[Pacific Century Logo]
YOUR VOTE IS IMPORTANT!
Notice of 2000
Annual Meeting of Shareholders
and Proxy Statement
Meeting Date: April 28, 2000
PACIFIC CENTURY FINANCIAL CORPORATION
130 Merchant Street
Honolulu, Hawaii 96813
[Pacific Century Logo]
PACIFIC CENTURY FINANCIAL CORPORATION
130 MERCHANT STREET
HONOLULU, HAWAII 96813
March 8, 2000
Dear Shareholder:
You are invited to attend the Annual Meeting of shareholders of Pacific
Century Financial Corporation ("Pacific Century" or the "Company"). We will meet
at 8:30 a.m. on Friday, April 28, 2000 on the Sixth Floor of the Bank of Hawaii
Building, 111 South King Street, Honolulu, Hawaii.
The Notice of Meeting and Proxy Statement accompanying this letter describe
the business we will consider and vote upon at the meeting. A report to
shareholders on the affairs of Pacific Century also will be given, and
shareholders will have the opportunity to discuss matters of interest concerning
the Company.
YOUR VOTE IS VERY IMPORTANT. Please complete, sign, date and return the
enclosed proxy card and mail it promptly in the enclosed postage-paid return
envelope, even if you plan to attend the Annual Meeting. You may also vote by
telephone or electronically via the Internet. If you wish to do so, your proxy
may be revoked at any time before its use.
On behalf of the Board of Directors, thank you for your cooperation and
support.
Sincerely,
[LOGO]
LAWRENCE M. JOHNSON
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
TABLE OF CONTENTS
PAGE
--------
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS............... 1
PROXY STATEMENT............................................. 2
Questions and Answers About the Proxy Materials and the
Annual Meeting............................................ 2
Proposals to Be Voted On.................................. 5
Board of Directors........................................ 6
Board Compensation...................................... 9
Board Committees and Meetings........................... 10
Beneficial Ownership...................................... 11
Executive Compensation.................................... 13
Report of the Compensation Committee.................... 13
Summary Compensation Table.............................. 18
Stock Option/SAR Grants in Last Fiscal Year............. 19
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option Values....................... 20
Long-Term Incentive Plans--Awards in Last Fiscal Year... 20
Pension Plan Table...................................... 21
Profit Sharing and Money Purchase Plans................. 21
Change-in-Control Arrangements.......................... 22
Performance Graph......................................... 23
Certain Transactions with Management and Others........... 24
Section 16(a) Beneficial Ownership Reporting Compliance... 24
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 2000
------------------------
To Our Shareholders:
The Annual Meeting of shareholders of Pacific Century Financial Corporation
("Pacific Century" or the "Company") will be held on Friday, April 28, 2000, at
8:30 a.m. on the sixth floor of the Bank of Hawaii Building, 111 South King
Street, Honolulu, Hawaii, for the following purposes:
1. To elect four Class II Directors for terms expiring in 2003.
2. To elect an Independent Auditor.
3. To transact any other business that may be properly brought before the
meeting.
Shareholders of record of Pacific Century common stock at the close of
business on February 28, 2000 are entitled to attend the meeting and vote on the
business brought before it.
We look forward to seeing you at the meeting. However, if you cannot attend
the meeting, your shares may still be voted if you complete, sign, date, and
return the enclosed proxy card in the enclosed postage-paid return envelope. You
also may vote by telephone or electronically via the Internet. The accompanying
proxy statement, also available online at www.boh.com, provides certain
background information that will be helpful in deciding how to cast your vote on
business transacted at the meeting.
By Order of the Board of Directors
[/S/ CORI C. WESTON]
CORI C. WESTON
VICE PRESIDENT AND SECRETARY
PACIFIC CENTURY FINANCIAL CORPORATION
Honolulu, Hawaii
Dated: March 8, 2000
IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD OR VOTE BY TELEPHONE OR
ON THE INTERNET AS PROMPTLY AS POSSIBLE. THIS WILL SAVE YOUR COMPANY THE
EXPENSE OF A SUPPLEMENTARY SOLICITATION.
THANK YOU FOR ACTING PROMPTLY.
PROXY STATEMENT
The Board of Directors of Pacific Century Financial Corporation ("Company"
or "Pacific Century") is soliciting the enclosed proxy for the Company's 2000
annual meeting. The proxy statement, proxy card, and the Company's 2000 Annual
Report to Shareholders are being distributed on or about March 8, 2000.
SHAREHOLDERS MAY OBTAIN ADDITIONAL COPIES OF THE ANNUAL REPORT AND FORM 10K
WITHOUT CHARGE FROM CORI C. WESTON, CORPORATE SECRETARY, PACIFIC CENTURY
FINANCIAL CORPORATION, 130 MERCHANT STREET, HONOLULU, HAWAII 96813.
------------------------
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: WHAT AM I VOTING ON?
A: The election of directors and an independent auditor.
Q: WHO CAN VOTE AT THE ANNUAL MEETING?
A: Shareholders as of the close of business on February 28, 2000 (the "Record
Date") can attend and vote at the annual meeting. Each share of common stock
is entitled to one vote. On the Record Date, there were 79,650,024 shares of
common stock issued and outstanding.
Q: HOW MANY VOTES DO WE NEED TO HOLD THE ANNUAL MEETING?
A: The holders of at least one-third of the outstanding common stock on the
Record Date entitled to vote at the annual meeting must be present to
conduct business. That amount is call a QUORUM. Shares are counted as
present at the meeting, if a shareholder entitled to vote is present and
votes at the meeting, has submitted a properly signed proxy, or has properly
voted by telephone or over the Internet. We also count abstentions and
broker non-votes for a quorum.
Q: WHAT SHARES CAN I VOTE?
A: You may votes all shares you own on the Record Date. The enclosed proxy card
shows the number of shares you may vote.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE ANNUAL MEETING?
A: If you are a shareholder of record, you can attend the annual meeting and
vote in person the shares you hold directly in your name as the shareholder
of record. If you choose to do that, please bring the enclosed proxy card or
proof of identification. If you hold your shares as a beneficial owner, you
must vote your shares through your broker or other nominee.
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE RECOMMEND YOU ALSO SUBMIT
YOUR PROXY SO YOUR VOTE WILL BE COUNTED IF YOU LATER DECIDE NOT TO ATTEND
THE ANNUAL MEETING.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE ANNUAL MEETING?
A: You may direct your vote without attending the annual meeting. You may vote
by granting a proxy, or, for shares held in street name, by submitting
voting instructions to your broker or other nominee. You can do that over
the Internet, by telephone, or by mail. If your shares are held by a broker
or other nominee, then you will receive instructions from it that you must
follow to have your shares voted. If you hold your shares as the shareholder
of record, then you may instruct the proxies how to vote your shares, using
the toll free telephone number or the Internet voting site listed on the
proxy card, or by signing, dating, and mailing the proxy card in the postage
paid envelope we have provided you. Please refer to the summary instructions
below and those on your proxy card, or, for shares held in street name, the
voting instruction card sent by your broker or nominee.
2
MAIL. You may mail your proxy by signing your proxy card or, for shares
held in street name, the voting instruction card included by your broker or
nominee, and mailing it in the enclosed, postage prepaid and addressed
envelope. If you provide specific voting instructions, your shares will be
voted as you instruct. If you sign and return a proxy card without giving
specific voting instructions, your shares will be voted as recommended by
our Board of Directors.
INTERNET. If you have Internet access, you may submit your proxy from
anywhere, following the "Vote by Internet" instruction on your proxy card.
TELEPHONE. If you live in the United States you may submit your proxy by
following the "Vote by Phone" instructions on the proxy card.
Q: CAN I CHANGE MY VOTE?
A: Yes. You may change your proxy instructions any time before the vote at the
annual meeting. For shares you hold as shareholder of record, you may change
your vote by granting a new proxy or by attending the annual meeting and
voting in person. Attendance at the annual meeting will not cause your
previously granted proxy to be revoked unless you specifically so request.
For shares you hold as beneficial owner, you may change your vote by
submitting new voting instructions to your broker or nominee.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE ANNUAL MEETING?
A: We will announce voting results at the annual meeting. We also will publish
those results in our quarterly report on Form 10-Q for the first quarter of
fiscal 2000.
Q: WHO WILL COUNT THE VOTES?
A: Morrow & Company will count and tabulate the votes.
Q: IS MY VOTE CONFIDENTIAL?
A: Yes. Proxy instructions, ballots, and voting tabulations that identify the
individual shareholders are handled to protect your privacy. Your vote will
not be disclosed within Pacific Century or to third parties except (i) as
necessary to meet applicable legal requirements, (ii) to allow for the
tabulation of votes and certification of the vote, and (iii) to facilitate a
successful proxy solicitation by our Board. Occasionally, shareholders write
comments on their proxy cards, which are forwarded to Pacific Century
management.
Q: WHO WILL BEAR THE COST OF SOLICITING PROXIES?
A: We will pay the cost of this proxy solicitation. In addition to soliciting
proxies by mail, we expect that a number of our employees will solicit
shareholders for the same type of proxy, personally, and by telephone, the
Internet, facsimile, or other means. None of those employees will receive
any additional or special compensation for doing that task. We have retained
Georgeson & Company, a firm of professional proxy solicitors, to assist in
the solicitation of proxies for an estimated fee of $6,500, plus reasonable
out-of-pocket costs and expenses. We will, upon request, reimburse brokers
or other nominees for their reasonable out-of-pocket expenses in forwarding
proxy materials to their customers who are beneficial owners and obtaining
their voting instructions.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: It means your shares are registered differently and are in more than one
account. Sign and return all proxy cards or vote each proxy card by
telephone or Internet, to ensure all your shares are voted. To provide
better shareholder services, we encourage you to have all accounts
registered in the same name and address. You may do that, by contacting our
transfer agent, Continental Stock Transfer & Trust Company (1-800-509-5586).
3
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING OF
SHAREHOLDERS OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
A: Yes. You may submit proposals for consideration at future shareholder
meetings, including director nominations.
PROXY STATEMENT PROPOSALS. Under the rules of the Securities and Exchange
Commission, proposals that shareholders wish to have included in the proxy
statement for the 2001 annual meeting of shareholders must be received by
the Corporate Secretary of Pacific Century on or before November 9, 2000
(address below).
OTHER SHAREHOLDER PROPOSALS. Under our By-Laws, for Pacific Century to
consider a shareholder proposal for the 2001 annual meeting, it must receive
the written proposal no later than 80 days nor earlier than 90 days before
the first anniversary of the 2000 annual meeting; that date range will be
not later than February 8, 2001 and not earlier than January 24, 2001.
(Please refer to Section 1.12 Pacific Century's By-Laws.) The proposal also
must contain the information as required in Pacific Century's By-Laws. Those
advance notice provisions are in addition to, and separate from, the
requirements a shareholder must meet to have a proposal included in the
proxy statement under the rules of the Securities and Exchange Commission.
NOMINATING DIRECTOR CANDIDATES. The Nominating Committee will consider your
recommendation for nominees for election to the Board at the 2001 annual
meeting if it receives your recommendation in writing, on or before
February 8, 2001 and not earlier than January 24, 2001, and as otherwise
provided in Section 1.12 of Pacific Century's By-Laws, addressed to Pacific
Century's Nominating Committee in care of the Corporate Secretary (address
below). Your written notice, and written consent of such individual to serve
as director, must be delivered or mailed by first class mail to the
Corporate Secretary and must set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in such notice,
(ii) the principal occupation or employment of the nominee, and (iii) the
number of shares of Pacific Century stock the nominee beneficially owns.
COPY OF BY-LAW PROVISIONS. You may contact the Corporate Secretary at 130
Merchant Street, Honolulu, Hawaii 96813, for a copy of the relevant by-law
provisions regarding the requirements for making shareholder proposals and
nominating director candidates.
Q: WHERE CAN I FIND OUT MORE INFORMATION ABOUT THE COMPANY BEFORE THE ANNUAL
MEETING?
A: You can find more information about the Company on-line at: www.boh.com.
A COPY OF PACIFIC CENTURY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE
RELATED FINANCIAL STATEMENTS AND SCHEDULES FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, IS AVAILABLE WITHOUT CHARGE TO ANY SHAREHOLDER WHO REQUESTS
A COPY IN WRITING TO THE CORPORATE SECRETARY AT THE ADDRESS ABOVE. THE FORM 10-K
CONSISTS PRIMARILY OF INCORPORATION BY REFERENCE OF INFORMATION CONTAINED IN THE
ANNUAL REPORT TO SHAREHOLDERS OR IN THIS PROXY STATEMENT.
4
PROPOSALS TO BE VOTED ON
The shares represented by your proxy will be voted FOR each of the following
proposals, unless you indicate to the contrary.
1. ELECTION OF DIRECTORS. Nominees for election are David A. Heenan, Stuart T.
K. Ho, Lawrence M. Johnson, and Fred E. Trotter for three-year terms expiring in
2003. See page 6 for more information. Each nominee has consented to serve. All
nominees are currently serving on the Board. If a nominee is not a candidate at
the annual meeting, then the proxies plan to vote for the remaining nominees and
other persons as the proxies may determine. Directors are elected by a plurality
of votes cast; nominees who receive the most votes will be elected. Abstentions
and broker non-votes will not be taken into account in determining the outcome
of the election. If you do not want to vote for a particular nominee, you may
indicate that on the proxy card or through your telephone or Internet voting.
Your Board recommends a vote FOR these directors.
2. ELECTION OF AN INDEPENDENT AUDITOR. Ernst & Young LLP has been Pacific
Century's independent auditor since its incorporation in 1971, and it also
serves as independent auditor for the Bank of Hawaii (the "Bank"). We expect
representatives of Ernst & Young LLP to attend the annual meeting. Ernst & Young
LLP have indicated that they will have no statement to make but will be
available to respond to questions. We need the affirmative vote of a majority of
shares present in person or by proxy and entitled to vote at the annual meeting
to re-elect Ernst & Young LLP as our independent public accountants for 2000.
Your Board recommends a vote FOR Ernst & Young LLP as the Company's independent
auditor for 2000.
3. OTHER BUSINESS. The Board knows of no other business for consideration at
the annual meeting. Your signed proxy or proper telephone or Internet vote gives
authority to the proxies to vote at their discretion on other matters properly
presented at the annual meeting, or any adjournment or postponement of the
meeting.
5
BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides that the Board of
Directors shall consist of not less than 3 nor more than 15 persons. The Board
is to be divided into 3 classes, with the terms of office of one class expiring
each year.
NOMINEES FOR ELECTION FOR CLASS II TERMS EXPIRING IN 2003
NAME, AGE, AND YEAR
FIRST ELECTED AS PRINCIPAL OCCUPATION(S)
DIRECTOR DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ------------------------ ------------------------------------------------------ ------------------------------
David A. Heenan; Trustee, The Estate of James Campbell since January 1, Maui Land & Pineapple Co.;
60; 1993 1995; Chairman, President and Chief Executive Officer Inc. Various subsidiaries and
of Theo H. Davies & Co., Ltd. (the North American affiliates of Pacific Century.
subsidiary of Hong Kong-based Jardine Matheson
Holdings Ltd., a diversified multi-national
corporation) July 1982 to December 31, 1994.
Stuart T. K. Ho; Chairman of the Board and President, Capital Capital Investment of Hawaii,
64; 1987 Investment of Hawaii, Inc. (diversified real estate Inc.; Gannett Co., Inc.;
development and management company) since January College Retirement Equities
1982; Chairman, Gannett Pacific Corp. (newspaper Fund; TIAA- CREF Mutual Funds;
publishing company) since 1987. Various subsidiaries and
affiliates of Pacific Century.
Lawrence M. Johnson; Chairman and Chief Executive Officer of Pacific Various subsidiaries and
59; 1989 Century and the Bank of Hawaii since August 1994; affiliates of Pacific Century.
President of Pacific Century and Bank March 1989 to
July 1994; Executive Vice President of Pacific Century
August 1980 to February 1989.
Fred E. Trotter; President of F. E. Trotter, Inc. since January 1970. Longs Drug Stores; Maui Land &
69; 1978 Pineapple Co., Inc.; Various
subsidiaries and affiliates of
Pacific Century.
6
CLASS I DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2002
NAME, AGE, AND YEAR
FIRST ELECTED AS PRINCIPAL OCCUPATION(S)
DIRECTOR DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ------------------------ ------------------------------------------------------ ------------------------------
Peter D. Baldwin; President of Baldwin Pacific Corporation (livestock Maui Land & Pineapple Co.,
62; 1991 maintenance and sales on Maui and orchard farming in Inc.
California) since 1965; President, Baldwin Pacific
Properties, Inc. (real estate development company)
since 1988; Director and Chief Executive Officer of
Orchards Hawaii, Inc. (fruit juice marketing) since
1986; President of Haleakala Ranch Co. (cattle
ranching and real estate development).
Richard J. Dahl; President of Pacific Century and Bank of Hawaii since Various subsidiaries and
48; 1995 August 1994; Chief Operating Officer of Pacific affiliates of Pacific Century.
Century since 1997; Chief Operating Officer of the
Bank since August 1995; Executive Vice President and
Chief Financial Officer of Pacific Century, April 1987
to January 1994; Vice Chair of the Bank, December 1989
to July 1994. Director of Bank since April 1994.
Donald M. Takaki; Chairman and Chief Executive Officer, Island Movers, Various subsidiaries and
58; 1997 Inc. since 1964 (a transportation service company); affiliates of Pacific Century.
President, Transportation Concepts, Inc. since 1988 (a
transportation leasing company) and General Partner,
Don Rich Associates since 1979 (a real estate
development company).
7
CLASS III DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2001
NAME, AGE, AND YEAR
FIRST ELECTED AS PRINCIPAL OCCUPATION(S)
DIRECTOR DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ----------------------- ------------------------------------------------------ --------------------------------
Mary G.F. Bitterman; President and Chief Executive Officer, KQED, Inc. Various subsidiaries and
55; 1994 (public broadcasting center) since November 1993; affiliates of Pacific Century.
Consultant (telecommunications, investments and
Asian-Pacific affairs) November 1988 to October 1993
Martin A. Stein President, Sonoma Mountain Venture, (strategic and Bank of Hawaii
59; 1999; technology consulting and venture capital) since
October 1998, Vice Chair of BankAmerica Corp.; from
1990 to October 1998, responsible for Technology,
Operations, Payments, and Purchasing.
Stanley S. Takahashi; Executive Vice President & Chief Operating Officer, Various subsidiaries and
67; 1996 Kyo-Ya Company, Ltd. since 1989; Chairman since 1996 affiliates of Pacific Century.
and Director of United Laundry Service, Inc. since
1992; President and Director of Kyo-Ya Insurance
Services Inc. since 1994; Director of Kokusai Kogyo
Company, Ltd. since 1992 (diversified ownership of
hotels and resorts in Hawaii, California, Florida,and
Australia).
8
BOARD COMPENSATION
Pacific Century's Board of Directors met seven times during 1999. Each
director attended 75% or more of the aggregate of the total number of Board
meetings and the total number of meetings held by the committees on which he or
she served in 1999.
Except Messrs. Johnson and Dahl, who do not receive fees for serving on the
Board, each director was paid an annual retainer of $8,000, plus $750 for each
regular Board meeting attended. All Pacific Century directors are also directors
of the Bank of Hawaii and, except Messrs. Johnson, Dahl, Kuioka and
Ms. Carryer, receive an annual retainer as a Bank director of $8,000, plus $750
for each regular Bank Board meeting. Each current Pacific Century director
except Mr. Stein, holds 125 shares of Bank of Hawaii stock, and during 1999
received $4,950 in dividends on such shares. Directors are reimbursed for board-
related travel expenses. The Company does not have a retirement plan for
directors not employed by the Company.
The Board has five committees: Audit Committee, Compensation and Management
Development Committee ("Compensation Committee"), Chief Executive Officer
Evaluation Committee ("CEO Evaluation Committee"), Executive Committee, and
Nominating Committee. Directors not employed by the Company or its subsidiaries
serving as members of the Compensation Committee and Executive Committee receive
$600 for each meeting attended. The Audit Committee meeting fee is $750. The
chair of the Compensation Committee receives an annual retainer of $2,500. The
chair and vice chair of the Audit Committee also received an annual retainer of
$3,500 and $3,000, respectively. The chair of the CEO Evaluation Committee
receives an annual retainer of $1,500 and each member receives an annual
retainer of $1,000. Members of the CEO Evaluation Committee receive no separate
meeting fees.
DIRECTORS DEFERRED COMPENSATION PLAN
Pacific Century maintains a Directors Deferred Compensation Plan under which
each director may elect to defer all of his or her annual retainer and meeting
fees or all of his or her annual retainer. Distribution of the deferred amounts
will begin as of the first day of the first month after the participating
director ceases to be a director of Pacific Century. Distribution will be made
in a lump sum or in approximately equal annual installments over such period of
years (not exceeding 10 years) as the director elects at the time of deferral.
Under the Deferred Plan, deferred amounts are not credited with interest, but
they are valued based on corresponding investments in Pacific Capital Funds or
Pacific Century Stock, as selected by participants.
DIRECTOR STOCK PROGRAM
Pacific Century maintains a Director Stock Program under which each director
of Pacific Century and the Bank, who is not an employee, receives an annual
grant of options to acquire restricted stock at a price equal to the fair market
value of Pacific Century's stock at the date of grant. A director not employed
by Pacific Century or the Bank, and a member of both Boards, receives an annual
option for 2,000 restricted shares; a director who serves on only one Board
receives an annual option for 1,000 restricted shares. Under the Director Stock
Program, all directors of the Bank also receive annual grants of 200 restricted
shares (not to exceed 1,000 restricted shares to any one director). Restricted
stock issued under the Director Stock Program carries voting and dividend rights
but is generally non-transferable during a restriction period that ends upon
expiration of a director's last consecutive term, at death, upon disability,
upon a change in control, or upon removal from office by shareholders without
cause. Restricted stock will be forfeited if a director ceases to serve as a
director for any reason that does not cause a lapse of the restriction period.
9
BOARD COMMITTEES AND MEETINGS
AUDIT COMMITTEE 6 MEETINGS IN 1999
FUNCTIONS CURRENT MEMBERS
- --------- ---------------
- - Reviews Pacific Century's filings with the Securities and David A. Heenan (Chair)
Exchange Commission
- - Reviews tax matters of consequence to Pacific Century and Mary G.F. Bitterman (Vice Chair)
its subsidiaries
- - Reviews the internal financial controls of Pacific Stuart T.K. Ho
Century and its subsidiaries
- - Reviews the scope of auditing activity and reports Robert Wo, Jr.
prepared by Pacific Century's independent and internal +J. Richard Fredericks
auditors and regulatory agencies
- - Reviews the audit services provided by the independent
auditors and makes recommendations to the Board of
Directors concerning the nomination of independent
auditors for Pacific Century
- - Reviews matters pertaining to corporate governance
+ Mr. Fredericks became U.S. Ambassador to Switzerland and resigned from the Board effective November
19, 1999.
COMPENSATION COMMITTEE 4 MEETINGS IN 1999
FUNCTIONS CURRENT MEMBERS
- --------- ---------------
Reviews, approves, and reports to the Board of Directors on the Fred E. Trotter (Chair)
compensation arrangements and plans for senior management of Stuart T.K. Ho
Pacific Century and its subsidiaries
- - Reviews and approves goals for incentive compensation plans *Herbert M. Richards
and stock option plans, and evaluates performance against
those goals
CEO EVALUATION COMMITTEE 2 MEETINGS IN 1999
FUNCTIONS CURRENT MEMBERS
- --------- ---------------
Determines performance objectives of the CEO and evaluates the CEO's Fred E. Trotter (Chair)
performance measured against the performance objectives and goals Stuart T.K. Ho
of Pacific Century Mary G.F. Bitterman
Stanley S. Takahashi
*Herbert M. Richards
EXECUTIVE COMMITTEE 1 MEETING IN 1999
FUNCTIONS CURRENT MEMBERS
- --------- ---------------
Has power to act for the Board whenever the Board is not in session and *H. Howard Stephenson (Chair)
time is of essence Lawrence M. Johnson (Vice Chair)
Richard J. Dahl
Stuart T.K. Ho
Fred E. Trotter
**Mary G.F. Bitterman
**David A. Heenan
**Two non-employee directors serve for six-month terms
NOMINATING COMMITTEE 3 MEETINGS IN 1999
FUNCTIONS CURRENT MEMBERS
- --------- ---------------
Reviews the qualifications of all Board candidates and recommends Fred R. Trotter (Chair)
candidates for membership on the Board Stuart T. K. Ho (Vice Chair)
Peter D. Baldwin
Mary G.F. Bitterman
David A. Heenan
*Herbert M. Richards, Jr.
* Messrs. Stephenson and Richards, currently directors, have reached Martin A. Stein
the mandatory retirement age of 70 and will retire from the Board *H. Howard Stephenson
effective Stanley S. Takahashi
April 28, 2000. Donald M. Takaki
10
BENEFICIAL OWNERSHIP
At the close of business on December 31, 1999, Pacific Century had 80,065,876
shares of common stock outstanding. As of December 31, 1999, this table shows
how much Pacific Century common stock (i) is owned by its directors, nominees,
and executive officers and (ii) by two companies that own beneficially 5% or
more of Pacific Century's common stock.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
NUMBER OF PERCENT OF
SHARES OUTSTANDING
BENEFICIALLY RIGHT TO SHARES AS OF
NAME OWNED ACQUIRE TOTAL 12-31-99
- ------------------------------------------- --------- --------- --------- ----
Wellington Management Co., LLP 75 State
Street Boston, Massachusetts 02109 6,464,800 (1) -0- 6,464,800 8.06%
State Farm Mutual Auto Insurance Company
and its related entities One State Farm
Plaza Bloomington, Illinois 61701 5,061,312 (2) -0- 5,061,312 6.30%
Peter D. Baldwin 3,529 (3) 8,000 (9) 11,529 *
Mary G.F. Bitterman 11,914 (3)(4) 8,000 (9) 19,914 *
David A. Heenan 10,453 (3)(7) 8,000 (9) 18,453 *
Stuart T.K. Ho 18,435 (3)(4)(8) 8,000 (9) 26,435 *
Martin A. Stein 200 (3) 2,000 (9) 2,200 *
Stanley S. Takahashi 2,300 (3)(4) 8,000 (9) 10,300 *
Donald M. Takaki 5,264 (3)(4) 7,000 (9) 12,264 *
Fred F. Trotter 4,208 (3) 8,000 (9) 12,208 *
Lawrence M. Johnson 440,123 (3)(5)(6) 553,707 993,830 *
Richard J. Dahl 159,002 (3)(4)(5) 459,110 618,112 *
Alton T. Kuioka 77,166 (3)(5) 214,188 291,354 *
Mary P. Carryer 6,177 (3) 131,575 137,752 *
David A. Houle 10,161 (4)(5) 107,198 117,359 *
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
AS A GROUP (13 PERSONS) 748,932 1,522,778 2,271,710 2.84%
* Each of the directors and named executive officers beneficially owns less than 1% of the outstanding
common stock except Mr. Johnson. Mr. Johnson beneficially owns 2% of the outstanding shares, if the
152,273 shares owned by the Bank of Hawaii Charitable Foundation mentioned in footnote 6 are included.
11
NOTES TO TABLE ON AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
(1) Wellington Management Company, LLP ("WMC") is an investment adviser
registered with the Securities and Exchange Commission under the Investment
Advisers Act of 1940, as amended. As of December 31, 1999 WMC, in its
capacity as investment adviser, may be deemed to have beneficial ownership
of 6,464,800 shares of Pacific Century common stock owned by numerous
investment advisory clients, none known to have such interest for more than
five percent of the class. As of December 31, 1999, WMC had shared voting
power over 4,450,540 shares, and shared dispositive power over 6,464,800
shares.
(2) State Farm Mutual Automobile Insurance Company and its related entities have
sole power to vote or to direct the vote and to dispose or to direct the
disposition of 5,061,312 shares.
(3) Includes 800 restricted shares that each of the directors owns under the
Director Stock Program with the exception of the following directors and
named executive officers: Mr. Stein, 200 shares; Mr. Kuioka, 600 shares; and
Ms. Carryer, 200 shares. See discussion on page 9 for further information on
the Director Stock Program.
(4) Includes shares held by family members individually, jointly, or in trust as
follows: Ms. Bitterman, 6,030 shares; Mr. Ho, 675 shares; Mr. Takahashi,
1,500 shares; Mr. Takaki, 2,393 shares; Mr. Dahl, 57,778 shares; and
Mr. Houle, 6,998 shares.
(5) Includes shares held in trust for the following named executive officers
under the Pacific Century Profit Sharing Plan described on page 21:
Mr. Johnson, 26,076 shares; Mr. Dahl, 7,182 shares; Mr. Kuioka; 18,630
shares; and Mr. Houle 2,563 shares.
(6) Includes 152,273 shares owned by the Bank of Hawaii Charitable Foundation,
of which Mr. Johnson is President. Mr. Johnson disclaims beneficial
ownership of those shares.
(7) Includes 420 shares owned by a family partnership.
(8) Includes 1,298 shares as co-trustee for the Chinn Ho Trust under Trust
Agreement dated February 6, 1987.
(9) Includes restricted shares that each director has the right to acquire under
the Director Stock Program described on page 9.
12
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee, composed entirely of independent directors, sets
and administers the policies that govern Pacific Century's executive
compensation programs, and various incentive and stock option programs. The
Committee reviews compensation levels of members of management, evaluates the
performance of management, and considers management succession and related
matters. All decisions relating to the compensation of Pacific Century's
officers are reviewed with the full Board.
The policies and underlying philosophy governing Pacific Century's executive
compensation program, endorsed by the Committee and the Board of Directors, are
designed to accomplish the following:
1. Maintain a compensation program that is equitable in a competitive
marketplace.
2. Provide opportunities that integrate pay with Pacific Century's annual
and long-term performance goals.
3. Encourage achievement of strategic objectives and creation of
shareholder value.
4. Recognize and reward individual initiative and achievements.
5. Maintain an appropriate balance between base salary and short and
long-term incentive opportunity.
6. Allow Pacific Century to compete for, retain, and motivate talented
executives critical to Pacific Century's success.
The Committee seeks to target executive compensation at levels that the
Committee believes to be consistent with others in Pacific Century's industry.
The executive officers' compensation is weighted toward programs contingent upon
Pacific Century's level of annual and long-term performance. In general, for
senior management positions of Pacific Century (including Pacific Century's
executive officers) and its subsidiaries, Pacific Century will pay base salaries
that, on average, are at the 50th percentile of other banks and financial
service companies of Pacific Century's current and projected asset size, and
with similar products and markets. Goals for specific components include:
1. Base salaries for executives generally are targeted at the 50th
percentile.
2. The short-term (one-year) incentive plan will provide 50th percentile
awards if annual goals are achieved. The plan will pay higher awards if
annual performance goals are exceeded.
3. Under long-term incentive plans, Pacific Century will provide to
participants a consistent 50th percentile opportunity from year-to-year,
with possibilities of earning substantially higher levels if long-term
performance goals are exceeded.
Pacific Century retains the services of nationally recognized consulting
firms to assist the Committee in performing its various duties. Those firms
advise the Committee on compensation programs for senior management (including
executive officers) of Pacific Century and its subsidiaries. Pacific Century
also obtains an extensive compensation survey every two years. That survey was
received in October 1999 with the consulting firm's review of Pacific Century's
compensation programs for senior managers.
The 1999 compensation survey provided a comparative analysis of 35 positions
using a comparator group of 24 bank corporations (including Pacific Century).
Those bank corporations were viewed as more comparable to Pacific Century in
terms of overall size, business mix, and geographic scope than the 25 bank
corporations in the S&P Major Regional Bank Index (which includes 10 of the 24
compensation survey bank corporations) used in the performance graph. For the
1999 survey, the consultant obtained base salaries as of April 1, 1999 and other
compensation data from the comparator group and derived market comparables from
those data.
In addition to the survey performed every two years, Pacific Century
participates in a series of annual compensation practice reviews conducted by
nationally recognized compensation consultants. In 1999,
13
those reviews provided pay practice data for professional and managerial
positions at 39 nationwide banks with $15 billion and higher in assets (a group
that includes 14 of the 24 bank corporations utilized for comparative purposes
in the 1999 compensation survey) and 16 in the S&P Major Regional Bank Index.
Based on that data and the results of Pacific Century's 1999 survey, Pacific
Century believes, after taking into account the compensation discussed below,
that salary and total cash compensation of its executive officers generally
corresponds to the 50th percentile of cash compensation opportunities provided
by comparable banks and financial services companies.
1999 COMPENSATION ELEMENTS
Compensation paid to named executive officers in 1999, as reflected in the
Summary Compensation Table on page 18, consisted of the following elements:
(1) base salary, (2) profit sharing and money purchase pension plans,
(3) one-year incentive plan cash award for 1999 payable to Mr. Kuioka,
Ms. Carryer, and Mr. Houle, and (4) bonus paid to Ms. Carryer. In addition, as
indicated in the Summary Compensation Table and the table on page 19 entitled
"STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR," in 1999 the Committee awarded
stock options under Pacific Century's employee stock plan.
BASE SALARIES
Base salaries for executive officers are determined by evaluating:
(i) responsibilities of the positions held, (ii) the experience of the
individual, (iii) the competitive marketplace, and (iv) the individual's
performance of his or her responsibilities.
The greatest emphasis is on individual performance and the competitive
marketplace. Adjustments to salary also reflect new responsibilities assigned or
assumed by the individual. In setting salaries, the focus is generally on
competitive data. Also taken into account are key differences in
responsibilities between the executives of Pacific Century and of other banks,
and the overall economic environment. No specific weighting is given to the
foregoing factors.
The Committee did not increase the base salaries of the named executive
officers for 1999 in consideration of a number of factors including the
implementation of New Era Redesign initiatives and the economic situations in
Hawaii and Asia two of the companies significant markets. The Committee
determined it would decide more appropriately on any base salary changes after
reviewing the Company's 1999 performance and assessing the 1999 Implementation
Phase of the New Era Redesign program.
INCENTIVE PLANS
ONE-YEAR PLAN. The Pacific Century one-year incentive plan (the "One Year
Plan") became effective as of January 1, 1999, and it was approved by the
Company's shareholders at the 1999 annual meeting. The stated objectives of the
One-Year Plan are to optimize profitability and growth of the Company, provide
an incentive for excellence in individual performance, and promote teamwork
among participants.
At the Committee's discretion, each participant is granted a contingent
award expressed as dollars or a percentage of salary for the fiscal year and
contingent on both individual and corporate performance criteria. At the end of
the fiscal year, the Committee assesses the performance and makes a
determination of the final award amount that may be greater or smaller than the
contingent award.
To qualify certain awards as performance-based compensation exempt from the
$1 million compensation deduction limitation under Section 162(m) of the
Internal Revenue Code of 1986 (the "Code"), a contingent award to a named
executive officer is limited to a percentage of an incentive pool determined for
the fiscal year ("incentive pool percentage"). The incentive pool is expressed
as a percentage of the Company's net income for the fiscal year, and the total
of the contingent awards for named executive officers for a fiscal year may not
exceed 100% of the incentive pool. After assessing the satisfaction of the
applicable performance criteria for the fiscal year, the final award amount for
a named executive officer
14
may be lesser, but not greater, than the officer's stated incentive pool
percentage. The incentive pool percentages do not constitute "targets", but
instead constitute the stated upper limit on final award amounts to give the
Committee flexibility in determining final awards in compliance with the
performance-based exemption under Section 162(m). In addition, as an overriding
limitation, the maximum aggregate payout for contingent awards granted in any
one fiscal year to any one participant is $2,000,000.
For 1999, the Committee determined the incentive pool to consist of 2% of
the Company's 1999 net income before tax. The 1999 incentive pool percentages as
a maximum limitation on each named executive officer's final award were:
Mr. Johnson, 11%; Mr. Dahl, 8%; Ms. Carryer, 5%; Mr. Kuioka, 5%; and Mr. Houle
4%. The actual payout amounts for 1999 under the One-Year Plan are set forth in
the Summary Compensation Table on page 18.
The Committee postponed determining any payout from the One-Year Plan for
Messrs. Johnson and Dahl until it better may assess the success of the
Implementation Phase of the New Era Redesign Project.
GROWTH PLAN AND LONG-TERM INCENTIVE COMPENSATION PLAN. The Pacific Century
Sustained Growth Plan (the "Growth Plan") is intended to motivate participants
by emphasizing long-term performance objectives. Under the Growth Plan, each
participant receives a contingent incentive award equal to a specified
percentage of his or her average annual base salary for a three-year performance
period. At the beginning of the three-year performance period, the Committee
establishes specific objective numeric performance goals for the three-year
period based on selected business criteria. Actual awards are determined by
measuring the Company's performance over the three-year performance period.
The business criteria selected for the 1997 to 1999 Growth Plan performance
period were earnings growth rate and return on average equity. The Company did
not meet its performance goals for the cycle ending 1999 and, accordingly, no
long-term incentive payments were made to any named executive officer for that
cycle. Final grants were made under the Growth Plan for the performance period
1998 to 2000.
The Pacific Century Financial Corporation Long-Term Incentive Compensation
Plan (the "Long-Term Plan") was established effective as of January 1, 1999, and
it was approved by the Company's shareholders at the 1999 annual meeting. The
Long-Term Plan replaces the prior Growth Plan under which grants were last made
for the performance period 1998 to 2000. The stated objectives of the Long-Term
Plan are to optimize profitability and growth of the Company over a multi-year
period, provide an incentive for excellence in individual performance, and
promote teamwork among participants.
At the discretion of the Compensation Committee, each participant is granted
a contingent award expressed as a dollar amount or a percentage of average
annual base salary for a performance period and the payment of the award is
contingent upon the achievement of designated performance goals for the
performance period. At the beginning of the performance period, the Committee
establishes specific numeric performance goals for the performance period based
on selected business criteria. Following the completion of the performance
period, the Committee assesses the performance of each participant and make a
determination of the payment of a final award amount that may be greater or
smaller than the contingent award. To qualify certain awards as
performance-based compensation exempt from the compensation limitation under
Section 162(m) of the Code, a contingent award to a named executive officer is
subject to downward adjustment but not upward adjustment above the contingent
award amount. In addition, the maximum aggregate payout for contingent awards
granted in any one fiscal year to any one participant is $2,000,000.
In 1999, the Committee made contingent awards under the Long-Term Plan for
the three-year performance period 1999 to 2002, and the business criteria
selected for measuring the performance objectives and return on average equity
and earnings growth rate. The Long-Term Incentive Plans Table--Awards In Last
Fiscal Year on page 20 sets forth the estimated future payouts for named
executive officers for the performance period if the performance objectives are
achieved.
15
STOCK OPTION PLAN
The Committee considers stock option grants under the Pacific Century
Financial Corporation Stock Option Plan of 1994 (the "Option Plan") for key
employees of Pacific Century and its subsidiaries. Stock options are granted by
the Committee to those key employees whose management responsibilities place
them in a position to make substantial contributions to the financial success of
Pacific Century. Directors who are not employees may not participate in the
Option Plan. The Committee, which administers the Plan, determines whether the
options are incentive stock options or nonqualified stock options. Stock options
ordinarily are granted with an exercise price equal to the market price of
Pacific Century's common stock on the date of grant.
The Committee believes stock options provide a strong incentive to increase
shareholder value, because stock options have value only if the stock price
increases over time. The Committee believes option grants to its executive
officers and other key employees help to align the interests of management with
those of shareholders and to focus the attention of management on the long-term
success of Pacific Century.
The size of stock option awards is based primarily on the individual's
responsibilities and position. Individual awards are also affected by the
Committee's subjective evaluation of other factors it deems appropriate, such as
assumption of additional responsibilities, competitive factors, and achievements
that in the Committee's view are not fully reflected by other compensation
elements. The Committee's decisions concerning individual grants generally are
not affected by the number of options previously exercised, or the number of
unexercised options held.
In 1999, the Committee granted a total of 1,016,000 options of 524 key
employees as follows: In January 1999, 6,500 options to 6 key employees; in
February 1999, 102,500 options to 34 key employees; in April 1999, 29,500
options to 5 key employees; in July 1999, 35,500 options to 9 key employees and
in December 1999, 842,000 options to 496 key employees for a total of 1,016,000
options to 524 key employees. The number of grants in 1999, reflected advice
received by the Committee from a compensation consulting firm that annual levels
of option grants should be .75% to 1.25% of outstanding stock.
The amounts of individual awards to executive officers in 1999 were based on
their individual positions and responsibilities, and the other factors discussed
above. In the case of Mr. Johnson, the Committee elected to grant him a stock
option for 35,000 shares at an option price of $18.125. The 1999 award to
Mr. Johnson reflects the Committee's continuing strategy of balancing short and
long-term incentives in structuring executive officer compensation. The level of
his 1999 option awards was determined primarily by the Committee's subjective
evaluation of the importance to Pacific Century of its Chairman and Chief
Executive Officer relative to positions held by other key employees to whom
options were awarded. In addition, the Committee's December 1999 grants to
Mr. Johnson took into account, without any specific weighting, competitive
considerations and the Committee's view that Mr. Johnson had made significant
contributions and accomplishments in 1999 to Pacific Century.
The Committee has also granted performance share (restricted stock unit)
awards under the Plan to Messrs. Johnson and Dahl and Ms. Carryer in 1998 and to
Mr. Kuioka and Mr. Houle in 1997. Each named executive officer has received an
award that provides for issuance of 10,000 unrestricted units of Pacific Century
common stock if, as of December 31, 2000, Pacific Century attains a return on
average assets of at least 1.2% and a return on average equity of at least
17.5%. If the shares are earned, the grantee will also receive a cash payment
equal to the amount of dividends (without interest) that would have been earned
on the shares if they had been outstanding during the performance period.
CEO COMPENSATION
In evaluating Mr. Johnson's annual compensation as Chief Executive Officer
("CEO"), the Committee has sought to provide levels that are competitive among
comparable banks and financial services corporations as described on pages
13-14. The specific target levels for each element of compensation were
16
the same as those described on page 14 for all Pacific Century executive
officers. Pacific Century's One-Year Incentive Plan, Growth Plan, Long-Term
Plan, and option grants make a substantial percentage of Mr. Johnson's
compensation dependent upon Pacific Century's performance. These arrangements
also implement the Committee's intent to have a significant percentage of each
executive officer's target compensation based on objective long-term performance
criteria.
The members of the Committee are a majority of the CEO Evaluation Committee
and as a result, they have the benefit of that Committee's deliberations on
Mr. Johnson's performance. The Committee engages in an evaluation process with
the CEO Evaluation Committee. The CEO Evaluation Committee requested a
self-performance review from Mr. Johnson, and the CEO Evaluation Committee and
Compensation Committee discussed Mr. Johnson's performance relative to the
criteria set forth below. The Committee presented the ratings and evaluation to
Mr. Johnson and the full board for discussion and Mr. Johnson responded to the
Committees and the full board. The Committee evaluated Mr. Johnson's performance
using the following criteria: strategic planning, financial performance,
structural soundness, decision making, external relations, board relations,
shareholder relations, and corporate objectives. The Committee also considered,
without any specific weighting, key quantitative performance indicators such as
the following:
COMPANY PERFORMANCE
------------------------------
1997 1998 1999
-------- -------- --------
Net Income (millions)................................. $139.5 $ 107 $ 133
Earnings Per Share (EPS)*............................. $ 1.72 $1.32 $1.64
Return on Average Assets (ROAA)....................... .98% 0.72% 0.91%
Return on Average Equity (ROAE)....................... 12.57% 9.21% 10.99%
Equity to Assets (EOA)................................ 7.79% 7.81% 8.30%
- ------------------------
* EPS shown is diluted.
As discussed on page 14 under "Base Salary" and pages 14-15 under "Incentive
Plans," the Committee did not increase Mr. Johnson's base salary for 1999 and
postponed determining any payout under the One-Year Incentive Plan for the
reasons specified.
REVENUE RECONCILIATION ACT OF 1993
In general, Pacific Century intends to maintain deductibility for all
compensation paid to covered employees, and it will comply with the required
terms of the specified exemptions under Section 162(m) of the Code as enacted by
the Revenue Reconciliation Act of 1993, except where that compliance unduly
would interfere with the goals of Pacific Century's executive compensation
program or the loss of deductibility would not be materially adverse to Pacific
Century's overall financial position.
Members of the Compensation Committee
Fred E. Trotter, Chairman
Stuart T. K. Ho
*Herbert M. Richards, Jr.
*Mr. Richards, currently a director, has reached the mandatory retirement age of
70 and will retire from the Board effective April 28, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of Pacific Century served as a member of a compensation
committee (or board of directors serving as such) of any entity of which any
member of the Compensation Committee was an executive officer.
17
EXECUTIVE COMPENSATION
The following table shows for the fiscal years ending December 31, 1999,
1998, and 1997, information on compensation Pacific Century paid its Chief
Executive Officer and other persons who, at December 31, 1999, were the four
most highly compensated executive officers of Pacific Century other than the CEO
("named executive officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------
AWARDS PAYOUTS
---------- --------
ANNUAL SECURITIES LONG
COMPENSATION OTHER RESTRICTED UNDERLYING TERM
------------------- ANNUAL STOCK OPTIONS/ INCENTIVE ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION(1) YEAR ($) ($)(2) ($)(4) (#)(5) (#)(6) ($)(7) ($)(8)
- ---------------------- -------- -------- -------- ------------- --------- ---------- -------- -------------
Lawrence M. Johnson... 1999 735,000 0(3) -- 200 35,000 0 87,790
Chairman of the Board 1998 735,000 200,000 -- 200 150,000 0 86,361
and Chief Executive
Officer 1997 700,000 80,151 -- 200 75,000 0 145,454
Richard J. Dahl....... 1999 525,000 0(3) -- 200 35,000 0 66,730
President and Chief 1998 525,000 175,000 -- 200 120,000 0 61,990
Operating Officer 1997 475,000 48,950 -- 200 60,000 0 96,081
Alton T. Kuioka....... 1999 325,000 225,000(2) -- 200 35,000 0 46,568
Vice Chair and Chief 1998 325,000 150,000 -- 200 55,000 0 39,960
Lending Officer 1997 300,000 30,915 -- 200 32,500 0 61,464
Mary P. Carryer....... 1999 325,000 250,000(2) -- 200 35,000 0 46,568
Vice Chair 1998 325,000 150,000 55,000 0 6,138
1997 50,000 0 -- 82,500 0 0
David A. Houle........ 1999 255,000 130,000(2) -- 35,000 33,707
Executive Vice
President, 1998 255,000 76,500 -- 25,000 0 35,666
Treasurer and Chief
Financial Officer 1997 236,256 58,420 -- 18,000 0 44,055
- ------------------------------
(1) Mr. Johnson has been Chairman of the Board and Chief Executive Officer since August 1, 1994. Mr. Dahl has been
President since August 1, 1994 and Chief Operating Officer since August 1995. Mr. Kuioka, age 56, has been Executive
Vice President since October 26, 1994 and Chief Lending Officer since August 1995; and in April of 1997 assumed the
title of Vice Chair and Chief Lending Officer. Ms. Carryer, age 52, joined the Company on November 1, 1997 as Vice
Chair; from August 1993 to November 1997, Ms. Carryer was General Manager Consumer Marketing/Product Development for
Westpac Banking Corporation. Mr. Houle, age 52, has been Executive Vice President since April 1997 & Senior Vice
President, Treasurer and Chief Financial Officer since December 1992.
(2) "Bonus" consists of cash awards under Pacific Century's One-Year Plans for the year 1997. No cash awards were made to
any named executive officer under the Executive One-Year Plan for 1998, as performance goals were not met. In 1998, a
cash bonus was awarded to the Executive One-Year Plan participants: Mr. Johnson, Mr. Dahl, Mr. Kuioka, and
Ms. Carryer. In 1998, Mr. Houle received a cash award under the Company's One-Year Plan that covers other key
employees of the Company and its subsidiaries. In 1999, Mr. Kuioka, Ms. Carryer, and Mr. Houle received a cash award
under the Company's One-Year Plan. Ms. Carryer also received a bonus of $25,000 for her accomplishments in
successfully addressing the Company's Y2K issues. The Company's incentive plans are described on pages 14-15.
(3) Messrs. Johnson and Dahl received no cash award. The Committee postponed its determination of any payout from the
One-Year Plan for Messrs. Johnson and Dahl for 1999, until such time as it better may assess the success of the
Implementation Phase of the New Era Redesign Project.
(4) Perquisites did not exceed the lesser of $50,000 or 10% of the total of annual salary and bonus reported for any
named executive officer for 1999.
18
(5) In 1997, 1998, and 1999, Messrs. Johnson, Dahl, Kuioka each received 200 restricted shares. In
1999, Ms. Carryer received 200 restricted shares under the Director Stock Program. The fair market
value on the date of the 1997, 1998, and 1999 grants were $20.88, $24.50, and $18.69 per share
respectively. Dividends are paid on the restricted stock.
(6) Under the Pacific Century Stock Option Plan of 1994, each stock option was in tandem with a stock
appreciation right ("SAR"). A SAR entitles the optionee, in lieu of exercising the stock option, to
receive cash equal to the excess of the value of one share over the option price times the number
of shares as to which the option is exercised. All stock option awards were granted with an
exercise price equal to the fair market value of Pacific Century's common stock on the date of
grant. The number and exercise price of the stock options awarded to the named executive officers
were not adjusted for 1997, 1998, and 1999, except adjustments for the 100% stock dividend paid on
December 12, 1997, as required by the underlying stock option plans.
(7) There were no amounts paid under Pacific Century's Sustained Profit Growth Plan (the "Growth Plan")
for the three-year incentive periods of January 1, 1995 through December 31, 1997, January 1, 1996
through December 31, 1998, or January 1, 1997 through December 31, 1999. The Growth Plan is
described on page 15.
(8) This column includes the following allocations under the Pacific Century Profit Sharing Plan, the
Pacific Century Profit Sharing Excess, the Pacific Century Money Purchase Plan, and the Pacific
Century Excess Money Purchase Plan. Those plans are described on pages 21-22.
EXCESS EXCESS
401(K) PROFIT PROFIT MONEY
401(K) SHARING PLAN SHARING MONEY PURCHASE
PROFIT-SHARING PLAN FORMULA PLAN PURCHASE PLAN PLAN
MATCHING ALLOCATION ALLOCATION ALLOCATION ALLOCATION ALLOCATION
------ ------ -------- ------ -------
Lawrence M.
Johnson............ $4,000 $7,938 $ 38,451 $6,400 $31,000
Richard J. Dahl...... $4,000 $7,938 $ 26,792 $6,400 $21,600
Alton T. Kuioka...... $4,000 $7,938 $ 15,629 $6,400 $12,600
Mary P. Carryer...... $4,000 $7,938 $ 15,629 $6,400 $12,600
David A. Houle....... $4,000 $7,938 $ 8,509 $6,400 $ 6,860
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS POTENTIAL REALIZABLE
UNDERLYING GRANTED TO EXERCISE OR VALUE (1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR $/SHARE DATE 5% 10%
- ---------------------- ----------- ------------- ------------- -------- -------- ----------
Lawrence M. Johnson... 35,000(2) 3.45%/16.28% $18.125 12-9-09 $398,955 $1,011,030
Richard J. Dahl....... 35,000(2) 3.45%/16.28% $18.125 12-9-09 $398,955 $1,011,030
Alton T. Kuioka....... 35,000(2) 3.45%/16.28% $18.125 12-9-09 $398,955 $1,011,030
Mary P. Carryer....... 35,000(2) 3.45%/16.28% $18.125 12-9-09 $398,955 $1,011,030
David A. Houle........ 35,000(2) 3.45%/16.28% $18.125 12-9-09 $398,955 $1,011,030
- --------------------------
(1) The Potential Realizable Values were determined using the Black-Scholes model. The following
assumptions were used in determining the values: annual dividend yield of 3.18%, stock price
volatility of 31.35% (based on daily stock prices for the one-year period before the grant date),
and an option term of ten years.
(2) Stock options in tandem with SARs become exercisable one year from the date of grant for a
nine-year period ending December 9, 2009. The exercise or base price of the stock options and
tandem SARs was the fair market value of Pacific Century's common stock on date of grant. All
such options and tandem SARs would become exercisable immediately upon a change in control of
Pacific Century.
19
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table shows the stock options and stock appreciation rights exercised by the
named executive officers during fiscal 1999, and the number and total value of unexercised
in-the-money options as of December 31, 1999.
NUMBER OF SECURITIES VALUE OF UNEXERCISED,
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
SHARES OPTIONS/SARS AT AT FISCAL YEAR-END
ACQUIRED VALUE FISCAL YEAR-END (#) ($)(2)
ON REALIZED --------------------- -----------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------- -------- -------- ---------- ---------- ----------
Lawrence M. Johnson...... 2,786 $ 29,798 553,707 35,000 $1,027,557 $0
Richard J. Dahl.......... 55,514 639,281 459,110 35,000 852,364 0
Mary P. Carryer.......... 5,925 6,666 131,575 35,000 88,948 0
Alton T. Kuioka.......... 12,374 135,244 214,188 35,000 393,120 0
David A. Houle........... 798 5,320 107,198 35,000 165,974 0
- ------------------------
(1) Includes exercise of stock appreciation rights.
(2) The fair market value of Pacific Century's stock at year-end was $18.69.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
ESTIMATED FUTURE PAYOUT UNDER
TARGET PAYOUT LONG-TERM INCENTIVE PLAN
AS A % OF PERFORMANCE OR OTHER ---------------------------------
FY1999-2001 PERIOD UNTIL MATURATION THRESHOLD TARGET MAXIMUM
AVERAGE PAY OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
--------------- ------------------------- --------- --------- ---------
Lawrence M. Johnson................. 50% 3 years ending 12/31/2001 386 385,875 771,750
Richard J. Dahl..................... 45% 3 years ending 12/31/2001 248 248,063 496,125
Mary P. Carryer..................... 40% 3 years ending 12/31/2001 137 136,500 273,000
Alton T. Kuioka..................... 40% 3 years ending 12/31/2001 137 136,500 273,000
David A. Houle...................... 35% 3 years ending 12/31/2001 94 93,713 187,425
Executive Group..................... 20%-50% 3 years ending 12/31/2001 1,030 1,029,849 2,059,698
- ------------------------------
(1) Represents contingent awards under the Pacific Century Financial Corporation Long Term Incentive Compensation
Plan for the three-year performance period January 1, 1999 through December 31, 2001. Under this Plan each
executive receives a contingent award of a specified percentage of his or her average annual base salary over
the three-year period. The payment of final awards is contingent upon the Company's performance as measured by
return on average equity ("ROAE") and earnings growth rate. ROAE is defined as the summation of the Company's
net income as reported in the annual report to shareholders (subject to certain adjustments as determined by the
Compensation Committee) for the performance period divided by the summation of the Company's reported average
total assets (subject to certain adjustments as determined by the Committee) for the performance period.
Earnings growth rate is defined as the percentage growth of earnings per share during the performance period (as
compared to the earnings per share for the fiscal year immediately preceding the performance period). Earnings
per share is defined as the Company's fully diluted earnings per share as reported in the annual report to
shareholders (subject to certain adjustments as determined by the Committee). Maximum payout, which is two times
the contingent award, can occur only if the ROAE for the performance period is 16% or more and earnings growth
rate for the performance period is 30% or more. No payments will be made if ROAE for the performance period is
10% or less and earnings growth rate is 10% or less. If the ROAE for the performance period is about 13% and
earnings growth rate is about 20%, then one times the earnings growth rate would be payable ("Target" above).
After the end of the performance period, the Compensation Committee will make a determination as to the final
award amounts. Target amounts are not presently determinable and the amounts set forth above are based on an
assumed adjustment of 5% per annum of the 1999 base salaries.
20
PENSION PLAN TABLE
ESTIMATED MAXIMUM ANNUAL RETIREMENT BENEFIT
AVERAGE ANNUAL BASED UPON YEARS OF SERVICE
SALARY IN CONSECUTIVE ----------------------------------------------------
HIGHEST PAID YEARS 15 20 25 30 35*
- --------------------- -------- -------- -------- -------- --------
75,$000 $ 20,254 $ 27,005 $ 33,756 $ 40,507 $ 47,258
100,000 27,754 37,005 46,256 55,507 64,758
125,000 35,254 47,005 58,756 70,507 82,258
150,000 42,754 57,005 71,256 85,507 99,758
200,000 57,754 77,005 96,256 115,507 134,758
250,000 72,754 97,005 121,256 145,507 169,758
300,000 87,754 117,005 146,256 175,507 204,758
350,000 102,754 137,005 171,256 205,507 239,758
400,000 117,754 157,005 196,256 235,507 274,758
450,000 132,754 177,005 221,256 265,507 309,758
500,000 147,754 197,005 246,256 295,507 344,758
550,000 162,754 217,005 271,256 325,507 379,758
600,000 177,754 237,005 296,256 355,507 414,758
650,000 192,754 257,005 321,256 385,507 449,758
700,000 207,754 277,005 346,256 415,507 484,758
750,000 222,754 297,005 371,256 445,507 519,758
* Applies only to individuals hired before November 1, 1969.
The Employees' Retirement Plan of Bank of Hawaii (the "Retirement Plan")
provides retirement benefits for eligible employees based on the employee's
years of service and average annual salary during the 60 consecutive months
resulting in the highest average (excluding overtime, incentive plan payouts,
and discretionary bonuses). The normal retirement benefit in the above table
assumes payment in the form of a single life annuity commencing at age 65 and
not subject to any deduction for Social Security or other offset amounts. The
Internal Revenue Code generally limits the maximum annual benefit that can be
paid under the Retirement Plan. If at retirement the annual benefit of any
participant should exceed this limit, the excess amount will be paid to the
participant out of general assets from the Pacific Century Excess Benefit Plan,
an unfunded excess benefit plan designed for this purpose, at the time the
participant receives a distribution of his Retirement Plan benefits.
The Retirement Plan was frozen as of December 31, 1995, except that for the
five-year period commencing January 1, 1996, benefits for certain eligible
participants, including Messrs. Johnson and Kuioka, will increase in proportion
to the increase in the participant's average annual salary. The credited years
of service and the 1995 compensation covered by the Retirement Plan of the named
executive officers as of the 1995 freeze date are as follows: Mr. Johnson,
32 years and $575,004; Mr. Dahl, 13 years and $375,000; Mr. Kuioka 26 years and
$226,257; and Mr. Houle, 2 years and $168,639. From the 1995 freeze date through
1999, the retirement benefits determined under the above table for
Messrs. Johnson and Kuioka were increased by 7.93% and 11.79%, respectively, due
to increases in their average annual salaries. Ms. Carryer is not a participant
in the Retirement Plan.
PROFIT SHARING AND MONEY PURCHASE PLANS
In addition to the Retirement Plan, Pacific Century maintains the Profit
Sharing Plan and Money Purchase Plan as tax-qualified defined contribution
plans. Each plan year, Pacific Century makes a profit sharing contribution to
the Profit Sharing Plan based on Pacific Century's adjusted net income and
adjusted return on equity for the plan year. The profit sharing contribution is
allocated to all participants based on a participant's eligible compensation.
The Profit Sharing Plan contains a 401(k) member savings
21
feature as well as a company matching contribution of $1.25 for each $1.00 (up
to 2% of eligible compensation) a participant contributes in 401(k) savings.
Under the Money Purchase Plan, a participant receives an allocation of an amount
equal to 4% of the participant's total eligible compensation for each plan year.
The Code imposes certain limitations on the annual amounts that any
participant may receive under the Profit Sharing Plan and Money Purchase Plan.
The amount of any excess contributions as a result of Code limitations are
credited under the Excess Profit Sharing and Excess Money Purchase Plans to
accounts maintained on the books of Pacific Century. The amounts allocated under
these plans will be paid from the general assets of Pacific Century at the time
the participant receives a distribution of his respective account from the
Profit Sharing Plan and Money Purchase Plan.
CHANGE-IN-CONTROL ARRANGEMENTS
Pacific Century's Key Executive Severance Plan (the "Severance Plan")
provides participants, following a change in control of Pacific Century, with
severance benefits under circumstances and in amounts set forth in the Severance
Plan and in individual severance agreements with each participant. Each of the
severance agreements with Pacific Century's current named executive officers
provides that a "change of control" will be deemed to have occurred if (1) any
person or group becomes the beneficial owner of 25% or more of the total number
of voting securities of Pacific Century, or (2) the persons who were directors
of Pacific Century before a cash tender or exchange offer, merger or other
business combination, sale of assets, or contested election cease to constitute
a majority of the Board of Directors of Pacific Century or any successor to
Pacific Century.
Mr. Johnson's agreement and the Severance Plan further provide that a
"change of control" will be deemed to have occurred if a majority of the Board
of Directors determines in good faith that a change of control is imminent. For
Messrs. Johnson, Dahl, and Kuioka, Ms. Carryer, and Mr. Houle, severance
benefits are payable if their employment is terminated voluntarily or
involuntarily within two years of a change of control. Key features include:
(1) The payment of a lump sum amount equal to three years of compensation,
consisting of salary, bonuses, and certain other incentive compensation,
calculated in Mr. Johnson's case on the basis of his highest total
compensation during any 12-month period in the preceding three years, and
in the case of Messrs. Dahl, Kuioka, Ms. Carryer, and Mr. Houle, by
applying a multiplier of three to the highest salary, bonus, and
incentive compensation amounts paid in the preceding three years.
(2) Special supplemental retirement payments equal to the retirement
benefits the participant would have received had his or her employment
continued for three years following his or her termination of employment
(or until his or her normal retirement date, if earlier).
(3) The continuation of all other benefits he or she would have received had
employment continued for three years following the termination of
employment (or until his or her normal retirement date, if earlier), such
as medical and group life insurance.
(4) The lump sum payment to Mr. Dahl, Mr. Kuioka, Ms. Carryer, and
Mr. Houle also would include a payment equal to any difference between
the actual payout under the One-Year Incentive Plan for the year of
termination and the maximum amount that would be payable if employment
continued to the end of the period and all performance goals were
achieved.
(5) The agreements with Mr. Dahl, Mr. Kuioka, Ms. Carryer, and Mr. Houle
provide that amounts payable will be grossed up for the amount necessary
to pay any golden parachute excise tax due.
22
Stock options and SARs held by named executive officers will become
immediately exercisable upon a change of control. See notes to the table
entitled "STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR" on page 19. A change in
control also will cause the lapse of restrictions on stock issued under the
Director Stock Program, and (as described on page 9) will entitle named
executive officers to receive all or a portion of the shares covered by
performance share grants. For the One-Year Incentive Plan, the 2000 to 2002 and
1999 to 2001 Long-term Incentive Plans, and the 1998 to 2000 Growth Plan cycles,
the relevant incentive period will end and awards will be paid upon a
dissolution, liquidation, or change in control (as defined under the Severance
Plan) of Pacific Century. In those circumstances, payments will be calculated by
multiplying contingent awards by 2.0 and by adjusting awards in proportion to
the number of months of the original incentive period that elapsed before the
triggering event.
PERFORMANCE GRAPH
The following graph shows the cumulative total return for Pacific Century
common stock compared to the cumulative total returns for the S&P 500 Index and
the S&P Major Regional Bank Index. The graph assumes that $100 was invested on
December 31, 1994 in Pacific Century's stock, the S&P 500 Index and the S&P
Major Regional Bank Index. The cumulative total return on each investment is as
of December 31, of each of the subsequent five years and assumes reinvested
dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
Pacific Century Financial Corporation $100 $146 $176 $213 $216 $171
S&P 500 $100 $138 $169 $226 $290 $351
S&P 500 Major Regional Bank Index $100 $157 $215 $324 $357 $307
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Pacific Century Financial Corporation...... $100 $146 $176 $213 $216 $171
S&P 500 Index.............................. $100 $138 $169 $226 $290 $351
S&P Major Regional Bank Index.............. $100 $157 $215 $324 $357 $307
23
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
Certain transactions involving loans, deposits and certificates of deposit,
other money market instruments, sales of commercial paper, and certain other
banking transactions occurred during 1999 between the Company and Bank of Hawaii
on the one hand and certain directors or executive officers of the Company and
Bank of Hawaii, and members of their immediate families or associates of the
directors on the other. All such transactions were made in the ordinary course
of business on substantially the same terms, including interest rates and
collateral, that prevailed at the time for comparable transactions with other
persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the Securities and Exchange Commission require Pacific Century
to disclose late filings of reports of ownership (and changes in stock
ownership) of Pacific Century common stock by its directors and Section 16
officers. To Pacific Century's knowledge, based solely on review of the copies
of such reports received by Pacific Century and the written representations of
its directors and officers, Pacific Century believes that its directors and
officers satisfied all those filing requirements for 1999, except for one option
exercise for 15,340 shares in October 1999 by Mr. Dahl, and two option exercises
for 3,096 and 3,090 shares in October 1999 by Mr. Kuioka, which when initially
filed did not reflect the exercise as an SAR (stock appreciation right), due to
an administrative oversight at the Company. Upon discovery of those omissions,
Pacific Century immediately filed amended Form 4s.
24
[LOGO]
PACIFIC CENTURY
FINANCIAL CORPORATION
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
2 BROADWAY
NEW YORK, NY 10004
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to submit your proxy 24 hours a day, 7 days a week.
Have your proxy card in hand when you call. You will be prompted to enter the
12-digit Control Number which is located to the right. Your voting instructions
will be repeated to you and you will be asked to confirm them.
VOTE BY INTERNET www.proxyvote.com
Use the Internet to submit your proxy 24 hours a day, 7 days a week. Have your
proxy card in hand when you access the website. You will be prompted to enter
the 12-digit Control Number which is located to the right to obtain your records
and create an electronic ballot. You will then be asked to confirm your
submission.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Pacific Century Financial Corporation, c/o ADP,
51 Mercedes Way, Edgewood, NY 11717.
IF YOU VOTE BY PHONE OR THE INTERNET, PLEASE DO NOT MAIL YOUR PROXY.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X
PACIFIC CENTURY FINANCIAL CORPORATION
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS- APRIL 28, 2000
Shareholders of record of Pacific Century common stock at the close of business
February 28, 2000 are entitled to attend the meeting and vote on business
brought before it. The meeting will be held on Friday, April 28, 2000 at 8:30
a.m. on the sixth floor of the Bank of Hawaii Building, 111 South King St,
Honolulu Hawaii.
We look forward to seeing you at the meeting. However, in the event that you are
unable to attend the meeting, your shares may still be voted if you complete,
sign, date and return the enclosed proxy card in the enclosed postage-paid
return envelope. You also may vote by telephone or electronically via the
Internet. The accompaning proxy statement also available online at www.boh.com,
provides certain background information that will be helpful in deciding how to
cast your vote on business transacted at the meeting.
By Order of the Board Directors
/s/ Cori C. Weston
CORI C. WESTON
Vice President and Secretary
Pacific Century Financial Corporation
PACEN2 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------
PACIFIC CENTURY FINANCIAL CORPORATION
THE BOARD OF DIRECTORS RECOMMENDS VOTING
FOR ALL OF THE FOLLOWING PROPOSALS:
VOTE ON PROPOSALS
1. To elect the following Class II Directors for For Withhold For All
terms expiring in 2003. All All Except
(01) David A. Heenan, (02) Stuart T. K. Ho,
(03) Lawrence M. Johnson, (04) Fred E. Trotter 0 0 0
To withhold authority to vote, mark "For All Except"
and write the nominee's number on the line below.
____________________________________________________
For Against Abstain
2. To elect Ernst & Young LLP as Independent 0 0 0
Auditor.
3. To transact any other business that may 0 0 0
be properly brought before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 28, 2000
The undersigned hereby constitutes and appoints PETER D. BALDWIN, MARY G.F.
BITTERMAN AND MARTIN A. STEIN, and each of them, the proxy of the undersigned,
with full powers of substitution, to vote all common stock of Pacific Century
Financial Corporation, that the undersigned may be entitled to vote at the
annual meeting of shareholders of the Pacific Century Financial Corporation to
be held on April 28, 2000, or any adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR EACH OF THE PROPOSALS. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED
FOR ALL NOMINEES AND PROPOSALS, AND ACCORDING TO THE DISCRETION TO THE PROXY
HOLDERS ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
Please date, sign exactly as your name appears on the form and mail the proxy
promptly. When signing as an attorney, executor, administrator, trustee or
guardian please give your full title. If shares are held jointly, both owners
must sign.
- ---------------------------------- ------ ------------------------ ------
- ---------------------------------- ------ ------------------------ ------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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