award. For example, if the Participant has a Salary of $80,000
and the Contingent Award awarded to such Participant is 30%, the Contingent
Award is $24,000. In this example, the maximum payout under this Plan is two
times the Contingent Award, or $48,000.
5.04 For the named executive officers, assessment of individual performance
may result in a downward adjustment of the maximum award, or the entire
elimination of this award. No upward adjustments based on discretion are
permitted beyond the maximum award for the named executive officers.
SECTION 6. ENDING VALUE OF CONTINGENT AWARD
6.01 The Ending Value of a Contingent Award shall be determined by
multiplying the Contingent Award by the Ending Value Multiplier.
6.02 The Ending Value Multiplier is the Financial Performance Factor
(determined from the Performance Matrix in this Section 6).
6.03 The maximum Ending Value Multiplier under all circumstances is 2.000.
6.04 Performance Matrix:
FINANCIAL PERFORMANCE FACTOR
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------
R 16% 0.98 1.1 1.3 1.7 2.0
----------------------------------------------------------------
O 15% 0.72 1.06 1.2 1.6 2.0
----------------------------------------------------------------
A 14% 0.55 0.77 1.0 1.4 1.9
----------------------------------------------------------------
E 12% 0.4 0.5 0.88 1.2 1.9
----------------------------------------------------------------
2% 4% 6% 7% 8%
EARNINGS GROWTH
----------------------------------------------------------------
</TABLE>
44
<PAGE>
6.05 Interpolation shall be made on a straight line basis, rounded to three
decimal places. For example, if ROAE is 13% and Earnings Growth is 5%, the
Financial Performance Factor is 0.725. (In certain unusual cases, either ROAE
or Earnings Growth may be below 12% and 2% respectively. Proration will still
be performed if at least one of these factors is within the range indicated on
the Performance Matrix.)
SECTION 7. DETERMINATION AND PAYMENT OF AWARDS
7.01 If the Ending Value as computed and adjusted in accordance with
Section 6 is zero, no payment shall be made, any Contingent Awards shall
terminate and all rights thereunder shall cease.
7.02 Subject to the provisions of Section 8 hereof, the Ending Value, if
any, of the Contingent Award for each Participant shall be determined as per
Section 6. The amount determined for each Participant shall be paid in cash in
a lump sum (subject to withholding requirements, if applicable) as soon as
practicable after determination thereof.
However, a Participant may make a request, on a form approved by the
Committee, for the deferral of all or part of any payment he or she may receive,
provided that such request is delivered to the Human Resources Division no later
than November 1 of the Incentive Period.
The Committee may accept or reject any such request for a deferral and
may determine the conditions of such deferral at the Committee's sole
discretion.
SECTION 8. TERMINATION OF EMPLOYMENT
8.01 Except as otherwise provided in Section 8.02 below, if a Participant
does not remain continuously in the employ of the Holding Company or a
Subsidiary until the expiration of the Incentive Period with respect to any
Contingent Award, such Contingent Award shall terminate and all rights
thereunder shall cease.
8.02 If the employment of a Participant with the Holding Company or a
Subsidiary terminates during the Incentive Period due to his or her death,
disability or retirement, the Committee shall determine the case payment to be
made with respect to such Participant under the following method:
Salary shall be annualized based on the number of whole months of the
Incentive Period prior to the Participant's death, disability or retirement.
The Ending Value of the Contingent Award calculated under Sections 6 and 7 shall
be multiplied by a fraction, the numerator of which shall be the number of full
months of the Incentive Period during which Participant was an employee of the
Holding Company or Subsidiary, and the denominator of which shall be 12. This
calculation and the payment of any award necessarily must be paid in accordance
with Section 7.02.
SECTION 9. NON-TRANSFERABILITY OF CONTINGENT AWARDS
No Contingent Award shall be sold, assigned, transferred, encumbered,
hypothecated or otherwise anticipated by a Participant, and during the lifetime
of a Participant, any payment shall be payable only to the Participant. The
Committee shall, if it so determines, adopt rules for the designation by a
Participant of a beneficiary to receive cash payments, if any, that may become
due pursuant to this Plan after the death of the Participant.
SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN
The Board or the Committee may, at any time, terminate or at any time and
from time to time amend, modify or suspend this Plan provided that no such
amendment, modification, suspension or termination of the Plan shall in any
manner adversely affect any Contingent Award theretofore made under the Plan
without the consent of the Participant.
45
<PAGE>
SECTION 11. CHANGES IN CAPITALIZATION
In the event of a dissolution or liquidation of the Holding Company, or a
merger or consolidation in which the Holding Company is not the surviving
corporation, the amount of cash payable with respect to any Contingent Award for
an Incentive Period that will end after such event shall be determined and
payable as if the Incentive Period ended on the date of such event and an Ending
Value Multiplier of 2.00 shall be used in calculating payments under this Plan,
notwithstanding any other provisions of this Plan. All Contingent Awards shall
be calculated based on annualized salary for such shortened Incentive Period and
shall be paid to such participants within ten days of the end of the shortened
Incentive Period.
46
<PAGE>
EXHIBIT C
BANCORP HAWAII, INC.
SUSTAINED PROFIT GROWTH PLAN
----------------------------
EFFECTIVE JANUARY 1, 1994
SECTION 1. ESTABLISHMENT AND PURPOSES
1.01 Bancorp Hawaii, Inc. hereby establishes the Sustained Profit Growth
Plan.
1.02 The purpose of this Plan is to advance the interests of Bancorp
Hawaii, Inc. by (i) motivating special achievement by Eligible Employees upon
whose judgment, initiative and efforts Bancorp Hawaii, Inc. is largely dependent
for the successful conduct of its business through a compensation program
emphasizing long-term performance incentives; (ii) supplementing other
compensation plans; and (iii) assisting Bancorp Hawaii, Inc. in retaining and
attracting such employees.
SECTION 2. DEFINITIONS
As used herein, the following terms shall have the following meanings unless
a different meaning is plainly required in the context:
2.01 "Base Year" shall mean the fiscal year prior to the Incentive Period.
2.02 "Board" shall mean the Board of Directors of the Holding Company.
2.03 "Committee" shall mean the Compensation Committee of the Holding
Company.
2.04 "Contingent Award" shall mean an award to an Eligible Employee
expressed as a percentage of average annual Salary for the Incentive Period.
2.05 "Eligible Employees" shall mean Key Employees of the Holding Company
or of a Subsidiary who, in the opinion of the Committee, are or give promise of
becoming of exceptional importance to the Holding Company or any Subsidiary, and
of making substantial contributions to the success, growth and profit of the
Holding Company and its Subsidiaries.
2.06 "Earnings Per Share" (EPS) shall mean fully diluted Earnings Per Share
as reported by the Holding Company in its annual report (or as otherwise
reported to shareholders) adjusted as described in this Section 2.06. The
Holding Company's reported net income shall be adjusted for the following in
computing EPS:
a) Any extraordinary or unusual gain or loss transactions,
b) Securities gains or losses,
c) Incentive Salary Expense, and
d) Dividends on preferred shares, if any, of the Holding Company.
The Committee will, in its sole discretion, determine any adjustments to
be made to EPS pursuant to this Section 2.06.
2.07 "Earnings Growth Rate" shall mean the growth of EPS during the
Incentive Period. For example, if EPS in the Base Year is $6.00 and EPS for the
third calendar year of the Incentive Period is $7.80, then the Earnings Growth
Rate is 30%. For purposes of this Plan, the Earnings Growth Rate shall be
rounded to the nearest one-tenth of one percent. In the event of a stock
dividend or stock split during the Incentive Period, Earnings Growth Rate shall
be restated to take into account the effect of such stock dividend or stock
split.
47
<PAGE>
2.08 "Ending Value Multiplier", with respect to any Contingent Award, shall
mean an amount ranging from zero to 2.00 as determined by applying the
Performance Matrix as described in Section 6 (or in certain events, Section
9.02) of the Plan.
2.09 "FTE Staff" shall be sum of (i) the total number of hours worked by
part-time employees of the Holding Company and its Subsidiaries during the
applicable fiscal year of the Incentive Period divided by 2,080 and (ii) the
average number of full-time staff members employed by the Holding Company and
the Subsidiaries during the same fiscal year.
2.10 "Growth in NIPE" or "NIPE Growth" shall mean the increase (if any) in
NIPE for the third year of the Incentive Period as compared to NIPE for the Base
Year. Growth in NIPE shall be expressed as a percentage to two decimal places.
For example, if NIPE in the Base Year is $25,000 and NIPE in the third year of
the Incentive Period is $35,000, then Growth in NIPE is 40%.
2.11 "Holding Company" shall mean Bancorp Hawaii, Inc.
2.12 "Incentive Period", with respect to any Contingent Award, shall mean
the Holding Company's fiscal years 1994 through 1996 inclusive.
2.13 "Incentive Salary Expense" shall mean the pre-tax amount accrued for
this Plan and any other sustained profit growth plans of the Holding Company
during the Incentive Period.
2.14 "Key Employees" shall mean officers or other employees of the Holding
Company or any Subsidiary, including directors who are also officers or other
employees of the Holding Company or of a Subsidiary.
2.15 "Net Income per Employee" (NIPE) shall mean the Holding Company's net
income as reported in its annual report, or as otherwise reported to
shareholders (adjusted in the same manner as provided in Section 2.06), divided
by FTE Staff.
2.16 "Participant" shall mean a person that the Committee, in its sole
discretion, selects from among the Eligible Employees to be awarded a Contingent
Award.
2.17 "Performance Matrix" shall mean the matrix shown in Section 6 which is
used in calculating Ending Value Multipliers under this Plan.
2.18 "Plan" shall mean this Sustained Profit Growth Plan, as it may be
amended from time to time.
2.19 "Salary" shall mean base salary only.
2.20 "Subsidiary" or "Subsidiaries" shall mean any corporation(s) in which
the Holding Company or any Subsidiary (as defined hereby) owns, at the time of
making a Contingent Award hereunder, stock possessing 50% or more of the total
combined voting power of all classes of stock in such corporation.
SECTION 3. ELIGIBILITY
3.01 Contingent Awards may be made only to Eligible Employees.
3.02 Neither members of the Committee nor any member of the Board who is
not an employee of the Holding Company or of a Subsidiary shall be an Eligible
Employee.
SECTION 4. ADMINISTRATION
4.01 The Plan shall be administered by the Committee.
48
<PAGE>
4.02 The Committee shall be vested with full authority to make such rules
and regulations as it deems necessary to administer the Plan and to interpret
the provisions of the Plan. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration or
application of the Plan shall be final, conclusive and binding upon all Eligible
Employees, Participants and any and all persons claiming under or through any
Eligible Employee or Participant, unless otherwise determined by the Board.
4.03 Any determination, decision or action of the Committee provided for in
this Plan may be made or taken by action of the Board if the Board so determines
with the same force and effect as if such determination, decision or action had
been made or taken by the Committee. No member of the Committee or Board shall
be liable for any determination, decision or action made in good faith with
respect to the Plan or any Contingent Award. The fact that a member of the
Board shall at the time be, or shall theretofore have been or thereafter may be,
an Eligible Employee or a Participant, shall not disqualify him or her from
taking part in and voting at any time as a member of the Board in favor of or
against any amendment of the Plan.
SECTION 5. CONTINGENT AWARDS
5.01 The Committee may, from time to time, in its sole discretion, award to
each Participant a Contingent Award. The Committee shall cause notice to be
given to each Participant of his or her selection as soon as practicable
following the making of a Contingent Award.
5.02 The Contingent Award that may be awarded to any Participant shall be a
percentage of his or her average annual Salary for the Incentive Period, which
percentage shall be no greater than the amounts set out in the table below.
Contingent Award
Bank of Hawaii Officers As a % of Salary
- -------------------------- ----------------
Chairman of the Board/CEO 40%
President or Vice Chairman 35%
Executive Vice President 30%
Senior Vice President 25%
Other Subsidiary Officers 25%
- --------------------------
5.03 The Contingent Award shall be multiplied by the Participant's average
annual Salary for the Incentive Period. In any event, the maximum payout under
this Plan shall be two times the Contingent Award. For example, a Participant
with an average annual Salary of $80,000 might receive a Contingent Award of 25%
or $20,000. In this example, the maximum payout under this Plan would be two
times the Contingent Award, or $40,000.
SECTION 6. ENDING VALUE OF CONTINGENT AWARD
6.01 The Ending Value of a Contingent Award shall be determined by
multiplying the Contingent Award by the Ending Value Multiplier determined from
the Performance Matrix in Section 6.02.
49
<PAGE>
6.02 Ending Value Multiplier
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NIPE EARNINGS GROWTH RATE
GROWTH 12% 14% 16% 18% 20% 22% 24% 26% 28%
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
26% 1.000 1.125 1.250 1.375 1.500 1.625 1.750 1.875 2.000
- ------------------------------------------------------------------------------------------------------------------
25% 0.875 1.000 1.125 1.250 1.375 1.500 1.625 1.750 1.875
- ------------------------------------------------------------------------------------------------------------------
24% 0.750 0.875 1.000 1.125 1.250 1.375 1.500 1.625 1.750
- ------------------------------------------------------------------------------------------------------------------
22% 0.625 0.750 0.875 1.000 1.125 1.250 1.375 1.500 1.625
- ------------------------------------------------------------------------------------------------------------------
20% 0.500 0.625 0.750 0.875 1.000 1.125 1.250 1.375 1.500
- ------------------------------------------------------------------------------------------------------------------
17% 0.375 0.500 0.625 0.750 0.875 1.000 1.125 1.250 1.375
- ------------------------------------------------------------------------------------------------------------------
14% 0.250 0.375 0.500 0.625 0.750 0.875 1.000 1.125 1.250
- ------------------------------------------------------------------------------------------------------------------
11% 0.125 0.250 0.375 0.500 0.625 0.750 0.875 1.000 1.125
- ------------------------------------------------------------------------------------------------------------------
8% 0.000 0.125 0.250 0.375 0.500 0.625 0.750 0.875 1.000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
6.03 Interpolation between the points shown above shall be made on a
straight line basis rounded to three decimal places. For example, if NIPE
Growth is 23% and the Earnings Growth Rate is 27%, the Ending Value Multiplier
would be 1.500. The maximum Ending Value Multiplier under all circumstances
will be 2.00.
SECTION 7. CONDITIONS
The Chairman and the President shall prepare recommendations for the
Committee. The Committee shall make the final determination of the Ending
Multiplier and any awards, and reserves the right to add to or withhold all or
any portion of any or all award(s) at its sole discretion.
SECTION 8. DETERMINATION AND PAYMENT OF AWARDS
8.01 If the Ending Value as computed and adjusted in accordance with
Section 6 and 7 is zero, no payment shall be made, any Contingent Awards shall
terminate and all rights thereunder shall cease.
8.02 Subject to the provisions of Section 9 hereof, the Ending Value, if
any, of the Contingent Award for each Participant shall be determined as per
Sections 6 and 7. The amount determined for each Participant shall be paid in
cash in a lump sum (subject to withholding requirements, if applicable) as soon
as practicable after determination thereof.
However, a Participant may make a request, on a form approved by the
Committee, for the deferral of all or part of any payment he or she may receive,
provided that such request is delivered to the Human Resources Division no later
than November 1 of the last year of the Incentive Period.
The Committee may accept or reject any such request for a deferral and
may determine the conditions of such deferral at the Committee's sole
discretion.
SECTION 9. TERMINATION OF EMPLOYMENT
9.01 Except as otherwise provided in Section 9.02 below, if a Participant
does not remain continuously in the employ of the Holding Company or a
Subsidiary until the expiration of the Incentive Period with respect to any
Contingent Award, such Contingent Award shall terminate and all rights
thereunder shall cease.
9.02 If the employment of a Participant with the Holding Company or a
Subsidiary terminates during the Incentive Period due to his or her death,
disability or retirement, the Committee shall determine the cash payment to be
made with respect to such Participant under the following method.
The Contingent Award payable, if any, shall be based on the annualized
salary of the Participant as of the last January 1 prior to the
Participant's death, disability or retirement. The Ending Value of the
Contingent Award calculated under Sections 6, 7 and 8 shall be multiplied by
a fraction, the numerator of which shall be the number of full months of the
Incentive Period during which Participant was an employee of the
50
<PAGE>
Holding Company or Subsidiary, and the denominator of which shall be 36.
This calculation and the payment of any award must be paid in accordance
with Section 8.02
SECTION 10. NON-TRANSFERABILITY OF CONTINGENT AWARDS
No Contingent Award shall be sold, assigned, transferred, encumbered,
hypothecated or otherwise anticipated by a Participant, and during the lifetime
of a Participant, any payment shall be payable only to the Participant. The
Committee shall, if it so determines, adopt rules for the designation by a
Participant of a beneficiary to receive cash payments, if any, that may become
due pursuant to this Plan after the death of the Participant.
SECTION 11. AMENDMENT OR TERMINATION OF THE PLAN
The Board or the Committee may, at any time, terminate or at any time and
from time to time amend, modify or suspend this Plan provided that no such
amendment, modification, suspension or termination of the Plan shall in any
manner adversely affect any Contingent Award theretofore made under the Plan
without the consent of the Participant.
SECTION 12. CHANGES IN CAPITALIZATION
In the event of a dissolution or liquidation of the Holding Company or a
merger or consolidation in which the Holding Company is not the surviving
corporation, the amount of cash payable with respect to any Contingent Award for
an Incentive Period that will end after such event shall be determined and
payable as if the Incentive Period ended on the date of such event and an Ending
Value Multiplier of 2.000 shall be used in calculating the award for this Plan,
notwithstanding any other provisions of this Plan. All Contingent Awards shall
be calculated based on the average annual Salary of the Participant for the
shortened Incentive Period, and shall be paid to such Participants within ten
days of the end of the shortened Incentive Period.
51
<PAGE>
BANCORP HAWAII, INC.
130 Merchant Street, Honolulu, Hawaii 96813
P R 0 X Y
FOR THE ANNUAL MEETING OF STOCKHOLDERS-APRIL 27, 1994
THIS PROXY IS SOLICITED BY MANAGEMENT BY ORDER OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Peter D. Baldwin, Thomas B.
Hayward, Stuart T. K. Ho, , H. Howard Stephenson, Fred E. Trotter, and Charles
R. Wichman and each of them, the proxy of the undersigned, with full powers of
substitution, to vote all of the common stock of Bancorp Hawaii, Inc., which the
undersigned may be entitled to vote at the annual meeting of stockholders of the
corporation to be held on April 27, 1994, or at any adjournment thereof. Said
proxies are instructed to vote as follows:
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR: (1) ELECTION OF ITS NOMINEES
AS DIRECTORS, (2) AMENDMENT OF THE RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK, (3) APPROVAL OF THE
BANCORP HAWAII, INC. STOCK OPTION PLAN OF 1994, (4) APPROVAL OF THE BANCORP
HAWAII, INC. EXECUTIVE OFFICER ONE-YEAR INCENTIVE PLAN, (5) APPROVAL OF THE
BANCORP HAWAII, INC. SUSTAINED PROFIT GROWTH PLAN, AND (6) ELECTION OF ERNST &
YOUNG AS AUDITOR. THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
INDICATED, IT WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS. SAID
PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS
WHICH MAY COME BEFORE THE MEETING.
(PLEASE DATE AND SIGN BELOW)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PLEASE MARK BOXES [_] OR [X] IN BLUE OR BLACK INK.
1. Elect the following Directors:
Class II Directors for terms expiring in 1997 NOMINEES: DAVID A. HEENAN, STUART T. K. HO, LAWRENCE M. JOHNSON, FRED E TROTTER
Class III Directors for term expiring in 1995 NOMINEES: MARY G. F. BITTERMAN, HERBERT M. RICHARDS, JR.
</TABLE>
<TABLE>
<S> <C> <C>
(CHECK ONE BOX ONLY)
For all nominees listed above. [X] Withhold Authority Generally. [X] For all nominees except as listed below. [X]
</TABLE>
(TO WITHHOLD AUTHORITY FOR ANY PARTICULAR NOMINEE WRITE HIS NAME
ON THE LINE BELOW.)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2. Approve an amendment to the Restated Articles of Incorporation
to increase the authorized number of shares of common stock. FOR [X] AGAINST [X] ABSTAIN [X]
3. Approve the Bancorp Hawaii, Inc. Stock Option Plan of 1994. FOR [X] AGAINST [X] ABSTAIN [X]
4. Approve the Bancorp Hawaii Inc. Executive Officer
One-Year Incentive Plan. FOR [X] AGAINST [X] ABSTAIN [X]
5. Approve the Bancorp Hawaii, Inc. Sustained Profit Growth Plan. FOR [X] AGAINST [X] ABSTAIN [X]
6. Elect Ernst & Young as Auditor. FOR [X] AGAINST [X] ABSTAIN [X]
</TABLE>
Please sign your name exactly as it appears hereon.
Joint owners should sign personally. Attorney,
Executor, Administrator. Trustee, or Guardian
should indicate full title. If Address is incorrect,
please give us correct one.
Dated:
--------------------------------------------
-----------------------------------------------------
Signature (no witness required)
-----------------------------------------------------
Signature if stock held jointly
Votes must be indicated (X) in Black or
Blue ink as in this example [X]
Sign, Date and Return Proxy Card Promptly Using the Enclosed Envelope.
