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
BANCORP HAWAII, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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):
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4) Proposed maximum aggregate value of transaction:
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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:
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4) Date Filed:
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130 MERCHANT STREET
HONOLULU, HAWAII 96813
March 7, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Bancorp Hawaii, Inc. to be held at 8:30 a.m. on Friday, April 26, 1996, on the
Sixth Floor of the Bank of Hawaii Building, 111 South King Street, Honolulu,
Hawaii.
The accompanying Notice of Meeting and Proxy Statement describe the matters
to be considered and voted upon at the meeting. In addition to consideration of
these matters, a report to shareholders on the affairs of the Company will be
given and shareholders will have the opportunity to discuss matters of interest
concerning the Company.
Regardless of the number of shares you own and whether or not you plan to
attend, it is important that your shares be represented and voted at the
meeting. In the event that you are unable to attend the meeting, your shares may
still be voted if you complete, sign, and return the enclosed Proxy Card. Please
complete the Proxy Card and mail it promptly in the enclosed postage-paid return
envelope to insure that your shares are voted in the manner you desire. If you
wish to do so, your proxy may be revoked at any time prior to its use.
On behalf of the Board of Directors, thank you for your cooperation and
support.
Sincerely,
[SIGNATURE]
LAWRENCE M. JOHNSON
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 1996
To Our Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Bancorp
Hawaii, Inc. ("Bancorp") will be held on Friday, April 26, 1996, 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 I Directors for terms expiring in 1999 and a
successor to fill the unexpired term of a retiring Class III Director.
2. To elect an Auditor.
3. To approve the Bancorp Hawaii, Inc. Director Stock Compensation
Program.
4. To transact any other business that may be properly brought before
the meeting.
Only owners of record of Bancorp Hawaii, Inc. common stock at the close of
business February 20, 1996 are entitled to attend the meeting and vote on the
business brought before it.
You are urged to attend the meeting in person. However, in the event that
you are unable to attend the meeting, your shares may still be voted if you fill
in, sign, and return the enclosed Proxy Card in the attached postage prepaid
envelope. The Proxy Statement, to which your attention is now invited, is
intended to provide certain background information that will be helpful in
deciding how to cast your vote on business transacted at the meeting.
Please complete the Proxy Card and mail it promptly in the enclosed
postage-paid envelope to insure that your shares are voted in the manner you
desire. If you wish to do so, your proxy may be revoked at any time prior to its
use.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
CORI C. WESTON
Vice President and Secretary
Bancorp Hawaii, Inc.
Honolulu, Hawaii
Dated: March 7, 1996
IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY
AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THIS WILL SAVE
BANCORP THE EXPENSE OF A SUPPLEMENTARY SOLICITATION.
THANK YOU FOR ACTING PROMPTLY.
BANCORP HAWAII, INC.
130 MERCHANT STREET
HONOLULU, HAWAII 96813
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 26, 1996
(Approximate Mailing Date: March 7, 1996)
The accompanying proxy is solicited by order of the Board of Directors of
Bancorp Hawaii, Inc. ("Bancorp"). Any proxy submitted as a result of this
solicitation may be revoked by the shareholder by giving notice of revocation to
Bancorp in writing or in person at any time prior to its use. Attendance at the
Annual Meeting will not in itself constitute revocation of a proxy.
The expense of this mail solicitation will be paid by Bancorp. In addition
to using the mails, proxies may be solicited by officers, directors, and regular
employees of Bancorp or its subsidiaries, in person, or by telephone, telefax or
telegram without additional compensation for such services. Bancorp will also
request brokers or nominees who hold Bancorp's common stock in their names to
forward proxy material at Bancorp's expense to the beneficial owners of such
stock. Bancorp has retained D.F. King & Co., Inc., a firm of professional proxy
solicitors, to aid in the solicitation of such proxies at an estimated fee of
$8,000 plus reimbursement of out-of-pocket expenses.
VOTING SECURITIES, VOTES REQUIRED, AND PRINCIPAL HOLDERS THEREOF
As of February 20, 1996 (the "record date"), Bancorp had outstanding
41,215,745 shares of common stock. If holders of more than 50% of those shares
are represented at the meeting, either in person or by proxy, a quorum will
exist for conducting business. Each share of common stock is entitled to one
vote; cumulative voting is not permitted under the By-Laws of Bancorp. Approval
of the Bancorp Hawaii, Inc. Director Stock Compensation Program requires the
affirmative vote of a majority of the outstanding stock. All other matters that
will be submitted to the shareholders at the meeting will require an affirmative
vote of a majority of shares present in order to be valid and binding. Under
Hawaii law and Bancorp's Restated Articles of Incorporation and By-Laws,
abstentions and broker non-votes are not voted in favor of or against any matter
that may come before the Annual Meeting. Such abstentions and broker non-votes
will, however, have the effect of a negative vote if an item requires the
approval of a specified percentage of all issued and outstanding shares of
Bancorp's common stock.
At the close of business on December 31, 1995, Bancorp had 41,340,817 shares
of common stock outstanding. Two corporations were known to Bancorp to own
beneficially 5% or more of Bancorp's common stock. Information about such
ownership is set forth in the following table:
NAMES AND ADDRESSES OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
- ----------------- ---------------------------------------------- -------------------- -------------
Common Stock State Farm Mutual Automobile Insurance 2,811,556(1) 6.8%
Company and its related entities
One State Farm Plaza
Bloomington, Illinois 61701
Common Stock Ruane, Cunniff & Co., Inc. 2,257,562(1) 5.5%
767 Fifth Avenue, Suite 4701
New York, NY 10153-4798
- ---------
(1) State Farm Mutual Automobile Insurance Company and its related entities have
sole voting and dispositive power over the 2,811,556 shares.
Ruane, Cunniff & Co., Inc., may be deemed beneficial owner of 2,257,562
shares, has sole voting power over 1,952,600 shares, sole dispositive power over
691,262 and shared dispositive power over 1,566,300.
1
ELECTION OF DIRECTORS
The Restated Articles of Incorporation of Bancorp provide that the Board of
Directors shall consist of not less than 3 nor more than 15 persons who shall be
elected for such terms as may be prescribed in the By-Laws of Bancorp. The
By-Laws of Bancorp provide for a Board of Directors consisting of 12 persons
divided into 3 classes, with the terms of office of one class expiring each
year. Directors to succeed the class of directors whose terms expire will be
elected for terms of 3 years at Bancorp's annual meetings.
Listed below are the four persons who have been nominated as Class I
directors to serve 3-year terms to expire in 1999, and the person who has been
nominated as a Class III director to fill the unexpired term of a Class III
director who has reached mandatory retirement age. All of the nominees, except
Stanley S. Takahashi and Thomas C. Leppert, are currently serving as directors
of Bancorp. Mr. Takahashi has been nominated as a Class III director to succeed
Charles R. Wichman, who has reached mandatory retirement age. Mr. Leppert has
been nominated as a Class I director. Should any of these nominees become unable
to serve, an event which is not anticipated by Bancorp, the proxies, except
those from shareholders who have given instructions to withhold voting for the
following nominees, will be voted for such other persons as management may
nominate. Certain information concerning each of the nominees, and each of the
continuing directors, is set forth after his/her name. Each nominee or director
continuing in office is also currently a director of Bank of Hawaii (the
"Bank"), Bancorp's major subsidiary.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS -- TERMS EXPIRE IN 1999
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1995
- ----------------------- -------------------------------------------- ------------------------ -----------------
Peter D. Baldwin; President of Baldwin Pacific Corporation Maui Land & Pineapple 1,337(1)
58; 1991 (diversified foods distribution, milk and Co., Inc.
juice processing/packaging company, and
orchard farming in 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.
Richard J. Dahl; President of Bancorp and the Bank, since Various subsidiaries and 168,591(2)
44; 1995 August 1994 and Chief Operating Officer of affiliates of Bancorp.
the Bank since August 1995; Executive Vice
President and Chief Financial Officer of
Bancorp April 1987 to January 1994; Vice
Chairman of the Bank December 1989 to July
1994.
Thomas C. Leppert; President and Chief Executive Officer, Castle & Cooke, Inc. 750(3)
41 Castle & Cooke Properties, Inc. since
1989; President of Residential Operations
and Hawaii Commercial Operations, Castle &
Cooke, Inc. (commercial and residential
development) since 1995.
2
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1995
- ----------------------- -------------------------------------------- ------------------------ -----------------
*K. Tim Yee; President, Queen's International Corporation Various subsidiaries and 4,598(4)
69; 1984 since April 1993; President, The Queen affiliates of Bancorp.
Emma Foundation (engaged in healthcare
alliances and partnerships with other
healthcare companies) May 1988 to March
1993.
*K. Tim Yee's term of office will expire on the day of the annual meeting of
stockholders to be held in 1997, as he will have reached mandatory retirement
age. His successor will be elected by the stockholders at the annual meeting in
1997 to serve for the remainder of the Class I director's term expiring in
1999.
NOMINEE FOR ELECTION AS CLASS III DIRECTOR -- TERM EXPIRES IN 1998
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1995
- ----------------------- --------------------------------------------- ---------------------- --------------------
Stanley S. Takahashi; Executive Vice President & Chief Operating Various subsidiaries 750(5)
63 Officer, Kyo-Ya Company, Ltd. since 1989; and affiliates of
Secretary/Treasurer since 1994 and Director Bancorp.
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).
The foregoing persons will be nominated for election as Class I and Class
III directors, as indicated above. The shares represented by the proxy cards
returned will be voted FOR the election of these nominees unless you specify
otherwise.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE ABOVE
NOMINEES AS DIRECTORS.
A shareholder may nominate a particular individual to serve as a director,
provided notice of such nomination together with the written consent of such
individual to serve as a director is given at least 14 days prior to the annual
meeting. The notice of nomination must be made in writing, delivered or mailed
by first class mail to the Secretary of Bancorp, and must set forth (i) the
name, age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of the
nominee, and (iii) the number of shares of Bancorp stock beneficially owned by
the nominee.
3
DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS -- TERMS EXPIRE IN 1998
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1995
- ---------------------------- ---------------------------------------- ---------------------- -----------------
Mary G. F. Bitterman; President and Chief Executive Officer, Various subsidiaries 6,116(6)
51; 1994 KQED, Inc. (public broadcasting and affiliates of
center) since November 1993; Bancorp.
Consultant (telecommunications, McKesson Corp.
investments and Asian-Pacific affairs)
November 1988 to October 1993.
Herbert M. Richards, Jr.; President and Manager, Kahua Ranch, Ltd. Various subsidiaries 3,661(7)
66; 1994 (cattle and sheep ranching and and affiliates of
diversified agricultural business) Bancorp.
since December 1953.
H. Howard Stephenson; Retired; Chairman and Chief Executive Various subsidiaries 282,264(8)
66; 1980 Officer of Bancorp and Bank March 1989 and affiliates of
to July 1994; President of Bancorp and Bancorp.
Bank August 1980 to February 1989.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS -- TERMS EXPIRE IN 1997
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1995
- ------------------------- ---------------------------------------- -------------------------- -----------------
David A. Heenan; Trustee, The Estate of James Campbell Aloha Airgroup, Inc.; 1,545(9)
56; 1993 since January 1, 1995; Chairman, Aloha Airlines, Inc.;
President and Chief Executive Officer C. Brewer Homes, Inc.;
of Theo H. Davies & Co., Ltd. (the Pico Products, Inc.;
North American subsidiary of Hong Bank of Hawaii
Kong-based Jardine Matheson Holdings International, Inc., a
Ltd., a diversified multi-national subsidiary of Bank of
corporation) July 1982 to December 31, Hawaii.
1994.
4
SHARES OF BANCORP
NAME, AGE, AND OTHER COMMON STOCK
YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) DIRECTORSHIPS OWNED AS OF
AS DIRECTOR DURING PAST 5 YEARS HELD DECEMBER 31, 1995
- ------------------------- ---------------------------------------- -------------------------- -----------------
Stuart T. K. Ho; Chairman of the Board and President, Aloha Airgroup, Inc.; 16,357(10)
60; 1987 Capital Investment of Hawaii, Inc. Aloha Airlines, Inc.;
(diversified real estate development Bishop Insurance of
and management company) since January Hawaii, Inc.;
1982; Chairman, Gannett Pacific Corp. Capital Investment of
(newspaper publishing company) since Hawaii, Inc.;
1987. Gannett Co., Inc.;
College Retirement
Equities Fund;
Various subsidiaries
and affiliates of
Bancorp.
Lawrence M. Johnson; Chairman and Chief Executive Officer of Various subsidiaries and 330,190(11)(12)
55; 1989 Bancorp and Bank since August 1994; affiliates of Bancorp.
President of Bancorp and Bank March
1989 to July 1994; Executive Vice
President of Bancorp August 1980 to
February 1989.
Fred E. Trotter; President of F. E. Trotter, Inc. since Longs Drug Stores; 2,692(13)
65; 1978 January 1970. Maui Land &
Pineapple Co., Inc.;
Bancorp Leasing of
Hawaii Inc., a
subsidiary of Bank
of Hawaii.
- ---------
(1) Shares owned by Baldwin Pacific Corporation, of which Mr. Baldwin is
President, Director, and owner of all of the outstanding shares of stock.
(2) Includes 19,494 shares owned jointly with spouse, 22,033 shares held in
trust for spouse, 1,389 shares owned by son Steven, 1,389 shares owned by
daughter Sarah, 1,335 shares owned by daughter Jane, 1,466 shares held in
trust for Mr. Dahl under the Bank of Hawaii Profit Sharing Plan, and 121,485
shares that Mr. Dahl has the right to acquire within 60 days through the
exercise of stock options.
(3) Includes 750 shares owned jointly with spouse in trust.
(4) Includes 225 shares owned by self in an individual retirement account, 337
shares owned by spouse in an individual retirement account, 200 shares owned
by son Kevin in an individual retirement account, 200 shares owned by
daughter Lauren in an individual retirement account, and 3,636 shares held
in trust for family. Mr. Yee disclaims beneficial ownership, investment and
voting power over the shares held in trust for family.
(5) Includes 750 shares owned jointly with spouse.
(6) Includes 1,705 shares owned jointly with spouse, 932 shares owned by self,
500 shares owned by self in an individual retirement account, 932 shares
owned by spouse, 1,000 shares owned by spouse in an individual retirement
account, and 1,047 shares owned by spouse as custodian for daughter, Sarah.
(7) Includes 2,103 shares owned by Kahua Ranch, Ltd., of which Mr. Richards is
President and Manager and beneficiary of trust, and 1,558 shares owned by
self.
5
(8) Includes 144,124 shares owned jointly with spouse, 56,254 shares owned by
self, and 81,886 shares that Mr. Stephenson has the right to acquire within
60 days through the exercise of stock options.
(9) Includes 1,385 shares owned by self and 160 shares held in trust for Mr.
Heenan.
(10) Includes 370 shares owned by self in an individual retirement account, 562
shares owned by spouse in an individual retirement account and, indirectly,
15,425 shares as co-trustee for the Chinn Ho Trust under Trust Agreement
dated February 6, 1987.
(11) Includes 19,293 shares held in trust for Mr. Johnson under the Bank of
Hawaii Profit Sharing Plan, and 145,219 shares that Mr. Johnson has the
right to acquire within 60 days through the exercise of stock options, and
117,416 owned by self.
(12) Includes 48,262 shares owned by the Bancorp Hawaii Charitable Foundation
(the "Foundation"). The Board of Directors of the Foundation, which consists
of the Bank's directors, has appointed Mr. Johnson as President of the
Foundation. Mr. Johnson, as President, has the authority to direct the
disposition and to vote and execute proxies of such shares on behalf of the
Foundation. Because Mr. Johnson possesses shared voting and investment power
with respect to such shares, he may be deemed to have incidents of
beneficial ownership thereof for certain purposes within the meaning of the
applicable regulations of the Securities and Exchange Commission. If the
total number of shares beneficially owned by Mr. Johnson included such
shares held in trust for the Foundation, the percentage of shares of common
stock owned by Mr. Johnson would be 0.77%. Mr. Johnson has advised Bancorp
that he disclaims beneficial ownership of such shares of Bancorp's common
stock.
(13) Includes 967 shares owned by the F. E. Trotter, Inc. Pension Plan, of which
Mr. Trotter is the sole participant, 21 shares owned by daughter Brooke, and
1,704 shares owned by self.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of December 31, 1995, the number of shares of
common stock of Bancorp beneficially owned by all named executive officers of
Bancorp, individually, and all directors, executive officers and nominees as a
group. Chairman and Chief Executive Officer Johnson and President and Chief
Operating Officer Dahl are omitted from this table since such information is
provided for Mr. Johnson as a director continuing in office on page 5 and Mr.
Dahl as a director nominee on page 2.
NUMBER OF SHARES
NAME, AND AGE OF CURRENT POSITION AND BUSINESS EXPERIENCE BENEFICIALLY OWNED
INDIVIDUAL DURING THE PAST FIVE YEARS (A)
- ---------------------------------- ------------------------------------------------------- --------------------
*Thomas J. Kappock; Executive Vice President of Bancorp April 1987 to June 21,058(b)
51 1995 and Vice Chairman of the Bank December 1989 to
June 1995.
Alton T. Kuioka; Executive Vice President of Bancorp since October 1994, 86,556(c)
52 Vice Chairman of the Bank since June 1994, and Chief
Lending Officer of the Bank since August 1995;
Executive Vice President of the Bank from November
1991 to May 1994; Senior Vice President from October
1988 to October 1991.
David A. Houle; Senior Vice President, Treasurer and Chief Financial 17,208(d)
48 Officer of Bancorp since December 1992 and Executive
Vice President and Chief Financial Officer of the
Bank since February 1994; Senior Vice President and
Investment Manager at Comerica Incorporated from
January 1985 to September 1992.
6
NUMBER OF SHARES
NAME, AND AGE OF CURRENT POSITION AND BUSINESS EXPERIENCE BENEFICIALLY OWNED
INDIVIDUAL DURING THE PAST FIVE YEARS (A)
- ---------------------------------- ------------------------------------------------------- --------------------
Denis K. Isono; Vice President and Controller of Bancorp since 1988; 17,285(e)
44 Senior Vice President of the Bank since 1993, and
Controller of the Bank since 1986.
Directors, nominees and executive 960,958(f)
officers as a group (16 persons)
- ---------
* Mr. Kappock, Executive Vice President of Bancorp and Vice Chairman of the
Bank, retired effective June 30, 1995.
(a) Each of the above named executive officers beneficially owns less than 1% of
the outstanding shares of common stock of Bancorp.
(b) Includes 3,572 shares held in trust for Mr. Kappock under the Bank of Hawaii
Profit Sharing Plan, and 17,486 shares owned by self.
(c) Includes 8,120 shares held in trust for Mr. Kuioka under the Bank of Hawaii
Profit Sharing Plan, 14,118 shares owned by self and 64,318 shares that Mr.
Kuioka has the right to acquire within 60 days through the exercise of stock
options.
(d) Includes 408 shares held in trust for Mr. Houle under the Bank of Hawaii
Profit Sharing Plan, 200 shares owned jointly with spouse, 100 shares owned
by spouse in an individual retirement account, and 16,500 shares that Mr.
Houle has the right to acquire within 60 days through the exercise of stock
options.
(e) Includes 13,675 shares that Mr. Isono has the right to acquire within 60
days through the exercise of stock options, 1,498 shares held in trust for
Mr. Isono under the Bank of Hawaii Profit Sharing Plan, 2000 shares owned
jointly with spouse, 54 shares owned by spouse as custodian for son Tyler
and 58 shares owned by spouse as custodian for son Travis.
(f) Includes 48,262 shares owned by the Bancorp Hawaii Charitable Foundation
(the "Foundation"), of which Mr. Johnson is President, as mentioned in
footnote (12) on page 6, 361,197 shares that may be acquired by executive
officers within 60 days through the exercise of stock options, and 34,357
shares held in trust under the Bank of Hawaii Profit Sharing Plan pursuant
to elections by executive officers. If all such shares are included, all
directors and executive officers of Bancorp as a group owned 2.32% of
Bancorp's common stock on December 31, 1995 and no one director or executive
officer owned more than 1% of such stock.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Bancorp's directors and executive officers and persons who own more than ten
percent of Bancorp's common stock to report their ownership and changes in their
ownership of Bancorp's common stock to the Securities and Exchange Commission
and the New York Stock Exchange. Specific due dates for these reports have been
established by the Securities and Exchange Commission and Bancorp is required to
report in this proxy statement any failure of its directors and executive (and
certain other) officers to file by these dates.
To Bancorp's knowledge, based solely on review of the copies of such reports
received by Bancorp and the written representations of its directors and
officers, Bancorp believes that all such filing requirements were satisfied by
its directors and officers for 1995, except that 2 reports covering 3
transactions in 1994 (grant of stock option and expiration of two stock options
for no value), were inadvertently filed late by Director H. Howard Stephenson. A
Form 5 was filed immediately upon discovery of the omissions.
7
DUTIES AND COMPENSATION OF DIRECTORS
Bancorp's Board of Directors met a total of 7 times during 1995. Each of the
directors attended 75% or more of the aggregate total number of meetings of the
Board of Directors and the total number of meetings held by the committees on
which he or she served in 1995.
With the exception of Mr. Johnson and Mr. Dahl, who are not compensated for
serving on the Board of Directors, each director was paid an annual retainer of
$8,000, plus $750 for each regular Board meeting attended.
The Board of Directors has 4 committees -- Audit Committee, Compensation and
Management Development Committee, Executive Committee, and Nominating Committee.
Directors who are not employees of Bancorp or any of its subsidiaries serving as
members of the Audit Committee, Compensation Committee, and Executive Committee
receive $600 for each meeting attended. The chairman and vice chairman of the
Audit Committee also receive an annual retainer of $3,000 and $2,500
respectively.
Bancorp maintains a Directors' Deferred Compensation Plan ("Plan") under
which each director may elect to defer all of his annual retainer and meeting
fees or all of his annual retainer. Under the Plan the rate of interest paid on
the deferred amounts is the average cost of interest bearing deposits of the
prior year, compounded and credited quarterly. The rate of interest paid on the
deferred amounts for the year 1995 was 3.62%. Distribution of the deferred
amounts will commence as of the first day of the first calendar month after the
participating director ceases to be a director of Bancorp. Distribution will be
made in a lump sum or in approximately equal annual installments over such
period of years (not exceeding 10 years) as the director elects. The Plan was
amended December 13, 1995, effective January 1, 1996, to permit investment of
the deferred amounts into Pacific Capital Funds. The deferred amounts will no
longer be credited with interest but will be valued based on the underlying
investment in the Pacific Capital Funds.
AUDIT COMMITTEE
The Audit Committee, composed of Stuart T. K. Ho (Chairman), Mary G. F.
Bitterman (Vice-Chairman), David A. Heenan, Robert Wo, Jr., and K. Tim Yee, met
3 times during 1995. The primary functions of this Committee are to review
Bancorp's filings with the Securities and Exchange Commission, review tax
matters of consequence to Bancorp and its subsidiaries, review the internal
financial controls of Bancorp and its subsidiaries, review the scope of auditing
activity and reports prepared by Bancorp's independent and internal auditors and
regulatory agencies, and report the results to the Board of Directors. The
Committee also annually reviews the audit services provided by the independent
auditors and makes recommendations to the Board of Directors with respect to the
nomination of independent auditors for Bancorp.
COMPENSATION COMMITTEE
The Compensation Committee, composed of Fred E. Trotter (Chairman), Stuart
T. K. Ho, and Charles R. Wichman, met 4 times during 1995. The functions of this
Committee are to review, approve, and report to the Board of Directors, the
compensation arrangements and plans for senior management of Bancorp and its
subsidiaries. No member of the Compensation Committee may be an executive
officer of Bancorp and no executive officer of Bancorp may be a member of the
parallel committee of a corporation of which any of Bancorp's outside directors
is an officer or director. No executive officer of Bancorp is a director of
another entity having an executive officer who is a member of the Compensation
Committee.
EXECUTIVE COMMITTEE
The Executive Committee, which did not meet during 1995, is composed of H.
Howard Stephenson (Chairman), Lawrence M. Johnson, Richard J. Dahl, Stuart T. K.
Ho, Charles R. Wichman, and two other non-employee directors (currently David A.
Heenan and Mary G. F. Bitterman) who serve for six-month rotating terms. This
Committee is authorized to exercise certain powers of the Board of Directors,
which are delegated by resolution, during intervals between the meetings of the
Board of Directors when time is of the essence.
8
NOMINATING COMMITTEE
The Nominating Committee, composed of Fred E. Trotter (Chairman), Peter D.
Baldwin, Mary G. F. Bitterman, David A. Heenan, Stuart T. K. Ho, Herbert M.
Richards, Jr., Charles R. Wichman, and K. Tim Yee, did not meet during 1995. The
Nominating Committee did meet in January 1996. The functions of this Committee
include the authority to consider and recommend to the Board of Directors
nominees to fill Board vacancies. In addition to the nomination procedure
discussed on page 3, this Committee will consider recommendations by
shareholders for nominees for election to the Board, if such recommendations are
received in writing, prior to the first day in January preceding the next Annual
Meeting, addressed to Bancorp's Nominating Committee in care of the Corporate
Secretary, Bancorp Hawaii, Inc., 130 Merchant Street, Honolulu, Hawaii 96813.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ending December 31,
1995, 1994, and 1993, information with respect to compensation paid by Bancorp
to the Chief Executive Officer, Bancorp's other executive officers, and one
individual who retired as an executive officer during 1995 (the "named executive
officers"):
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
PAYOUTS
ANNUAL COMPENSATION AWARDS -----------
- ----------------------------------------------------------------------------------------- --------- LONG TERM
OTHER ANNUAL OPTIONS/ INCENTIVE ALL OTHER
BONUS COMPENSATION SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION (1) YEAR SALARY ($) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- --------------------------------------------- ---- ---------- -------- ------------ --------- ----------- ------------
Lawrence M. Johnson.......................... 1995 $ 575,004 488,753 -- 65,000 0 40,493
Chairman of the Board and 1994 485,233 145,000 -- 12,500 0 32,533
Chief Executive Officer 1993 411,685 191,603 -- 20,000 276,394 38,834
Richard J. Dahl.............................. 1995 $ 375,000 255,000 -- 50,000 0 26,440
President and Chief 1994 306,112 100,000 -- 10,000 0 20,555
Operating Officer 1993 251,160 116,890 -- 12,500 168,621 23,691
Alton T. Kuioka.............................. 1995 $ 226,257 153,855 -- 27,000 0 15,988
Executive Vice President and 1994 172,287 60,000 -- 7,500 0 11,606
Chief Lending Officer
Thomas J. Kappock............................ 1995 $ 140,004 94,352 -- 7,000 0 219,752
Retired Executive Vice President 1994 264,447 80,000 -- 7,500 0 17,769
1993 251,160 116,890 -- 12,500 168,621 23,691
David A. Houle............................... 1995 $ 168,639 80,319 -- 11,500 0 11,940
Senior Vice President, Treasurer 1994 149,420 40,000 -- 7,500 0 10,075
and Chief Financial Officer 1993 125,004 43,633 -- 2,500 0 986
Denis K. Isono............................... 1995 $ 106,710 38,824 -- 5,000 0 7,562
Vice President and Controller 1994 96,123 20,000 -- 1,250 0 6,481
1993 88,824 2,002 -- 3,293 0 8,425
- ---------
(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 has been Executive Vice
President since October 26, 1994 and Chief Lending Officer since August
1995. Accordingly, information is not presented for Mr. Kuioka prior to
1994. Mr. Kappock, Executive Vice President, retired from Bancorp Hawaii,
Inc. effective June 30, 1995.
(2) "Bonus" consists of cash awards under Bancorp's One-Year Incentive Plans for
the years 1993 and 1995. In 1994 a special cash bonus was awarded to all of
the named executive officers. The material terms of the One-Year Incentive
Plans are described in the Compensation Committee's Report in the section
entitled "One-Year Incentive Plans" on page 16.
9
(3) Perquisites did not exceed $50,000 or 10% of the total of annual salary and
bonus reported for any named executive officer for 1995.
(4) Each stock option was in tandem with a stock appreciation right ("SAR"). A
SAR entitles the optionee, in lieu of exercising the stock option, to
receive cash equal to the excess of the value of one share over the option
price times the number of shares as to which the option is exercised. There
were no restricted stock awards to the named executive officers of Bancorp
for the years 1993, 1994, or 1995. All stock option awards were granted with
an exercise price that is equal to the fair market value of Bancorp's common
stock on the date of grant. The number and exercise price of the stock
options awarded to the named executive officers were not adjusted or amended
for the years 1993, 1994 and 1995, except for the adjustment for the 50%
stock dividend paid on March 15, 1994, as required by the Stock Option
Plans. Stock options granted prior to March 16, 1994 have been adjusted for
the 50% stock dividend paid by Bancorp.
(5) Represents amounts paid under Bancorp's Sustained Profit Growth Plan. There
were no amounts paid under this plan for the three-year incentive period
January 1, 1992 through December 31, 1994 or January 1, 1993 through
December 31, 1995. See section entitled "Sustained Profit Growth Plan" on
page 17.
(6) This column includes allocations for 1995 under the Bank of Hawaii Profit
Sharing Plan (the "Profit Sharing Plan") and the Bank of Hawaii Profit
Sharing Excess Plan (the "Excess Profit Sharing Plan"). The Profit Sharing
Plan is a tax-qualified, defined contribution plan with features meeting the
requirements of Section 401(k) of the Internal Revenue Code. The Internal
Revenue Code limits the annual amounts that any participant may be allocated
under the Profit Sharing Plan. The Excess Profit Sharing Plan, which was
adopted effective as of January 1, 1992, establishes an account on the books
of Bancorp or a subsidiary to which is credited the amount of any reduction
in a participant's allocation under the Profit Sharing Plan. The amounts so
allocated under the Excess Profit Sharing Plan will be paid from the general
assets of Bancorp or a subsidiary at the same time the participant receives
a distribution of his accounts in the Profit Sharing Plan. The freezing of
the Retirement Plan as of December 31, 1995 allowed qualified early retirees
to elect a lump sum distribution which Mr. Kappock elected to receive in the
amount of $209,869.
For 1995 the named executive officers received the following allocations
under the Profit Sharing Plan and Excess Profit Sharing Plan:
PROFIT SHARING EXCESS PROFIT
PLAN SHARING
NAME ALLOCATION PLAN ALLOCATION
- ------------------------------------------------------- -------------- --------------------
Lawrence M. Johnson.................................... $ 10,630 $ 29,863
Richard J. Dahl........................................ 10,630 15,810
Alton T. Kuioka........................................ 10,630 5,358
Thomas J. Kappock...................................... 5,315 4,568
David A. Houle......................................... 10,630 1,310
Denis K. Isono......................................... 7,562 0
10
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED (#) FISCAL YEAR $/SHARE DATE 5%($) 10%($)
- ---------------------------- ------------- ---------------- ----------- ------------ ------------ ------------
Lawrence M. Johnson......... 20,000(2) 3.53%/12.08% $ 27.63 2-16-2005 $ 1,772,071 $ 4,161,723
45,000(3) 7.95%/27.19% 36.75 12-03-2005 5,303,224 12,454,668
Richard J. Dahl............. 15,000(2) 2.65%/ 9.06% 27.63 2-16-2005 1,329,053 3,121,292
35,000(3) 6.18%/21.15% 36.75 12-03-2005 4,124,730 9,686,964
Alton T. Kuioka............. 7,000(2) 1.24%/ 4.23% 27.63 2-16-2005 620,225 1,456,603
20,000(3) 3.53%/12.08% 36.75 12-03-2005 2,356,989 5,535,408
David A. Houle.............. 1,500(2) 0.27%/ 0.91% 27.63 2-16-2005 132,905 312,129
10,000(3) 1.77%/ 6.04% 36.75 12-03-2005 1,178,494 2,767,704
Denis K. Isono.............. 1,000(2) 0.18%/ 0.60% 27.63 2-16-2005 117,849 276,770
4,000(3) 0.71%/ 2.42% 36.75 12-03-2005 471,398 1,107,082
Thomas J. Kappock........... 7,000(2) 1.24%/ 4.23% 27.63 2-16-2005 620,225 1,456,603
- ---------
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises or stock holdings are dependent on
the future performance of the stock and overall market conditions. There can
be no assurance that the amounts reflected in this table will be achieved.
(2) Stock options in tandem with SARs granted on February 17, 1995 became
exercisable on February 16, 1996 for a nine year period ending February 16,
2005. The exercise price of the stock option and tandem SARs was the fair
market value of Bancorp's common stock on date of grant. Mr. Kappock's stock
options expired upon his retirement prior to the options becoming
exercisable.
(3) Stock options in tandem with SARs granted on December 4, 1995 become
exercisable on December 3, 1996 for a nine-year period ending December 3,
2005. The exercise or base price of the stock options and tandem SARs was
the fair market value of Bancorp's common stock on date of grant. All such
options and tandem SARs would become immediately exercisable upon a change
in control of Bancorp.
The stock options and stock appreciation rights exercised by the named
executive officers during fiscal 1995, as well as the number and total value of
unexercised in-the-money options as of December 31, 1995, are shown in the
following table:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT FISCAL
VALUE YEAR-END (#) YEAR-END ($)(2)
SHARES ACQUIRED REALIZED -------------------------- ---------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- ------------ ----------- ------------- ------------ -------------
Lawrence M. Johnson....... 9,963 $ 257,307 125,219 65,000 $ 1,538,904 $ 165,100
Richard J. Dahl........... 1,560 35,285 106,485 50,000 1,389,833 123,825
Alton T. Kuioka........... 5,569 114,673 57,318 27,000 716,450 57,785
David A. Houle............ 0 0 15,000 11,500 112,262 12,383
Denis K. Isono............ 500 8,748 12,675 5,000 172,364 8,255
Thomas J. Kappock......... 129,167 1,237,700 0 0 0 0
- ---------
(1) Includes exercise of stock appreciation rights.
(2) The fair market value of Bancorp's stock at year-end was $35.88.
11
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR (1)
ESTIMATED FUTURE PAYOUT UNDER
TARGET PAYOUT LONG-TERM INCENTIVE PLAN
AS A % OF FY PERFORMANCE OR OTHER -----------------------------------
96-98 AVERAGE PERIOD UNTIL MATURATION OR THRESHOLD TARGET MAXIMUM
NAME ANNUAL SALARY PAYOUT ($ OR #) ($ OR #) ($ OR #)
- -------------------------------- --------------- -------------------------- ----------- ---------- ----------
Lawrence M. Johnson............. 40% 3 years ending 12-31-98 $ 250 $ 247,000 $ 495,000
Richard J. Dahl................. 35% 3 years ending 12-31-98 140 141,000 282,000
Alton T. Kuioka................. 35% 3 years ending 12-31-98 90 85,000 170,000
David A. Houle.................. 30% 3 years ending 12-31-98 50 54,000 109,000
Denis K. Isono.................. 20% 3 years ending 12-31-98 20 23,000 46,000
- ---------
(1) Represents contingent awards under Bancorp's Sustained Profit Growth Plan
for the three-year incentive period from January 1, 1996 through December
31, 1998. Under this Plan each executive receives a contingent award of a
specified percentage of his average annual base salary for the three-year
period. The maximum cash award payable under the plan is two times the
contingent award. The amount of the cash awards will depend upon Bancorp's
performance as measured by earnings per share growth and return on average
equity. Maximum payout, which is two times the contingent award, can occur
only if the weighted average return on average equity for the three years
covered by the plan during the three-year period is 18% or more and total
growth in earnings per share is 30% or more. No payments will be made if the
weighted average return on average equity for the three years covered by the
plan is 12% or less and total growth in earnings per share is 10% or less.
If growth in the weighted average return on average equity for the three
years covered by the plan during such period is about 15% and growth in
earnings per share is 20%, then one times the contingent awards would be
payable ("Target" above). After the earnings per share growth rate and the
weighted average return on average equity for the three years covered by the
plan have been ascertained, the Chairman and the President of Bancorp will
prepare recommendations for all participants (excluding themselves) for the
Compensation Committee. The Compensation Committee will then make the final
determination of cash awards. Target amounts are not presently determinable
and the amounts set forth above are based on an assumed adjustment of 5% per
annum of the 1995 annual compensation.
PENSION PLAN TABLE
AVERAGE ANNUAL ESTIMATED MAXIMUM ANNUAL RETIREMENT
SALARY IN BENEFIT BASED UPON YEARS OF SERVICE
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.
12
The Employees' Retirement Plan of Bank of Hawaii (the "Retirement Plan")
provides retirement benefits for employees of participating employers who have
completed certain age and service requirements. "Participating employers" means
the Bank, Hawaiian Trust Company, Ltd., First Federal Savings and Loan
Association of America, First Savings and Loan Association of America, First
National Bank of Arizona, and any associated company that has adopted the
Retirement Plan. Although retirement generally occurs at age 65, employees may
retire at or after age 62 with unreduced benefits. The amount of benefits
payable to employees who retire prior to age 62 is subject to specified
adjustments. Benefits paid under the Retirement Plan are primarily determined by
(1) the number of months a participant has worked, and (2) a participant's
average annual salary during the 60 consecutive months in his or her last 120
months of service affording the highest average, excluding overtime, premium
pay, incentive plan payouts, or discretionary bonuses.
The normal retirement benefit shown earlier assumes payment in the form of a
single life annuity commencing at age 65, and is not subject to any deduction
for Social Security or other offset amounts. The Internal Revenue Code generally
limits the maximum annual benefit which can be paid under the Retirement Plan to
the lesser of $120,000 or 100% of the participant's average compensation for the
highest three consecutive calendar years during which he or she was a
participant. Accordingly, if at retirement the annual benefit of any participant
should exceed this limit, the individual's benefit from the Retirement Plan will
be reduced to the permissible maximum. The amount of this reduction will be paid
to the participant from an unfunded excess benefit plan designed for this
purpose. The Internal Revenue Code also limits the maximum average annual salary
that may be considered for purposes of determining a participant's benefit
(e.g., $150,000 beginning in 1994). The amount of the reduction of benefit due
to this salary limitation will also be paid to the participant under the
unfunded excess benefit plan.
The credited years of service and the 1995 compensation covered by the
Retirement Plan of the named executive officers are as follows: Mr. Johnson, 32
years and $575,004; Mr. Dahl, 13 years and $375,000; Mr. Kuioka, 26 years and
$226,257; Mr. Houle, 2 years and $168,639; Mr. Kappock, 23 years and $140,004;
and Mr. Isono, 10 years and $106,710.
On January 25, 1995, Bancorp's Board of Directors adopted a voluntary early
retirement program effective January 3, 1995. Under the program, five years are
added to both an employee's age and years of service for purposes of calculating
benefits under the Retirement Plan. An electing employee will also receive an
additional retirement payment of $250 per month until age 65. Messrs. Johnson,
Kappock and Kuioka were eligible to participate in the program. Only Mr. Kappock
elected to do so and his credited years of service increased to 28 years.
On January 25, 1995, Bancorp's Board of Directors also approved
comprehensive revisions to Bancorp's retirement and profit sharing benefits,
which will take effect on January 1, 1996. The revisions include the freezing of
the Retirement Plan and vesting of participants as of December 31, 1995 (with
the exception that for the next succeeding 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 implementation of a defined contribution retirement
plan under which 4% of an employee's total eligible compensation will be
contributed to an individual retirement account; expanding the compensation
basis upon which contributions to the profit sharing plan are calculated; and
the contribution of $1.25 for each $1 (up to 2% of total eligible compensation)
an employee contributes to the profit sharing member savings plan.
CHANGE-IN-CONTROL ARRANGEMENTS
Bancorp's Key Executive Severance Plan (the "Severance Plan") provides
participants, following a change in control of Bancorp, 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 Bancorp's named executive officers provides that a "change of
control" will be deemed to have occurred if (i) any person or group becomes the
beneficial owner of 25% or more of the total number of voting securities of
Bancorp, or (ii) the persons who were directors of Bancorp before a cash tender
or exchange offer, merger or other business combination, sale of assets, or
contested election cease to constitute a majority of the Board of Directors of
Bancorp or any successor to Bancorp. Mr. Johnson's agreement,
13
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, severance benefits are payable if their employment is terminated
voluntarily or involuntarily within 2 years of a change of control. Such
severance benefits include (i) payment of a lump sum amount equal to 3 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 and Kuioka, by applying a multiplier of 3 to the highest
salary, highest bonus and highest incentive compensation amounts paid in the
preceding three years); (ii) special supplemental retirement payments equal to
the retirement benefits the participant would have received had his employment
continued for 3 years following his termination of employment (or until his
normal retirement date, if earlier); and (iii) continuation of all other
benefits he would have received had employment continued for 3 years following
the termination of employment (or until his normal retirement date, if earlier),
such as hospital, medical-surgical, major medical, and group life insurance. The
lump sum payment to Mr. Dahl and Mr. Kuioka would also 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. For
Mr. Houle, severance benefits are payable if within 2 years of a change of
control his employment is involuntarily terminated (or if he voluntarily
terminates employment following certain events involving demotion, reduction of
responsibilities, relocation, reduction in base salary, certain failures to
continue compensation plans and benefits programs or his participation therein,
or a failure of Bancorp or its successor to assume the obligations to Mr. Houle
under the agreement following a change in control). If such events occur, Mr.
Houle would receive as severance two times his then base salary, two times his
target bonus under the One-Year Incentive Plan, payouts under the One-Year Plan
and the Sustained Growth Profit Plan, continuation of all benefits for two years
(or, if earlier, until normal retirement age), and special retirement benefits
similar to those described above but calculated as though he had continued
employment for two years following termination.
The agreements with Mr. Dahl and Mr. Kuioka provide that amounts payable
thereunder will be grossed up for the amount necessary to pay any golden
parachute excise tax due. Mr. Houle's agreement provides that if payments to him
would constitute or result in "excess parachute payments", payments to him under
the agreement are to be reduced, but only if such reduction would result in an
increase in his net benefit.
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 11.
The Growth Plan and the Incentive Plans provide that the relevant incentive
period will end and awards will be paid upon certain capitalization changes
(including dissolution, liquidation, consolidation or a merger in which Bancorp
is not the surviving corporation). In those circumstances, payments will be
calculated by multiplying contingent awards by 2.0 (and, in the case of the
Incentive Plans and the 1996 to 1998 Growth Plan cycle, by adjusting awards in
proportion to the number of months of the original incentive period that elapsed
prior to the capitalization change).
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee, composed entirely of independent non-employee
directors, sets and administers the policies which govern Bancorp'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 Bancorp's officers are
reviewed by the full Board, except for decisions about awards under Bancorp's
employee stock option plans, which must be made solely by the Committee.
The policies and underlying philosophy governing Bancorp's executive
compensation program, which are endorsed by the Committee and the Board of
Directors, are designed to: (i) maintain a compensation
14
program that is equitable in a competitive marketplace, (ii) provide
opportunities that integrate pay with Bancorp's annual and long-term performance
goals, (iii) encourage achievement of strategic objectives and creation of
stockholder value, (iv) recognize and reward individual initiative and
achievements, (v) maintain an appropriate balance between base salary and short
and long-term incentive opportunity, and (vi) allow Bancorp to compete for,
retain, and motivate talented executives who are critical to Bancorp's success.
The Committee seeks to target executive compensation at levels that the
Committee believes to be consistent with others in Bancorp's industry, with the
executive officers' compensation weighted toward programs contingent upon
Bancorp's level of annual and long-term performance. As a result, the executive
officers' actual compensation levels in any particular year may be above or
below those of Bancorp's competitors, depending upon Bancorp's performance. The
following are Bancorp's competitive targets:
In general, for senior management positions of Bancorp and its subsidiaries
(including Bancorp's executive officers), Bancorp will pay base salaries that,
on average, are at the 50th percentile of other banks and financial service
companies of Bancorp's current and projected asset size, with opportunities for
incentives that will result in total cash compensation above the 50th percentile
when Bancorp's performance exceeds expectations.
Goals for specific components are as follows:
Base salaries for executives generally are targeted at the 50th
percentile of the comparator group.
The short-term (one-year) incentive plan will provide 50th
percentile awards if annual goals are achieved. The plan will pay higher
awards if annual performance goals are exceeded.
Under long-term incentive plans, Bancorp will provide to
participants a consistent 50th percentile opportunity from year-to-year,
with possibilities of earning substantially higher levels if long-term
performance goals are exceeded.
For competitive compensation purposes, Bancorp uses a comparator group of 18
Bank Corporations. This group occasionally changes due to such factors as
mergers and acquisitions, changes in markets, and growth by Bancorp or its
competitors. Bancorp believes these 18 Bank Corporations are more comparable to
Bancorp in terms of overall size, business mix, and geographic scope than the 26
bank corporations in the Montgomery Securities Regional Bank Group used in the
performance graph. Eight of the 18 Bank Corporations are in the Montgomery
Securities Regional Bank Group.
Bancorp retains the services of a nationally recognized consulting firm to
assist the Committee in connection with the performance of its various duties.
The consulting firm provides advice to the Committee with respect to
compensation programs for senior management (including executive officers) of
Bancorp and its subsidiaries. Bancorp also obtains an extensive compensation
survey biannually. Such a survey was received in August 1995 in connection with
the review by the consulting firm of Bancorp's compensation programs for senior
managers.
The 1995 review of Bancorp's compensation programs provided a comparative
analysis of 23 positions. The consulting firm obtained base salaries as of April
1, 1995 and other comparative data from the 18 Bank Corporations, and derived
market comparables from that data. The consulting firm reported that, in its
opinion, Bancorp's overall net total compensation program for the positions
reviewed was 20% below the 50th percentile of market data derived from the
comparator group, and 32% below the 75th percentile of that market data. Because
this comparison was affected by the comparatively low amounts of Bancorp's 1994
bonuses, the consulting firm also provided a comparison of relative positions
using targeted awards. That comparison concluded that targeted net total
compensation was 14% below the 50th percentile of market data and 27% below the
75th percentile of market data. The study also indicated that on an overall
basis each individual component of total compensation (base salary, actual and
targeted annual bonuses, and long-term incentives) was below the 50th
percentile.
15
1995 COMPENSATION ELEMENTS
Compensation paid to named executive officers in 1995, as reflected in the
Summary Compensation Table on page 9, consisted of the following elements: base
salary, profit sharing, and One-Year Incentive Plan cash awards for 1995. In
addition, as indicated in the Summary Compensation Table and the table on page
11 entitled "Stock Option/SAR Grants in Last Fiscal Year", in 1995 the Committee
awarded stock options under Bancorp's employee stock plans. No awards were paid
under Bancorp's Sustained Profit Growth Plan (the "Growth Plan") for the 1993
through 1995 cycle. Both the One-Year Incentive Plan and the Growth Plan are
performance-based plans in which awards to named executive officers are tied to
objective measures of corporate performance.
BASE SALARIES
Base salaries for executive officers are determined by evaluating the
responsibilities of the positions held, the experience of the individual, the
competitive marketplace, and the individual's performance of his
responsibilities, with greatest emphasis 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 Bancorp and of other banks, and the
overall economic environment. No specific weighting is given to the foregoing
factors.
The 1995 compensation survey concluded that the base salaries of Mr. Johnson
and Mr. Dahl (as well as other components of their compensation) were below the
50th percentile of market data. However, the Committee deferred action on their
base salaries until 1996. Mr. Kuioka's 17.5% adjustment to base salary during
1995 reflected, among other things, the assignment to him of additional
responsibilities as Chief Lending Officer of the Bank.
ONE-YEAR INCENTIVE PLANS FOR 1995
The stated purpose of Bancorp's One-Year Incentive Plans (in the aggregate,
"Incentive Plans") is to (i) motivate special achievement by eligible employees
upon whose judgment, initiative and efforts Bancorp is largely dependent for the
successful conduct of its business through a compensation program emphasizing
performance objectives; (ii) supplement other compensation plans; and (iii)
assist Bancorp in retaining and attracting such employees. There are two
Incentive Plans. The first covers the Chairman, President, and Vice Chairmen of
Bank of Hawaii, and the second covers other key employees of Bancorp and its
subsidiaries. Under the Incentive Plans, the Committee establishes, at the start
of the fiscal year, performance objectives applicable to annual award payments
and the amounts of such awards. Each participant receives a contingent incentive
award of a specified percentage of his or her annual base salary. The maximum
actual bonus payment permitted is 200% of the contingent incentive award. For
1995, the contingent incentive awards for named executive officers of Bancorp
were as follows: Mr. Johnson -- 50%; Messrs. Dahl, Kappock and Kuioka -- 40%;
Mr. Houle -- 30%; and Mr. Isono -- 25%. The awards under the Incentive Plans
reported in the "Bonus" column of the Summary Compensation Table on page 9 were
based upon financial performance factors established at the start of the fiscal
year and reviewed and approved by the Committee. These factors measured
Bancorp's (i) Return On Average Assets ("ROAA") and (ii) Earnings Per Share. For
purposes of the 1995 Incentive Plans, "ROAA" is defined as Bancorp's net income
subject to certain adjustments such as unusual gain or loss transactions for
1995 divided by Bancorp's Average Total Assets (as reported in its Annual Report
to Shareholders) for 1995 and "Earnings Per Share" is defined as Bancorp's fully
diluted Earnings Per Share as reported by Bancorp in its Annual Report (subject
to certain adjustments such as unusual gain or loss transactions) for 1995. The
Committee regards ROAA and Earnings Per Share as appropriate measures of
performance over a one-year time frame. As elements of the Incentive Plans, they
are intended to induce growth in earnings through a more efficient mix of
earning assets.
Under the 1995 Incentive Plan covering the group which includes the
Chairman, the maximum financial performance factor of 2.0 would be attained if
Earnings Per Share were $2.92 or more and ROAA were 1.10% or more, and a
financial performance factor of 1.0 would be attained if (among other possible
combinations) Earnings Per Share and ROAA were $2.80 and 1.0%, respectively.
Under the 1995 Incentive Plan covering other key employees, the maximum
financial performance factor of 1.4 would be attained if
16
Earnings Per Share were $2.92 or more and ROAA were 1.00% or more or,
alternatively, if Earnings Per Share were $2.86 or more and ROAA were 1.10% or
more, and a financial performance factor of 1.0 would be attained if (among
other possible combinations) Earnings Per Share were $2.80 and ROAA were 1.0%,
respectively. In the case of the Incentive Plan covering the group which
includes the Chairman, the amount of the annual award is determined by
multiplying the contingent incentive award by the financial performance factor,
and the Committee is not permitted to increase (though it may reduce) the
resulting award amount. The Incentive Plan covering other key employees
(including Mr. Houle and Mr. Isono) utilizes both a financial performance factor
and an individual performance factor. The latter factor reflects an appraisal of
the individual's performance of job responsibilities during the incentive
period. For this group, the annual award payment is determined by multiplying
the contingent incentive award by both the financial performance factor and the
individual performance factor.
For 1996, the Incentive Plans will again utilize ROAA and Earnings Per Share
to determine the financial performance factor. For 1996, the Committee has
increased the contingent incentive award for the President and Vice Chairman
(currently Mr. Dahl and Mr. Kuioka) from 40% to 45%. This increased
participation better reflects the added responsibilities of Mr. Dahl and Mr.
Kuioka as Chief Operating Officer and Chief Lending Officer.
SUSTAINED PROFIT GROWTH PLAN
The Bancorp Sustained Growth Plan (the "Growth Plan") is intended to advance
the interests of Bancorp by (i) motivating special achievement by eligible
employees upon whose judgment, initiative, and efforts Bancorp is largely
dependent for the successful conduct of its business through a compensation
program emphasizing long-term performance incentives; (ii) supplementing other
compensation plans; and (iii) assisting Bancorp in retaining and attracting such
employees. The Committee has the discretion to determine which, and to what
extent, selected senior officers will participate in the Growth Plan on the
basis of their ability to make substantial contributions to the long-term
success, growth, and profitability of Bancorp. Currently, 43 senior officers
(including all Bancorp executive officers) participate in the Growth Plan. Under
the Growth Plan, each selected senior officer receives a contingent incentive
award opportunity of a specified percentage of his or her average annual base
salary for the three-year period. Actual awards are determined by measuring
Bancorp's performance over a three year period. Before the beginning of a Growth
Plan year, the Committee selects business criteria or measures and establishes
specific objective numeric goals for the following three-year period.
The measures selected for the 1993 to 1995 Growth Plan cycle were net income
per employee and growth in earnings per share, weighted equally. Bancorp did not
meet its performance goals for the 1993 to 1995 cycle. Accordingly, no long-term
incentive payments were made to any named executive officer with respect to such
cycle.
The performance measures selected by the Committee for the 1996 to 1998
cycle, and contingent award percentages for current named executive officers,
are described on page 12 under "Long-Term Incentive Plans -- Awards in Last
Fiscal Year."
STOCK OPTION PLANS
The Committee considers stock option grants under the Bancorp Hawaii, Inc.
Stock Option Plans of 1988 and 1994 (collectively, the "Plans") for key
employees of Bancorp 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
Bancorp. Directors who are not also employees may not participate in the Plans.
The Committee, which administers the Plans, determines whether the options are
incentive stock options or nonqualified stock options. Stock options are granted
with an exercise price equal to the market price of Bancorp's common stock on
the date of grant.
The Committee believes that stock options provide a strong incentive to
increase shareholder value, since stock options have value only if the stock
price increases over time. The Committee believes that option grants to its
executive officers and other key employees help to align the interests of
management with those of stockholders and to focus the attention of management
on the long-term success of Bancorp.
17
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. While the value realizable from exercisable options is dependent upon
the extent to which Bancorp's performance is reflected in the market price of
Bancorp's common stock at any particular point in time, the decision as to
whether such value will be realized in any particular year is primarily
determined by each individual executive and not by the Committee. Accordingly,
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 February and August 1995, the Committee granted a total of 166,000
options to 159 key employees. In December 1995, the Committee granted options
for a total of 400,000 shares to 227 key employees. The number of grants in
December 1995 reflected advice received by the Committee from two compensation
consulting firms. Bancorp was advised that its option grants in prior years were
low both in comparison to market practice and in comparison to other elements of
compensation. In the consultants' opinions, more typical levels of option grants
were 1% to 1.5% of outstanding stock. In addition, the compensation survey
received in August 1995 indicated Bancorp was not meeting its objective of
providing long-term incentive compensation opportunities at the 50th percentile.
The latter conclusion was based on valuations of options granted in February
1995 and December 1994, as well as valuation at target of the most recent Growth
Plan awards. The Committee concluded in December 1995 that it would increase the
aggregate number of options awarded, and presently anticipates future annual
awards in amounts approximating one percent of Bancorp's outstanding shares.
The amounts of individual awards to executive officers in 1995 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 20,000 shares at an option price of $27.63 on February 17, 1995 and
an option for 45,000 shares at an option price of $36.75 per share on December
4, 1995. The 1995 awards to Mr. Johnson reflect the Committee's continuing
strategy to balance short and long-term incentives in structuring executive
officer compensation. The level of his 1995 option awards was determined
primarily by the Committee's subjective evaluation of the importance to Bancorp
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 1995 grants to Mr. Johnson took into account, without any specific
weighting, competitive considerations (including advice received from the
Committee's consultants that the value of Mr. Johnson's long-term incentive
opportunities provided by the Growth Plan and prior option grants was below the
50% percentile of market data); the Committee's view that Mr. Johnson had
successfully completed the leadership transition that commenced with his
appointment as Chairman and Chief Executive Officer in August 1994; and the
Committee's awareness that, despite the continued impact of a sluggish Hawaii
economy, Bancorp's 1995 results would by most measures improve over those of
1994 (see "Management Discussion and Analysis of Operations" in Bancorp's 1995
Annual Report).
CEO COMPENSATION
In setting Mr. Johnson's target annual compensation as Chief Executive
Officer, the Committee has sought to provide levels that are competitive among
the 18 Bank Corporations that comprise Bancorp Hawaii's comparative group for
compensation purposes. The specific target levels for each element of
compensation were the same as those shown on page 15 for all Bancorp executive
officers. Bancorp's One-Year Incentive Plan, the Growth Plan and option grants
make a substantial percentage of Mr. Johnson's compensation dependent upon
Bancorp's performance. These arrangements also implement the Committee's intent
to have a significant percentage (over 20%) of each executive officer's target
compensation based on objective long-term performance criteria.
Mr. Johnson's base salary remained at $575,000 in 1995, and he received no
payments under the Growth Plan. During 1996, he received a 1995 bonus of
$488,753. The amount of that bonus, which was determined by applying Bancorp's
1995 results to the applicable financial performance factor for the Incentive
Plan in which he participates, increased Mr. Johnson's 1995 direct cash
compensation (salary plus bonus) to a level
18
above the 50th percentile of direct cash compensation market data for the
comparator group. In 1995 the Committee awarded Mr. Johnson at-market options to
acquire a total of 65,000 shares, for reasons described above.
REVENUE RECONCILIATION ACT OF 1993
In 1993, Congress adopted the Revenue Reconciliation Act of 1993 (the "1993
Act"), certain provisions of which limit the ability of publicly-held companies
to deduct for taxation purposes the compensation paid to individual employees in
excess of $1 million in any fiscal year. The 1993 Act affords certain exemptions
to the deductibility limitation, generally requiring that compensation be
closely tied to objective performance criteria.
In general, Bancorp intends to maintain deductibility for all compensation
paid to covered employees, and will comply with the required terms of the
specified exemptions under the 1993 Act, except in circumstances under which
such compliance would unduly interfere with the goals of Bancorp's executive
compensation program or the loss of deductibility would not be materially
adverse to Bancorp's overall financial position. The One-Year Incentive Plan,
discussed on page 17, was amended for 1996 to increase the maximum contingent
incentive award for the President and Vice-Chairmen of Bank of Hawaii (currently
Mr. Dahl and Mr. Kuioka) from 40% to 45% of annual base salary. The Committee
recognizes that any increased compensation attributable to this amendment would
not qualify for exemption from the deduction limitation. However, consistent
with the Committee's above-stated intent, the Committee believes that the
amendment is necessary to achieve the incentive goals of Bancorp's executive
compensation program and any loss of deductibility would not be materially
adverse.
Compensation Committee
Fred E. Trotter, Chairman
Stuart T. K. Ho
Charles R. Wichman
19
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No executive officer of Bancorp served as a member of a compensation
committee (or board of directors serving as such) of any entity of which any
member if the Compensation Committee was an executive officer.
As discussed under "Transactions with Management and Others" Bancorp offers
preferential rate loans for primary residences to directors and executive
officers of Bancorp and its subsidiaries. Such preferential rate loans include
primary residence adjustable rate mortgage loans made to two members of the
Compensation Committee, Messrs. Ho and Trotter. The largest such loan amounts
outstanding during 1995, the loan amounts outstanding at December 31, 1995, and
the average interest rates charged during 1995 in connection with these two
loans were, respectively, $377,100, $368,942 and 6.50% for Mr. Ho, and $314,530,
$310,748 and 6.55% for Mr. Trotter. The third member of the Compensation
Committee, Mr. Wichman, is a retired partner of Carlsmith Ball Wichman Murray
Case & Ichiki. That firm provided legal services to Bancorp and its subsidiaries
in 1995 and is expected to do so in 1996. Mr. Ho is Chairman and President of
Capital Investment of Hawaii, Inc. which purchased commercial paper from Bancorp
during 1995. The range of purchases was from $150,000 to $700,462 at an average
interest rate of 4.75% and the amount outstanding as of December 31, 1995 was
$501,137. Such purchases were made in the ordinary course of business on
substantially the same terms as those prevailing at the time for comparable
transactions with other persons.
PERFORMANCE GRAPH
The following performance graph, which shows a five-year comparison of
cumulative total returns for Bancorp, the S&P 500 Index, and a peer group
defined in the Montgomery Securities Regional Bank Median, shall not be deemed
to be incorporated by reference into any filing under the 1933 Act or the 1934
Act, except to the extent Bancorp specifically incorporates it by reference into
a filing under the 1933 Act or the 1934 Act; nor shall it be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulation 14A or 14C under the 1934 Act or to the
liabilities of Section 18 of the 1934 Act, except to the extent that Bancorp
specifically requests that such information be treated as soliciting material or
specifically incorporates it by reference into a filing under the 1933 Act or
the 1934 Act. As of the date of this Proxy Statement, Bancorp has made no such
incorporation by reference or request.
20
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
(INCLUDES DIVIDEND REINVESTMENT)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
BANCORP HAWAII S&P 500 REGIONAL BANK MEDIAN
12/90 100 100 100
12/91 162 131 183
12/92 163 141 241
12/93 157 155 249
12/94 151 157 235
12/95 222 217 377
* Assumes $100 invested on December 31, 1990 in Bancorp Hawaii stock, the S&P
500 Index and the Montgomery Securities Regional Bank Median. The total return
on each investment is as of December 31 of each of the subsequent five years
and assumes reinvested dividends.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
LOANS
Directors and named executive officers of Bancorp and their associates were
customers of, and had transactions with Bancorp and its subsidiaries in the
ordinary course of business in 1995, and additional transactions in the ordinary
course of business may be expected to take place in the future with Bancorp and
its subsidiaries.
With the exception of the preferential rate loans described below, all
outstanding loans and commitments by Bancorp to directors, named executive
officers, and their associates were made in the ordinary course of business,
were made on substantially the same terms (including interest rates and
collateral) as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risk of collectibility or
present other unfavorable features. Bancorp offers preferential rate loans to
directors and executive officers of Bancorp and its subsidiaries for primary
residences under policies, terms, and conditions applicable to all other
employees at rates no lower than 1% below the prevailing market rates.
21
The following schedule (together with certain information set forth under
"Compensation Committee Interlocks and Insider Participation") provides
information concerning preferential rate loans made by Bancorp to those
directors and executive officers of Bancorp whose aggregate indebtedness
exceeded $60,000 at any time during 1995:
LARGEST LOAN
AMOUNT(S) LOAN AMOUNT(S) AVERAGE
OUTSTANDING OUTSTANDING ON TYPE OF INTEREST RATE
DIRECTORS DURING 1995 12/31/95 TRANSACTION(S) CHARGED
- ------------------------- ------------ --------------- ------------- --------------
Peter D. Baldwin $ 353,440 $ 347,793 Real Estate 6.625%(1)
Richard J. Dahl 1,067,722 1,054,335 Real Estate 7.417%(1)
Stuart T.K. Ho 377,100 368,942 Real Estate 6.500%(1)
Lawrence M. Johnson 561,590 555,410 Real Estate 7.000%(1)
Fred E. Trotter 314,530 310,748 Real Estate 6.552%(1)
K. Tim Yee 72,274 65,131 Real Estate 7.000%(2)
EXECUTIVE OFFICERS
(EXCLUDING THOSE WHO ARE
ALSO DIRECTORS)
- -------------------------
Thomas J. Kappock 288,440 273,356 Real Estate 5.906%(1)
Alton T. Kuioka 488,600 484,028 Real Estate 7.500%(2)
David A. Houle 304,282 299,956 Real Estate 5.750%(1)
Denis K. Isono 175,412 172,150 Real Estate 7.250%(1)
- ---------
(1) Primary residence adjustable rate mortgage loan.
(2) Primary residence fixed rate mortgage loan.
CERTAIN BUSINESS RELATIONSHIPS
Bancorp and its subsidiaries, in the ordinary course of business, have
occasion to utilize the products or services of a number of organizations with
which directors of Bancorp are or were affiliated as officers, directors,
partners or shareholders, including a law firm of which Mr. Wichman is a retired
partner. See "Compensation Committee Interlocks and Insider Participation."
Management believes that such transactions were on terms that were at least as
favorable to Bancorp or the subsidiaries of Bancorp involved as would have been
available from unaffiliated parties.
SALE OF COMMERCIAL PAPER
As a means to borrow funds on a short-term basis, Bancorp issues commercial
paper that matures in 1 to 269 days. The interest rates paid are determined by
prevailing money market conditions. Among those who purchased Bancorp's
commercial paper during 1995 were:
AMOUNT OR AVERAGE AMOUNT
RANGE OF INTEREST OUTSTANDING
PURCHASER PURCHASES RATE 12/31/95
- ------------------------------------------------- ------------- ------------ -----------
Capital Investment of Hawaii, Inc. (of which Mr. $150,000 to 4.75% $ 501,137
Ho, a director of Bancorp, is Chairman and 700,462
President)
22
PROPOSAL TO ADOPT THE BANCORP HAWAII, INC.
DIRECTOR STOCK COMPENSATION PROGRAM
SUMMARY OF THE DIRECTOR STOCK COMPENSATION PROGRAM
Bancorp's Board of Directors has approved, and recommended that shareholders
approve, the Bancorp Hawaii, Inc. Director Stock Compensation Program (the
"Program"), a copy of which is attached as Exhibit A. The following summary
description is qualified in its entirety by reference to the terms of the
Program.
The purpose of the Program is to advance the interests of Bancorp by
encouraging and enabling eligible members of the Boards of Bancorp and the Bank
of Hawaii to acquire and retain throughout each member's tenure as a director a
proprietary interest in Bancorp by ownership of shares of Bancorp common stock.
Under the Program, directors of Bancorp and of Bank of Hawaii will receive
automatic annual grants of options to acquire restricted stock. A director who
is a member of both Boards would receive an annual option for 1,000 restricted
shares, and a director who serves on only one Board would receive an annual
option for 500 restricted shares. In addition, directors of Bank of Hawaii will
receive automatic annual grants of 100 restricted shares (not to exceed 500
restricted shares to any one director). These grants will replace qualifying
shares (which are no longer required by state law) currently held by most Bank
of Hawaii directors. Upon receipt of 500 shares of restricted stock under the
Restricted Share Plan, directors will transfer their qualifying shares to the
Bank at par value.
The Stock Compensation Program is composed of two parts. The first part is
the Bancorp Hawaii, Inc. Director Stock Compensation Plan ("Stock Option Plan"),
and the second part is the Bancorp Hawaii, Inc. Director Restricted Share Plan
("Restricted Share Plan") (collectively, the "Plans").
The Program will be administered by the Compensation Committee, which will
have sole authority: (a) to construe and interpret the Program; (b) to define
its terms; (c) to determine, to the extent not provided by the Program or the
relevant Plan, the terms and conditions of options and restricted shares granted
pursuant to the terms of the Program; and (d) to make all other determinations
and do all other things necessary or advisable for the administration of the
Program.
The maximum aggregate number of shares of Bancorp common stock ("Common
Stock") which may be issued under the Plans is 250,000 shares. The shares of
Common Stock to be issued upon exercise of an option or as grants of restricted
shares may be authorized but unissued shares or reacquired shares. If any of the
options expire or terminate for any reason before they have been exercised in
full, the unpurchased shares subject to those expired or terminated options
shall cease to reduce the number of shares available for purposes of the
Program. Adjustments will be made to the number and kind of shares subject to
the Program, and to shares allocable to unexercised options, restricted shares,
or portions thereof, in connection with any change in Bancorp's outstanding
Common Stock resulting from a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or certain other corporate
changes.
Any director entitled to receive compensation from Bancorp or the Bank for
service as a director, other than a director who is also a salaried officer or
employee of Bancorp or any of its subsidiaries, will be entitled to receive
options and restricted shares according to the terms of the Plans. In addition,
in order to address qualifying shares held by two employee directors, the
current employee directors of Bank of Hawaii will be entitled to receive
restricted stock grants pursuant to the Restricted Share Plan. The Program will
continue for a term of ten years from January 1, 1996, unless sooner terminated
under the provisions of the Program.
Subject to certain limitations and conditions, the Board of Directors may at
any time without further reference to Bancorp's shareholders terminate or
suspend the Program or amend or revise its terms, including the form and
substance of the option and restricted share agreements to be used thereunder.
However, without approval of a majority of Bancorp's voting stock, no amendment
or revision shall increase the maximum number of shares that may be sold or
distributed under the Program, increase the maximum term established for any
option or restricted share, permit the grant of options or restricted shares to
any person other than as provided in the Program, or alter the exercise price
for any option. In addition, shareholder approval will be required in connection
with any amendment that requires such approval in order for the Program to
maintain compliance with Rule 16b-3 of the Securities Exchange Act of 1934.
23
STOCK OPTION PLAN: Under the Stock Option Plan, directors will receive
automatic annual grants of non-qualified options to purchase restricted shares
of Common Stock. The Plan is designed to provide directors a means to obtain
Common Stock on a basis that requires retention of such Common Stock throughout
periods of service as a director, and thereby provide additional incentive to
contribute to the success of Bancorp.
Commencing with the 1996 regular annual meeting of shareholders, Bancorp
will automatically grant an option for the purchase of the following number of
shares to each person who will be a director immediately following that annual
meeting: (a) an option for the purchase of 1,000 shares to a director who is a
director of both Bancorp and Bank of Hawaii; (b) an option for the purchase of
500 shares to a director who is a director of Bank of Hawaii but not Bancorp;
and (c) an option for the purchase of 500 shares to a director who is a director
of Bancorp but not Bank of Hawaii.
Each option will expire ten years from the date on which the option is
granted. The exercise price for option shares will be the fair market value of
the shares at the time the option is granted, defined as the closing price for
the Common Stock on the day of the option grant. If an optionee ceases to serve
as a director for any reason other than death, his or her option will
immediately terminate. If an optionee dies while serving as a director, the
option will expire one year from the date of death (unless by its terms it
expires sooner) and during that period may be exercised by the person or persons
to whom the optionee's rights pass by will or the laws of descent and
distribution.
Options granted pursuant to the Stock Option Plan may not be sold, pledged,
assigned, or transferred in any manner (except, in certain circumstances, to a
trust of which the optionee is both a trustee and beneficiary) otherwise than by
will or the laws of descent or distribution and shall not be subject to
execution, attachment, or similar process.
The shares of Common Stock purchased upon exercise of options granted under
the Stock Option Plan will be restricted shares. If during the Restriction
Period (described below) the holder of restricted shares so acquired ceases to
be a director for any reason other than those events that cause a lapse of
restrictions, the holder will be required to sell those shares to Bancorp at the
price paid for that stock.
RESTRICTED SHARE PLAN: The Restricted Share Plan is designed to grant
Bancorp Common Stock to Bank of Hawaii directors, to require retention of such
stock throughout each director's tenure as a director, and thereby to provide
additional incentive to contribute to the success of the Bank and Bancorp.
On the date of each regular annual shareholders meeting of the Bank,
commencing with the 1996 annual meeting, Bancorp will automatically grant 100
restricted shares of Common Stock to each person who will be a director of Bank
of Hawaii immediately following such annual meeting. The maximum aggregate
number of shares that may be issued to any person pursuant to the Restricted
Share Plan is 500 restricted shares.
The restricted shares granted to a director will be forfeitable during the
Restriction Period, which will commence on the date the restricted shares are
issued, and end on the later of the expiration of the director's current or
future consecutive term(s) as a director. During the Restriction Period, the
shares may not be sold, pledged, assigned, or transferred in any manner (except
to a trust of which the holder is both a trustee and beneficiary), and shall not
be subject to execution, attachment, or similar process. The Restriction Period
will not expire (and no forfeitures will occur) if a person ceases to be a
director of Bancorp or Bank of Hawaii but continues to serve as a director of
Bank of Hawaii or Bancorp. During the Restriction Period (I.E., prior to
expiration of the person's last consecutive term as a director) the holder of
restricted shares will forfeit those shares if he or she ceases to serve as a
director for any reason that does not cause a lapse of the restrictions. The
restrictions will lapse upon the earlier of expiration of the Restriction
Period, the death of the director, the occurrence of a "Change in Control" of
Bancorp, or the removal of a director from office by stockholders without cause.
Section 7 of the Restricted Share Plan provides that a change in control will be
deemed to have occurred if any person or group becomes the beneficial owner of
shares having 25% or more of the votes that may be cast for the election of
directors of Bancorp, or if as the result of or in connection
24
with any tender or exchange offer, merger of other business combination, sale of
assets, contested election or any combination of the foregoing, the persons who
were directors of Bancorp before the transaction cease to constitute a majority
of Bancorp's Board of Directors.
Holders of restricted shares will have during the Restriction Period all of
the rights of Bancorp shareholders, including the right to vote and the right to
receive any dividends.
CERTAIN TAX ASPECTS OF THE PROGRAM: The grant or exercise of a nonqualified
stock option and the grant of restricted shares to a director under the Program
will not at such time result in income to the director for federal income tax
purposes. After receipt of restricted shares, either due to the exercise of an
option or by direct grant, the director will generally recognize taxable
ordinary income at the time the shares cease to be subject to restrictions under
the Program, equal to the excess of the fair market value of the shares at such
time over the amount, if any, paid for the shares (i.e., the exercise price, in
the case of the exercise of an option).
However, within 30 days after the date the restricted shares are received,
the director may elect under Section 83(b) of the Internal Revenue Code to
recognize taxable ordinary income at the time of transfer in an amount equal to
the excess of the fair market value (determined without regard to applicable
restrictions) of the shares at such time over the amount, if any, paid for such
shares. If an election is made, no additional income will be recognized upon
lapse of restrictions on the shares, but, if the shares are subsequently
forfeited, the participant may not deduct the income that was recognized at the
time of receipt of the shares and the participant will have a capital loss equal
to the amount, if any, paid for the shares. The participant's holding period for
the shares will begin at the time the taxable income is recognized under these
rules, and the tax basis of the shares will be that amount of income so
recognized plus the amount, if any, paid for the shares.
Any dividends received on the restricted shares will be taxable compensation
income when received. Bancorp will be entitled to the deduction at the same time
and in the same amount as the director recognizes ordinary income, provided
Bancorp has satisfied any applicable withholding obligations under the Code.
25
NEW PLAN BENEFITS: The following table sets forth summary information
concerning the hypothetical value of stock option grants and stock grants for a
single year to all eligible Bancorp directors under the Stock Option Plan and
Restricted Share Plan, based on the assumption that such grants had been made on
April 26, 1995.
NEW PLAN BENEFITS
DIRECTORS STOCK OPTION AND STOCK GRANT PLANS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK DOLLAR
NUMBER OF PRICE APPRECIATION VALUE
RESTRICTED SHARES FOR OPTION TERMS RESTRICTED
UNDERLYING (3)(4) NUMBER OF SHARES
OPTIONS GRANTED --------------------- RESTRICTED SHARES GRANTED
PLAN PARTICIPANTS (1) (2) 5% ($) 10% ($) GRANTED (2) ($) (3)
- ---------------------------- ----------------- --------- ---------- ----------------- -----------
Lawrence M. Johnson, -0- -0- -0- 100 2,813
Chairman and Chief
Executive Officer
Richard J. Dahl, -0- -0- -0- 100 2,813
President and Chief
Operating Officer
Non-Employee Directors 10,000 902,000 2,118,500 1,000 28,130
as a Group
- ---------
(1) Mr. Johnson and Mr. Dahl are eligible to participate in the Restricted Share
Plan, but not the Stock Option Plan. No other executive officers or
employees of Bancorp or its subsidiaries are eligible to participate in the
Program.
(2) Number of shares aquirable with each annual stock option or stock grant.
Currently, all non-employee directors of Bancorp are also Bank directors and
each would receive options to acquire 1,000 shares and grants of 100 shares.
(3) Amounts shown in these columns are based on a hypothetical grant date of
April 26, 1995 at the then-current fair market value of Bancorp's stock
($28.13). As of December 31, 1995, the fair market value of Bancorp's common
stock was $35.88.
(4) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises or stock holdings are dependent on
the future performance of the stock and overall market conditions. There can
be no assurance that the amounts reflected in this table will be achieved.
VOTE REQUIRED: Approval of the Director Stock Compensation Program requires
the affirmative vote of a majority of Bancorp's Common Stock outstanding on the
record date. Shares represented by executed proxy cards will be voted for this
proposal unless otherwise specified on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE FOREGOING
PROPOSAL.
ELECTION OF AN AUDITOR
The Board of Directors, on recommendation of the Audit Committee, recommends
the reelection of Ernst & Young LLP as Bancorp's Independent Auditor for 1996
and thereafter, until its successor is elected. Ernst & Young LLP has been
Bancorp's Independent Auditor since its incorporation in 1971 and also serves as
Independent Auditor for the Bank. Representatives of Ernst & Young LLP are
expected to attend the Annual Meeting and have indicated that they will have no
statement to make but will be available to respond to questions.
26
OTHER MATTERS
Bancorp knows of no other matter to come before the meeting. However, if any
other matter properly comes before the meeting, the persons named in the
enclosed proxy will vote in accordance with their judgment upon any such
matters.
Section 2.06 of Bancorp's By-Laws provides that for business to be properly
brought before the meeting by a shareholder, the shareholder must give written
notice thereof to the Secretary of Bancorp no later than ten days following the
day notice of the shareholders meeting was mailed to shareholders. Such written
notice must set forth as to each matter that the shareholder proposes to bring
before the meeting including, (i) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
such meeting, (ii) the name and address, as they appear on Bancorp's books, of
the shareholder proposing such business, (iii) the class and number of shares of
securities of Bancorp beneficially owned by such shareholder, and (iv) any
material interest of such shareholder in such business. Any such notice must be
delivered or mailed to the Corporate Secretary, Bancorp Hawaii, Inc., 130
Merchant Street, Honolulu, Hawaii 96813.
SHAREHOLDER PROPOSALS FOR 1997 MEETING
Proposals of shareholders to be presented at and included in Bancorp's Proxy
Statement and proxy for the 1997 Annual Meeting of Shareholders must be received
by Bancorp (at 130 Merchant Street, Honolulu, Hawaii 96813) on or before
November 7, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
CORI C. WESTON
VICE PRESIDENT AND SECRETARY
HONOLULU, HAWAII
MARCH 7, 1996
A COPY OF BANCORP'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE RELATED
FINANCIAL STATEMENTS AND SCHEDULES FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, IS AVAILABLE WITHOUT CHARGE TO ANY SHAREHOLDER WHO REQUESTS A COPY
IN WRITING. THE FORM 10-K CONSISTS PRIMARILY OF INCORPORATION BY REFERENCE OF
INFORMATION CONTAINED IN THE ANNUAL REPORT TO SHAREHOLDERS OR IN THIS PROXY
STATEMENT. REQUESTS FOR COPIES SHOULD BE MAILED TO CORI C. WESTON, VICE
PRESIDENT AND SECRETARY, BANCORP HAWAII, INC., 130 MERCHANT STREET, HONOLULU,
HAWAII 96813.
27
APPENDIX A
BANCORP HAWAII, INC.
DIRECTOR STOCK COMPENSATION PROGRAM
(EFFECTIVE AS OF JANUARY 1, 1996)
1. PURPOSE. This Bancorp Hawaii, Inc. Director Stock Compensation Program
(the "Program") is established by Bancorp Hawaii, Inc. (the "Company"). The
purpose of the Program is to advance the interests of the Company by encouraging
and enabling members of the Board of Directors of the Company or of Bank of
Hawaii ("Directors") to acquire and retain throughout each member's tenure as a
Director a proprietary interest in the Company by ownership of shares of the
Company's common stock ("Common Stock").
2. ELEMENTS OF THE PROGRAM. The Program is composed of two parts. The
first part is the Bancorp Hawaii, Inc. Director Stock Option Plan ("Stock Option
Plan"), and the second part is the Bancorp Hawaii, Inc. Director Restricted
Share Plan ("Restricted Share Plan") (collectively, the "Plans"). The Stock
Option Plan and Restricted Share Plan respectively comprise Plan I and Plan II
of the Program.
3. APPLICABILITY OF GENERAL PROVISIONS. The Plans shall be administered,
construed, governed, and amended in accordance with their respective terms.
Unless any Plan specifically indicates to the contrary, all Plans shall be
subject to the General Provisions of the Stock Compensation Program set forth
below.
GENERAL PROVISIONS OF STOCK COMPENSATION PROGRAM
Article 1. ADMINISTRATION. The Program shall be administered by the
Compensation Committee of the Company's Board of Directors (the "Committee").
The Committee shall hold meetings at such times and places as they may
determine, shall keep minutes of their meetings, and shall adopt, amend, and
revoke such rules and procedures as they may deem proper with respect to the
Program. Any action of the Committee shall be taken by majority vote or the
unanimous written consent of the Committee members.
Article 2. AUTHORITY OF COMMITTEE. Subject to the other provisions of this
Program, and with a view to effecting its purpose, the Committee shall have sole
authority, in its absolute discretion: (a) to construe and interpret the
Program; (b) to define the terms used herein; (c) to determine, to the extent
not provided by the Program or the relevant Plan, the terms and conditions of
options and restricted shares granted pursuant to the terms of the Program; and
(d) to make all other determinations and do all other things necessary or
advisable for the administration of the Program. All decisions, determinations,
and interpretations made by the Committee shall be binding and conclusive on all
participants in the Program and on their legal representatives, heirs, and
beneficiaries.
Article 3. MAXIMUM NUMBER OF SHARES SUBJECT TO THE PROGRAM. The aggregate
number of shares of Company common stock ("Common Stock") which may be granted
under the Plans shall be 250,000 shares. The shares of Common Stock to be issued
upon exercise of an option or issued as restricted shares may be authorized but
unissued shares or reacquired shares.
If any of the options granted under the Program expire or terminate for any
reason before they have been exercised in full, the unpurchased shares subject
to those expired or terminated options shall cease to reduce the number of
shares available for purposes of the Program. However, notwithstanding that the
conditions associated with a grant of restricted shares are not achieved within
the period specified for satisfaction of the applicable conditions, or that the
restricted share grant terminates for any reason before the date on which the
conditions must be satisfied, the shares of Common Stock associated with such
restricted shares shall reduce the number of shares available for purposes of
the Program.
Article 4. ELIGIBILITY AND PARTICIPATION. Any Director entitled to
compensation by the Company or Bank of Hawaii for service as a Director, other
than a Director who is also a salaried officer or employee of the Company or any
of its subsidiaries, shall be entitled to receive options and restricted shares
according to
the terms of the Plans. In addition, those salaried officers or employees of the
Company or any of its subsidiaries who as of January 1, 1996, are members of the
Board of Directors of Bank of Hawaii shall be entitled to receive restricted
shares pursuant to the Restricted Share Plan.
All references herein to "Directors" shall be construed to mean those
persons who are eligible to participate in the Stock Option Plan and/or the
Restricted Share Plan, as the context may require.
Article 5. EFFECTIVE DATE AND TERM OF PROGRAM. The Program shall become
effective as of January 1, 1996, conditioned upon its adoption by the Board of
Directors of the Company and subject to approval of the Program by the holders
of a majority of the Company's outstanding stock entitled to vote thereon at a
meeting of the Company's stockholders following adoption of the Program by the
Board of Directors, which vote shall be taken within 12 months of adoption of
the Program by the Company's Board of Directors; provided, however, that options
and restricted shares may be granted under this Program prior to obtaining
stockholder approval of the Program, but any such options or restricted shares
shall be contingent upon such stockholder approval being obtained and may not be
exercised prior to such approval. The Program shall continue in effect for a
term of ten years from January 1, 1996, unless sooner terminated under Article 7
of these General Provisions.
Article 6. ADJUSTMENTS. If the then outstanding shares of Common Stock are
changed into or exchanged for a different number or kind of shares or securities
through merger, consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock dividend, stock split
or reverse stock split, an appropriate and proportionate adjustment shall be
made in the maximum number and kind of shares or securities as to which options
and restricted shares may be granted under this Program. A corresponding
adjustment changing the number and kind of shares or securities allocated to
unexercised options, restricted shares, or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment in outstanding options shall be made without change in the aggregate
purchase price applicable to the unexercised portion of the option, but with a
corresponding adjustment in the price for each share or other unit of any
security covered by the option.
Article 7. TERMINATION AND AMENDMENT OF PROGRAM. The Program shall terminate
at the end of the term of the Program described in Article 5, or shall terminate
at such earlier time as the Board of Directors may determine. No options or
restricted shares shall be granted under the Program after that date. Subject to
the limitation contained in Article 8 of these General Provisions, the Board of
Directors may at any time without further reference to the Company's
stockholders terminate or suspend the Program or amend or revise its terms,
including the form and substance of the option and restricted share agreements
to be used hereunder; provided, however, that without approval by the
stockholders of the Company representing a majority of the voting power (as
contained in Article 5 of these General Provisions) no amendment or revision
shall (a) increase the maximum aggregate number of shares that may be sold or
distributed pursuant to options or restricted shares granted under this Program,
except as permitted under Article 6 of these General Provisions; (b) increase
the maximum term established under the Plans for any option or restricted share;
(c) permit the granting of an option or restricted share to anyone other than as
provided in Article 4 of the General Provisions; or (d) alter the exercise price
for any option; and provided further that no amendment which requires
stockholder approval in order for the Program to continue to comply with Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"), including
any successor to such Rule, shall be effective unless such amendment shall be
approved by the requisite vote of stockholders of the Company entitled to vote
thereon.
Article 8. PRIOR RIGHTS AND OBLIGATIONS. No amendment, suspension, or
termination of the Program shall, without the consent of the individual who has
received an option or restricted share, alter or impair any of that person's
rights or obligations under any option or restricted share granted under the
Program prior to that amendment, suspension, or termination. However, the grant
of an option or restricted share shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure; to merge or consolidate; or to
dissolve, liquidate, or sell or transfer all or any part of its business or
assets.
Article 9. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the exercise of
any option granted pursuant to the terms of this Program or the achievement of
any conditions specified in any restricted share granted pursuant to the terms
of this Program, no individual shall have any of the rights or privileges of a
stockholder of the Company in respect of any shares of stock issuable upon the
exercise of his or her option or the
satisfaction of his or her restricted share conditions until certificates
representing the shares have been issued and delivered. No shares shall be
required to be issued and delivered upon exercise of any option or satisfaction
of any conditions with respect to a restricted share unless and until all of the
requirements of law and of all regulatory agencies having jurisdiction over the
issuance and delivery of the securities shall have been fully complied with.
Article 10. RESERVATION OF SHARES OF COMMON STOCK. The Company, during the
term of this Program, shall at all times reserve and keep available such number
of shares of its Common Stock as shall be sufficient to satisfy the requirements
of the Program.
Article 11. CONTINUED SERVICE. Nothing contained in this Program shall be
construed as conferring upon a Director the right to continue in the service of
the Company or of Bank of Hawaii as a Director or in any other capacity.
Further, nothing contained in this Program or in any option or restricted share
granted hereunder shall be deemed to create any obligation on the part of the
Board of Directors of the Company or of Bank of Hawaii to nominate any Director
for reelection.
Article 12. TAX WITHHOLDING. The exercise of any option or restricted share
granted under this Program is subject to the condition that if at any time the
Company shall determine, in its discretion, that the satisfaction of withholding
tax or other withholding liabilities under any state or federal law is necessary
or desirable as a condition of, or in connection with, such exercise or the
delivery or purchase of shares pursuant thereto, then in such event, the
exercise of the option or restricted share shall not be effective unless such
withholding shall have been effected or obtained in a manner acceptable to the
Company.
Article 13. GENDER. Wherever any words are used under the Program in the
masculine, feminine, or neuter gender, they shall be construed as though they
were also used in another gender in all cases where they would so apply.
Article 14. RULE 16B-3 REQUIREMENTS. With respect to Directors who are
subject to the provisions of Section 16 of the Exchange Act, the provisions of
the Program and all transactions thereunder are intended and shall be construed
and applied so as to comply with all applicable requirements and conditions of
Rule 16b-3 or any successor Rule under the Exchange Act. To the extent any
provision of the Program or action by the Committee fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
PLAN I
BANCORP HAWAII, INC.
DIRECTOR STOCK OPTION PLAN
Section 1. PURPOSE. The purpose of this Bancorp Hawaii, Inc. Director Stock
Option Plan ("Plan") is to permit the Company to grant options to Directors for
the purchase of shares of Common Stock. The Plan is designed to provide
Directors a means to obtain Company Common Stock on a basis that requires
retention of such Common Stock throughout periods of service as a Director, and
thereby provide additional incentive to contribute to the success of the
Company. Any option granted pursuant to this Plan shall be clearly and
specifically designated as not being an incentive stock option, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended. This Plan is Plan
I of the Company's Director Stock Compensation Program (the "Program"). Unless
any provision herein indicates to the contrary, this Plan shall be subject to
the General Provisions of the Program.
Section 2. GRANT OF OPTION. Effective on the date of each of the next ten
regular annual meetings of stockholders of the Company, commencing with the 1996
regular annual meeting, the Company shall automatically grant an option for the
purchase of the following designated number of shares of Common Stock to each
Director who will be a Director immediately following that annual meeting: (a)
an option for the purchase of 1,000 shares to a Director who is a Director of
both the Company and the Bank of Hawaii; (b) an option for the purchase of 500
shares to a Director who is a Director of Bank of Hawaii but not the Company;
and (c) an option for the purchase of 500 shares to a Director who is a Director
of the Company but not of Bank of Hawaii.
Section 3. DURATION OF OPTIONS. Each option and all rights thereunder
granted pursuant to the terms of this Plan shall expire ten years from the date
on which the option is granted. In addition, each option shall be subject to
earlier termination as provided in the Plan.
Section 4. EXERCISE PRICE. The exercise price for shares subject to any
option granted hereunder shall be equal to the fair market value of the shares
at the time of the grant of the option. Fair market value on any day shall be
deemed to be the highest closing price of the Common Stock on such day on the
New York Stock Exchange (or such other exchange or interdealer quotation system
that then constitutes the primary trading market for the Common Stock), and if
no reported sale takes place on such day, fair market value shall be deemed to
be the highest closing price on the next preceding day on which such a sale
occurred.
Section 5. EXERCISE OF OPTIONS. Each option shall be exercisable in whole or
part during its term. The person exercising an option may do so only by written
notice of exercise delivered to the Company's Corporate Secretary, in such form
as the Corporate Secretary prescribes or approves from time to time, specifying
the number of shares to be purchased and accompanied by a tender of the exercise
price for those shares. The exercise price of any shares purchased shall be paid
in full in cash or by certified or cashier's check payable to the order of the
Company or (subject to compliance with any applicable requirements of Rule 16b-3
(or any successor Rule) of the Exchange Act) by delivery of shares of Common
Stock (excluding restricted shares acquired pursuant to Plan I or Plan II of the
Program as to which restrictions have not lapsed), or a combination thereof, at
the time of exercise of the option. If any portion of the purchase price is paid
in shares of Common Stock, those shares shall be tendered at their then fair
market value as determined in accordance with Section 4 of this Plan. Fractional
shares resulting from any adjustment in options pursuant to Article 6 of the
general provisions of the Program shall be settled in cash based on the fair
market value of the Common Stock as determined under Section 4.
Section 6. COMPLIANCE WITH SECURITIES LAWS. Shares shall not be issued with
respect to any option granted under the Plan unless the exercise of that option
and the issuance and delivery of the shares pursuant thereto shall comply with
all relevant provisions of state and federal law, including, without limitation,
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Company may also require an
optionee to furnish evidence satisfactory to the Company and its counsel
(including a written and signed representation letter and consent to be bound by
any transfer restrictions imposed by law, legend, condition, or otherwise) that
the shares are being purchased only for investment purposes and without any
present intention to sell or distribute the shares in violation of any state or
federal law, rule, or regulation. Further, each optionee shall
consent to the imposition of one or more legends on the certificates for shares
of Common Stock issued upon exercise of his or her option restricting their
transferability as required by law, by Section 10 below, by Section 8 of Plan
II, and/or by Section 9 of Plan II.
Section 7. OPTION RIGHTS UPON TERMINATION OF SERVICE. If an optionee under
this Plan ceases to serve as a Director for any reason other than death, his
option shall immediately terminate as of the date on which the Director ceases
his service as a Director.
Section 8. OPTION RIGHTS UPON DEATH OF OPTIONEE. If an optionee dies while
serving as a Director, his option shall expire one year after the date of death
unless by its terms it expires sooner. During this one year or shorter period,
the option may be exercised, to the extent that it remains unexercised on the
date of death, by the person or persons to whom the optionee's rights under the
option shall pass by will or by the laws of descent and distribution.
Section 9. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the terms
of this Plan may not be sold, pledged, assigned, or transferred in any manner
otherwise than by will or the laws of descent or distribution and shall not be
subject to execution, attachment, or similar process; except that at the
holder's election, such options may be transferred to and held by a trust of
which the optionee is both a trustee and beneficiary, in which case such options
shall continue to be subject to all restrictions set forth in the Program and
this Plan, provided, however, that in the case of any option held by a person
who is subject to Section 16 of the Exchange Act, this exception shall not apply
if such exception would make unavailable to such option the exemption provided
by Rule 16b-3 of the Exchange Act or any successor Rule. Such options may be
exercised during the lifetime of an optionee only by (a) the optionee, (b) at
the optionee's election, by a trust of which the optionee is both a trustee and
beneficiary, (c) on behalf of the optionee, by a person holding the optionee's
power of attorney for that purpose, or (d) the duly appointed guardian of the
person and property of an optionee who is disabled within the meaning of Section
105(d)(4) of the Internal Revenue Code of 1986, as amended.
Section 10. OPTION STOCK RESTRICTED. The shares of Common Stock purchased
upon exercise of an option granted hereunder shall be deemed to be "restricted
shares" granted under the Restricted Share Plan for purposes of applying all
provisions and terms and conditions of the Restricted Share Plan other than
Section 2 thereunder. As such, during the "Restriction Period" (as described in
Section 3 of the Restricted Share Plan), such shares of Common Stock shall be
subject to redemption and nontransferability, and all restrictions shall lapse
upon occurrence of events described in Section 7 of the Restricted Share Plan.
Further, the procedures of the Restricted Share Plan relating to issuance,
surrender, and assignment of shares and the provisions thereof relating to
stockholder rights shall apply to the shares of Common Stock issued upon
exercise of any option granted hereunder.
PLAN II
BANCORP HAWAII, INC.
DIRECTOR RESTRICTED SHARE PLAN
Section 1. PURPOSE. The purpose of this Bancorp Hawaii, Inc. Director
Restricted Share Plan (the "Plan") is to permit the Company to grant restricted
shares to Directors of Bank of Hawaii. The Plan is designed to grant to such
Directors shares of Company Common Stock, to require retention of such stock
throughout each Director's tenure as a Director, and thereby to provide
additional incentive to contribute to the success of the Company. This Plan is
Plan II of the Company's Director Stock Compensation Program.
Section 2. GRANT OF RESTRICTED SHARES. Effective as of the date of each
regular annual meeting of stockholders of Bank of Hawaii during the term of the
Program, commencing with the 1996 annual meeting of stockholders, the Company
shall automatically grant 100 restricted shares of Common Stock to each person
who will be a Director of Bank of Hawaii immediately following such annual
meeting; provided that the maximum aggregate number of shares that may be issued
to any person pursuant to this Plan II shall be 500 restricted shares.
Section 3. FORFEITURE OF SHARES. The restricted shares granted to a Director
shall be forfeitable during the Restriction Period. "Restriction Period" means
the period commencing on the date restricted shares are issued, and ending at
the later of the expiration of: (a) the Director's then current term as a
Director of either the Company or Bank of Hawaii (whichever term last expires);
or (b) any immediately succeeding future consecutive term as a Director of
either the Company or of Bank of Hawaii that results from election, appointment,
reelection or reappointment to either such Board of Directors; provided that the
Restriction Period shall not expire (and no forfeiture of restricted shares
shall occur) at the time a person ceases to be a member of the Board of
Directors of the Company or of Bank of Hawaii, respectively, if at that time
such person continues to be a Director by reason of membership on the Board of
Directors of Bank of Hawaii or of the Company. If during this Restriction Period
(I.E., prior to the expiration date of a person's last consecutive term as a
Director), the holder of the restricted shares ceases to serve as a Director for
any reason other than an event described in clause (b), (c), or (d) of Section 7
below, the holder shall forfeit the restricted shares and such shares shall
revert to the Company.
Shares of Common Stock that were purchased by exercise of an option granted
under the Stock Option Plan shall be treated in all respects as restricted
shares during the Restriction Period pursuant to Section 10 of the Stock Option
Plan. If during the Restriction Period, the holder of the restricted option
shares ceases to serve as a Director for any reason other than an event
described in clause (b), (c) or (d) of Section 7 below, the holder shall sell to
the Company, and the Company shall redeem, the restricted option shares at the
price equal to the fair market value of the shares (determined as provided in
Section 4 of the Stock Option Plan) at the time of grant (i.e., the option
exercise price). The redemption price shall be paid to the holder in a single
payment for the complete redemption of the restricted option shares.
Section 4. RESTRICTED SHARES NOT TRANSFERABLE. During the Restriction
Period, restricted shares may not be sold, pledged, assigned, or transferred in
any manner, and shall not be subject to execution, attachment, or similar
process; except that, at the holder's election, the restricted shares may be
transferred to and held by a trust of which the holder is both a trustee and
beneficiary, in which case the restricted shares shall continue to be subject to
the nontransferability, forfeiture, and redemption limitations.
Section 5. STOCKHOLDER RIGHTS. The holder of restricted shares shall have
during the Restriction Period all of the rights of a stockholder of the Company
with respect to the restricted shares, including the right to vote the shares,
and the right to receive any dividends and other distributions thereon; provided
that any shares of Common Stock issued as the result of any stock dividend or
stock split shall, to the extent attributable to restricted shares, themselves
constitute restricted shares.
Section 6. SURRENDER OF STOCK CERTIFICATE AND ASSIGNMENT OF SHARES. Upon the
occurrence of an event triggering the forfeiture or redemption of restricted
shares, the holder shall immediately return the certificate representing the
restricted shares to the Company's Corporate Secretary, duly endorsed in blank
by holder or with duly endorsed stock powers attached, all in forms suitable for
the transfer of the restricted shares to the Company. From and after occurrence
of such an event, the Company shall not pay any dividends to the holder on or
with respect to the restricted shares, or permit the holder to exercise any of
the
privileges or rights of a stockholder with respect to such shares, but shall
treat the Company or its nominee as the owner of the shares. Any assignment of
the restricted shares pursuant to this Section 6 shall be effective as of the
date of the holder's termination of service as a Director.
Section 7. LAPSE OF RESTRICTIONS. The restrictions set forth in Section 3
above relating to the forfeiture or redemption of restricted shares and Section
4 above relating to the nontransferability of restricted shares shall lapse and
no longer apply upon the earlier of (a) the expiration of the Restriction
Period, (b) the death of the Director, (c) the occurrence of a "Change in
Control" of the Company or (d) the removal of the Director from office by
stockholders without cause. A "Change in Control" of the Company shall be deemed
to occur if (1) any person, including a "group" as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, becomes the beneficial owner of shares
of stock of the Company having 25% or more of the total number of votes that may
be cast for the election of directors of the Company or (2) as a result of, or
in connection with, any cash tender or exchange offer, merger or other business
combination, sale of assets, contested election or any combination of the
foregoing transactions, the persons who were directors of the Company before the
transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor of the Company. Modified certificates for shares of
stock, without the restrictive legend referred to in Section 8 below, shall be
delivered to the holder as soon as reasonably practicable after, and only after,
the lapse of the restrictions.
Section 8. RESTRICTIVE LEGEND. The holder of restricted shares shall not
have any rights with respect to such award, unless and until such holder has
executed an agreement evidencing the terms and conditions of the award. Each
individual who is awarded restricted shares shall be issued a stock certificate
in respect of such shares. Such certificate shall be registered in the name of
the holder and shall bear an appropriate legend (in addition to any legend
required pursuant to Section 9 below) referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture and redemption) of the Bancorp Hawaii, Inc. Director Stock
Compensation Program, the Bancorp Hawaii, Inc. Director Stock Option
Plan and related Stock Option Grant Agreement, and/or the Bancorp
Hawaii, Inc. Director Restricted Share Plan and related Restricted Share
Award Agreement, which Agreements were entered into between the
registered owner and Bancorp Hawaii, Inc. Copies of such Program, Plans
and Agreements are on file in the offices of Bancorp Hawaii, Inc.
Section 9. COMPLIANCE WITH SECURITIES LAWS. Shares shall not be issued under
the Plan unless the issuance and delivery of the shares pursuant thereto shall
comply with all relevant provisions of state and federal law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder and the requirements of any stock exchange upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance. The Company may also
require a holder to furnish evidence satisfactory to the Company and its counsel
(including a written and signed representation letter and consent to be bound by
any transfer restrictions imposed by law, legend, condition, or otherwise), that
the shares are being acquired only for investment purposes and without any
present intention to sell or distribute the shares in violation of any state or
federal law, rule, or regulation. Further, each holder shall consent to the
imposition of one or more legends on the certificates for shares issued under
Plan I or Plan II restricting their transferability as required by law, by this
Section 9, by Section 8 above, and/or by Section 10 of Plan I.
BANCORP HAWAII, INC.
130 MERCHANT STREET, HONOLULU, HAWAII 96813
PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS -- APRIL 26, 1996
THIS PROXY IS SOLICITED BY MANAGEMENT BY ORDER OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints David A. Heenan, Mary G.F.
Bitterman, Stuart T.K. Ho, Herbert M. Richards, Jr., H. Howard Stephenson, and
Fred E. Trotter, and each of them, the proxy of the undersigned, with full
powers of substitution, to vote all common stock of Bancorp Hawaii, Inc., which
the undersigned may be entitled to vote at the annual meeting of stockholders of
the corporation to be held on April 26, 1996, or at any adjournment thereof.
Said proxies are instructed to vote as follows:
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE ELECTION OF ITS NOMINEES AS
DIRECTORS, ELECTION OF ERNST & YOUNG LLP AS AUDITOR, AND APPROVAL OF THE BANCORP
HAWAII, INC. DIRECTOR STOCK COMPENSATION PROGRAM. THIS PROXY WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS INDICATED, IT WILL BE VOTED AS RECOMMENDED BY THE
BOARD OF DIRECTORS. SAID PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION WITH
RESPECT TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING.
1. Elect the following Directors:
Class I Directors for terms Nominees: Peter D. Baldwin, Richard J. Dahl, Thomas C. Leppert,
expiring in 1999 K. Tim Yee
Class III Director for term Nominee: Stanley S. Takahashi
expiring in 1998
(CHECK ONE BOX ONLY)
For all nominees listed above / / Withhold Authority for all nominees listed
above / / For all nominees except as listed below / /
(TO WITHHOLD AUTHORITY FOR ANY PARTICULAR NOMINEE WRITE HIS NAME ON THE LINE
BELOW)
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(PLEASE DATE AND SIGN ON REVERSE SIDE)
2. Elect Ernst & Young LLP as Auditor. FOR / / AGAINST / / ABSTAIN / /
3. Approve the Bancorp Hawaii, Inc. Director FOR / / AGAINST / / ABSTAIN / /
Stock Compensation Program.
ADDRESS CHANGE AND/OR COMMENTS MARK
HERE
PLEASE SIGN YOUR NAME EXACTLY AS IT
APPEARS HEREON. JOINT OWNERS SHOULD
SIGN PERSONALLY. ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN
SHOULD INDICATE FULL TITLE. IF ADDRESS
IS INCORRECT, PLEASE GIVE THE CORRECT
ONE.
Dated
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Signature (no witness required)
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Signature if stock held jointly
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.