Exhibit 10.4
PACIFIC CENTURY FINANCIAL CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
(Effective as of January 1, 1999)
Contents
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Article 1. Establishment, Objectives, and Effective Date 1
Article 2. Definitions 1
Article 3. Administration 3
Article 4. Eligibility and Participation 3
Article 5. Contingent Awards 4
Article 6. Determination and Payment of Final Awards 5
Article 7. Termination of Employment 6
Article 8. Beneficiary Designation 7
Article 9. Rights of Employees 7
Article 10. Change in Control 7
Article 11. Amendment, Modification, and Termination 8
Article 12. Withholding 8
Article 13. Indemnification 9
Article 14. Successors 9
Article 15. Legal Construction 9
PACIFIC CENTURY FINANCIAL CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
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ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND EFFECTIVE DATE.
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1.1. ESTABLISHMENT OF THE PLAN. Pacific Century Financial Corporation, a
Delaware corporation ("PCFC"), hereby establishes an incentive compensation plan
to be known as the "Pacific Century Financial Corporation Long-Term Incentive
Compensation Plan" ("Plan"), as set forth in this document.
1.2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
profitability and growth of PCFC and its Subsidiaries through incentives for a
multi-year period which are consistent with PCFC's goals and which link the
personal interests of Participants to those of PCFC's stockholders; to provide
Participants with an incentive for excellence in individual performance; and to
promote teamwork among Participants.
1.3. EFFECTIVE DATE. The Plan shall become effective as of January 1, 1999
("Effective Date"). The Plan shall commence on the Effective Date and shall
remain in effect, subject to the right of the Board of Directors to amend or
terminate the Plan at any time pursuant to Article 11 hereof, until January 1,
2009.
ARTICLE 2. DEFINITIONS.
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Whenever used in the Plan, the following capitalized terms shall have
the meanings set forth below:
2.1. "AWARD AGREEMENT" shall mean an agreement entered into by PCFC and
each Participant setting forth the terms and conditions applicable to an Award
granted under this Plan.
2.2. "BOARD OF DIRECTORS" or "BOARD" shall mean the Board of Directors of
PCFC.
2.3. "CHANGE IN CONTROL" of PCFC shall mean any one or more of the
following: (i) 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 PCFC having 25% or more of the total number of votes that may be cast for the
election of Directors of PCFC; or (ii) as a result of, or in connection with,
any cash tender or exchange offer, merger
or other business combination, sale of assets or contested election, or any
combination of the foregoing transactions, the persons who were Directors of
PCFC before the transaction shall cease to constitute a majority of the Board of
Directors of PCFC or any successor to PCFC.
2.4. "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.5. "COMMITTEE" shall mean the Compensation Committee of the Board of
Directors of PCFC or any other committee designated by the Board.
2.6. "CONTINGENT AWARD" OR "AWARD" shall mean an award which is contingent
on the achievement of designated performance goals and final determination by
the Committee and which is granted to an Eligible Employee at the outset of the
Performance Period.
2.7. "DISABILITY" shall have the meaning ascribed to such term under the
long-term disability plan sponsored by PCFC or a Subsidiary and applicable to
the Participant, or if no such plan exists, the meaning as determined at the
sole discretion of the Committee.
2.8. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Article 1.3 hereof.
2.9. "ELIGIBLE EMPLOYEES" shall mean officers or other employees of PCFC
or any Subsidiary, who, in the opinion of the Committee, are or give promise of
becoming of exceptional importance to PCFC or any Subsidiary, and of making
substantial contributions to the success, growth, and profit of PCFC and its
Subsidiaries. Neither members of the Committee nor any member of the Board who
is not an employee of PCFC or a Subsidiary shall be an Eligible Employee.
2.10. "FINAL AWARD" shall mean the award ultimately paid out to each
Participant, based on the extent to which corresponding performance goals have
been achieved and the Committee's determination under Article 6.
2.11. "NAMED EXECUTIVE OFFICER" shall mean a Participant who, as of the
date of vesting or payout of an Award, as applicable, is one of the group of
"covered employees" as defined under Code Section 162(m) and regulations
thereunder.
2.12. "PARTICIPANT" shall mean a person that the
Committee, in its sole discretion, selects from among the Eligible Employees to
be granted a Contingent Award.
2.13. "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.14. "PERFORMANCE PERIOD" shall mean the length of time over which
performance is measured for determining Final Awards. The length of the
Performance Period shall be set at the sole discretion of the Committee.
2.15. "PLAN" shall mean this Pacific Century Financial Corporation Long-
Term Incentive Compensation Plan, as it may be amended from time to time.
2.16. "RETIREMENT" shall mean the termination of a Participant's
employment with PCFC or a Subsidiary under circumstances where the Participant
terminates on or after the retirement dates specified under the Employees'
Retirement Plan of Bank of Hawaii.
2.17. "SALARY" shall mean average annual base salary.
2.18. "SUBSIDIARY"" shall mean any corporation in which PCFC or any
Subsidiary (as defined hereby) owns 50 percent or more of the total combined
voting power of all classes of stock.
ARTICLE 3. ADMINISTRATION.
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3.1. THE COMMITTEE. The Plan shall be administered by the Committee. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
articles of incorporation or bylaws of PCFC, and subject to the provisions
herein, the Committee shall have full power to interpret and administer the
Plan, including to: identify and designate Eligible Employees and Participants
under the Plan; determine the size of Awards; determine the terms and conditions
of Awards in a manner consistent with the Plan; construe and interpret the Plan
and any Award Agreement or any other agreement or instrument entered into under
the Plan; establish, amend, or waive rules and regulations for the Plan's
administration; amend the terms and conditions of any outstanding Award or Award
Agreement to the extent such terms
and conditions are within the discretion of the Committee as provided in the
Plan; and amend, modify, or terminate the Plan in the manner described in
Article 11. As permitted by law, the Committee may delegate its authority as
identified herein.
3.3. DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive, and binding on all
persons, including PCFC and its Subsidiaries, their shareholders, their
employees, and the directors, Eligible Employees, Participants, and their
estates and beneficiaries.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION.
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4.1. ELIGIBILITY. Eligible Employees of PCFC or any Subsidiary shall be
eligible to participate in the Plan.
4.2. PARTICIPATION. Subject to the provisions of the Plan, the Committee
may, from time to time and at its sole discretion, designate the Eligible
Employees who shall be Participants and receive grants of Contingent Awards
under the Plan.
ARTICLE 5. CONTINGENT AWARDS.
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5.1. GRANT. The Committee may, from time to time and at its sole
discretion, make a grant of a Contingent Award to each Participant. The
Contingent Award for any Participant shall be an amount, expressed either as a
dollar amount or as a percentage of Salary for the Performance Period. The
Committee shall cause notice to be given to each Participant of his or her
participation under the Plan.
In the event that the Committee determines that it is advisable to
grant Awards to Named Executive Officers which do not qualify for the
Performance-Based Exception, the Committee may make such grants without
satisfying the requirements of Code Section 162(m).
5.2. VALUE. A Contingent Award shall be of no immediate and certain value,
and rather the amount payable to a Participant with respect to a Contingent
Award for any given Performance Period shall be the Final Award as determined
under Article 6 and shall be conditioned upon the extent to which the
Performance Goals designated under this Article 5 are met and any adjustment to
such Award as may be determined under Article 6.
5.3. PERFORMANCE MEASURE SELECTION. The performance goals upon which an
Award is conditioned shall be based upon one or more of the following
performance measures: earnings per share (actual or targeted growth), economic
value added, net income after capital cost, net income (before or after taxes),
various return measures (either absolute or relative to peers) including: return
on average assets, return on average equity, risk-adjusted return on capital
("RAROC"), efficiency ratio, full time equivalency ("FTE") control, stock price
(actual or targeted growth), total shareholder return ("TSR", absolute or
relative to an index), and non-interest income to net interest income ratio. In
the case of Awards to Named Executive Officers which are intended by the
Committee to qualify for the Performance-Based Exception, the performance goals
shall be based upon the performance measures set forth in this Article 5 as of
the Effective Date, and any material addition or change to the performance
measures shall not be utilized or taken into account for such Awards unless and
until such performance measures are disclosed to and approved by shareholders in
accordance with the requirements of Code Section 162(m).
5.4. PERFORMANCE GOAL ESTABLISHMENT. The Committee shall select among the
performance measures, and shall establish specific performance goals relative to
such performance measures prior to the end of the first quarter of the first
year of the applicable Performance Period. Such performance goals shall,
depending on the extent to which they are met as determined by the Committee,
determine the value of the Final Awards paid out to Participants.
5.5. ADJUSTMENT OF PERFORMANCE GOALS. Once established, performance goals
generally shall not be changed during a Performance Period. However, if the
Committee determines that external changes or other unanticipated business
conditions have materially affected the fairness of the goals, then the
Committee may approve appropriate adjustments to the performance goals (either
up or down) during a Performance Period as such goals apply to Contingent
Awards. However, in the case of Awards to Named Executive Officers which are
intended by the Committee to qualify for the performance-based Exception, any
adjustments shall be made within the time period described in Article 5.4 to the
extent required under Code Section 162(m).
5.6. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. In the event of any change in corporate capitalization,
such as a stock split, or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or
property of PCFC or a Subsidiary, any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368), or
any partial or complete liquidation of PCFC or a Subsidiary, or in the event of
unusual or nonrecurring events affecting PCFC or the financial statements of
PCFC or of changes in applicable laws, regulations, or accounting principles,
such adjustments shall be made to the Contingent Awards and performance goals
relating to the then-current Performance Period, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights. However, in the case of Awards to Named
Executive Officers which are intended by the Committee to qualify for the
performance-based Exception, any adjustments shall be made within the time
period described in Article 5.4 to the extent regarded under Code Section
162(m).
ARTICLE 6. DETERMINATION AND PAYMENT OF FINAL AWARDS.
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6.1. DETERMINATION OF FINAL AWARDS. Subject to the terms and conditions of
the Plan, after the applicable Performance Period has ended, the Committee shall
determine the Final Award to be paid to each Participant based on the
Participant's Contingent Award and the extent to which corresponding performance
goals have been achieved.
Notwithstanding any other provision in the Plan to the contrary, the
Committee may adjust the Final Award payable to a Participant by making any
upward or downward adjustment to the corresponding Contingent Award. Except as
otherwise provided in the case of a Change in Control or other event as
described in Article 10, the Committee may modify or repeal the Contingent Award
of any Participant at any time before the determination of the Participant's
Final Award. However, Contingent Awards which are designed to qualify for the
Performance-Based Exception with respect to Named Executive Officers may not be
adjusted upward (although the Committee shall retain the discretion to adjust
such Awards downward).
6.2. MAXIMUM AWARDS. The maximum aggregate payout with respect to
Contingent Awards granted in any one fiscal year to any one Participant shall be
$2,000,000.
6.3. PAYMENT. Payment of Final Awards shall be normally made in a single
lump sum as soon practicable following the close of the applicable Performance
Period.
However, a Participant may make a request, on a form approved by the
Committee, for the deferral of all or part of
any payment he or she may receive for a Performance Period, provided that such
request is delivered to the Human Resources Division no later than November 1 of
the last year within the Performance Period. The Committee may accept or reject
any such request for a deferral and may determine the conditions of such
deferral at the Committee's sole discretion.
Payment of Final Awards shall be made normally in the form of cash.
However, the Committee, in its sole discretion, may provide for payment of Final
Awards in the form of PCFC stock, restricted stock or nonqualified stock
options.
6.4. PARTICIPATION DURING PERFORMANCE PERIOD. Unless determined otherwise
by the Committee and set forth in the Participant's Award Agreement, in the
event that an Eligible Employee's participation commences or terminates (for
reason other than a termination of employment as described in Article 7) mid-
term during a Performance Period, the Participant shall receive a payout of the
Award which is prorated in a manner determined by the Committee in its sole
discretion.
ARTICLE 7. TERMINATION OF EMPLOYMENT.
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7.1. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT.
Unless determined otherwise by the Committee and set forth in the Participant's
Award Agreement, in the event the employment of a Participant is terminated by
reason of death, Disability, or Retirement during a Performance Period, the
Participant shall receive a payout of the Award which is prorated in a manner
determined by the Committee in its sole discretion. Payments of any prorated
Final Awards shall be made at the similar time as payments are made to
Participants who did not terminate employment during the applicable Performance
Period.
7.2. TERMINATION OF EMPLOYMENT FOR OTHER REASONS. Unless determined
otherwise by the Committee and set forth in the Participant's Award Agreement,
in the event that a Participant's employment terminates during a Performance
Period for any reason other than those reasons set forth in Article 7.1, all
Awards for that Performance Period shall be forfeited by the Participant.
ARTICLE 8. BENEFICIARY DESIGNATION.
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Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the
Plan is to be paid in case of his or her death before he or she receives any or
all of such benefit. Each such designation shall revoke all prior designations
by the same Participant, shall be in a form prescribed by PCFC, and shall be
effective only when filed by the Participant in writing with PCFC during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
ARTICLE 9. RIGHTS OF EMPLOYEES.
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9.1. EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of PCFC or a Subsidiary to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue in
the employ of the of PCFC or a Subsidiary.
9.2. PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
9.3. NONTRANSFERABILITY. No Award shall be sold, assigned, transferred,
encumbered, hypothecated, or otherwise anticipated by a Participant and, during
the lifetime of a Participant, any payment shall be payable only to the
Participant.
ARTICLE 10. CHANGE IN CONTROL.
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10.1. TREATMENT OF OUTSTANDING AWARDS. Notwithstanding any other
provision of the Plan to the contrary, in the event of a dissolution or
liquidation of PCFC, or a Change in Control of PCFC, the amount of cash
payable with respect to any Contingent Award for a Performance Period that ends
after such event shall be determined and payable as if the Performance Period
ended on the date of such event and a Final Award shall be calculated and paid
under the Plan in an amount equal to two times the Contingent Award. The
Contingent Award shall be calculated based on the Salary of the Participant for
the shortened Performance Period. The Final Award calculated under this
Article 10 shall be multiplied by a fraction, the numerator of which shall be
the number of full months of the Performance Period, as adjusted under this
Article 10, and the denominator of which shall be the number of full months in
the intended Performance Period. The Final Award under this Article 10 shall be
paid to such Participant within ten days of the end of the shortened Performance
Period.
10.2. TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE IN CONTROL
PROVISIONS. Notwithstanding any other provision of the Plan or any Award
Agreement provision, the provisions of this Article 10 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to the Participant's outstanding Awards;
provided, however, the Board of Directors, upon recommendation of the Committee,
may terminate, amend, or modify this Article 10 at any time and from time to
time prior to the date of a Change in Control.
10.3. POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other
provision of the Plan to the contrary, in the event that the consummation of a
Change in Control is contingent on using pooling of interests accounting
methodology, the Board may take any action necessary, including but not limited
to the amendment or repeal of any Contingent Award, to preserve the use of
pooling of interests accounting.
ARTICLE 11. AMENDMENT, MODIFICATION, AND TERMINATION.
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11.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board or the
Committee, may, at any time, terminate, amend, modify, or suspend this Plan
provided that no such amendment, modification, suspension, or termination of the
Plan shall in any manner (except as allowable under Section 10.3) adversely
affect in any material way any Final Award previously made under the Plan
without the consent of the Participant holding the Final Award.
11.2. COMPLIANCE WITH CODE SECTION 162(M). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m). However, in the event the Committee
determines that such compliance is not desired with respect to the initial grant
of any Award under the Plan, then compliance with Code Section 162(m) shall not
apply and be required for such Award. In addition, in the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award available under the Plan, the Committee may, subject to this Article 11,
make any adjustments it deems appropriate.
ARTICLE 12. WITHHOLDING.
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PCFC shall have the power and the right to deduct, withhold, or
require a Participant to remit to PCFC an amount sufficient to satisfy federal,
state, and local taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result of this Plan.
ARTICLE 13. INDEMNIFICATION.
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Each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by PCFC against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with PCFC's approval, or paid by him or her in satisfaction of any judgment in
any such action, suit, or proceeding against him or her, provided he or she
shall give PCFC an opportunity, at its own expense, to handle and defend the
same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
PCFC's articles of incorporation or bylaws, as a matter of law, or otherwise, or
any power that PCFC have to indemnify them or hold them harmless.
ARTICLE 14. SUCCESSORS.
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All obligations of PCFC under the Plan with respect to Awards granted
hereunder shall be binding on any successor to PCFC, whether the existence of
such successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business and/or
assets of PCFC.
ARTICLE 15. LEGAL CONSTRUCTION.
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15.1. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
15.2. SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
15.3. REQUIREMENTS OF LAW. The granting of Contingent Awards and the
payment of Final Awards under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
15.4. GOVERNING LAW. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the state of Delaware.