SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
CPB INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated
and state how it was determined):
---------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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<PAGE>
4) Date Filed:
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<PAGE>
CPB INC.
220 South King Street
Honolulu, Hawaii 96813
(808) 544-0500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1997
TO THE SHAREHOLDERS OF CPB INC.:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of
its Board of Directors, the Annual Meeting of Shareholders (the "Meeting") of
CPB Inc. (the "Company") will be held on the third floor of the Central
Pacific Plaza Building, 220 South King Street, Honolulu, Hawaii 96813, on
Tuesday, April 22, 1997, at 10:00 a.m., Hawaii time, for the purpose of
considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect three persons to the Board of
Directors for a term of three years and to serve until their successors are
elected and qualified, as more fully described in the accompanying Proxy
Statement.
2. APPROVAL OF THE 1997 STOCK OPTION PLAN. To approve the adoption
of the 1997 Stock Option Plan.
3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS. To
ratify the appointment of KPMG Peat Marwick LLP as the Company's independent
accountants for the fiscal year ending December 31, 1997.
4. OTHER BUSINESS. To transact such other business as may properly
come before the Meeting and at any and all adjournments thereof.
Only those shareholders of record at the close of business on
February 28, 1997 shall be entitled to notice of and to vote at the Meeting.
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY IN THE
POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT THEY PLAN TO
ATTEND THE MEETING IN PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY
WITHDRAW THEIR PROXY AND VOTE IN PERSON IF THEY WISH TO DO SO.
By order of the Board of
Directors
(signed)
AUSTIN Y. IMAMURA
Vice President and Secretary
Dated: March 24, 1997
<PAGE>
CPB INC.
220 South King Street
Honolulu, Hawaii 96813
(808) 544-0500
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 22, 1997
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies ("Proxies") by the Board of Directors of CPB Inc. (the "Company")
for use at the Annual Meeting of Shareholders (the "Meeting") of the Company
to be held on the third floor of the Central Pacific Plaza Building, 220 South
King Street, Honolulu, Hawaii 96813, on Tuesday, April 22, 1997, at 10:00
a.m., Hawaii time, and at any and all adjournments thereof. This Proxy
Statement and accompanying Notice will be mailed to shareholders on or about
March 24, 1997.
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Meeting will be:
1. ELECTION OF DIRECTORS. To elect three persons to the Board of
Directors for a term of three years and to serve until their successors are
elected and qualified.
2. APPROVAL OF THE 1997 STOCK OPTION PLAN. To approve the adoption
of the 1997 Stock Option Plan.
3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS. To
ratify the appointment of KPMG Peat Marwick LLP as the Company's independent
accountants for the fiscal year ending December 31, 1997.
4. OTHER BUSINESS. To transact such other business as may properly
come before the Meeting and at any and all adjournments thereof.
VOTING AND REVOCABILITY OF PROXIES
A Proxy for use at the Meeting is enclosed. Any shareholder who
executes and delivers such Proxy has the right to revoke it at any time before
it is exercised by filing with the Secretary of the Company an instrument
revoking it or a duly executed Proxy bearing a later date. It may also be
revoked by attendance at the Meeting and election to vote in person thereat.
Subject to such revocation, all shares represented by a properly executed
Proxy received in time for the Meeting will be voted by the Proxy Holders in
accordance with the instructions on the Proxy. If no instructions are
specified with respect to matters to be acted upon, the shares represented by
the Proxy will be voted "FOR" the election of all nominees as directors, "FOR"
approval of the 1997 Stock Option Plan (the "1997 Plan") and "FOR"
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the fiscal year ending December 31, 1997. It is
not anticipated that any matters will be presented at the Meeting other than
as set forth in the accompanying Notice of the Meeting. If any other matters
are presented properly at the Meeting, however, the Proxy will be voted by the
Proxy Holders in accordance with the recommendations of the Board of
Directors.
1
<PAGE>
If you hold your shares of common stock, no par value ("Common
Stock"), in "street name" and you fail to instruct your broker or nominee as
to how to vote your Common Stock, your broker or nominee may, in its
discretion, vote your Common Stock "FOR" the election of the Board of
Directors' nominees and "FOR" the proposal to ratify the appointment of KPMG
Peat Marwick LLP as the Company's independent accountants for the fiscal year
ending December 31, 1997. However, pursuant to applicable stock exchange
rules, your broker or nominee may NOT vote your Common Stock "FOR" approval of
the 1997 Plan without your specific direction.
COST OF SOLICITATIONS OF PROXIES
This solicitation of Proxies is made on behalf of the Board of
Directors of the Company (the "Board") and the Company will bear the costs of
solicitation. The expense of preparing, assembling, printing and mailing this
Proxy Statement and the materials used in this solicitation of Proxies also
will be borne by the Company. It is contemplated that Proxies will be
solicited principally through the mail, but directors, officers and regular
employees of the Company or its subsidiary, Central Pacific Bank (the "Bank"),
may solicit Proxies personally or by telephone. Although there is no formal
agreement to do so, the Company may reimburse banks, brokerage houses and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding these proxy materials to their principals. The Company does not
intend to utilize the services of other individuals or entities not employed
by or affiliated with the Company in connection with the solicitation of
Proxies.
OUTSTANDING SECURITIES AND VOTING RIGHTS
The close of business on February 28, 1997 has been fixed as the
record date ("Record Date") for the determination of the shareholders of the
Company entitled to notice of and to vote at the Meeting. There were
5,269,874 shares of Common Stock issued and outstanding on the Record Date.
Each holder of Common Stock will be entitled to one vote, in person
or by proxy, for each share of Common Stock standing in his or her name on the
books of the Company as of the Record Date on any matter submitted to the vote
of the shareholders, except that in connection with the election of directors,
the shares are entitled to be voted cumulatively, provided that not less than
forty-eight hours prior to the time fixed for the Meeting, a written request
for such cumulative vote has been delivered to the Secretary of the Company.
If a shareholder has given such request, all shareholders may cumulate their
votes for candidates in nomination. Cumulative voting entitles a shareholder
to give one nominee as many votes as is equal to the number of directors to be
elected multiplied by the number of shares of stock owned by such shareholder,
or to distribute his or her votes on the same principle between two or more
nominees as he or she sees fit. Nominees receiving the highest number of
votes on the foregoing basis up to the total number of directors to be elected
will be elected directors. Accordingly, abstentions from voting or votes
withheld from the election of directors will have no effect in an uncontested
election. Discretionary authority to cumulate is hereby solicited by the
Board of Directors and return of the Proxy shall grant such authority.
The proposal to approve the 1997 Plan requires the affirmative vote
of shareholders holding not less than a majority of shares of the Company's
Common Stock represented and entitled to vote at the Meeting. Accordingly, an
abstention from voting on the proposal to approve the 1997 Plan will have the
effect of a vote "AGAINST" the proposal.
The proposal to ratify the appointment of KPMG Peat Marwick LLP as
the Company's independent accountants requires the affirmative vote of
shareholders holding not less than a majority of the shares of the Company's
2
<PAGE>
Common Stock represented and entitled to vote at the Meeting. Accordingly, an
abstention from voting on the proposal to ratify the appointment of KPMG Peat
Marwick LLP will have the effect of a vote "AGAINST" the proposal.
PRINCIPAL SHAREHOLDERS
As of February 28, 1997, the following entities were the only
entities known to Management of the Company to beneficially own more than five
percent of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
Amount and
Nature of
Title of Name and Address Beneficial Percent
Class of Beneficial Owner Ownership of Class
- -------- ------------------- ---------- --------
<S> <C> <C> <C>
Common The Sumitomo Bank, Limited 725,525<F1> 13.73%<F2>
6-5 Kitahama 4-Chome,
Chuo-ku
Osaka, Japan
Common The Committee of the Central 528,597<F3> 10.03%
Pacific Bank Employee Stock
Ownership Plan
220 South King Street
Honolulu, Hawaii 96813
Common State of Wisconsin 275,000<F4> 5.22%
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
<FN>
<F1> Includes 13,775 additional shares which may be issued
pursuant to the exercise of warrants granted pursuant to
a Share Purchase Agreement between the Company and The
Sumitomo Bank, Limited ("Sumitomo") and based upon the
exercise of stock options by participants of the 1986 Stock
Option Plan. See "ELECTION OF DIRECTORS -- Certain Transactions."
<F2> This percentage is computed as if the 13,775 shares
described in footnote 1 were outstanding. However, the
13,775 shares are not deemed to be outstanding for the
purpose of computing the percentage of Common Stock owned by
any other person.
<F3> Under the terms of the Employee Stock Ownership Plan of
Central Pacific Bank ("ESOP"), shares of the Common Stock of
the Company are held in trust by Central Pacific Bank, the
trustee under the ESOP Trust ("Trustee"), for the exclusive
benefit of the participants. The Trustee is the
recordholder of the Common Stock held by the ESOP; however,
the Committee of the ESOP (the "ESOP Committee"), which
consists of five members, gives the Trustee investment
instructions with respect to all of the ESOP assets and
voting instructions with respect to those shares held by the
ESOP for which the voting rights have not passed through to
participants. At February 28, 1997, all of the shares of
3
<PAGE>
Common Stock held by the ESOP had been allocated to the
accounts of participants. Although the members of the ESOP
Committee share among themselves as committee members
dispositive power, subject to the terms of the ESOP, over
all of the shares held by the ESOP and, therefore, pursuant
to the applicable regulations promulgated pursuant to the
Securities Exchange Act of 1934, as amended, are technically
the beneficial owners of such shares, the actual beneficial
owners are the employees who participate in the ESOP. The
members of the ESOP Committee, therefore, disclaim
beneficial ownership of such shares held in trust which are
otherwise attributable to them by virtue of serving on such
ESOP Committee.
<F4> Based upon information provided by this shareholder.
</FN>
</TABLE>
ELECTION OF DIRECTORS
Under the Company's Restated Articles of Incorporation and Bylaws,
which provide for a "classified" Board, three directors (out of a present
total of nine) are to be elected at the Meeting to serve three-year terms
expiring at the Year 2000 Annual Meeting of Shareholders and until their
respective successors are elected and qualified. The Company's Bylaws
currently provide for nine directors, three each serving as Class I, Class II
and Class III directors. Nominees for the election at the Meeting will serve
as Class III directors.
There are no family relationships among directors or executive
officers of the Company, and, except as set forth below, as of the date
hereof, no directorships are held by any director with a company which has a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or subject to the
requirements of Section 15(d) of the Exchange Act or any company registered as
an investment company under the Investment Company Act of 1940. Mr. Stanley
W. Hong, a director of the Company, serves as director of the following
companies: Capital Investment of Hawaii, Inc., First Insurance Company of
Hawaii, Ltd., Theo H. Davies & Co., Ltd., Hawaiian Tax Free Trust: Pacific
Capital Funds, Kerr Pacific Corporation and Lanihau Management Corporation.
All nominees have indicated their willingness to serve and unless
otherwise instructed, Proxies will be voted for all of the nominees. However,
in the event that any of them should be unable to serve, the Proxy Holders
named on the enclosed Proxy Card will vote in their discretion for such
persons as the Board of Directors may recommend. Messrs. Paul Devens, Stanley
W. Hong and Yoshiharu Satoh, who are currently serving as Class III Directors,
are nominees.
The following table sets forth certain information, as of
February 28, 1997, with respect to each of the directors, nominees and the
Named Executives (as defined below) as well as all continuing directors and
executive officers of the Company, as a group:
4
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Beneficially
Owned on
First Year February 28, 1997<F2>
Elected or ------------------------------
Principal Appointed as
Occupation Officer or Percent
for the Past Director of of Term
Name Five Years Age the Company<F1> Number Class<F3> Expires
- ----------- ---------------- ---- --------------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
DEVENS, Vice Chairman of 65 1980 2,221<F4> * 1997
Paul the Board of
(Class III Company; Attorney
Director, at Law; Of Counsel
Nominee) (1994 - present),
Partner (1975 - 1994),
Devens, Lo, Nakano,
Saito, Lee & Wong
GUILD, Retired, former 62 1980 1,056 * 1999
Alice F. Managing Director,
(Class II Iolani Palace
Director) (1986-1991)
HIROTA, President, Sam O. 56 1980 2,900<F6> * 1998
Dennis I., Hirota, Inc. -
Ph.D. Engineering
(Class I and Surveying
Director) (1986-present);
Registered
Professional
Engineer and
Licensed Pro-
fessional Land
Surveyor<F5>
HONG, President and 60 1993 200<F7> * 1997
Stanley W. Chief Executive
(Class III Officer;
Director, The Chamber of
Nominee) Commerce of
Hawaii (1996-
present);
Consultant to
HRT, Ltd (1994-
1996);
Senior Vice
President --
McCormack
Properties, Ltd.
(1993-1994);
President
and Chief
Executive
Officer, Hawaii
Visitors
Bureau (1984-1993);
Attorney at Law
HOTTA, Senior Managing 58 1993 -- <F8> * 1998
Kensuke Director and
(Class I and Executive
Director) Committee Member
in Charge of Inter-
national Banking
at Head Office, The
Sumitomo Bank,
Limited (1993-
present);
5
<PAGE>
Senior Managing
Director
and Member of the
Executive
Committee of The
Sumitomo
Bank, Limited
(1992-1993);
Managing Director
of The Sumitomo
Bank, Limited
(1990-1992)
NAGAMINE, President, Flamingo 55 1983 5,280<F9> * 1999
Daniel M. Enterprises, Inc.
(Class II (1985-present);
Director) General Partner,
Flamingo Downtown,
a limited partnership
(1981-present);
Certified Public
Accountant
SAITO, Chairman of the Board 61 1989 17,783<F11> * 1998
Joichi and Chief Executive
(Class I) Officer of Company
Director) (1996-present);
President
of Company (1992-
1995); Executive
Vice President
of Company (1988-
1992); Chairman
of the Board and
Chief Executive
Officer of Bank
(1996-present);
President and
Chief Operating
Officer of Bank
(1989-1995)<F5><F10>
SATOH, Retired; Chairman 68 1975 30,725<F13> * 1997
Yoshiharu of the Board and
(Class III Chief Executive
Director, Officer of Company
Nominee) (1992-1995);
Chairman of the
Board, President
and Chief Executive
Officer of Company
(1990-1992);
President and Chief
Executive Officer of
Company (1982-1990);
Chairman of the Board
and Chief Executive
Officer of Bank
(1988-1995)<F5><F12>
SHIBUYA, President of Company 55 1995 2,723<F15> * 1999
Naoaki (1996-present);
(Class II Executive Vice
Director) President of Company
(1993-1995); President
and Chief Operating
Officer of Bank
(1996-present);
Executive Vice
President of Bank
(1993-1995); Executive
Vice President of The
Sumitomo Bank of
California
(1989-1993)<F5><F14>
IMAMURA, Vice President and 50 1991 5,818<F16> * N/A
Austin Y. Secretary of Company
6
<PAGE>
(1991-present);
Executive Vice
President and
Secretary of Bank
(1991-present)
KANDA, Vice President and 48 1991 7,423<F17> * N/A
Neal K. Treasurer of the
Company (1991-
present); Execu-
tive Vice President
of Bank (1996-present);
Executive Vice President
and Controller of Bank
(1993-1996);
Senior Vice President
and Controller of
Bank (1990-1993)
All Directors 76,129<F18> 1.44%
and Executive
Officers,
as a Group
(11 persons)
* Less than 1%.
<FN>
<F1> All directors of the Company are also directors of the
Bank. Dates prior to the formation of the Company in
1982 indicate the year first appointed director of the
Bank. Dr. Hirota, Mrs. Guild and Messrs. Devens,
Nagamine, and Satoh commenced service as directors of the
Company on February 1, 1982, the date of formation of the
Company. Dr. Hirota, Mrs. Guild and Mr. Nagamine served
as directors of the Company until April 23, 1985 when the
Company's shareholders adopted a classified Board and
reduced the number of directors to nine. However, Dr.
Hirota, Mrs. Guild and Mr. Nagamine continued to serve on
the Bank's Board until they were reelected to the
Company's Board in 1986, 1990, and 1990, respectively.
Mr. Hong has been a director of the Bank since 1985. Mr.
Shibuya has been a director of the Bank since 1994.
<F2> Except as otherwise noted below, each person has sole
voting and investment powers with respect to the shares
listed.
<F3> In computing the percentage of shares beneficially owned,
the number of shares which the person (or group) has a
right to acquire within 60 days after February 28, 1997
are deemed outstanding for the purpose of computing the
percentage of Common Stock beneficially owned by that
person (or group) but are not deemed outstanding for the
purpose of computing the percentage of shares
beneficially owned by any other person.
<F4> Includes 1 share held of record by Devens, Lo, Nakano,
Saito, Lee & Wong, a partnership for which Mr. Devens
is of counsel.
<F5> Messrs. Hirota, Saito, Satoh and Shibuya are also
directors of CPB Properties, Inc., a wholly-owned
subsidiary of the Bank.
7
<PAGE>
<F6> Includes 1,180 shares for which Dr. Hirota has shared
voting and investment powers with his wife, Kathryn
Hirota.
<F7> Includes 200 shares for which Mr. Hong has shared voting
and investment powers with his wife, Karen Ho Hong.
<F8> Does not include 711,750 shares held of record by
Sumitomo, of which Mr. Hotta is a Senior Managing
Director, or 13,775 shares which Sumitomo has the right
to acquire by the exercise of warrants. With respect to
shares described in the preceding sentence, Mr. Hotta
disclaims any beneficial ownership.
<F9> Includes 5,280 shares for which Mr. Nagamine has shared
voting and investment powers with his wife, Maxine
Nagamine.
<F10> Mr. Saito was formerly an officer of Sumitomo and is now
retired from Sumitomo.
<F11> Includes 1,500 shares for which Mr. Saito has shared
voting and investment powers with his wife, Yoko Saito,
9,680 shares which Mr. Saito has the right to acquire by
the exercise of stock options vested pursuant to the
Company's 1986 Stock Option Plan and 6,603 shares
allocated to Mr. Saito's account under the Bank's ESOP.
<F12> Mr. Satoh was formerly an officer of Sumitomo and is now
retired from Sumitomo.
<F13> Includes 23,821 shares held in the name of Yoshiharu Satoh
Revocable Living Trust, Yoshiharu Satoh Trustee, and 6,904
shares held in the name of Ikuko Satoh Revocable Living Trust,
Ikuko Satoh Trustee, for which Mr. Satoh has shared
voting and investment powers with his wife, Ikuko Satoh.
<F14> Mr. Shibuya is on indefinite leave of absence from Sumitomo.
<F15> Includes 200 shares for which Mr. Shibuya has shared voting and
investment powers with his wife, Tsuneko Shibuya, 1,900 shares
which Mr. Shibuya has the right to acquire by the exercise of
stock options vested pursuant to the Company's 1986 Stock
Option Plan and 623 shares allocated to Mr. Shibuya's account
under the Bank's ESOP.
<F16> Includes 5,818 shares allocated to Mr. Imamura's
account under the Bank's ESOP.
<F17> Includes 5,040 shares which Mr. Kanda has the right to acquire
by the exercise of stock options vested pursuant to the
Company's 1986 Stock Option Plan and 2,183 shares allocated to
Mr. Kanda's account under the Bank's ESOP.
<F18> Includes 15,265 shares for which certain directors and
officers have shared voting and investment powers, 16,620
shares which members of the group have the right to
acquire by the exercise of stock options vested pursuant
to the Company's 1986 Stock Option Plan and 15,227 shares
allocated to the accounts of executive officers under the
Bank's ESOP.
8
<PAGE>
</FN>
</TABLE>
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company has various standing
committees, including an Executive Committee, a Nominating Committee, an Audit
Committee and a Stock Option Plan Committee. The Board has no standing
Compensation Committee.
The Executive Committee, which did not hold any meetings during 1996,
is chaired by Mr. Devens, and Messrs. Hirota, Hong, Saito and Satoh are
members. The purpose of the Executive Committee is, among other things, to
manage the business affairs of the Company while not in conflict with specific
directives that may be given by the Board of Directors.
The Nominating Committee held one meeting during 1996. The committee
is chaired by Mr. Satoh, and Messrs. Devens, Saito and Mrs. Guild are members.
It is responsible for recommending nominees for directors of the Company. It
will consider nominees for election at the 1998 Annual Meeting of Shareholders
recommended by shareholders if such recommendations are received in writing
prior to December 15, 1997. Shareholder recommendations should be addressed
to the Company's Secretary, P.O. Box 3590, Honolulu, Hawaii 96811.
The Audit Committee held one meeting during 1996. The committee is
chaired by Mrs. Guild, and Messrs. Devens, Hirota and Nagamine are members.
The primary functions of the Audit Committee are to review various financial
and audit reports and to make recommendations concerning the appointment of
independent accountants.
The Stock Option Plan Committee, which did not meet during 1996, is
chaired by Mr. Hong, and Messrs. Hirota and Nagamine are members. The
committee's primary functions include determining individuals to whom options
will be granted and their terms and making periodic reports to the Board of
Directors as to the status of the Company's 1986 Stock Option Plan.
During the fiscal year ended December 31, 1996, the Board of
Directors of the Company held a total of six meetings. All of the persons who
were directors of the Company during 1996 attended at least 75% of the
aggregate of (1) the total number of such Board meetings and (2) the total
number of meetings held by all committees of the Board on which they served
during the year, except for Mr. Hotta.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE BOARD OF
DIRECTORS' NOMINEES.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the three other executive officers of the
Company (determined as of the end of the last fiscal year) whose annual salary
and bonus exceeded $100,000 in 1996 (the "Named Executives") for each of
the fiscal years ended December 31, 1996, 1995 and 1994:
9
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation All
Name and Principal Awards Other
Position Year Salary Options(#) Compensation
- ------------------ ---- ------ ------------ ------------
<S> <C> <C> <C> <C>
Joichi Saito 1996 $292,336 -- $19,213<F1>
Chairman of the 1995 244,992 -- 19,273<F2>
Board and Chief 1994 236,661 -- 19,637<F3>
Executive Officer
Naoaki Shibuya 1996 196,667 -- 19,535<F4>
President 1995 160,000 9,500 18,648<F5>
1994 156,667 -- 35<F6>
Austin Y. Imamura 1996 163,333 -- 18,267<F7>
Vice President and 1995 150,000 -- 18,447<F8>
Secretary 1994 145,667 -- 18,353<F9>
Neal K. Kanda 1996 125,333 -- 16,100<F10>
Vice President 1995 112,000 -- 13,761<F11>
and Treasurer 1994 109,333 -- 13,763<F12>
<FN>
<F1> Includes contributions to the Bank's Cash or Deferred
Arrangement ("CODA")/Profit Sharing Plan, the Bank's ESOP
and the Bank's Split Dollar Life Insurance Plan for the
account of Mr. Saito of $7,262, $10,691 and $1,260,
respectively.
<F2> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Saito of $7,294,
$10,879 and $1,100, respectively.
<F3> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Saito of $7,500,
$11,155 and $982, respectively.
<F4> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP, the Bank's Split Dollar Life
Insurance Plan and the Bank's 401(k) Plan for the account
of Mr. Shibuya of $7,262, $10,691, $540 and $1,042, respectively.
<F5> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Shibuya of $7,294,
$10,879, and $475, respectively.
<F6> Represents a contribution to the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Shibuya.
<F7> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Imamura of $7,262,
$10,691 and $314, respectively.
<F8> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Imamura of $7,294,
$10,879 and $274, respectively.
10
<PAGE>
<F9> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Imamura of $7,284,
$10,833 and $236, respectively.
<F10> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP, the Bank's Split Dollar Life
Insurance Plan and the Bank's 401(k) Plan for the account of
Mr. Kanda of $6,068, $8,933, $219 and $880, respectively.
<F11> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Kanda of $5,467,
$8,131 and $163, respectively.
<F12> Includes contributions to the Bank's CODA/Profit Sharing
Plan, the Bank's ESOP and the Bank's Split Dollar Life
Insurance Plan for the account of Mr. Kanda of $5,467,
$8,131 and $165, respectively.
</FN>
</TABLE>
Option Grants
No options or stock appreciation rights were granted during 1996 to
the Named Executives.
Option Exercises and Holdings
The following table provides information with respect to the Named
Executives concerning the exercise of options during the fiscal year ended
December 31, 1996 and unexercised options held by the Named Executives as of
December 31, 1996:
11
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option<F1> Exercises in 1996
and Year-End Option Values
Value of Unexercised
In-the-Money
Shares Number of Unexercised Options<F2>
Acquired Value Options at 12/31/96 at 12/31/96
on Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
SAITO, Joichi -- N/A 9,680 -- $149,380 --
SHIBUYA, Naoaki -- N/A 1,900 7,600 6,973 $27,892
IMAMURA, Austin Y. -- N/A -- -- -- --
KANDA, Neal K. -- N/A 5,040 1,260 21,672 5,418
<FN>
<F1> The Company has no compensation plans pursuant to which
stock appreciation rights may be granted.
<F2> The value of unexercised "in-the-money" options is the
difference between the market price of the Common Stock
on December 31, 1996 ($29.75 per share) and the exercise
price of the option, multiplied by the number of shares
subject to the option.
</FN>
</TABLE>
Defined Benefit Pension Plan
The table below shows estimated annual retirement benefits at age 65
for various levels of executive compensation and service under the Bank's
Defined Benefit Pension Plan.
<TABLE>
<CAPTION>
Pension Plan Table
Annualized Final Years of Service
Average Compensation ---------------------------------------------------------------------
- -------------------- 15 Years 20 Years 25 Years 30 Years 35 Years
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 5,625 $ 7,500 $ 9,375 $ 11,250 $ 13,125
100,000 11,250 15,000 18,750 22,500 26,250
150,000 16,875 22,500 28,125 33,750 39,370
200,000 22,500 30,000 37,500 45,000 52,500
250,000 28,125 37,500 46,875 56,250 65,625
300,000 33,750 45,000 56,250 67,500 78,750
350,000 39,375 52,500 65,625 78,750 91,875
400,000 45,000 60,000 75,000 90,000 105,000
450,000 50.625 67,500 84,375 101,250 118,125
500,000 56,250 75,000 93,750 112,500 131,250
</TABLE>
Under the Defined Benefit Pension Plan, benefits are based upon the
employee's years of service and highest average annual salary in a
60-consecutive-month period of service, excluding the period between June 30,
1986 and January 1, 1991, when the Defined Benefit Pension Plan was curtailed.
Benefits based on the highest average annual salary in a 60-consecutive-month
period of service in excess of the qualified plans maximum compensation limit
of $150,000 for 1996 would be payable to eligible employees pursuant to the
Supplemental Executive Retirement Plan. The credited years of service as of
December 31, 1996 for Messrs. Saito, Shibuya, Imamura and Kanda are 9, 3, 10,
and 6, respectively.
12
<PAGE>
Compensation of Directors
The Company and the Bank each has a policy of paying fees to
directors for their attendance at board meetings and committee meetings. The
Company and the Bank pay $800 per board meeting to all directors and $600 per
board committee meeting to non-officer directors. In addition, the Company
pays $4,000 annually to each director (excluding officers), and the Bank pays
$10,000 annually to each director (excluding officers). CPB Properties, Inc.
pays $600 per board meeting to its directors.
Non-officer directors of the Company are eligible to participate in
the Company's 1997 Plan. See "APPROVAL OF THE 1997 STOCK OPTION PLAN."
REPORT OF BOARD OF DIRECTORS TO SHAREHOLDERS
The Board of Directors of the Company establishes the general
policies regarding compensation for the Bank's employees, adopts and amends
employee compensation plans and approves specific compensation levels for
executive officers, including the Named Executives. The Bank's Compensation
Committee (the "Compensation Committee") implements and monitors the Board's
policies regarding compensation, recommends changes to compensation policies
or compensation plans and makes recommendations regarding specific
compensation levels for executives. Currently, the members of the
Compensation Committee are Joseph F. Blanco (chair), Paul Devens, Dennis I.
Hirota, Stanley W. Hong and Daniel M. Nagamine. Each member of the
Compensation Committee is a non-employee director of the Company and/or the
Bank. The Company also retained the services of a compensation consultant to
provide input and data to the Compensation Committee.
Set forth below is a report of the Board of Directors addressing the
Company's compensation policies for 1996 applicable to the Company's
executives, including the Named Executives.
The Report of the Board of Directors on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933 (the "Securities Act") or under the Exchange Act, except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's compensation programs reflect the philosophy that
executive compensation levels should be linked to Company performance, yet be
competitive and consistent with that provided to others holding positions of
similar responsibility in the banking and financial services industry. The
Company's compensation plans are designed to assist the Company in attracting
and retaining qualified employees critical to the Company's long-term success,
while enhancing employees' incentives to perform to their fullest abilities to
increase profitability and maximize shareholder value. With the exception of
the 1996 Annual Executive Incentive Plan (the "Annual Incentive Plan") and the
Supplemental Executive Retirement Plan (the "SERP"), the Company's
compensation plans are generally available to all employees, subject to
certain hours and years of service requirements. In addition, the Board of
Directors has reserved the authority to grant discretionary awards to
individual employees where deemed appropriate.
Salary Compensation
The Company pays cash salaries to its executive officers which are
competitive with salaries paid to executives of other companies in the banking
and financial services industry based upon the individual's experience,
13
<PAGE>
performance and responsibilities and past and potential contribution to the
Company. In determining the market rate, the Company obtains information
regarding executive salary levels for other companies in the banking and
financial services industry, especially among the larger Hawaii banks. The
relative asset size and profitability levels of these institutions are also
considered. On April 23, 1996, the Company's Board of Directors set the
compensation for all executive officers for the ensuing year, effective May 1,
1996.
In determining the compensation of the Company's Chief Executive
Officer, the Board considered the factors described above, along with other
performance criteria, such as the Company's 1995 earnings performance,
management of credit risk and growth. The Company weighted each of these
factors relatively equally. The Company's 1995 net income increased by 2.4%
over 1994, compared with a decrease of 15.4% from 1993. Return on average
assets was 1.00% in 1995, compared with 1.03% in 1994. The overall level of
nonperforming assets, past due loans and charge-offs decreased during 1995.
Total assets decreased by 0.7% in 1995, compared with a 6.1% increase in 1994.
In assessing the Company's performance, the Board also took into account
economic conditions in Hawaii.
At year-end 1995, the Company's and Bank's Chairman of the Board and
Chief Executive Officer retired, and the Company promoted Mr. Saito to those
positions. Mr. Shibuya was promoted to President of the Company, and
President and Chief Operating Officer of the Bank. The base salaries for
Messrs. Saito and Shibuya were increased to reflect these promotions. In
addition, the other Named Executives received salary increases averaging
15.3%.
Incentive Compensation
During 1996, the Bank had four programs whereby individual
compensation was directly linked to the Company's performance: the Incentive
Cash Bonus Program (the "Bonus Plan"), the Profit Sharing Plan, the ESOP and
the Annual Incentive Plan.
Bonus Plan. The Bonus Plan was adopted in 1990 to provide an
opportunity pursuant to which employees could receive cash bonuses annually.
All employees of the Bank who are employed at the end of the fiscal year and
persons who retired during the year after attaining age 62 are eligible to
participate in the Bonus Plan, except those executives who are participants in
the Annual Incentive Plan. Subject to the Bank's Board of Directors approval,
each qualifying employee may be paid a cash bonus equal to a specified
percentage of the employee's regular annual salary. The percentage, which
ranges from 2% to 10%, is determined according to a formula based upon
increases of 15% or more in the Bank's net income (excluding the after tax
effect of the bonus) over the prior fiscal year. During 1996, the Bank's net
income (as defined) increased 2.0% over the 1995 fiscal year. Therefore, the
Bank's employees did not receive any cash bonuses pursuant to the Bonus Plan.
Profit Sharing Plan and ESOP. The Bank makes annual contributions
(the "Plan Contribution") to the Profit Sharing Plan and ESOP (collectively,
the "Plans") as determined by the Bank's Board of Directors depending on the
profitability of the Bank during the year, subject to certain limitations on
contributions under the Internal Revenue Code and the Plans.
The assets of the Plans are held in trust for the exclusive benefit
of the participants. Employees with not less than one year of service with
the Bank are eligible to participate in the Plans. The portion of the Plan
Contribution contributed to each Plan is allocated among the participating
employees, including the Named Executives, in the proportion which each
participant's compensation for the fiscal year bears to the total compensation
14
<PAGE>
for all participating employees for such year. Benefits vest at a rate of 20%
per year and participants receive a distribution of vested amounts allocated
to their accounts only upon retirement or termination of employment with the
Bank.
The Bank's Board of Directors makes its determination of the amount
of the Plan Contribution based upon management's recommendation at the end of
the fiscal year. For 1996, the Plan Contribution equaled 10% of the pre-tax
income of the Bank and CPB Properties, Inc. (excluding the effect of the Plan
Contribution expense), less the amount of cash dividends paid by the Bank
during the fiscal year. The Plan Contribution is allocated between the Profit
Sharing Plan and the ESOP by the Bank's Board of Directors in its discretion
based upon management's recommendation. In determining the allocation of the
Plan Contribution, the Bank's Board of Directors considers the countervailing
concerns of investment diversification through the Profit Sharing Plan and
employee Common Stock ownership through the ESOP. In 1994, the Bank's Board
of Directors approved the Cash or Deferred Arrangement ("CODA") program which
allows each employee who is a participant in the Profit Sharing Plan to elect
to receive one-half of the current year's profit sharing contribution in cash
with the other half being allocated to such employee's account under the
Profit Sharing Plan. Elections not made would be deferred into that
employee's 401(k) Plan account. For 1996, approximately 40% of the Plan
Contribution was allocated to the Profit Sharing Plan and 60% to the ESOP. In
1996, the Bank contributed $810,000 to the CODA and Profit Sharing Plan and
$1,199,000 to the ESOP, which equaled 4.8% and 7.1%, respectively, of total
compensation paid to all participating employees for the year.
Annual Incentive Plan. The Annual Incentive Plan was adopted by the
Bank's Board of Directors for the 1996 fiscal year. Full-time employees of
the Company or its subsidiaries who have been granted the title of Senior Vice
President or above prior to October 1, 1996, were eligible to participate in
the Annual Incentive Plan. In addition, a participant must receive a
performance appraisal rating of "accomplished" or above during the calendar
year to be considered eligible for an award. Participants in the Annual
Incentive Plan were not eligible to participate in the Bonus Plan. During
1996, 11 executives, including each of the Named Executives, were eligible to
participate in the Annual Incentive Plan.
Subject to review by the Bank's Board of Directors, participants were
eligible to receive a cash bonus under the Annual Incentive Plan, provided
certain corporate objectives for financial performance, as measured by return
on equity ("ROE"), growth in average assets and the ratio of the Company's
return on average assets ("ROA") to that of Hawaii bank holding companies
("ROA Ratio"), are met. During 1996, based upon the Company's historical
earnings and asset growth trends, the Board of Directors established a target
ROE of 10.5%, asset growth of 10.0% and ROA Ratio of 1.05.
For 1996, the Company's ROE and asset growth did not meet the
established targets. Although the ROA Ratio has not yet been determined,
based on preliminary estimates, it is anticipated that the established target
will be achieved and accordingly executives will be eligible for incentive
bonuses. However, assessment of the Company's performance resulted in
management's recommendation to the Bank's Board of Directors that, even if
said target is achieved, bonuses for the Named Executives would not be
warranted for 1996.
Stock-Based Compensation
The Company also believes that stock ownership by employees,
including the Named Executives, provides valuable long-term incentives for
such persons who will benefit as the Common Stock price increases and that
stock-based performance compensation arrangements are beneficial in aligning
15
<PAGE>
employees' and shareholders' interests. To facilitate these objectives, the
Company adopted the 1986 Stock Option Plan (the "1986 Plan").
1986 Plan. The 1986 Plan was adopted in 1986 and amended in 1992 to
increase the number of shares available for issuance upon the exercise of
stock options granted under the plan. Through the 1986 Plan, stock options
have been granted to key employees, generally at a level of vice president and
above, including the Company's executive officers. Non-employee directors and
consultants were eligible to participate in the 1986 Plan, but the Company did
not grant stock options to such persons, in keeping with the Company's
philosophy that stock incentive programs should be used to motivate employees
and to tie their interests to those of the shareholders. The 1986 Plan is
administered by the Stock Option Plan Committee consisting of three
non-employee directors. No stock options were granted during 1996. The 1986
Plan expired on November 7, 1996.
Other Compensation
The Company's executives are eligible to participate in the Bank's
Defined Benefit Pension Plan (the "Pension Plan"), the SERP and the Split
Dollar Life Insurance Plan (the "Insurance Plan"). The Pension Plan is a
qualified defined benefit plan which provides for monthly annuity payments
upon retirement. Benefits are based upon the employee's years of service and
highest average annualized compensation in a 60-consecutive-month period of
employment. In 1995, the maximum annual compensation allowable for
determining benefits payable under the Pension Plan was reduced to $150,000,
which had the effect of reducing the benefits payable under the Pension Plan
to the Company's executive officers whose annualized compensation was likely
to exceed $150,000. See "ELECTION OF DIRECTORS -- Compensation of Directors
and Executive Officers -- Executive Compensation -- Defined Benefit Pension
Plan."
The SERP was adopted by the Board of Directors effective January 1,
1995 as a means of supplementing the benefits provided under the Pension Plan
in light of the recently imposed salary limitations. Under the Insurance
Plan, the Bank provides life insurance coverage for certain senior officers,
including the Named Executives. The Split Dollar Agreements provide death
benefits of approximately two times the officers' normal annual salary during
employment and an amount approximating the officers' final normal annual
salary upon retirement.
The Named Executives also participate in the Company's broad-based
employee benefit plans, such as the 401(k) Plan, medical, supplemental
disability and term life insurance.
Dated: February 19, 1997. THE BOARD OF DIRECTORS
PAUL DEVENS
ALICE F. GUILD
DENNIS I. HIROTA, Ph.D.
STANLEY W. HONG
KENSUKE HOTTA
DANIEL M. NAGAMINE
JOICHI SAITO
YOSHIHARU SATOH
NAOAKI SHIBUYA
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company does not have a standing
compensation committee. Decisions regarding executive compensation are made
16
<PAGE>
by the entire Board of Directors based upon recommendations of the Bank's
Compensation Committee. See "ELECTION OF DIRECTORS -- Report of Board of
Directors to Shareholders." During 1996, three of the Company's executive
officers, Joichi Saito, Naoaki Shibuya and Neal Kanda, participated in
deliberations of the Board of Directors concerning executive officer
compensation.
Some of the directors and executive officers of the Company and the
Bank and the companies with which they are associated were customers of and
had banking transactions with the Bank in the ordinary course of the Bank's
business during 1996, and the Bank expects to conduct similar banking
transactions in the future. All such loans and commitments were made on
substantially the same terms, including interest rates, collateral and
repayment terms, as those prevailing at the time for comparable transactions
with other persons of similar creditworthiness, and in the opinion of
Management of the Bank, did not involve more than a normal risk of
collectibility or present other unfavorable features.
Paul Devens, a director of the Company and a member of the Bank's
Compensation Committee, is of counsel to the law firm of Devens, Lo, Nakano,
Saito, Lee & Wong. The Company and the Bank retained the legal services of
Mr. Devens' law firm during 1996. Management is of the opinion that the fees
paid to Mr. Devens' law firm are comparable to those fees that would have been
paid for comparable legal services from a law firm not affiliated with the
Company or the Bank. It is anticipated that Mr. Devens' law firm will perform
certain legal services for the Company and the Bank during 1997.
Performance Graph
The following graph compares the yearly percentage change in the
Company's cumulative total shareholder return on Common Stock with (i) the
cumulative total return of the Nasdaq market index and (ii) the cumulative
total return of banks and bank holding companies listed on Nasdaq over the
period from December 31, 1991 through December 31, 1996. The graph assumes an
initial investment of $100 at the end of 1991 and reinvestment of dividends
during the ensuing five-year period. The graph is not necessarily indicative
of future price performance.
The graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act or under the Exchange Act, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Comparison of Five Year Cumulative Total Return
Among Nasdaq U.S. Companies,
Nasdaq Banks/Bank Holding Companies,
and CPB Inc.
(Performance Graph -- Data Points)
NASDAQ-U.S. 1992 $116
1993 $134
1994 $131
1995 $185
1996 $227
NASDAQ-Banks/Bank 1992 $146
Holding Companies 1993 $166
1994 $165
1995 $246
17
<PAGE>
1996 $326
CPB Inc. 1992 $105
1993 $102
1994 $108
1995 $137
1996 $131
(end of graph)
Certain Transactions
On June 21, 1991, the ESOP Committee filed a Notice of Change in Bank
Control ("Notice") with the Board of Governors of the Federal Reserve System
(the "FRB") pursuant to 12 U.S.C. Section 1817(j) to permit the acquisition
(the "Acquisition") on behalf of the ESOP of 125,000 shares of Common Stock,
which at that time would have resulted in the ESOP Committee beneficially
owning more than 10% of the outstanding voting securities of the Company. The
FRB notified the ESOP Committee on August 30, 1991 that it would not
disapprove the Acquisition, and on May 18, 1992, the Trustee on behalf of the
ESOP consummated the Acquisition. As a result of the Acquisition, the ESOP
Committee owned beneficially 528,597 shares of Common Stock or 10.03% of the
total outstanding Common Stock, as of February 28, 1997. Pursuant to
applicable regulations of the FRB, the Committee may acquire up to 25% of the
outstanding voting stock of the Company on behalf of the ESOP without
additional notification to the FRB.
On December 16, 1986, the shareholders of the Company ratified an
agreement ("Share Purchase Agreement") dated November 20, 1986 between the
Company and Sumitomo (see "PRINCIPAL SHAREHOLDERS"), which provides that the
Company will not issue or reissue shares of any class of the Company's
authorized capital stock, or issue any obligations or securities convertible
into shares of capital stock of the Company without first giving written
notice to Sumitomo describing the securities to be sold and offering Sumitomo
the opportunity to purchase an amount of securities which will allow it to
maintain its 13.734% level of ownership of the Company's capital stock.
Pursuant to the Share Purchase Agreement, on December 24, 1986, the Company
issued a warrant (the "ISOP Warrant") to Sumitomo which gave it the right to
purchase from the Company 35,025 shares of Common Stock upon the exercise of
stock options at a price equal to the fair market value of the Common Stock on
the date Sumitomo exercises the ISOP Warrant or any portion thereof. The
Company notifies Sumitomo when it grants stock options to its officers and
employees and when such options are exercised. Prior to the scheduled
expiration of the ISOP Warrant on December 23, 1996, the Board of Directors
extended the expiration date of the ISOP Warrant to June 14, 2006 to permit
Sumitomo to purchase shares with respect to which the ISOP Warrant had not yet
become exercisable. Sumitomo currently has the right to acquire 13,775 shares
by exercise of the ISOP Warrant.
CKSS Associates (the "Partnership"), a limited partnership in which
CPB Properties, Inc., a wholly-owned subsidiary of the Bank, is a general
partner and 50% owner, entered into loan agreements with Sumitomo and the Bank
for the development of office building complexes in Honolulu known as Central
Pacific Plaza, part of which serves as the Company's headquarters, and Kaimuki
Plaza, in which one of the Bank's branches is located. At December 31, 1996,
notes payable by the Partnership totaling $10,701,000 to Sumitomo and due on
June 18, 2001, were secured by a mortgage on Central Pacific Plaza. Notes
payable totaling $12,100,000 to the Bank and due on August 10, 2001, were
secured by a mortgage on the leasehold interest in the Kaimuki Plaza. As part
of the development of the Kaimuki Plaza, the Partnership entered into a lease
agreement with CPB Properties, Inc., which owns the land, effective from
January 1, 1993 to December 31, 2047. The Partnership has a $1,400,000 note
18
<PAGE>
payable to the Bank, due on April 10, 2001, which is secured by second
mortgages on the Central Pacific Plaza and Kaimuki Plaza properties. All
loans are priced at 0.75% above the London Interbank Offered Rate. The
weighted average rate on these notes was 6.3125% at December 31, 1996.
Management of the Company believes that the terms of such loans are as
favorable as could be negotiated with unaffiliated third parties.
APPROVAL OF THE 1997 STOCK OPTION PLAN
The Company historically has used stock options as part of its
overall program of compensation and had granted options pursuant to the 1986
Plan. At February 28, 1997, there were 148,013 shares subject to outstanding
options granted under the 1986 Plan which expire at various dates through
2005. The Board of Directors believes that the Company's policy of
encouraging stock ownership by its officers and key employees, in part through
the granting of stock options, has been a positive factor in its growth and
success, in that it has enhanced the Company's ability to attract and retain
qualified management. However, the 1986 Plan expired in 1996.
On February 19, 1997, the Board of Directors ratified the adoption by
the Stock Option Committee of the Company's 1997 Stock Option Plan (the "1997
Plan"). The Board of Directors believes that the 1997 Plan is necessary to
attract and retain qualified management. The purpose of the 1997 Plan is to
strengthen the Company by providing added incentive to participating officers,
directors, consultants, and other key employees of the Company and its
affiliates for high levels of performance and to encourage stock ownership in
the Company. The Company's 1997 Plan provides for the granting of options to
purchase shares of the Company's stock to participants selected by the
committee administering the 1997 Plan (the "Committee"). The 1997 Plan
authorizes the granting of a maximum of 500,000 shares to participants as
incentive stock options ("Incentive Stock Options") as that term is used in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor thereto, or options which do not qualify as incentive stock
options ("Non-Qualified Stock Options"). No options have been granted under
the 1997 Plan.
If all outstanding options under the 1986 Plan were exercised, such
shares would constitute approximately 2.73% of the Common Stock outstanding at
February 28, 1997, plus such additional shares. If the 1997 Plan is approved
and options to purchase the shares then outstanding under the 1986 Plan and
the 1997 Plan were exercised, such shares would constitute approximately
10.95% of the Common Stock outstanding at February 28, 1997 plus such
additional shares. While the Board of Directors recognizes the possible
dilutive effect of the proposed 1997 Plan on the shareholders, it believes, on
balance, the incentive which can be provided by the opportunity to participate
in the growth and earnings of the Company through the granting of stock
options to participants is important to the continued success of the Company
and, accordingly, will benefit the Company and its shareholders.
ADMINISTRATION. The 1997 Plan provides for administration by the
Committee, which shall be composed solely of "outside directors," as that term
is defined in Section 162(m) of the Internal Revenue Code of 1986 (the "Code")
and its regulations. The Committee has full power and authority in its
discretion to take any and all action required or permitted to be taken under
the 1997 Plan, including the selection of the participants to whom stock
options may be granted, the determination of the number of shares which may be
covered by stock options, the purchase price and other terms and conditions
thereof.
ELIGIBILITY. All employees, officers, consultants and employee
directors of the Company and its affiliates are eligible to participate in the
19
<PAGE>
1997 Plan and are eligible to receive Incentive and Non-Qualified Stock
Options. Non-employee directors of the Company and its affiliates are
eligible to participate in the 1997 Plan, but are only eligible to receive
Non-Qualified Stock Options. No person may be granted an option under the
1997 Plan if such person at the time of grant owns more than 10% of the
outstanding shares of Common Stock of the Company, unless the exercise price
of the option is at least 110% of the fair market value of the Common Stock as
of the date of grant and such option expires five years from the date of
grant.
OPTION PRICE AND EXERCISABILITY. The exercise price of options
granted pursuant to the 1997 Plan must not be less than the fair market value
of the Common Stock on the date of the grant. The purchase price of Common
Stock acquired pursuant to an option may be paid in cash or, at the discretion
of the Committee, by delivery of Common Stock or other form of legal
consideration. Options may be exercised in such installments as the Committee
prescribes.
ADJUSTMENTS. If the outstanding shares of Common Stock of the
Company are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company, without receipt of
consideration by the Company, through merger, reorganization,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, an appropriate adjustment shall be made in the
maximum number of shares of Common Stock subject to the 1997 Plan and in the
number of shares and price per share of stock subject to outstanding options.
EXPIRATION, TRANSFER AND TERMINATION OF OPTIONS. No option under the
1997 Plan may extend more than 10 years from the date of grant. No options
may be granted under the 1997 Plan after February 18, 2007. Options are not
transferable other than by will or the laws of descent and distribution and
shall terminate three months after termination of the optionee's employment or
relationship as a director or consultant unless (i) the termination was by
reason of disability, in which case the option may provide that it may be
exercisable for one year after termination, (ii) the termination was by reason
of death, in which case the option shall remain exercisable for three months
after termination and may provide that it shall remain exercisable for one
year after termination, (iii) the termination was by reason of retirement at
age 65, in which case the option may provide that it may be exercised for a
longer period, but only as to that portion of the option which had vested at
the time of such retirement, (iv) the termination (or removal of a non-
employee director from the Board of Directors) was for cause, in which case
the option shall terminate immediately, or (v) the option provides otherwise.
TERMINATION AND AMENDMENT. The 1997 Plan and any option or portion
thereof not exercised will terminate upon the occurrence of a terminating
event, including, but not limited to, a dissolution, liquidation,
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving or
resulting corporation, or a sale of substantially all the assets of the
Company to another person, or a reverse merger in which the Company is the
surviving corporation but the shares of the Company's stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, or any other capital reorganization in which shares of stock
of the Company possessing more than 50% of the voting power of the Company are
exchanged (a "Terminating Event"). The Committee shall notify each optionee
not less than thirty days prior thereto of the pendency of a Terminating
Event. Upon delivery of such notice, any option outstanding shall be
exercisable in full and not only as to those shares with respect to which
installments, if any, have then accrued, subject, however, to earlier
expiration or termination as provided elsewhere in the 1997 Plan and subject
to the consummation of the Terminating Event. The Board of Directors may also
20
<PAGE>
suspend or terminate the 1997 Plan at any time. Unless sooner terminated, the
1997 Plan shall terminate on February 18, 2007, ten years from its effective
date. No options may be granted under the 1997 Plan while it is suspended or
after it is terminated. Rights and obligations under any option granted
pursuant to the 1997 Plan, while it is in effect, shall not be altered or
impaired by suspension or termination of the 1997 Plan, except with the
consent of the person to whom the stock option was granted.
The 1997 Plan may be amended by the Board of Directors at any time,
and from time to time, except that, unless otherwise provided in the 1997 Plan
with respect to adjustments upon changes in stock (e.g., stock splits or stock
dividends), no amendment shall be effective unless approved by a vote of the
majority of the shares of the Company represented and entitled to vote at a
meeting held or by written consent adopted within twelve months before or
after the adoption of the amendment if the amendment will: (i) increase the
number of shares reserved for issuance under the 1997 Plan; (ii) materially
modify the requirements as to eligibility for participation in the 1997 Plan;
or (iii) materially increase the benefits accruing to participants under the
1997 Plan.
COPY OF PLAN. The description of the 1997 Plan provided above is
qualified in its entirety by the full text of the 1997 Plan, copies of which
are available for review at the Company's principal office and will be
furnished to shareholders without charge upon request directed to the
Secretary of the Company, Post Office Box 3590, Honolulu, Hawaii 96811.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion is only a
summary of the principal federal income tax consequences of the options and
rights to be granted under the 1997 Plan, and is based on existing federal law
(including administrative regulations and rulings) which is subject to change,
in some cases retroactively. This discussion is also qualified by the
particular circumstances of individual optionees, which may substantially
alter or modify the federal income tax consequences herein discussed.
Generally under present law, when an option qualifies as an Incentive
Stock Option under Section 422 of the Code: (a) an optionee will not realize
taxable income either upon the grant or the exercise of the option, (b) any
gain or loss upon a qualifying disposition of the shares acquired by the
exercise of the option will be treated as capital gain or loss, and (c) no
deduction will be allowed to the Company for federal income tax purposes in
connection with the grant or exercise of an Incentive Stock Option or a
qualifying disposition of the shares. A disposition by an optionee of stock
acquired upon exercise of an Incentive Stock Option will constitute a
qualifying disposition if it occurs more than two years after the grant of the
option, and more than one year after the transfer of the shares to the
optionee. If such stock is disposed of by the optionee before the expiration
of those time limits, the transfer would be a "disqualifying disposition" and
the optionee, in general, will recognize ordinary income equal to the lesser
of (a) the aggregate fair market value of the shares as of the date of
exercise less the option price, or (b) the amount realized on the
disqualifying disposition less the option price. Ordinary income from a
disqualifying disposition will constitute compensation for which withholding
may be required under federal and state law. Any gain in addition to the
amount reportable as ordinary income from a "disqualifying disposition"
generally will be capital gain.
Upon the exercise of an Incentive Stock Option, the difference
between the fair market value of stock on the date of exercise and the option
price generally is treated as a "tax preference" item in that taxable year for
alternative minimum tax purposes, as are a number of other items specified by
the Code. Such tax preference items (with adjustments) form the basis for the
alternative minimum tax (presently at graduated rates with a top rate of 28%
21
<PAGE>
for individuals), which may apply depending on the amount of the computed
"regular tax" of the employee for that year. Under certain circumstances the
amount of alternative minimum tax is allowed as a carryforward credit against
regular tax liability in subsequent years.
In the case of stock options which do not qualify as Incentive Stock
Options ("Non-Qualified Stock Options"), no income generally is recognized by
the optionee at the time of the grant of the option. Under present law the
optionee generally will recognize ordinary income at the time the Non-
Qualified Stock Option is exercised equal to the aggregate fair market value
of the shares acquired less the option price. However, if the shares received
upon exercise of a Non-Qualified Stock Option are subject to certain
restrictions, the taxable event is postponed until the restrictions lapse.
For example, if a sale of the shares at a profit would subject an optionee to
liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended, the optionee generally will recognize taxable income on the date that
the optionee is no longer subject to such liability in an amount equal to the
fair market value of the shares on such date less the option price.
Notwithstanding the foregoing, the optionee may make a special election within
thirty days of receiving restricted shares to recognize taxable income as of
the date of exercise. Income from the exercise of a Non-Qualified Stock
Option will constitute compensation for which withholding may be required
under federal and state law.
Subject to special rules applicable when an optionee uses Common
Stock to exercise an option, shares acquired upon exercise of a Non-Qualified
Stock Option will have a tax basis equal to their fair market value on the
exercise date or other relevant date on which ordinary income is recognized
and the holding period for the shares generally will begin on the date of
exercise or such other relevant date. Upon subsequent disposition of the
shares, the optionee generally will recognize capital gain or loss. Provided
the shares are held by the optionee for more than one year prior to
disposition, such gain or loss will be long-term capital gain or loss.
The Company will generally be entitled to a deduction equal to the
ordinary income (i.e., compensation) recognized by the optionee in the case of
a "disqualifying disposition" of an Incentive Stock Option or upon the
exercise of a Non-Qualified Stock Option provided the Company complies with
withholding requirements of federal and state law.
Shareholders are being asked to approve the 1997 Plan. Approval of
the 1997 Plan requires the affirmative vote of a majority of the shares of the
Common Stock represented and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE PROPOSAL TO APPROVE
THE 1997 STOCK OPTION PLAN.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has audited the Company's consolidated
financial statements since the Company's inception in 1982 and has been the
independent accountants for the Bank since 1975. Accordingly, the Board of
Directors has appointed KPMG Peat Marwick LLP as the Company's independent
accountants for the fiscal year ending December 31, 1997 and the shareholders
are being asked to ratify such appointment. Representatives of KPMG Peat
Marwick LLP will be present at the Meeting to respond to appropriate questions
and will have an opportunity to make a statement if they desire to do so.
22
<PAGE>
Audit services of KPMG Peat Marwick LLP for fiscal year 1996 included
the audit of the consolidated financial statements and audits of certain
employee benefit plans of the Bank.
All services provided to the Company and the Bank by KPMG Peat
Marwick LLP were approved in advance or ratified by the Company's and Bank's
Boards of Directors, and the possible effect on the independence of KPMG Peat
Marwick LLP by rendering such services was considered. All professional
services rendered by KPMG Peat Marwick LLP during 1996 were furnished at
customary rates and terms.
The affirmative vote of the holders of at least a majority of the
outstanding shares of the Company's Common Stock represented and entitled to
vote at the Meeting will be required for passage of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER BUSINESS
Management knows of no other business that will be presented for
consideration at the Meeting other than as stated in the Notice of Meeting.
If, however, other matters are properly brought before the Meeting, it is the
intention of the persons named in the accompanying form of Proxy to vote the
shares represented thereby on such matters in accordance with the
recommendation of the Board of Directors.
PROPOSALS OF SHAREHOLDERS
The 1998 Annual Meeting of Shareholders will be held on or about
April 21, 1998. Proposals of shareholders intended to be presented at the
1998 Annual Meeting must be received by the Secretary of the Company, Post
Office Box 3590, Honolulu, Hawaii 96811, no later than November 17, 1997.
SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K INCLUDING FINANCIAL STATEMENTS REQUIRED TO BE FILED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 BY
WRITING TO AUSTIN Y. IMAMURA, VICE PRESIDENT AND SECRETARY, CPB INC., POST
OFFICE BOX 3590, HONOLULU, HAWAII 96811.
Dated: March 24, 1997.
CPB INC.
(signed)
Joichi Saito
Chairman of the Board and
Chief Executive Officer
23
<PAGE>
CPB INC.
Annual Meeting of Shareholders
To Be Held April 22, 1997
This Proxy is solicited on behalf of the Board of Directors
The undersigned shareholders of CPB Inc. (the "Company") hereby
nominate, constitute and appoint Messrs. Joichi Saito, Naoaki Shibuya and
Austin Y. Imamura, or any one of them, each with full power of substitution,
as the lawful attorneys, agents and proxies of the undersigned, for the Annual
Meeting of Shareholders of CPB Inc. ("Annual Meeting") to be held on the third
floor of the Central Pacific Plaza Building, 220 South King Street, Honolulu,
Hawaii 96813, on Tuesday, April 22, 1997 at 10:00 a.m., Hawaii time, and at
any and all adjournments thereof, to represent the undersigned and to cast all
votes to which the undersigned would be entitled to cast if personally
present, as follows:
IMPORTANT: Continued and to be signed on reverse side.
<PAGE>
- --------- [X] Please mark your votes
COMMON as indicated in this example
1. ELECTION OF DIRECTORS, Class III, Term Will Expire in 2000.
[ ] FOR ALL NOMINEES (EXCEPT AS INDICATED TO THE CONTRARY
BELOW)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED
BELOW.
Nominees: Paul Devens, Stanley W. Hong and Yoshiharu Satoh
(Instructions: To withhold authority to vote for any
individual nominee, write that nominee's name on the space
below.)
________________________________________________________
2. APPROVAL OF THE 1997 STOCK OPTION PLAN.
To approve the adoption of the 1997 Stock Option Plan.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent accountants for the fiscal year ending
December 31, 1997.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. OTHER BUSINESS. In their discretion, the Proxy Holders are
authorized to transact such other business as may properly
come before the meeting and any and all adjournments
thereof. The Board of Directors at present knows of no
other business to be presented by or on behalf of the
Company or its Board of Directors.
The Board of Directors recommends a vote "FOR" the election of all nominees
for director, "FOR" approval of the 1997 Stock Option Plan and "FOR"
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants. If any other business is properly presented at such
meeting, this Proxy shall be voted in accordance with the recommendations of
the Board of Directors.
<PAGE>
The undersigned hereby ratifies and confirms all that said
attorneys and Proxy Holders, or any of them, or their
substitutes, shall lawfully do or cause to be done by virtue
hereof, and hereby revokes any and all proxies heretofore
given by the undersigned to vote at the Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual
Meeting and the Proxy Statement accompanying said notice.
Date: ___________________, 1997
_____________________________________
Signature
_____________________________________
Signature if held jointly
Please date this Proxy and sign above as your name(s) appear(s) on this Proxy.
Joint owners should each sign personally. Corporate proxies should be signed
by an authorized officer. Partnership proxies should be signed by an
authorized partner. Personal representatives, executors, administrators,
trustees or guardians should give their full titles. This Proxy will be voted
"FOR" the election of all nominees unless authority to do so is withheld for
all nominees or for any individual nominee. Unless "AGAINST" or "ABSTAIN" is
indicated, this Proxy will be voted "FOR" APPROVAL of the adoption of the 1997
Stock Option Plan. Unless "AGAINST" or "ABSTAIN" is indicated, this Proxy
will be voted "FOR" APPROVAL of the appointment of KPMG Peat Marwick LLP as
the Company's independent accountants. PLEASE SIGN, DATE AND RETURN THIS
PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE PREPAID ENVELOPE PROVIDED.
CPB INC.
1997 STOCK OPTION PLAN
Adopted by the Compensation Committee as of February 18, 1997
Adopted by the Board of Directors as of February 19, 1997
Approved by the Shareholders on April 23, 1997
1. PURPOSE.
(a) The purpose of the CPB Inc. 1997 Stock Option Plan
(the "1997 Plan") is to strengthen CPB Inc. (the "Company") and
those corporations which are or hereafter become subsidiary
corporations of the Company, within the meaning of Section 424 of
the Internal Revenue Code of 1986, as amended (the "Code"), by
providing to participating full-time salaried employees (the
"Employees"), full-time salaried employee directors (the
"Employee Directors") and directors who are not full-time
salaried employees (the "Non-Employee Directors") added
incentives for high levels of performance and to encourage stock
ownership in the Company. The 1997 Plan seeks to accomplish
these performance goals by providing a means whereby such
Employees, Employee Directors and Non-Employee Directors of the
Company and its subsidiaries may be given an opportunity to
purchase by way of option common stock of the Company. The
performance goal for those eligible to participate in the 1997
Plan is an increase in the value of the Company's shares over the
option exercise price.
(b) The Company, by means of the 1997 Plan, seeks to
secure and retain the services of such Employees, Employee
Directors and Non-Employee Directors of the Company or any of its
subsidiaries and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
(c) The Company intends that the options issued under
the 1997 Plan shall, in the discretion of the committee
responsible for administration of the 1997 Plan, be either
incentive stock options as that term is used in Section 422 of
the Code or any successor thereto ("incentive stock options"), or
options which do not qualify as incentive stock options
("non-qualified stock options"). All options shall be separately
designated as incentive stock options or non-qualified stock
options at the time of grant, and a separate certificate or
certificates shall be issued for shares purchased on the exercise
of each type of option.
2. ADMINISTRATION.
(a) The 1997 Plan has been adopted and shall be
administered solely by a committee ("Committee"). The Board and
the Committee have evidenced their adoption and approval of the
1997 Plan by their signatures at the end of the 1997 Plan.
(b) The Committee shall have the authority, in its
discretion, in connection with the administration of the 1997
<PAGE>
Plan, subject to and within the limitations of the express
provisions of the 1997 Plan:
(i) To determine from time to time which of the
persons eligible under the 1997 Plan shall be granted an option;
when and how the option shall be granted; whether the option will
be an incentive stock option or a non-qualified stock option; the
provisions of each option granted (which need not be identical),
including, without limitation, the time or times during the term
of each option within which all or portions of such option may be
exercised; the duration of and purposes of leaves of absence
which may be granted to participants without constituting a
termination of their employment for purposes of the 1997 Plan;
and the number of shares for which an option shall be granted to
each such person.
(ii) To determine any conditions or restrictions
imposed on stock acquired pursuant to the exercise of an option
(including, but not limited to, repurchase rights, forfeiture
restrictions and restrictions on transferability).
(iii) To construe and interpret the 1997 Plan and
the options granted under it, to construe and interpret any
conditions or restrictions imposed on stock acquired pursuant to
the exercise of an option, to define the terms used herein, and
to establish, amend and revoke rules and regulations for its
administration, to establish and administer performance goals
under the 1997 Plan and, to the extent required by the Code and
Treasury Regulations, ensure and certify that performance goals
have been attained; provided, however, that the Committee has no
authority to change the performance goals of the 1997 Plan after
the shareholders of the Company have approved the 1997 Plan and
any amendments thereto. The Committee, in the exercise of this
power, may correct any defect, omission or inconsistency in the
1997 Plan or in any option agreement, in a manner and to the
extent it shall deem necessary or expedient to make the 1997 Plan
fully effective.
(iv) To cancel, at any time and from time to time,
with the consent of the affected optionee or optionees, any or
all outstanding options granted under the 1997 Plan and the grant
and substitution therefor of new options under the 1997 Plan
(subject to limitations hereof) covering the same or different
number of shares of stock at an option price per share in all
events not less than the fair market value on the new grant date.
(v) Generally, to exercise such powers and to
perform such acts as it deems necessary or expedient to promote
the best interests of the Company.
(c) The Committee shall be composed of not fewer than
two (2) members of the Company's Board of Directors (the
"Board"). All members of the Committee shall qualify as "outside
directors" within the meaning of Section 162(m) of the Code and
<PAGE>
Treasury Regulation Section 1.162-27(c)(3) ("Outside Directors").
Members of the Committee shall serve at the pleasure of the Board
and the Board may from time to time remove members from, or add
members to, the Committee; provided, however, that any attempted
appointment to the Committee of a person who does not qualify as
an Outside Director shall be null and void. Any member of the
Committee who loses the status of an Outside Director shall
automatically and without further action cease to be a member of
the Committee as soon as such status is lost. In the event the
Company registers or has registered any class of equity security
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "1934 Act") as in effect from time to time, from the
effective date of such registration until six months after
termination of such registration, all of the members of the
Committee also shall be "nonemployee directors" as provided in
Rule 16b-3 promulgated pursuant to the 1934 Act. The Committee
shall comply with the provisions of Rule 16b-3, to the extent
applicable to the 1997 Plan.
(d) Any action of the Committee with respect to
administration of the 1997 Plan shall be taken pursuant to a
majority vote or to the unanimous written consent of its
members.
(e) The determinations of the Committee on matters
referred to in this paragraph 2 shall be final and conclusive.
(f) Notwithstanding any other provision herein, the
Board may at any time abolish the Committee and administer the
1997 Plan itself.
3. SHARES SUBJECT TO THE 1997 PLAN. Subject to the
provisions of paragraph 9 relating to adjustments upon changes in
stock, the stock that may be offered pursuant to options granted
under the 1997 Plan shall not exceed the aggregate of 500,000
shares of the Company's common stock. If any option granted
under the 1997 Plan shall for any reason expire, be canceled or
otherwise terminate without having been exercised in full, the
stock not purchased under such option shall again become
available for the 1997 Plan.
4. ELIGIBILITY.
(a) All Employees and Employee Directors of the
Company or its subsidiaries shall be eligible to receive
incentive stock options. Non-Employee Directors of the Company
or its subsidiaries shall not be eligible to receive incentive
stock options.
(b) All Employees, Employee Directors and Non-Employee
Directors of the Company or its subsidiaries shall be eligible to
receive non-qualified stock options.
(c) No person shall be eligible for the grant of an
incentive stock option under the 1997 Plan if, at the time of
<PAGE>
grant, such person owns (or is deemed to own pursuant to Section
425(d) of the Code) stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the
Company or of any of its affiliates unless the exercise price of
such incentive stock option is at least one hundred ten percent
(110%) of the fair market value (determined without regard to any
restriction other than a restriction which, by its terms, will
never lapse) of such stock at the date of grant and such
incentive stock option by its terms is not exercisable after the
expiration of five (5) years from the date such incentive stock
option was granted.
(d) The Company may issue incentive stock options
provided that the aggregate fair market value (determined at the
time the incentive stock option is granted) of the stock with
respect to which incentive stock options are exercisable for the
first time by the optionee during any calendar year (under all
incentive stock option plans of the Company) shall not exceed One
Hundred Thousand Dollars ($100,000). Should it be determined
that any incentive stock option granted pursuant to the 1997 Plan
exceeds such maximum, such incentive stock option shall be con
sidered to be a non-qualified option and not to qualify for
treatment as an incentive stock option under Section 422 of the
Code to the extent, but only to the extent, of such excess.
(e) Notwithstanding anything to the contrary contained
in this Plan, no person may be granted an option under this Plan
if such person at the time of grant holds options to purchase
more than 10% of the outstanding shares of common stock of the
Company. In addition, no person may be granted options to
purchase more than 100,000 shares of common stock in any calendar
year, or more than 100,000 shares of common stock in the
aggregate, subject to adjustment pursuant to Paragraph 9. The
amount of compensation any eligible person could receive under an
option grant is based solely on an increase in value of the
Company's common stock after the date of the grant of the option.
5. OPTION PROVISIONS. Each option shall be in such form
and shall contain such terms and conditions as the Committee
shall deem appropriate. The provisions of separate options need
not be identical, but each option shall include (through
incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) Each option granted and all rights or obligations
thereunder by its terms shall expire on such date as the
Committee may determine as set forth in such stock option
agreement, but not later than ten (10) years from the date the
option was granted and shall be subject to earlier termination as
provided elsewhere in the 1997 Plan. Notwithstanding the
foregoing, any incentive stock option granted to an optionee who
owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
<PAGE>
any of its affiliates shall expire not later than five (5) years
from the date of grant. For purposes of the 1997 Plan, the date
of grant of an option shall be the date on which the Committee
takes final action approving the award of the option,
notwithstanding the date the optionee accepts the option, the
date of execution of the option agreement, or any other date with
respect to such option.
(b) The exercise price of each option shall be
determined by the Committee and shall be not less than one
hundred percent (100%) of the fair market value of the stock
subject to the option on the date the option is granted;
provided, however, that the purchase price of common stock
subject to an incentive stock option may not be less than one
hundred ten percent (110%) of such fair market value (without
regard to any restriction other than a restriction which, by its
terms, will never lapse) where the optionee owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company. The fair market value of such
stock shall be determined by the Committee in accordance with any
reasonable valuation method, including the valuation method
described in Treasury Regulation Section 20.2031-2.
(c) The purchase price of stock acquired pursuant to
an option shall be paid, as specified in the option, either (i)
in cash at the time the option is exercised, or (ii) at the
discretion of the Committee, (A) by delivery to the Company of
other common stock of the Company, (B) according to a deferred
payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other common stock of
the Company) with the person to whom the option is granted or to
whom the option is transferred pursuant to subparagraph 5(d), or
(C) in any other form of legal consideration that may be
acceptable to the Committee in its discretion, either at the time
of grant or exercise of the option. Shares of stock given as
part of the purchase price shall be valued at fair market value
determined by the Board or the Committee in accordance with any
reasonable valuation, including the valuation methods described
in Treasury Regulation Section 20.2031.2.
In the case of any deferred payment arrangement
specified at the time of grant, an interest rate shall be stated
which is not less than the rate then specified which will prevent
any imputation of higher interest under the Code. If other than
the optionee, the person or persons exercising the option shall
be required to furnish the Company appropriate documentation that
such person or persons have the full legal right and power to
exercise the option on behalf of and for the optionee.
(d) An option by its terms may only be transferred by
will or by the laws of descent and distribution upon the death of
the optionee, shall not be transferable during the optionee's
lifetime other than pursuant to a qualified domestic relations
<PAGE>
order (within the meaning of the Code), and shall be exercisable
during the lifetime of the person to whom the option is granted
only by such person or a permitted transferee.
(e) At the discretion of the Committee the total
number of shares of stock subject to an option granted to an
eligible participant may, but need not, be allotted in periodic
installments (which may, but need not, be equal) and upon such
contingencies as the Committee may determine. In addition, the
Committee shall have the power to accelerate the time (other
than, except as provided in paragraph 10, the expiration date)
during which an option may be exercised, notwithstanding the
provisions in the option stating the time during which it may be
exercised.
(f) From time to time during each of such installment
periods, the option may be exercised with respect to some or all
of the shares allotted to that period, and/or with respect to
some or all of the shares allotted to any prior period as to
which the option was not fully exercised. During the remainder
of the term of the option (if its term extends beyond the end of
the installment periods), the option may be exercised from time
to time with respect to any shares then remaining subject to the
option. The provisions of this subparagraph (5)(f) are subject
to any option provisions governing the minimum number of shares
as to which an option may be exercised.
(g) The Company may require any optionee, or any
person to whom an option is transferred under subparagraph 5(d),
as a condition of exercising any such option, to give written
assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's
own account and not with any present intention of selling or
otherwise distributing the stock. The requirement of providing
written assurances, and any assurances given pursuant to the
requirement, shall be inoperative if (i) the shares to be issued
upon the exercise of the option have been registered under a then
currently effective registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), or (ii) a
determination is made by counsel for the Company that such
written assurances are not required in the circumstances under
the then applicable federal or state securities laws.
(h) If an Employee or Employee Director optionee
ceases to be employed by the Company or its subsidiaries or a
Non-Employee Director optionee ceases to serve as a director of
the Company or its subsidiaries, then such optionee's option
shall terminate three (3) months thereafter, and during such
three month period, such option shall be exercisable only as to
those shares with respect to which installments, if any, had
accrued as of the date on which the optionee ceased to be
employed by the Company or its subsidiaries or ceased to serve as
a director of the Company or its subsidiaries, unless:
<PAGE>
(i) Such termination or cessation of service is
due to such person's permanent and total disability, within the
meaning of Section 22(e)(3) of the Code, in which case such
person's stock option agreement may, but need not, provide that
it may be exercised at any time within a period of not more than
one (1) year following such termination of employment, or
cessation of service as a director and provided further that if
such optionee dies during such one (1) year specified period
following such termination of employment or cessation of service,
then the stock option agreement may, but need not, provide that
such option may be exercised at any specified time up to one (1)
year following the death of the optionee, but only to the extent
that the optionee was entitled to exercise said option
immediately prior to the termination of the optionee's employment
or cessation of service as a director;
(ii) The optionee dies while in the employ of the
Company or its subsidiaries or while serving as a director, in
which case options may be exercised at any time within a period
of not more than one (1) year following the death of the
optionee, but only to the extent that the optionee was entitled
to exercise said option immediately prior to the termination of
optionee's employment or cessation of service; and, provided
further that if an optionee dies within not more than three (3)
months after termination of such employment or cessation of
service, then such person's option may, but need not, provide
that it may be exercised at any time within one (1) year
following the death of the optionee, and provided further that,
unless the option provides otherwise, such option shall only be
exercisable to the extent that the optionee was entitled to
exercise said option immediately prior to the as provided herein;
(iii) The option by its terms specifies (a)
that it shall terminate sooner than three (3) months after
termination of the optionee's employment or cessation of the
optionee's directorship or (b) that it may be exercised more than
three (3) months after termination of the optionee's employment,
provided that, unless the option provides otherwise, such option
shall only be exercisable to the extent that the optionee was
entitled to exercise said option immediately prior to the
optionee's termination;
(iv) The optionee's employment is terminated due
to the optionee's retirement at age sixty-five (65), in which
case the option may, but need not, provide that it may be
exercised for a period greater or less than three (3) months
after termination on the optionee's employment, provided that,
unless the option provides otherwise, such option shall only be
exercisable to the extent that the optionee was entitled to
exercise said option immediately prior to the optionee's
termination;
(v) The Employee or Employee Director optionee's
employment is terminated for cause, whereupon the option
<PAGE>
terminates immediately unless such termination is waived by the
Committee. Termination for cause shall include termination for
malfeasance or gross misfeasance in the performance of duties, or
conviction of illegal activity in connection therewith,
conviction for a felony, or any significant conduct detrimental
to the interest of the Company or any of its subsidiaries, and
the determination of the Committee with respect thereto shall be
final and conclusive; or
(v) The Employee Director or Non-Employee
Director optionee is removed from the Board for cause, whereupon
the option terminates immediately on the date of such removal
unless such termination is waived by the Committee. Removal for
cause shall include removal of a director who has been declared
of unsound mind by an order of court or convicted of a felony.
This subparagraph 5(h) shall not be construed to
extend the term of any option or to permit anyone to exercise the
option after expiration of its term, nor shall it be construed to
increase the number of shares as to which any option is
exercisable from the amount exercisable on the date of
termination of the optionee's employment or service as director.
(i) Options may be exercised by ten (10) days' written
notice delivered to the Company stating the number of shares with
respect to which the option is being exercised together with
payment for such shares. Not less than ten (10) shares may be
purchased at any one time unless the number purchased is the
total number of shares which may be purchased under the option.
(j) Any option granted hereunder shall provide as
determined by the Committee for appropriate arrangements for the
satisfaction by the Company or its subsidiaries and the optionee
of all federal, state, local or other income, excise or
employment taxes or tax withholding requirements applicable to
the exercise of the option or the later disposition of the shares
of stock thereby acquired. Such arrangements shall include,
without limitation, the right of the Company or any subsidiary
thereof to deduct or withhold in the form of cash or, if
permitted by law, shares of stock from any transfer or payment to
an optionee or, if permitted by law, to receive transfers of
shares of stock or other property from the optionee, in such
amount or amounts deemed required or appropriate by the Committee
in its discretion. Any shares of stock issued pursuant to the
exercise of an option and transferred by the optionee to the
Company for purposes of satisfying any withholding obligation
shall not again be available for purposes of the 1997 Plan.
6. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the
1997 Plan, the Company shall keep available at all times the
number of shares of stock required to satisfy such options.
<PAGE>
(b) The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the 1997
Plan or the Company such authority as may be required to issue
and sell shares of stock upon exercise of the options granted
under the 1997 Plan; provided, however, that this undertaking
shall not require the Company to register under the Securities
Act either the 1997 Plan, any option granted under the 1997 Plan
or any stock issued or issuable pursuant to any such option or
grant. If the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of
stock under the 1997 Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon grant or upon
exercise of such options unless and until such authority is
obtained.
(c) The Company shall indemnify and hold harmless the
members of the Committee in any action brought against any member
in connection with the administration of the 1997 Plan to the
maximum extent permitted by then applicable law.
7. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of
stock pursuant to options granted under the 1997 Plan shall
constitute general funds of the Company.
8. MISCELLANEOUS.
(a) The Board or the Committee shall have the power to
accelerate the time during which an option may be exercised,
notwithstanding the provisions in the option stating the time
during which it may be exercised.
(b) Neither an optionee nor any person to whom an
option is transferred under subparagraph 5(d) shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such option unless and until
such person has satisfied all requirements for exercise of the
option pursuant to its terms.
(c) Nothing contained in the 1997 Plan, or in any
option granted pursuant to the 1997 Plan, shall obligate the
Company, or any of its subsidiaries to employ any employee for
any period or interfere in any way with the right of the Company,
or any of its subsidiaries to reduce the compensation of any
employee.
9. ADJUSTMENTS UPON CHANGES IN STOCK. If the outstanding
shares of the stock of the Company are increased, decreased, or
changed into, or exchanged for a different number or kind of
shares or securities of the Company, without receipt of
consideration by the Company, through reorganization, merger,
recapitalization, reclassification, stock split, stock dividend,
stock consolidation, or otherwise, an appropriate and
proportionate adjustment shall be made in the number and kind of
<PAGE>
shares as to which options may be granted. A corresponding
adjustment changing the number or kind of shares and the exercise
price per share allocated to unexercised options, or portions
thereof, which shall have been granted prior to any such change
shall likewise be made. Any such adjustment, however, in an
outstanding option shall be made without change in the total
price applicable to the unexercised portion of the option but
with a corresponding adjustment in the price for each share
subject to the option. Adjustments under this section shall be
made by the Committee whose determination as to what adjustments
shall be made, and the extent thereof, shall be final and
conclusive. No fractional shares of stock shall be issued under
the 1997 Plan on account of any such adjustment.
10. TERMINATING EVENT. Not less than thirty (30) days
prior to the dissolution or liquidation of the Company, or a
reorganization, merger, or consolidation of the Company with one
or more corporations as a result of which the Company will not be
the surviving or resulting corporation, or a sale of
substantially all the assets of the Company to another person, or
a reverse merger in which the Company is the surviving
corporation but the shares of the Company's stock outstanding
immediately preceding the merger are converted by virtue of the
merger into other property, or in the event of any other capital
reorganization or in which shares of stock of the Company
possessing more than fifty percent (50%) of the voting power of
the Company are exchanged (a "Terminating Event"), the Committee
shall notify each optionee of the pendency of the Terminating
Event. Upon delivery of said notice, any option granted prior to
the Terminating Event shall be, notwithstanding the provisions of
paragraph 5 hereof, exercisable in full and not only as to those
shares with respect to which installments, if any, have then
accrued, subject, however, to earlier expiration or termination
as provided elsewhere in the 1997 Plan. Upon the date thirty
(30) days after delivery of said notice, any option or portion
thereof not exercised shall terminate, and upon the effective
date of the Terminating Event, the 1997 Plan shall terminate,
unless provision is made in connection with the Terminating Event
for assumption of options theretofore granted, or substitution
for such options of new options covering stock of a successor
employer corporation, or a parent or subsidiary corporation
thereof, solely at the option of such successor corporation or
parent or subsidiary corporation, with appropriate adjustments as
to number and kind of shares and prices.
11. AMENDMENT OF THE 1997 PLAN.
(a) The Committee at any time, and from time to time,
may amend the 1997 Plan. However, except as provided in para
graph 9 relating to adjustments upon changes in stock, no
amendment shall be effective unless, within twelve (12) months
before or after the adoption of the amendment, the amendment is
approved by the vote of a majority of the outstanding shares of
the Company represented and voting at a shareholders meeting or
<PAGE>
by the written consent of a majority of the outstanding shares of
the Company where the amendment will:
(i) Increase the number of shares reserved for
options under the 1997 Plan;
(ii) Materially modify the requirements as to
eligibility for participation in the 1997 Plan; or
(iii) Materially increase the benefits accruing
to participants under the 1997 Plan.
It is expressly contemplated that the Board may amend
the 1997 Plan in any respect the Board deems necessary or
advisable to provide optionees with the maximum benefits provided
or to be provided under the provisions of the Code and the
regulations promulgated thereunder relating to incentive stock
options and/or to bring the 1997 Plan and/or options granted
under it into compliance therewith.
(b) Rights and obligations under any option granted
pursuant to the 1997 Plan, while the 1997 Plan is in effect,
shall not be altered or impaired by any amendment, suspension or
termination of the 1997 Plan, except with the consent of the
person to whom the stock or option was granted.
12. TERMINATION OR SUSPENSION OF THE 1997 PLAN.
(a) The Committee may suspend or terminate the 1997
Plan at any time. Unless sooner terminated, the 1997 Plan shall
terminate ten years from the effective date of the 1997 Plan. No
options may be granted under the 1997 Plan while the 1997 Plan is
suspended or after it is terminated.
(b) Rights and obligations under any option granted
pursuant to the 1997 Plan, while the 1997 Plan is in effect,
shall not be altered or impaired by suspension or termination of
the 1997 Plan, except with the consent of the person to whom the
stock or option was granted.
13. EFFECTIVE DATE OF PLAN. The 1997 Plan shall be deemed
adopted as of February18, 1997. The 1997 Plan shall become
effective as determined by the Board, but no options granted
under the 1997 Plan shall be exercised unless and until the 1997
Plan has been approved within twelve (12) months after February
18, 1997 by the vote of the holders of a majority of the
outstanding shares of the Company represented and voting at a
shareholders meeting or by the written consent of a majority of
the outstanding shares of the Company and, if required, an
appropriate permit has been issued by the Director of Business
Registration of the Hawaii Department of Commerce and Consumer
Affairs.
<PAGE>
The CPB Inc. 1997 Stock Option Plan is hereby approved
and adopted in all respects.
STOCK OPTION PLAN COMMITTEE
Stanley W. Hong
Dennis I. Hirota, Ph.D.
Daniel M. Nagamine
BOARD OF DIRECTORS
Paul Devens
Alice J. Guild
Dennis I. Hirota, Ph.D.
Stanley W. Hong
Kensuke Hotta
Daniel M. Nagamine
Joichi Saito
Yoshihara Satoh
Naoaki Shibuya
