UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Bank of Hawaii Corporation | ||||
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Your VOTE is important!
Notice of 20052006
Annual Meeting of Shareholders
and Proxy Statement
Meeting Date: April 29, 200528, 2006
Bank of Hawaii Corporation
130 Merchant Street
Honolulu, Hawaii 96813
BANK OF HAWAII CORPORATION
130 Merchant Street
Honolulu, Hawaii 96813
March 17, 20052006
Dear Shareholder:
The 20052006 Annual Meeting of shareholders of Bank of Hawaii Corporation will be held on Friday, April 29, 200528, 2006 at 8:30 a.m. on the Sixth Floor of the Bank of Hawaii Building, 111 South King Street, Honolulu, Hawaii. Each shareholder may be asked to present valid picture identification. Shareholders holding stock in brokerage accounts will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date.
The Notice of Meeting and Proxy Statement accompanying this letter describe the business we will consider and vote upon at the meeting. A report to shareholders on the affairs of Bank of Hawaii Corporation also will be given, and shareholders will have the opportunity to discuss matters of interest concerning Bank of Hawaii Corporation.the Company.
For reasons explained in the accompanying Proxy Statement, the Board of Directors recommends that you vote FOR all proposals.
Your vote is very important. Please complete, sign, date and return the enclosed proxy card and mail it promptly in the enclosed postage-paid return envelope, even if you plan to attend the Annual Meeting. You may also vote by telephone or electronically via the Internet. If you wish to do so, your proxy may be revoked at any time before its use.voting occurs.
On behalf of the Board of Directors, thank you for your cooperation and support.
Sincerely, | ||
ALLAN R. LANDON Chairman of the Board, Chief Executive Officer and President |
| Page | |||
---|---|---|---|---|
Notice of | 1 | |||
Proxy Statement | 2 | |||
Questions and Answers About the Proxy Materials and the Annual Meeting | 2 | |||
Proposal 1: Election of Directors | ||||
Board of Directors | ||||
Beneficial Ownership | ||||
Corporate Governance, Board Structure and Compensation | ||||
Board Committees and Meetings | 14 | |||
Audit Committee Report | 17 | |||
Executive Compensation | 18 | |||
Report of the Compensation Committee | 18 | |||
Executive Compensation and Summary Compensation Table | ||||
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values | ||||
Long-Term Incentive Plans—Awards In Last Fiscal Year | 25 | |||
Stock Option Grants In Last Fiscal Year | 26 | |||
Pension Plan Table and Retirement Plan | ||||
Change-in-Control Arrangements, Retention and Other Arrangements | ||||
Performance Graph | 29 | |||
Certain Transactions with Management and Others | 29 | |||
Section 16(a) Beneficial Ownership Reporting Compliance | 30 | |||
Proposal 2: Approval of Amendment No. 2006-1 to the Bank of Hawaii Corporation | 31 | |||
Proposal 3: Ratification of Selection of an Independent Registered Public Accounting Firm and Audit Fees | ||||
Appendix A. Bank of Hawaii Corporation | ||||
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 29, 200528, 2006
To Our Shareholders:
The Annual Meeting of shareholders of Bank of Hawaii Corporation will be held on Friday, April 29, 2005,28, 2006, 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:
The Board of Directors recommends that shareholders vote FOR all proposals.
Shareholders of record of Bank of Hawaii Corporation common stock (NYSE: BOH) at the close of business on February 28, 20052006 are entitled to attend the meeting and vote on the business brought before it.
We look forward to seeing you at the meeting. However, if you cannot attend the meeting, your shares may still be voted if you complete, sign, date, and return the enclosed proxy card in the enclosed postage-paid return envelope. You also may vote by telephone or electronically via the Internet. The accompanying proxy statement, also available online atwww.boh.com, provides certain background information that will be helpful in deciding how to cast your vote on business transacted at the meeting.
By Order of the Board of Directors
CORI C. WESTONCYNTHIA G. WYRICKSeniorExecutive Vice President and Corporate Secretary
Bank of Hawaii Corporation
Honolulu, Hawaii
Dated: March 17, 20052006
IMPORTANT
Please sign and return the enclosed proxy card or vote by telephone or on the Internet as promptly as possible. This will save your Company the expense of a supplementary solicitation.
Thank you for acting promptly.
The Board of Directors (the "Board") of Bank of Hawaii Corporation ("Bank of Hawaii" or the "Company") is soliciting the enclosed proxy for the Company's 20052006 annual meeting. Bank of Hawaii Corporation, together with its subsidiaries, including its banking subsidiary, Bank of Hawaii (the "Bank"), are collectively referred to herein as "Bank of Hawaii" or the "Company". The proxy statement, proxy card, and the Company's Annual Report to Shareholders and Annual Report on Form 10-K are first being distributed to the Company's shareholders on or about March 17, 2005.2006.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Even if you plan to attend the annual meeting, we recommend you also submit your proxy so your vote will be counted if you later decide not to attend the annual meeting.
or the Internet voting site listed on the proxy card, or by signing, dating,
and mailing the proxy card in the prepaid and addressed envelope we have provided you. Please refer to the summary instructions below and those on your proxy card, or, for shares held in street name, the voting instruction card sent by your broker or nominee.
Mail. You may mail your proxy by signing your proxy card or, for shares held in street name, the voting instruction card included by your broker or nominee, and mailing it in the enclosed, postage prepaid and addressed envelope. If you provide specific voting instructions, your shares will be voted as you instruct. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board.
Internet. If you have Internet access, you may submit your proxy from anywhere, following the "Vote by Internet" instruction on your proxy card.
Telephone. If you live in the United States, you may submit your proxy by following the "Vote by Phone" instructions on the proxy card.
Communications, Inc., 17 State Street, New York, New York 10004 to assist in the solicitation of proxies for an estimated fee of $7,500,$10,000, plus reasonable out-of-pocket costs and expenses. We will, upon request, reimburse brokers or other nominees for their reasonable out-of-pocket expenses in forwarding proxy materials to their customers who are beneficial owners and obtaining their voting instructions.
Potential nominees will be evaluated based on their independence, within the meaning of the Company's Corporate Governance Guidelines and the rules of the New York Stock Exchange ("NYSE"). Candidates to be nominated as a director, including those submitted by shareholders, are selected based on, among other criteria, their integrity, informed judgment, financial literacy, high performance standards, accomplishments and reputation in the community, experience, skill sets, ability to commit adequate time to Board and committee matters, and to act on behalf of shareholders.
The criteria also include a determination of the needs of the Board and of the individuals' personal qualities and characteristics with those of the other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Company and its shareholders. The Board should encompass a broad range of skills, expertise, industry knowledge, diversity of viewpoints, background, and business and community contacts relevant to the Company's business.
Candidates to be considered for nomination by the Nominating and Corporate Governance Committee at the 2006 shareholder meeting must be presented in writing to the Corporate Secretary on or before November 18, 2005 at 130 Merchant Street, Honolulu, Hawaii 96813.
Proposals To Be Included In The Proxy Statement and Voted On At The Meeting. Proposals that shareholders wish to have included in the proxy statement for the 20062007 annual meeting of shareholders must be made in accordance with U. S. Securities and Exchange Commission ("SEC") Rule 14a-8 under the Securities Exchange Act of 1934.14a-8. Proposals
must be received by the Company's Corporate Secretary on or before November 18, 200517, 2006 at the above address.
Proposals To Be Voted On At The Meeting Only. Under our By-Laws, for a shareholder to bring a proposal before the 20062007 annual meeting, Bank of Hawaii must receive the written proposal no later than 80 days nor earlier than 90 days before the first anniversary of the 20052006 annual meeting; in other words, no later than February 9, 20068, 2007 and no earlier than January 30, 2006.29, 2007. (Please refer to Section 1.12 of Bank of Hawaii's By-Laws.) The proposal also must contain the information required in the By-Laws. If you wish to make one or more nominations for election to the Board, the required information includes, among other things, the written consent of such individual to serve as director and (i) the name, age, business address and, if known, residence address of each nominee proposed in person, (ii) the principal occupation or employment of each nominee, and (iii) the number of shares of Bank of Hawaii stock each nominee beneficially owns. These advance notice provisions are separate from the requirements a shareholder must meet to have a proposal included in the proxy statement under Securities Exchange Commission ("SEC")SEC rules. By complying with these provisions, a shareholder may present a proposal in person at the meeting, but will not be entitled to have the proposal included in the Company's proxy statement. In addition, persons holding proxies may exercise discretionary authority to vote against such proposals.
PROPOSAL 1: ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides that the Board shall consist of not less than 3three, nor more than 15fifteen persons as established from time to time by resolution of the Board. The Board has fixed the number of directors at twelve, divided into three classes, with the terms of office of one class expiring each year. Nominees for election are described below. Each nominee has consented to serve. All nominees are currently serving on the Company's Board, with the exception of Mr. Lucien (Class I), who has been nominated to fill a vacancy on the Board. The nominees were originally proposed by the Nominating and Corporate Governance Committee. If a nominee below is not a candidate at the time of the annual meeting, then the proxy holders plan tomay vote for the remaining nominees and other persons as they may determine.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE FOREGOING PROPOSAL.NOMINEES.
NOMINEES FOR ELECTION FOR CLASS II DIRECTORS WITH TERMS EXPIRING IN 2009
Name, Age, and Year First Elected as Director | Principal Occupation(s) During Past 5 Years | Other Public Directorships Held | ||
---|---|---|---|---|
S. Haunani Apoliona; 57; 2004 | Chairperson and Trustee, Office of Hawaiian Affairs ("OHA") (entity established by the Constitution of the State of Hawaii to improve the conditions and protect the entitlements of Native Hawaiians) since 2000; Trustee, OHA from 1996 to 2000. | — | ||
Clinton R. Churchill; 62; 2001 | Trustee, The Estate of James Campbell (an organization administering the assets held in trust under the will of James Campbell) since 1992 (Chairman 1998, 2000, 2004). | — | ||
David A. Heenan; 66; 1993 | Trustee, The Estate of James Campbell (an organization administering the assets held in trust under the will of James Campbell) since 1995 (Chairman 1999, 2001). | Maui Land & Pineapple Co., Inc. | ||
Allan R. Landon; 57; 2004 | Chairman, Chief Executive Officer and President of the Company since September 2004; President and Chief Operating Officer from April 2004 to September 2004; President, Chief Financial Officer and Treasurer from 2003 to 2004; Vice Chairman, Chief Financial Officer and Treasurer from 2001 to 2003; Executive Vice President and Director of Risk Management from 2000 to 2001. | — | ||
NOMINEE FOR ELECTION FOR CLASS I DIRECTORS TERMSDIRECTOR WITH TERM EXPIRING IN 2008
Name, Age, and Year First Elected as Director | Principal Occupation(s) During Past 5 Years | Other Public Directorships Held | ||
---|---|---|---|---|
CLASS I DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2008
Name, Age, and Year First Elected as Director | Principal Occupation(s) During Past 5 Years | Other Public Directorships Held | ||
---|---|---|---|---|
Michael J. Chun; | President and Headmaster of Kamehameha Schools—Kapalama (a college preparatory school serving children of Hawaiian ancestry) since 2001; President of Kamehameha Schools from | Alexander & Baldwin, Inc. | ||
Robert Huret; | Managing Member of Financial Technology Management (a venture capital management company) since 1998; Senior Consultant, Financial Services Group at Montgomery Securities from | — | ||
Donald M. Takaki; | Chairman and Chief Executive Officer, HawkTree International, Inc. (a diversified holding company engaged in transportation, leasing, business records management and real estate) since 1999; Chairman and Chief Executive Officer, Island Movers, Inc. (a transportation service company) since 1964; President, Transportation Concepts, Inc. (a transportation leasing company) since | — | ||
CLASS III DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2007
Name, Age, and Year First Elected as Director | Principal Occupation(s) During Past 5 Years | Other Public Directorships Held | ||
---|---|---|---|---|
Mary G.F. Bitterman; | President and Trustee, the Bernard Osher Foundation since | — | ||
Martin A. Stein; | Partner, RSA Ventures since 1999 (a venture capital company that invests in new technology companies); Chief Executive Officer and President, Sonoma Mountain Ventures, LLC (strategic and technology consulting and venture capital) | — | ||
Barbara J. Tanabe; | Owner and Partner, Ho'akea Communications, LLC (a communication and community building company) since 2003; Owner and Partner, Ho'akea (a public affairs company) from | — | ||
Robert W. Wo, Jr.; | President and Director, C.S. Wo & Sons, Ltd. (a furniture retailer) since 1984. | — | ||
CLASS II DIRECTORS WHOSE CURRENT TERMS EXPIRE IN 2006
At the close of business on February 18, 2005,17, 2006, Bank of Hawaii had 53,463,01551,106,794 shares of its common stock outstanding. As of February 18, 2005,17, 2006, this table shows how much Bank of Hawaii common stock was owned by (i) its directors and nominees, (ii) the Chief Executive Officer ("CEO"), the four other persons who were the most highly compensated executive officers of Bank of Hawaii at December 31, 2004, andnamed in the former CEO of the Bank of Hawaii during 2004Summary Compensation table on page 23 (the "named executive officers"), and (iii) by two companiesentities that are known toby us to own beneficially more than 5five percent of Bank of Hawaii's common stock. Unless otherwise indicated and subject to applicable community property and similar statutes, all persons listed below have sole voting and investment power over all shares of common stock beneficially owned. Share ownership has been computed in accordance with SEC rules and does not necessarily indicate beneficial ownership for any other purpose.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
Name | Number of Shares Beneficially Owned | Right to Acquire Within 60 Days | Total | Percent of Outstanding Shares as of 02-18-05 | Number of Shares Beneficially Owned | Right to Acquire Within 60 Days | Total | Percent of Outstanding Shares as of 02-17-06 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Private Capital Management. L. P. 8889 Pelican Blvd. Naples, Florida 34108 | 3,341,157 | (1) | -0- | 3,341,157 | 6.3 | % | ||||||||||||
Private Capital Management L.P. 8889 Pelican Blvd. Naples, Florida 34108 | 3,978,801 | -0- | 3,978,801 | 7.8 | %(1) | |||||||||||||
Goldman Sachs Asset Management, L.P. 32 Old Slip New York, New York 10005 | 2,837,906 | (1) | -0- | 2,837,906 | 5.4 | % | 3,359,337 | -0- | 3,359,337 | 6.5 | %(1) | |||||||
Barclays Global Investors, NA. Barclays Global Fund Advisors Barclays Global Investors, Ltd. Barclays Global Investors Japan Trust and Banking Company Limited 45 Fremont Street San Francisco, CA 94105 | 3,152,138 | -0- | 3,152,138 | 6.1 | %(1) | |||||||||||||
S. Haunani Apoliona | 1,816 | (2) | 17,000 | (7) | 18,816 | * | 2,571 | (2) | 16,800 | 19,371 | * | |||||||
Peter D. Baldwin | 4,698 | (2)(9) | 22,000 | (7) | 26,698 | * | ||||||||||||
Mary G.F. Bitterman | 13,191 | (2)(3) | 22,000 | (7) | 35,191 | * | 15,567 | (2)(3) | 20,000 | 35,567 | * | |||||||
Michael J. Chun | 5,500 | (2) | 17,000 | (7) | 22,500 | * | 5,355 | (2) | 17,000 | 22,355 | * | |||||||
Clinton R. Churchill | 6,615 | (2)(8) | 17,000 | (7) | 23,615 | * | 7,506 | (2)(6) | 17,000 | 24,506 | * | |||||||
David A. Heenan | 16,657 | (2)(6) | 22,000 | (7) | 38,657 | * | 18,133 | (2)(5) | 22,000 | 40,133 | * | |||||||
Robert Huret | 7,909 | (2) | 12,000 | (7) | 19,909 | * | 9,568 | (2) | 12,000 | 21,568 | * | |||||||
Kent T. Lucien | -0- | -0- | -0- | * | ||||||||||||||
Martin A. Stein | 1,200 | (2) | 15,000 | (7) | 16,200 | * | 1,755 | (2) | 15,000 | 16,755 | * | |||||||
Donald M. Takaki | 13,303 | (2)(10) | 21,000 | (7) | 34,303 | * | 11,718 | (2) | 21,000 | 32,718 | * | |||||||
Barbara J. Tanabe | 8,677 | (2) | 16,000 | (7) | 24,677 | * | 9,658 | (2) | 16,000 | 25,658 | * | |||||||
Robert W. Wo, Jr. | 12,817 | (2)(3) | 17,000 | (7) | 29,817 | * | 13,720 | (2)(3) | 17,000 | 30,720 | * | |||||||
Michael E. O'Neill | 7,044 | -0- | 7,044 | * | ||||||||||||||
Allan R. Landon | 171,303 | 242,238 | 413,541 | * | 155,801 | 242,238 | 398,039 | * | ||||||||||
Peter S. Ho | 45,801 | 57,835 | 103,636 | * | ||||||||||||||
Alton T. Kuioka | 145,348 | (2)(4) | 157,500 | 302,848 | * | 161,305 | (2)(4) | 30,000 | 191,305 | * | ||||||||
William C. Nelson | 8,308 | 188,300 | 196,608 | * | ||||||||||||||
Donna A. Tanoue | 163,237 | (5) | 89,733 | 252,970 | * | 17,471 | (2) | 160,054 | 177,525 | * | ||||||||
David W. Thomas | 14,575 | 110,825 | 125,400 | * | 47,487 | 69,950 | 117,437 | * | ||||||||||
Directors, nominees and executive officers as a group (19 persons) | 612,717 | 1,025,197 | 1,637,914 | |||||||||||||||
Directors, nominees and executive officers as a group (20 persons) | 578,050 | 997,093 | 1,575,143 | 3.1 | % |
Share amounts disclosed in the beneficial ownership table and accompanying notes exclude 152,273 shares owned by the Bank of Hawaii Charitable Foundation (the "Foundation"), a non-profit corporation. The directors of the Company are directors of the Foundation, and Ms. Tanoue and Mr. Landon serve as the Foundation's president and its vice president, respectively. Each of the directors, Ms. Tanoue and Mr. Landon disclaims beneficial ownership of the shares of the Company held by the Foundation.
Notes to Table on Amount and Nature of Beneficial Ownership
All stock is subject to sole voting and investment power unless otherwise specified.
According to the information furnished by it, Goldman Sachs Asset Management ("GSAM") is an investment adviser registered with the SEC under the Investment Advisers Act of 1940, as amended. As of December 31, 2004,its most recent filing made under Section 13(g) of the Securities Exchange Act of 1934 on February 3, 2006, GSAM, in its capacity as investment adviser, may be deemed to have beneficial ownership as of 2,837,906December 31, 2005 of 3,359,337 shares of Bank of Hawaii common stock owned by numerous investment advisory clients, none known to have more than five percent of the class. As of December 31, 2004,According to the same filing, GSAM had sole power to vote or to direct the vote over 1,615,8582,048,563 of those shares, and sole power to dispose or to direct the disposition of 2,837,9063,359,337 shares. The percentage
According to the information furnished by them, Barclays Global Investors, NA, Barclays Global Fund Advisors, Barclays Global Investors, Ltd., and Barclays Global Investors Japan Trust and Banking Company Limited (collectively referred to as "Barclays") are either investment advisers registered with the SEC under the Investment Advisers Act of shares outstanding indicated is1940, as amended, or banks as defined in section 3(a) (6) of the Securities Exchange Act of 1934. As of its most recent filing made under Section 13(g) of the Securities Exchange Act of 1934 on January 31, 2006, Barclays, as a group, may be deemed to have beneficial ownership as of December 31, 2004.2005 of 3,152,138 shares of Bank of Hawaii common stock owned by numerous investment advisory or bank clients, none known to have more than five percent of the class. According to the same filing, Barclays has sole power to vote or to direct the vote over 2,741,625 of those shares, and sole power to dispose or to direct the disposition of 3,152,138 shares.
CORPORATE GOVERNANCE
BOARD STRUCTURE & COMPENSATION
Corporate Governance Guidelines
The Company hasand the Board have adopted Corporate Governance Guidelines ("Governance Guidelines"), which are posted on the Company's Investor Relations website atwww.boh.com. Shareholders may receive a copy of the Governance Guidelines by writing the Corporate Secretary at 130 Merchant Street Honolulu, Hawaii 96813. The Governance Guidelines address director qualification and independence standards, responsibilities, access to management and independent advisors, compensation, orientation and continuing education, Board committees, CEOChief Executive Officer evaluation, management succession, Code of Business Conduct and Ethics, shareholder communications to the Board and the Board's annual performance evaluation.
Board Governance and Attendance
The Board met ten times during 2004.2005. The Board's policy is that directors should make every effort to regularly attend meetings of the Board and committees on which they serve and the Company's annual shareholder meeting. Each director attended 75 percent75% or more of the aggregate of the total number of Board meetings and the total number of meetings held by the committees on which he or she served in 2004. Thirteen2005. All of the Company's then current directors attended the 20042005 shareholders' meeting.
The Board has four standing committees: the Audit Committee, the Human Resources and& Compensation Committee (the "Compensation Committee"), the Executive & Strategic Planning Committee (the "Executive Committee"), and the Nominating and& Corporate Governance Committee (the "Nominating & Governance Committee").Committee. The committee charters are posted on the Investor Relations page of the Company's website previously given.www.boh.com.
Ms. Bitterman has served as the Lead Independent Director since 1999, and is Vice Chairman of the Executive Committee and ChairmanChair of the Nominating & Corporate Governance Committee. The Lead Independent Director's duties are set forth in the Governance Guidelines and include presiding over regularly scheduled executive sessions of the non-management directors orand serving as a liaison between the non-management directors and executive management and assisting the Board and executive management to ensure compliance with the Governance Guidelines. The non-management directors meet in executive session without management in attendance for regularly scheduled meetings which are usually held five times a year. The non-management directors may also meet in executive session each time the full Board convenes for a meeting. In 2004,2005, the non-management directors met in executive session eightseven times.
Board Independence
The Board has a majority of independent directors as defined by the listing standards of the New York Stock Exchange ("NYSE") and the Governance Guidelines. In considering all of the relevant facts and the categorical standards with respect to each director and nominee, the Board has affirmatively determined that all directors and nominees other than Messrs. Landon, Stein and Takaki are independent within the meaning of the NYSE listing standards and the Board's categorical standards for determining independence. The following nineeight directors and nominees have been affirmatively determined by the Board to be independent: Messrs. Baldwin, Chun, Churchill, Heenan, Huret and Wo, and Mmes. Apoliona, Bitterman and Tanabe. All of the committees, with the exception of the Executive Committee, are composed entirely of independent directors. The Board has adopted the following categorical standards for determining whether a director is independent and has no material relationships with the Company, including but not limited to the following:independent.
the end of such employment relationship. Employment as an interim Chairman or CEOChief
Executive Officer ("CEO") shall not disqualify a director from being considered independent following that employment.
For purposes of these independence standards, an "immediate family member" includes the director's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) thatwho shares the director's home.
Code of Business Conduct & Ethics
The Company has earned its reputation as a respected leader in the communities it serves and in the financial services industry by conducting business in an ethical, responsible and professional manner. The
Company is proud of the high standards of quality and service whichthat have been our hallmark through the years. These qualities represent fundamental business practices and apply to all directors, officers and employees. All directors owe a duty of loyalty to the Company. This duty mandates that, in the course of carrying out the duties and responsibilities of that position, the best interest of the Company and its shareholders take precedence over any personal interests of the director.
The Company and Board have adopted a Code of Business Conduct and Ethics for Directors, Officers and Employees (the "Code of Conduct and Ethics"), which is posted on the Investor Relations page of the Company's website previously provided.www.boh.com. The Code of Conduct and Ethics addresses the professional, honest and candid conduct of each director, officer and employee; conflicts of interest, disclosure process and compliance with laws, rules and regulations, (including insider trading laws); corporate opportunities, confidentiality, fair dealing, protection and proper use of Company assets; and encourages the reporting of any illegal or unethical behavior. The Company will disclose any amendments to, or waivers, of the Code of Conduct and Ethics for directors or executive officers on the Company's website. Shareholders may obtain a printed copy by contacting the Corporate Secretary at the address previously provided.
Board Compensation
Directors' fees are paid only to directors who are not employees of the Company. In 2004,2005, each such director was paid an annual retainer of $20,000, plus $750 for each Board meeting attended. The Lead Independent Director is paid an additional annual retainer fee of $10,000. Directors are reimbursed for board-related travel expenses, and directors who are non-Hawaii residents receive an additional $5,000 to compensate them for travel time. The Company does not have a retirement plan for directors who are not employed by the Company or its subsidiaries.
Directors who are not employed by the Company and who serve as members of the Compensation Committee or the Executive Committee receive $750 for each meeting attended. The fee is $1,500 per meeting for members of the Audit Committee and $2,000 per meeting fee is $1,500.for the Chairman of the Audit Committee. The chairmenchairs of the Compensation and Audit Committees, and the vice chairmenchair of the Executive Committee, also receive an annual retainer of $5,000.
Directors Deferred Compensation Plan
The Company maintains a Directors Deferred Compensation Plan under which each director may elect to defer either all of his or her annual retainer and meeting fees, or all of his or her annual retainer. Distribution of the deferred amounts will begin as of the first day of the first month after the participating director ceases to be a director of the Company. Distribution will be made in a lump sum or in approximately equal annual installments over such period of years (not exceeding 10 years) as the director elects at the time of deferral. Under the Deferredsuch Plan, deferred amounts are not credited with interest, but they are valued based on corresponding investments in Pacific Capital Funds or Bank of Hawaii stock, as selected by the participants. In January 2006, the Director's Deferred Compensation Plan was amended to bring it into compliance with certain requirements of Section 409A of the Internal Revenue Code, which was enacted under the American Jobs Creation Act of 2004. In general, the requirements of Section 409A impose certain new rules for non-qualified deferred compensation plans, primarily relating to the timing of elections and distributions.
Director Stock Program
The Company has aIn April 2005, the shareholders approved the Bank of Hawaii Corporation Amended and Restated Director Stock Compensation ProgramPlan ("Director Stock Program") that will expire on December 31, 2005. The Company is submitting an amendment and restatement of the Director Stock Compensation Program ("RestatedAmended Director Stock Plan") for shareholder approval at. The purpose of the annual meeting. Further information regarding the RestatedAmended Director Stock Plan is provided on pages 31-33. A copyto advance the interest of the RestatedCompany by encouraging and enabling eligible members of the Board to acquire and retain throughout each member's tenure as director a proprietary interest in the Company by ownership of shares of Bank of Hawaii common stock. The Amended Director Stock Plan is attached as Appendix B.
allows for the granting of stock options, restricted stock, and restricted stock units. Under the current
Amended Director Stock Program,Plan, the Board has the flexibility to set the form and terms of awards. In 2005, the Company annually grants 200issued 555 shares of restricted common stock ("Restricted Shares") and an option for 2,057 common shares to each non-employee director. The exercise price of the options was based on the closing market price of $47.35 on the date that the options were granted. Each option expires ten years from the date of grant and vests in one-third annual increments. The Amended Director Stock Plan will terminate on April 28, 2015, unless the Board terminates the plan at an earlier time.
Under the previous Director Stock Program, the Company annually granted 200 shares of restricted common stock and an option for 3,000 common shares to each non-employee director. The exercise price of the options iswas based on the closing market price of the shares on the date that the options were granted. Each option expires ten years from the date of grant and is generally not transferable. If an optionee ceases to serve as a director for any reason other than death or disability, any unexercised options terminate. Upon the exercise of options, the shares received ("Option Shares") are nontransferable during the term of the director. If an optionee ceases to serve as a director prior to the end of his or her term, for any reason other than death or disability, the Option Shares will be redeemed by the Company at a price equal to the exercise price. The Restricted Shares are also nontransferable during the term of the director. If an optionee ceases to serve as a director prior to the end of his or her term, for any reason other than death, disability, removal without cause, or change of control, the Restricted Shares are forfeited.
Director Qualifications and Nomination Process
The Nominating & Corporate Governance Committee is responsible for identifying and assessing all director candidates and recommending nominees to the Board. Potential nominees will be evaluated based on their independence, within the meaning of the Governance Guidelines and the rules of the NYSE. Candidates to be nominated as a director, including those submitted by shareholders, are selected based on, among other criteria, their integrity, informed judgment, financial literacy, high performance standards, accomplishments and reputation in the community, experience, skill sets, and ability to commit adequate time to Board and committee matters and to act on behalf of shareholders.
The criteria also include a determination of the needs of the Board and of the individuals' personal qualities and characteristics with those of the other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Company and its shareholders. The Board should encompass a broad range of skills, expertise, industry knowledge, diversity of viewpoints, background, and business and community contacts relevant to the Company's business. Mr. Lucien has been identified and nominated as a director for inclusion in this year's proxy statement by members of the Nominating & Corporate Governance Committee to fill a vacancy created by the retirement of Peter D. Baldwin effective November 18, 2005.
A shareholder may submit a candidate for consideration by the Board to be included in the Board's slate of director nominees. Candidates proposed by shareholders will be evaluated by the Nominating & Corporate Governance Committee under the same criteria that are applied to other candidates. The criteria are set forth above and in the Company's By-Laws and Governance Guidelines. Candidates to be considered for nomination by the Nominating & Corporate Governance Committee at the 2007 Annual Meeting of Shareholders must be presented in writing to the Corporate Secretary on or before November 17, 2006 at 130 Merchant Street, Honolulu, Hawaii 96813 to be included in the Company's proxy statement for 2007.
Communication with Directors
Shareholders may communicate with the Board, Non-Management Directors or Lead Independent Director by sending correspondence c/o the Company's Corporate Secretary, 130 Merchant Street, Honolulu, Hawaii 96813. All communications received will be forwarded to the Board, Non-Management Directors or Lead Independent Director as addressed.
The following information provides an overview of the primary responsibilities of the Board's standing committees and committee membership. The Board has affirmatively determined that all of the members of the Audit, Compensation and Nominating & Corporate Governance Committees ("Board Committees") meet the standards of the NYSE and the Company's Governance Guidelines for independence. The Board Committees' charters require that each committee perform an annual evaluation of its performance and assess the adequacy of its charter. Each Committee has the authority to retain consultants and advisors to assist it in its duties, including the sole authority for the retention, termination and negotiation of the terms and conditions of the assignment.
Copies of the Board Committee charters and governance guidelines can be viewed on the Company's Investor Relations page of the Company's website atwww.boh.com. Shareholders may request a printed copy of the charters and Governance Guidelines by contacting the Corporate Secretary at 130 Merchant Street, Honolulu, Hawaii 96813. A copy of the Audit Committee charter is included as Appendix A and a copy of the Governance Guidelines is posted on the Company's Investor Relations website atwww.boh.com.
Audit Committee: 87 Meetings in 20042005
Responsibilities of Committee | Current Members | ||
---|---|---|---|
• | The Committee assists the Board in its oversight of the following areas of the Company: regulatory and financial accounting and reporting and credit risk management; compliance with legal and regulatory requirements; independent | Clinton R. Churchill (Chairman) Robert Huret Mary G.F. Bitterman Robert W. Wo, Jr. | |
• | The Board has determined that Robert Huret meets the definition of "financial expert" within the meaning of the SEC regulations adopted under the Sarbanes-Oxley Act of 2002. | ||
• | The Board has determined that all Committee members meet the NYSE standard of financial literacy and have accounting or related financial management expertise. | ||
• | None of the Committee members | ||
• | The Committee has adopted policies and procedures governing the following: pre-approval of audit and non-audit services; the receipt and treatment of complaints regarding accounting, internal controls, or auditing matters and the confidential, anonymous submission by employees of the Company regarding questionable accounting or audit matters; and restrictions on the Company's hiring of employees of the independent | ||
Compensation Committee: 10 Meetings in | |||
Responsibilities of Committee | Current Members | ||
• | The Committee reviews, approves and reports to the Board on the corporate goals and objectives relevant to the CEO's compensation; evaluates the CEO's performance in light of those goals and objectives; and determines and approves the CEO's compensation based on this evaluation. | David A. Heenan (Chairman) Mary G.F. Bitterman Barbara J. Tanabe | |
• | The Committee reviews, approves, and reports to the Board on the compensation arrangements and plans for executive management of | ||
• | The Committee reviews and approves goals for incentive compensation plans and stock plans, and evaluates performance against those goals. | ||
• | The Committee reviews management development and training programs. | ||
• | The Committee reviews succession planning for senior and executive management. | ||
Executive Committee: -0- Meetings in | ||
Responsibilities of Committee | Current Members | |
---|---|---|
• The Committee has power to act for the Board in between its meetings except on those matters reserved to the Board by the By-Laws or otherwise. • The Committee has the authority to advise the CEO and Board on long-range strategy and monitor the Company's progress. | Allan R. Landon (Chairman) Mary G.F. Bitterman (Vice Chairman) Clinton R. Churchill David A. Heenan Robert W. Wo, Jr. | |
Nominating & Corporate Governance Committee: 5 Meetings in | ||
Responsibilities of Committee | Current Members | |
---|---|---|
• The Committee reviews the qualifications of all Board candidates and recommends qualified candidates for membership on the Board. • The Committee reviews the Board's organization, procedures and committees and makes recommendations concerning the size and composition of the Board and its committees. • The Committee makes recommendations to the Board regarding standards for determining non-management director independence and reviews the qualifications and independence of the members of the Board and its committees. • The Committee reviews and evaluates the Company's compliance with corporate governance requirements and leads and oversees the Board and its committees' annual performance evaluations. • Further information regarding the responsibilities performed by the Committee and the Company's corporate governance is provided in the Governance Guidelines. | Mary G.F. Bitterman (Chairman) S. Haunani Apoliona Michael J. Chun Clinton R. Churchill David A. Heenan Robert Huret Barbara J. Tanabe Robert W. Wo, Jr. |
The Board has determined that the Audit Committee's four members are independent directors, in accordance with the applicable laws, regulations, New York Stock Exchange'sNYSE listing requirements and the Governance Guidelines. The Audit Committee operates under and annually reviews a written charter that has been adopted by the Board and is included as Appendix A to this proxy statement.Board. Audit Committee members do not accept any consulting, advisory or other compensatory fees (except director fees) and are not affiliated with the Company (except as a director) or any subsidiary.
Each Audit Committee member shall be or must become financially literate at or within a reasonable period of time following his or her appointment. At least one member of the Audit Committee must have accounting or related financial management expertise. The Board has determined that the Audit Committee has one audit committee financial expert, Robert Huret, within the meaning of Securities Exchange Commission ("SEC")SEC regulations adopted under the Sarbanes-Oxley Act of 2002, and that all Audit Committee members are financially literate and have accounting or related financial management expertise. None of the Audit Committee members currently serve on the audit committee of another publicly traded company.
The Audit Committee's responsibilities include providing oversight of the quality and integrity of the Company's regulatory and financial accounting and reporting, risk management, legal and regulatory compliance and internal and external audit functions and the preparation of this Audit Committee report. In this context, theThe Audit Committee has reviewed and discussed with management and the independent auditorsregistered public accounting firm the Company's audited financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" to be included infor the Company's Annual Report on Form 10-K.fiscal year 2005. The Audit Committee has also discussed with management and the independent auditorsregistered public accounting firm the matters required to be discussed by Statement on Accounting Standards No. 61 (Communication with Audit CommitteesCommittees),). as amended. These discussions include the quality, not just the acceptability, of the accounting principles applied. The Company's independent auditorsregistered public accounting firm have provided to the Audit Committee their written disclosures and letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Audit Committee has discussed with the independent auditors,registered public accounting firm, that firm's qualifications and independence. The Audit Committee has adopted Pre-Approval Procedures for Audit and Non-Audit Services (the "Pre-Approval Procedures") that requires advance approval of all audit, audit-related, tax and other services performed by the independent auditor.registered public accounting firm. The PreapprovalPre-Approval Procedures provide for the Audit Committee's pre-approval of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must approve the permitted service before the independent auditorregistered public accounting firm is engaged to perform it. The Audit Committee may delegate pre-approval authority to any one of its members who shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Based on the review and discussions referred to above, the Audit Committee recommended to the Company's Board that the audited financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" be included in the Company's Annual Report on Form 10-K for the year ended December 31, 20042005 for filing with the SEC. The Audit Committee and
As submitted by the Board also have recommended, subject to shareholder approval, the selection of the Company's independent registered public accounting firm.
Membersmembers of the Audit Committee,
Clinton R. Churchill (Chairman)
Robert Huret (Financial Expert)
Mary G.F. Bitterman
Robert W. Wo, Jr.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee, composed entirely of independent directors in accordance with the applicable laws, regulations, NYSE listing requirements and the Governance Guidelines, sets and administers the policies that govern the Company's executive compensation programs, and various incentive and stock programs. The Compensation Committee reviews compensation levels of members of executive management, evaluates the performance of executive management, and considers executive management succession and related matters. All decisions relating to the compensation of the named executive officers are shared with the full Board.
The policies and underlying philosophy governing the Company's executive compensation program, as endorsed by the Compensation Committee and the Board, are designed to accomplish the following:
The Compensation Committee seeks to targetestablish executive compensation at levels that the Compensation Committee believes to be consistent with others in the banking industry. The executiveExecutive officers' compensation is weighted toward programs contingent upon the Company's level of annual and long-term performance. In general, for executive management positions of the Company (including the Company's named executive officers) and its subsidiaries, the Company will pay base salaries that, on average, are at the 50th percentile of other banks and financial service companies of Bank of Hawaii's asset size and complexity and that have similar products and markets. A significant portion of each executive's compensation is dependent on achieving business and financial goals, attaining other individual performance objectives and upon stock price appreciation. Goals for specific components include:
The Compensation Committee retains the services of nationally recognized consulting firms to assist the Compensation Committee in performing its various duties. These duties include the evaluation of competitive compensation levels and to make recommendations for the compensation of the CEO. Those firms advise the Compensation Committee on compensation programs for the named executive officers and executive management of the Company. The Company also obtains extensive compensation studies every 2-3 years. The most recent compensation study focusing on executive officers was conducted in 2004-2005; the results were presented along with the consulting firm's review of the Company's programs for executive management.
The study provided2004-2005. These studies provide an external competitive analysis of compensation for incumbents in the Company's Operating Committee, which includes the named executive officers and senior management,other executives, using data that focusedfocuses primarily on the Company's major talent and business competitors, including banking and diversified financial organizations. TheseThe organizations reflected in the data areaare also generally comparable in terms of overall size, business mix, and geographic scope. Many of the organizations in the S&P Bank index are represented in the study. For the 2004-2005 study, the consultants provided base salary
levels and other pay data to derive market-based compensation levels that were appropriate for the Company's executive positions. The results of the study found that the Company's overall pay levels overall were at the median levels of peer companies.
20042005 Compensation Elements
Compensation earned by the named executive officers in 2004,2005, as reflected in the Summary Compensation Table, on page 24, consisted of the following elements: base salary, value sharing and retirement savings plan, stock options, restricted stock and restricted stock units. As indicated in the Summary Compensation Table and the Long-Term Incentive Plans—Awards In Last Fiscal Year table on pages 24 and 26,Stock Options Granted in 2004, the Compensation Committee awardedLast Fiscal Year table, consisted of base salary, bonus (Executive Incentive Plan), retirement contributions, stock options, restricted stock and restricted stock units under the Company's 2004 Stock Option and Incentive Compensation Plan (the "2004 Stock Option and Incentive Plan"). No stock options were awarded to the named executive officers in 2004. The named executive officers (other than Mr. O'Neill) were granted contingent awards under the Bank of Hawaii Corporation Executive Incentive Plan ("Executive Incentive Plan") in 2004 as described below.stock.
Base Salaries
Base salaries for named 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 or her responsibilities.
The greatest emphasis is on individual performance and the competitive marketplace. Adjustments to salary also reflect new responsibilities assigned or assumed by the individual. Also taken into account are key differences in responsibilities between the executives of Bank of Hawaii and of other banks, and the overall economic environment. No specific weighting is given to the foregoing factors.
To ease the expense burden of the Company, Messrs. Landon, Kuioka, Nelson and Thomas reduced their 2002 salaries by 10 percent from 2001 levels and their salaries were reinstated to the 2001 level in 2003. In 2003, Mr. Landon and Ms. Tanoue elected to reduce their respective salaries and these reductions were considered in determining the amount of equity compensation granted to Mr. Landon and Ms. Tanoue, which are discussed on pages 24-25. Mr. O'Neill elected to waive his base salary and any bonus for 2002 and 2003 and this reduction was considered in determining the amount of equity compensation granted to Mr. O'Neill, which is discussed on pages 24-25.
Stock Ownership Guidelines
The Compensation Committee believes that it is important for executive management to support an ownership culture for the Company's employees and shareholders and in 2001, implemented stock ownership guidelines which require the named executive officers to own a minimum amount of the Company's stock within 3 years. The Chairman and CEO is required to own at least 5 times his salary and the other named executive officers are required to own at least 2.5 times their salary in market value of Company stock. Stock ownership includes net after-tax value of vested stock options, vested grants of performance-based restricted stock and stock or stock units from qualified plans. All of the named executive officers currently employed by the Company, have met or exceeded the stock ownership requirements. The amount of shares held by each of the named executive officers is reported in the Beneficial Ownership Table on page 9.
Executive Incentive Plan
The objectives of the Executive Incentive Plan are to optimize profitability and growth of the Company, provide an incentive for excellence in individual performance, advance the corporate and cultural imperatives and promote corporate initiatives. The Company's corporate and cultural imperatives include acting accountably, communicating openly and honestly, being results driven, working effectively in
teams and embracing change. The corporate initiatives are to focus on customer service and sales,accelerate growth in our markets, better integrate our business segments, continue to develop our management team, improve processes and systems, invest in the Company's employees and businesses, increaseour operating efficiency, and align compensationmaintain our culture of dependable risk and capital management, in order to performance and to theachieve our governing objective of maximizing shareholder value over time.
At the Compensation Committee's discretion, each participant is granted a contingent award expressed as dollars or a percentage of salary for the fiscal year and is contingent on both individual and corporate performance criteria. At the end of the fiscal year, the Compensation Committee assesses the performance and makes a determination of the final award amount that may be greater or smaller than the contingent award. The Compensation Committee granted contingent awards of up to 9 percent of the 2004 incentive pool to each of the named executive officers in 2004 with the exception of Mr. Landon, who was granted a contingent award of up to 15 percent of the 2004 incentive pool. The 20042005 limit for total awards for participants under the Executive Incentive Plan was 2two percent of the Company's total net income before taxes. During 2004,2005, the Compensation Committee granted awards to the named executive officers that participated in the Executive Incentive Plan for their 20042005 performance. The amounts of these awards are described in the Summary Compensation Table on page 24.Table.
To qualify certain awards as performance-based compensation exempt from the $1 million compensation deduction limitation under Section 162(m) of the Internal Revenue Code of 1986 (the "Code"), a contingent award to a named executive officer is limited to a percentage of an incentive pool determined for the fiscal year (the "incentive pool percentage"). The incentive pool is expressed as a percentage of the Company's net income for the fiscal year, and the total of the contingent awards for named executive officers for a fiscal year may not exceed 100 percent of the incentive pool. After assessing the satisfaction of the applicable performance criteria for the fiscal year, the final award amount for a named executive officer may be lesser, but not greater, than the officer's stated incentive pool percentage. The incentive pool percentages do not constitute "targets," but instead constitute the stated upper limit on final award amounts to give the Compensation Committee flexibility in determining final awards in compliance with the performance-based exemption under Section 162(m). In addition, as an overriding limitation, the maximum aggregate payout for contingent awards granted in any one fiscal year to any one participant is $2,000,000.
In December 2005, the Executive Incentive Plan was amended to bring it into compliance with certain requirements of Section 409A of the Internal Revenue Code, which was enacted under the American Jobs
Creation Act of 2004. In general, these requirements of Section 409A impose certain new rules for non-qualified deferred compensation plans, primarily relating to the timing of elections and distributions.
2004 Stock Option and Incentive Compensation Plan
The Compensation Committee consideredconsiders stock options, restricted stock and restricted stock unit grants under the 2004 Stock Option and Incentive Compensation Plan (the "2004 Plan") for employees of the Company. Awards under the 2004 Stock Option and Incentive Plan wereare granted by the Compensation Committee to those employees whose management responsibilities placedplace them in a position to make substantial contributions to the financial success of the Company. Directors who were not employees were not eligible to participate in the 2004 Stock Option and Incentive Plan. The Compensation Committee, which administeredadministers the 2004 Stock Option and Incentive Plan, determineddetermines whether the options wereare incentive stock options or nonqualified stock options. All stock options granted in 20042005 had an exercise price equal to the market price of the Company's common stock on the date of grant.
The Compensation Committee believes stock options provide a strong incentive to increase shareholder value, because these awards have value only if the stock price increases over time. The Compensation Committee also believes that restricted stock and restricted stock units, when used as an integral part of incentive compensation programs, provide an incentive to increase shareholder value. The Compensation Committee believes such equity awards to its named executive officers and other employees help to align the interests of management with those of shareholders and to focus the attention of management on the long-term success of the Company.
In 2004,2005, the size of the stock option, restricted stockoptions and restricted stock unit grants under the 2004 Stock Option and Incentive Plan were based primarily on the individual's responsibilities, performance and position. Individual awards were also affected by the Compensation Committee's subjective evaluation of
other factors it deemed appropriate, such as assumption of additional responsibilities, competitive factors, and achievements that in the Compensation Committee's view were not fully reflected by other compensation elements. The Compensation Committee's decisions concerning individual grants generally wereare not affected by the number of options previously exercised, or the number of unexercised options held.
In 2004,2005, the Compensation Committee granted a total of 3,000255,499 options to one employee, 63,500 restricted stock units to three employees and 80,556109,500 shares of restricted stock to three employees. Of these, 37,500 restricted stock units were granted in April 2004 to Mr. O'Neill and weretwenty-seven employees that are subject to certain time-time and performance-based vesting criteriacriteria. The amounts of individual awards in 2005 were based on individual positions, responsibilities, performance and leadership. Additional information regarding the stock grants issued to named executive officers is provided in the Long-Term Incentive Plans—Awards in Last Fiscal Year table. Additional information regarding stock options issued to named executive officers is provided in the Stock Options Granted in Last Fiscal Year table.
Retirement and Other Compensation
Executive officers are eligible to participate in health and insurance plans, retirement plans, profit sharing and other benefits generally available to all full time employees. The Compensation Committee believes that were not metsuch benefits should be competitive in our markets and consistent with its belief in offering employees basic health, welfare and retirement benefits. Additional information with respect to the type and amount of benefits appears in the column entitled All Other Compensation in the Summary Compensation Table and in footnote number seven to the Summary Compensation Table.
Stock Ownership Guidelines
The Compensation Committee believes that it is important for executive management to support an ownership culture for the Company's employees and shareholders, and in 2001, implemented stock ownership guidelines which require the named executive officers to own a minimum amount of the Company's stock within three years. The Chairman and CEO is required to own at least five times his base salary and the time Mr. O'Neill departed theother named executive officers are required to own at least 2.5 times their salary in market value of Company on September 1, 2004. In May 2004, Mr. Landon received 75,000 sharesstock. Stock ownership includes net after-tax value of vested stock options, vested grants
of performance-based restricted stock that will vest based on time and the successful completion of certain performance objectives. Nonestock or stock units from qualified plans. All of the named executive officers received stock options in 2004. Additional information regardingcurrently employed by the Company, have met or exceeded the stock unitsownership requirements.
Executive Deferred Compensation Program
During December 2005, the Compensation Committee adopted the Bank of Hawaii Corporation Executive Deferred Compensation Program, and restricted stock granted toas a component of that program, a new Bank of Hawaii Corporation Executive Base Salary Deferral Plan (collectively, the Messrs. O'Neill"Deferred Compensation Plan"). The Deferred Compensation Plan provides senior management and Landon is provided in Long-Term Incentive Plans—Awards In Last Fiscal Year table on page 26 and in the CEO Compensation discussion below. The amounts of individual awards to Messrs. O'Neill and Landon in 2004 were based on their individual positions, responsibilities, performance, leadership and the other factors discussed above. In addition, the amount of the award to Mr. Landon was in recognition of his appointment as Chief Operating Officerhighly compensated employees of the Company in April 2004.
Managing Committee 2003 Stock Compensation and Retention Program
All members of the Company's Managing Committee as constituted in 2003,its subsidiaries, including the named executive officers, other than Mr. O'Neill, participatewith the ability to defer up to 80% of base salary and 100% of bonus amounts. The Deferred Compensation Plan was effective January 1, 2006.
The amounts deferred by the participant will be distributed, as more specifically described in the Managing Committee 2003 Stock Compensationplan, at the time and Retention Program ("Retention Program"). As part of this program and underform elected by the 1994 Stock Option Plan, all participants were awarded restricted stock units ("RSUs") in October 2003 including grantsparticipant. With respect to the named executive officers as follows: Mr. Landon (30,000), Mr. Kuioka (30,000), Mr. Nelson (20,000), Mr. Thomas (30,000) and Ms. Tanoue (20,000). Each grant was based on the recipient's individual position, responsibilities, performance, leadership impact and other factors discussed above. Dividend equivalents are paid on the restricted stock units. The restricted stock units will vest based on time and the successful completion of certain performance objectives. The participant is entitled to a cash payment based on the fair market value of the Company's stock upon vesting. Fifty percent of the RSUs awarded to the named executive officers vested on April 30, 2004 on the successful completion of certain performance objectives, the remaining fifty percent will vest on March 31, 2005. The fair market value of the Company's stock on April 30, 2004 was $43.72. Further information regarding the cash payment made in 2004 is provided in the Summary Compensation Table on page 24. The vesting of the RSUs for Messrs. Kuioka, Nelson and Thomastiming, this may be accelerated in the event of a departure prior to the end of the vesting period only if the departure is with the Company's approval. If such a participant's employment continues beyond the end of the vesting period, they will receive a supplemental payment vesting on the earlier of twelve(i) any specific date, (ii) six months from the original final vesting date the participant separates from service with the Company or its subsidiaries, or (iii) an anniversary (up to five years) of the date the participant separates from service. In addition, the participant may receive his or her deferred compensation balance sooner as a result of departure, contingent ondisability, death, or unforeseeable emergency.
All deferral elections for a given plan year are irrevocable and cannot be changed. In addition, once the successful completion of certain performance objectives.participant elects a distribution date, he or she may change it to a later date but not an earlier date. The amount ofparticipant must make such a change in distribution date at least 12 months before the supplemental payment will be equal to the cash equivalent value of 50 percent of the participant's original RSU, based on the fair market value of the Company's stock on the last trading day of the month immediately preceding the payment of the supplemental payment, multiplied by a fraction, the numerator of which is the number of full months of additional employment,distribution date, and the denominatornew distribution date may be no earlier than five years after the original distribution date. Upon making the deferral election, the participant must choose between two distribution options: (i) single lump-sum cash payment or (ii) substantially equal annual installment payments over a period up to five years. However, distributions as a result of which is twelve.disability, death, or unforeseeable emergency will always be made as a single lump-sum cash payment.
CEO Compensation
Mr. Landon was appointed to the position of Chairman and CEO effective September 1, 2004. Mr. Landon also retained the position of President. In determining Mr. Landon's annual compensation as CEO, the Compensation Committee has sought to provide levels that are competitive among comparable banks and financial services corporations, as described on page 18.corporations. The Compensation Committee's objectives with regard to Mr. Landon's compensation are to attract, motivate and retain a CEO with the
experience and capabilities needed to maximize shareholder value, provide outstanding leadership to employees, and deliver products and services to the Company's customers. Mr. Landon's compensation reflects the Compensation Committee's continuing strategy of balancing short-short and long-term incentives in structuring executive officer compensation and aligning the interest of the CEO with those of shareholders.
In determining Mr. Landon's 20042005 compensation for the position of Chairman and CEO, the Compensation Committee considered, among other factors, the Company's financial performance in the first six months in 2004.during 2005. The Company's stock price performanceincreased to $51.54 per share and was in the topsecond quartile of the S & P Supercomposite BanksBank Super Composite Index. The Company's diluted earnings per share finished the first half of 20042005 up 55.8 percent. Net11 percent and net income for the first half of 20042005 was up 40.45 percent from the prior year, returnyear. Return on average assets was 1.731.81 percent, up from 1.291.78 percent in 2003,2004, and the return on average equity for the first half of 2004 was 22.0324.83 percent, up from 12.6722.78 percent in the first half of 2003.2004. The Company's efficiency ratio for the first half of 2004 was 56.8953.2 percent, ana significant improvement from 67.0156.1 percent for the same period in 2003.
2004. In April and May 2004, respectively, the Compensation Committee increased Mr. Landon's base salary from $550,000 to $600,000 and granted 75,000 shares of restricted stock to Mr. Landon upon his assumption of the additional responsibilities of Chief Operating Officer. Of the 75,000 restricted shares, (i) 35,000 are time-based restricted shares, with 8,750 shares vesting each year beginning March 31, 2005, and (ii) 40,000 are performance-based restricted shares with a five- year vesting period upon meeting certain efficiency ratio targets and top quartile performance for shareholder return or achieving annual NIACC (net income after capital charge) budget. If the efficiency ratio target is met, 20% of the original performance-based share grant vests each year. If the top quartile return or NIACC budget is met, 30 percent of the original grant vests each year. A maximum of 50 percent of the original grant can vest in one year. If the performance-based shares are not earned by 2008, they are forfeited. The restricted stock grants are further described in the Summary Compensation Table on page 24. Effective September 2004, the Compensation Committee approved an increase in Mr. Landon's compensation to $750,000 upon his appointment as Chairman and CEO.
In 2005,2006, the Compensation Committee awarded Mr. Landon a bonus of $600,000$750,000 under the Executive Incentive Plan in recognition of the Company's 20042005 performance. The Company's diluted earnings per share for 2004 was $3.08, up 39.4 percent from the diluted earnings per share of $2.21 in 2003. Net income for the year was $173.3 million, up $38.1 million or 28.2% from $135.2 million in the previous year. The return on average assets in 2004 was 1.78 percent, up from 1.44 percent in 2003. The return on average equity for the year was 22.78 percent, up from 15.02 percent in 2003. The Company's efficiency ratio was 56.14% in 2004, an improvement from 63.38% in 2003.
Mr. Landon participatesdid not receive any stock options or stock grants in the Company's Retirement Savings Plan and basic medical and dental insurance and life insurance and long term disability programs generally applicable to similarly situated executives of the Company. As noted above,2005. Mr. Landon received a grant of 75,000 restricted stock units in May 2004 under the 2004 Stock Option and Incentive Plan. Mr. Landon participates in the Company's Key Executive Severance Plan and the Retention Program. Under the Retention Program, Mr. Landon was awarded 30,000 restricted stock units in October 2003his final payment under the Company's 1994 Stock Option Plan.Retention Program as further described in footnote number six of the Summary Compensation Table.
Revenue Reconciliation Act of 1993
In general, Bank of Hawaii intends to maintain deductibility for all compensation paid to covered employees, and it will comply with the required terms of the specified exemptions under Section 162(m) of the Code as enacted by the Revenue Reconciliation Act of 1993, except where that compliance unduly would interfere with the goals of Bank of Hawaii's executive compensation program or the loss of deductibility would not be materially adverse to Bank of Hawaii's overall financial position.
As submitted by the members of the Compensation Committee
David A. Heenan, Chairman
Compensation Committee Interlocks and Insider Participation
No member of ourthe Compensation Committee during fiscal year 20042005 served as an officer, former officer, or employee of the Company or had a relationship discloseable under "Certain Transactions with Management and Others." Further, during 2004,2005, no executive officer of the Company served as:
Members of the Compensation Committee
David A. Heenan, ChairmanPeter D. BaldwinMary G. F. BittermanBarbara J. Tanabe
Executive Compensation
The following table shows, for the fiscal years ending December 31, 2005, 2004, 2003, and 2002,2003, information on compensation the Company paid its named executive officers.
| | | | | | Long-Term Compensation | | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Annual Compensation | | | Awards | Payouts | | |||||||||||||
| | Other Annual Compensation ($)(3) | Restricted Stock Award(s) ($)(4) | Securities Underlying Options (#)(5) | Long-Term Incentive Payouts ($)(6) | | ||||||||||||||
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | All Other Compensation ($)(7) | ||||||||||||||||
Allan R. Landon Chairman of the Board, Chief Executive Officer & President | 2005 2004 2003 | 750,001 621,035 255,010 | 750,000 600,000 125,000 | — — — | — 1,459,500 1,656,800 | — 70,000 | 2,381,100 678,750 — | 52,775 16,861 | ||||||||||||
Vice Chairman, | 2005 2004 2003 | — — — | — — — | — — | 1,263,675 678,750 — | |||||||||||||||
Vice Chairman, | ||||||||||||||||||||
2005 2004 2003 | ||||||||||||||||||||
— — — | — — — | — | 1,263,675 678,750 — | 806,108 54,788 31,980 | ||||||||||||||||
Peter S. Ho Vice Chairman, Investment Services Group | 2005 2004 2003 | 304,231 256,542 219,175 | 275,000 225,000 200,000 | — — — | 773,480 — | 54,919 — | 455,900 452,700 — | 45,819 40,442 51,737 | ||||||||||||
Donna A. Tanoue Vice Chairman, Chief Administrative Officer | 2005 2004 2003 | 315,000 306,813 207,844 | 195,000 230,000 211,437 | — — — | 228,240 — — | 28,654 125,000 | 455,900 452,500 — | 46,935 44,816 1,456 |
Name | Retirement Savings Plan 401(k) Matching Allocation($) | Retirement Savings Plan Value Sharing Allocation($) | Retirement Savings Plan Company Fixed Allocation($) | Excess Plan Value Sharing Allocation($) | Excess Plan Company Fixed Allocation($) | Retirement Savings Plan 401(k) Matching Allocation ($) | Retirement Savings Plan Value Sharing Allocation ($) | Retirement Savings Plan Company Fixed Allocation ($) | Excess Plan Value Sharing Allocation ($) | Excess Plan Company Fixed Allocation ($) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Michael E. O'Neill | — | — | — | — | — | |||||||||||||||
Allan R. Landon | 0 | 8,187 | 6,150 | 21,607 | 16,231 | — | 8,403 | 6,300 | 45,614 | 34,200 | ||||||||||
David W. Thomas | — | 8,403 | 6,300 | 18,806 | 14,100 | |||||||||||||||
Alton T. Kuioka | 8,200 | 8,187 | 6,150 | 18,160 | 13,641 | 8,400 | 8,403 | 6,300 | 18,606 | 13,950 | ||||||||||
William C. Nelson | 0 | 8,187 | 6,150 | 8,809 | 6,617 | |||||||||||||||
Peter S. Ho | 8,400 | 8,403 | 6,300 | 12,773 | 9,577 | |||||||||||||||
Donna A. Tanoue | 8,200 | 8,187 | 6,150 | 12,510 | 9,397 | 8,400 | 8,403 | 6,300 | 13,404 | 10,050 | ||||||||||
David W. Thomas | 2,333 | 8,187 | 6,150 | 12,783 | 9,602 |
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
There were no option grants made to the named executive officers during 2004. The following table shows the stock options exercised by the named executive officers during 2004,2005, and the number and total value of unexercised in-the-money options as of December 31, 2004.2005.
| | | Number of Securities Underlying Unexercised Options at Fiscal Year-End(#) | Value of Unexercised, In-the-Money Options at Fiscal Year-End($)(1) | | | Number of Securities Underlying Unexercised Options at Fiscal Year-End (#) | Value of Unexercised, In-the-Money Options at Fiscal Year-End ($)(1) | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Shares Acquired on Exercise(#) | Value Realized ($) | Shares Acquired on Exercise (#) | Value Realized ($) | ||||||||||||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||
Michael E. O'Neill | 2,812,000 | 88,449,741 | — | — | — | — | ||||||||||||||||||
Allan R. Landon | 49,059 | 1,386,533 | 242,238 | — | 6,452,946 | — | — | — | 242,238 | — | 6,646,736 | — | ||||||||||||
David W. Thomas | 40,875 | 1,253,636 | 69,950 | — | 2,125,081 | — | ||||||||||||||||||
Alton T. Kuioka | 215,438 | 5,315,133 | 212,500 | — | 6,472,300 | — | 162,500 | 5,236,565 | 50,000 | — | 1,226,500 | — | ||||||||||||
William C. Nelson | 48,000 | 1,406,800 | 188,300 | — | 5,118,454 | — | ||||||||||||||||||
Peter S. Ho | — | — | 57,835 | — | 116,563 | — | ||||||||||||||||||
Donna A Tanoue | — | — | 94,733 | 41,667 | 2,053,214 | 939,174 | 5,000 | 103,810 | 160,054 | — | 3,090,414 | — | ||||||||||||
David W. Thomas | 111,275 | 2,225,146 | 110,825 | — | 3,278,204 | — |
LONG-TERM INCENTIVE PLANS—AWARDS IN LAST FISCAL YEAR
| | | Estimated Future Payouts Under Non-Stock Price-Based Plans | | | Estimated Future Payouts Under Non-Stock Price-Based Plans | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number Of Shares, Units, or Other Rights (#)(1)(2) | Performance Or other Period Until Maturation Or Payout | Number Of Shares, Units, or Other Rights (#)(1) | Performance Or other Period Until Maturation Or Payout | ||||||||||||||||||||||
Name | Threshold ($ Or #) | Target ($ Or #) | Maximum ($ or #) | Threshold ($ Or #) | Target ($ Or #) | Maximum ($ Or #) | ||||||||||||||||||||
Michael E. O'Neill | 37,500 | N/A | N/A | N/A | N/A | |||||||||||||||||||||
Allan R. Landon | 40,000 | 2009 | $ | 405,920 | $ | 1,014,800 | $ | 2,029,600 | — | — | — | — | — | |||||||||||||
David W. Thomas | 40,000 | 2008 | $ | 309,240 | $ | 1,030,800 | $ | 2,061,600 | ||||||||||||||||||
Alton T. Kuioka | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||
William C. Nelson | — | — | — | — | — | |||||||||||||||||||||
Donna A. Tanoue | — | — | — | — | — | |||||||||||||||||||||
David W. Thomas | — | — | — | — | — | |||||||||||||||||||||
Peter S. Ho | 11,250 | 2010 | $ | 86,974 | $ | 289,912 | $ | 579,825 | ||||||||||||||||||
Donna A Tanoue | 1,500 | 2010 | $ | 11,596 | $ | 38,655 | $ | 77,310 |
STOCK OPTION GRANTS IN LAST FISCAL YEAR(1)
| Individual Grants | | | | | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Securities Underlying Options Granted (#) | % of Total Options Granted to Employees in Fiscal Year | | | Potential Realizable Value(2) | |||||||
Name | Exercise or Base Price $/Share | Expiration Date | ||||||||||
5% ($) | 10% ($) | |||||||||||
Allan R. Landon | — | — | — | — | — | — | ||||||
David W. Thomas | — | — | — | — | — | — | ||||||
Alton T. Kuioka | — | — | — | — | — | — | ||||||
Peter S. Ho | 54,919 | 19.75 | 50.72 | 12/16/2015 | 186,560 | 328,086 | ||||||
Donna A. Tanoue | 28,654 | 10.30 | 50.72 | 12/16/2015 | 97,338 | 171,179 |
| Estimated Maximum Annual Retirement Benefit Based Upon Years of Service | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Average Annual Salary in Consecutive 5 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.
Retirement Plan
The Employees' Retirement Plan of Bank of Hawaii (the "Retirement Plan") provides retirement benefits for eligible employees based on the employee's years of service and average annual salary during the 60 consecutive months resulting in the highest average (excluding overtime, incentive plan payouts, and discretionary bonuses). The normal retirement benefit in the above table assumes payment in the form of a single life annuity commencing at age 65 and not subject to any deduction for Social Security or other offset amounts. The Internal Revenue Code generally limits the maximum annual benefit that can be paid under the Retirement Plan. If at retirement the annual benefit of any participant should exceed this limit, the excess amount will be paid to the participant out of general assets from the Bank of Hawaii Excess Benefit Plan, an unfunded excess benefit plan designed for this purpose, at the time the participant receives a distribution on his Retirement Plan benefits.
The Retirement Plan was frozen as of December 31, 1995, except that for the five-year period commencing January 1, 1996, benefits for certain eligible participants, including Mr. Kuioka, were increased in proportion to the increase in the participant's average annual salary. The credited years of service and compensation covered by the plan as of the 1995 freeze date are as follows: Mr. Kuioka, 26 years and $226,257. The other named executive officers are not participants in the Retirement Plan.
As of December 31, 2000, the benefits under the Plan were completely frozen and not subject to increase for any additional years of service or increase in average annual salary. From the 1995 freeze date through 2000, the retirement benefit determined under the table for Mr. Kuioka was increased by 8.54% due to an increase in his average annual salary. The frozen retirement monthly annuity amount for Mr. Kuioka is approximately $13,096.
Change-In-Control, Retention and Other Arrangements
Bank of Hawaii's Key Executive Severance Plan (the "Severance Plan") provides participants, following a change in control of the Company, with severance benefits under circumstances and in amounts set forth in the Severance Plan and in individual severance agreements with each participant. All of the currently employed named executive officers participate in the Severance Plan. Each of the severance agreements with these named executive officers provides that a "change in control" will be deemed to have occurred if any person or group becomes the beneficial owner of twenty percent25% or more of the total number of voting securities of the Company, or the persons who were directors of the Company 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 the Company or any successor to the Company.
Severance benefits are payable if their employment is terminated voluntarily or involuntarily within two years of a change in control. Key features include:
maximum amount that would be payable if employment continued to the end of the period and all performance goals were achieved.
Stock options held by named executive officers will become immediately exercisable upon a change in control. A change in control also will cause the lapse of restrictions on restricted stock issued under the Director Stock Program, the 1994 Stock Option Plan and 2004 Stock and Incentive Compensation Plan. The incentive period for the Executive Incentive Plan will end, and awards will be paid upon a dissolution, liquidation, or change in control (as defined under the Severance Plan) of the Company. In those circumstances, payments will be calculated by multiplying contingent awards by 2.0two and by adjusting awards in proportion to the number of months of the original incentive period that elapsed before the triggering event.
Certain of the Company's existing and former executive officers, including Messrs. Kuioka and Thomas, are parties to retention agreements with the Company. Under these agreements, a participant is generally entitled to receive payments equal to up to twenty-four months of the participant's salary in a lump sum or as salary continuation upon the participant's departure, if and only if that departure occurs on or after an agreed upon date. These agreements were amended in December 2005 to bring them into compliance with certain requirements of Section 409A of the Internal Revenue Code, which was enacted under the American Jobs Creation Act of 2004. In general, these requirements of Section 409A impose certain new rules for non-qualified deferred compensation plans, primarily relating to the timing of elections and distributions.
Pursuant to his retention agreement, Mr. Kuioka received a payment of $750,000 in a single lump sum on January 20, 2006. In accordance with his retention agreement, Mr. William C. Nelson, the Company's former Chief Risk Officer, was entitled to receive a payment totaling $630,000, $157,500 of which was paid during 2005, and the remaining $472,500 was paid in a single lump sum on January 24, 2006.
In December 2005, the Company entered into a retention agreement with Mr. Thomas in connection with his promotion to Chief Operating Officer of the Company. Pursuant to his retention agreement, the Company will employ Mr. Thomas as its Chief Operating Officer until February 29, 2008 (the "Separation Date"), although the Company may advance the Separation Date to any date before February 29, 2008, or may extend the Separation Date to any date within three months after February 29, 2008. If Mr. Thomas performs his duties to the Company's satisfaction through February 29, 2008 and in accordance with the terms of the Retention Agreement, he will receive a payment equal to 24 months of his base monthly salary as of February 29, 2008. The payment will be made to Mr. Thomas in 36 monthly payments, as more particularly specified in his retention agreement, commencing on the first day of the seventh month after the Separation Date. In addition, Mr. Thomas will be entitled to certain continued health insurance coverage with the same percentage of shared premiums as prior to the Separation Date.
Effective January 2006, Mr. Kuioka was named Vice Chairman of the Board of Directors of the Bank and assumed additional responsibilities on behalf of the Bank Board to provide advisory services supporting client relationships. In consideration of Mr. Kuioka's advisory and client relationship services, he will receive annual compensation of approximately $66,000 and reimbursement of business related expenses, in addition to director retainer and meeting fees.
The following graph shows the cumulative total return for Bank of Hawaii common stock compared to the cumulative total returns for the S&P 500 Index and the S&P Banks Index. The graph assumes that $100 was invested on December 31, 19992000 in Bank of Hawaii's stock, the S&P 500 Index and the S&P Banks Index. The cumulative total return on each investment is as of December 31 of each of the subsequent five years and assumes reinvested dividends.
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $100 on December 31, 19992000
with dividends reinvested
| Dec-99 | Dec-00 | Dec-01 | Dec-02 | Dec-03 | Dec-04 | Dec-00 | Dec-01 | Dec-02 | Dec-03 | Dec-04 | Dec-05 | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Bank of Hawaii Corp. | $ | 100 | $ | 99 | $ | 150 | $ | 180 | $ | 256 | $ | 317 | $ | 100 | $ | 151 | $ | 182 | $ | 259 | $ | 320 | $ | 334 | ||||||||||||
S&P 500® | $ | 100 | $ | 91 | $ | 80 | $ | 62 | $ | 80 | $ | 89 | $ | 100 | $ | 88 | $ | 69 | $ | 88 | $ | 98 | $ | 103 | ||||||||||||
S&P© Banks index | $ | 100 | $ | 119 | $ | 119 | $ | 118 | $ | 156 | $ | 183 | $ | 100 | $ | 100 | $ | 99 | $ | 131 | $ | 154 | $ | 158 |
Certain Transactions with Management and Others
Certain transactions involving loans, deposits and certificates of deposit, and money market instruments, and certain other banking transactions occurred during fiscal year 20042005 between the Bank and its subsidiaries, and one or more of the Company's directors, nominees for director and executive officers, members of their immediate families, corporations and organizations of which one or more of them was a beneficial owner of 10% or more of a class of equity securities, certain of their associates and affiliates, and certain trusts and estates of which one or more of them was a trustee or substantial beneficiary.beneficiary, on the other hand. All such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral that prevailed at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or present other unfavorable features.
On May 10, 2004, the Company purchased 644,069 mature shares from Mr. O'Neill, at a purchase price with a volume weighted average price per share of $44.26 and totaling $28.5 million. The closing price of the Company's shares was $44.35 for that day. The purchase was approved by the Board and completed under the Company's ongoing share repurchase program.
Section 16(a) Beneficial Ownership Reporting Compliance
The rules of the SEC require Bank of Hawaii to disclose late filings of reports of ownership (and changes in stock ownership) of Bank of Hawaii common stock by its directors and certain officers. To our knowledge, based on review of the copies of such reports received by Bank of Hawaii and the written representations of its directors and officers, the Company believes that all of its directors and officers complied timely with those filing requirements for 2004,2005, with the exception of two reportsone report which werewas not filed timely becauseby Ms. Tanoue in connection with her acquisition of administrative errors. Upon discovery of the omissions, the relevant forms were immediately filed. Mr. Brian Stewart sold 1,81727 Bank of Hawaii shares on November 5, 2004July 31, 2003 as custodian for her daughter. Upon discovery of the omission, the transaction was reported. On February 9, 2005 a Form 4 was filed to reflect the exercise of options and Ms. Bitterman sold 1,000 Bankacquisition of Hawaii7,373 shares held by Mr. Kuioka. Due to an administrative error, the transaction was incorrectly reported as an acquisition rather than a disposition of 7,373 options on November 4, 2004. Both transactions were reportedTable II of such Form. Upon discovery of the administrative error on November 10, 2004.February 21, 2006, an amendment to such Form was immediately filed.
PROPOSAL 2: APPROVALAMENDMENT OF BANK OF HAWAII CORPORATIONAMENDED2004 STOCK AND RESTATED DIRECTOR STOCKINCENTIVE COMPENSATION PLAN TO INCREASE AVAILABLE SHARES
General
The Board of Directors has approved and recommended for shareholdersubmission to the shareholders for approval, an amendment increasing the total number of shares that may be granted under the Bank of Hawaii Corporation AmendedStock and Restated Director StockIncentive Compensation Plan ("Restated Director Stockof 2004 (the "Stock Plan"), and increasing the limit on the number of shares which may be issued pursuant to incentive stock options ("ISOs") and non-qualified stock options (NQSOs"). If adopted,The proposed amendment to the Restated Director Stock Plan would amend, restate and extendincrease the Company's existing Director Stock Compensation Plan ("Current Director Stock Plan")shares of common stock that shareholders approved in 1996. Existing awards will remain outstandingmay be issued under the Current DirectorsPlan by 1,000,000 to 1,700,000, and would increase the limit on the number of shares which may be issued pursuant to ISOs and NQSOs, in each case by 1,000,000, to 1,700,000. The original number of shares of Common Stock Compensationreserved and available for awards under the Stock Plan was 700,000; the limit on the number of shares which may be issued as ISOs and continue to be governed by their terms andNQSOs was, in each case, 700,000. As of December 31, 2005 there were 233,695 shares available for grant or award under the Current Director Stock Plan.
The Restated Directorpurpose of the Stock Plan is to promote the success and enhance the value of the Company by linking the interests of participants to those of the Company's shareholders and by providing participants with incentive for outstanding performance. The Stock Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of participants upon whose judgment, interest, and special effort the successful conduct of its operations largely is dependent. The Board of Directors believes that the additional shares are consistent with the Stock Plan's purpose, and is desirable in order to service the needs of the Plan.
Subject to the discretion of the Compensation Committee, the Stock Plan provides for the award of incentive stock options, nonqualified stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and stock-based awards. In addition, dividend equivalents may be paid in respect of any such awards. The Company's management intends to recommend that the Compensation Committee adopt a policy providing that equity grants made after shareholder approval of the proposed amendment to the Stock Plan will provideresult in a prospective gross three-year average "burn rate" through 2008 not exceeding 2.46% of common shares outstanding.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOREGOING PROPOSAL.
Description of the Stock Plan. The following is a brief summary of the principal provisions of the Stock Plan, as amended. The proposed amendment will not affect any existing provisions of the Stock Plan except the number of shares that may be granted, and the limit on the number of shares which may be issued pursuant to ISOs and NQSOs. Reference should be made to the full text of the Stock Plan for greater flexibilitya complete description of its terms and conditions and the summary below, which is general in granting and administering awards thannature, is qualified entirely by the Current Directorprovisions of the Stock Plan. As explained below, no additional shares will be reserved for issuance under the Restated Director Stock Plan.
The following descriptionA complete copy of the Restated DirectorStock Plan, including the proposed Amendment No. 2006-1 is included in Appendix A.
Previous Amendment. This is the first proposed amendment to the Stock Plan since having been approved by the shareholders in 2004.
Duration of the Stock Plan. Unless terminated sooner by the Compensation Committee or Board, the Stock Plan shall terminate on April 30, 2014. After the Stock Plan is not intended toterminated, no future awards may be completegranted but awards previously granted shall remain outstanding in accordance with their applicable terms and is qualified in its entirety byconditions and the complete text of the Restated Director Stock Plan, a copy of which is included as Appendix B to this proxy statement.
Description of the Principal Features of the Restated Director Stock PlanPlan's terms and conditions.
Authorized Shares. AUpon approval by the shareholders of the proposed amendment, the maximum number of 471,900 shares (as adjusted for prior stock splits) is authorizedof Common Stock reserved and available for awards under the Restated DirectorStock Plan will be 1,700,000. If any award under the Stock Plan is exercised or cashed out, or terminates or expires or is forfeited, without payment made in the form of Common Stock, the shares subject to such award will again be available for grant under the Stock Plan. ThisFurther, if the option price or tax withholding requirements
with respect to an award are satisfied by tendering shares, or if a SAR is exercised, only the original number of shares (as adjusted for prior stock splits) authorized underissued will be taken into account in determining the Current Director Stock Plan. Of thismaximum number as of February 28, 2005, 233,100 shares are subject to existing awards and 238,800 shares remain available for new awards under the Restated Director Stock Plan. The number of shares reserved and available for new awards willis subject to equitable adjustment at the discretion of the Compensation Committee in connection with any transaction or event that affects the Company's Common Stock (including, but not limited to, a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, split up, spin-off, combination of shares, exchange of shares, or other like change in capital structure) which may be increased byrequired in order to prevent dilution or enlargement of rights. Further, the plan is the successor to the Pacific Century Financial Corporation Stock Option Plan of 1994 (the "Predecessor Plan"), and any options issuedshares of Common Stock as to which awards under the Current DirectorPredecessor Plan lapse, terminate, expire or be cancelled, are settled in cash in lieu of Common Stock, Plan andor are tendered to pay an exercise price or to satisfy any awards issuedtax withholding requirement, will also be deemed to be available for issuance or reissuance under the Restated Director Stock Plan that, in the future, are forfeited, surrendered or otherwise unexercised. In addition, the number of authorized shares will be adjusted for stock splits, stock dividends and certain other corporate changes in accordance with the terms of the Restated Director Stock Plan.
Purpose. The purpose of the Restated Director Stock Plan is to align the interest of the Directors with those of the Company Shareholders by encouraging and enabling Directors to acquire and retain Company common stock.
Eligibility. Any non-employee member of the Board or of the board of directors of an affiliate of the Company ("Director") is eligible to participate in the Restated Director Stock Plan.
Administration. The Restated Director Stock Plan will beis administered by the Board.Compensation Committee. The Board hasCompensation Committee maintains the discretionary authority to establish, among other things, Directors to whom awards will be made,interpret the exercise price of options, any exceptions to nontransferability, vesting schedules, and all other material terms and conditions of the Stock Plan, determine the employees and independent contractors, to whom awards (whichmay be granted, determine the terms need not be identical), subjectand conditions of any award, including the performance goals, if any, applicable to an award, and adopt rules, regulations, and guidelines relating to the administration of the Stock Plan. Except with respect to awards to certain officers, the Compensation Committee may by resolution authorize one or more officers of the Company to designate the participants to whom awards are granted and to determine the size (subject to the aggregate number as the Compensation Committee may authorize) and terms and conditions of the awards. All decisions made by the Compensation Committee pursuant to the provisions of the Restated Director Stock Plan. Plan are final and binding on persons, including the Company and participants.
The Board also hasCompany's management intends to recommend that the authority to interpret and construe the provisionsCompensation Committee adopt a policy providing that equity grants made after shareholder approval of the Restated Directorproposed amendment to the Stock Plan will result in a prospective gross three-year average "burn rate" through 2008 not exceeding 2.46% of common shares outstanding.
Eligibility. The Compensation Committee may grant awards under the Stock Plan to any employee, including officers and other key employees, or independent contractors of the Company or any of its subsidiaries or affiliates. A director of the Company or any of its subsidiaries or affiliates, who is not otherwise employed by such an organization, is not eligible to participate in awards under the Stock Plan.
Types ofLimits on Awards. The Restated DirectorAnnual grant limitations under the Stock Plan allowsapply to awards that are intended to qualify for exemption from Section 162(m) of the grantingCode. Section 162(m) precludes a publicly held corporation from claiming a deduction for compensation in excess of stock$1 million paid to its chief executive officer or to any of its four other most highly compensated executive officers. Compensation is exempt from this limitation if it satisfies requirements for "qualified performance-based compensation." In order to comply with the exemption from Section 162(m), awards that are intended to qualify as performance based compensation to covered employees are subject to the following annual limits: (a) the maximum aggregate number of shares for options granted in any one calendar year to any one covered employee is 2,500,000 shares; (b) the maximum aggregate number of shares for SARs granted in any one calendar year to any one covered employee is 2,500,000 shares; (c) the maximum aggregate number of shares for restricted stock and restricted stock units ("RSUs").granted in any one calendar year to any one covered employee is 500,000 shares; (d) the maximum aggregate number of shares for performance shares and performance units granted in any one calendar year to any one covered employee is 500,000 shares; (e) the maximum aggregate value for cash-based awards paid in any one calendar year to any one covered employee is $10,000,000; and (f) the maximum aggregate number of shares for any other stock-based awards granted in any one calendar year to any one covered employee is 500,000 shares. In each case, the foregoing annual individual limit is increased by the amount the preceding fiscal year's applicable individual limit was not used. These annual limits, the above description of the individuals eligible to participate in the Stock optionsPlan,
and the below description of performance measures upon which awards may only be "nonqualified stock options,"conditioned are material terms of the Stock Plan required to be disclosed and approved by shareholders for purposes of meeting the requirements for performance-based compensation under Section 162(m) of the Code. The foregoing individual limits which do not qualifyare denominated in shares are subject to equitable adjustment at the discretion of the Compensation Committee in the same manner as the total number of shares reserved for issuance as discussed above under the heading "Authorized Shares."
Stock Options. Options granted under the Stock Plan may be either an option intended to be an ISO within the meaning of Section 422 of the Internal Revenue Code or an NQSO. Upon exercise of 1986,an option, the participant is entitled to purchase option shares at a specified exercise price. The Compensation Committee at its discretion determines the number of option shares, duration of the option (but no later than the tenth anniversary of the date of grant), exercise price (e.g., equal to, greater than fair market value, or indexed), vesting, rights to dividend equivalents, and other terms and conditions not inconsistent with the Stock Plan. The Stock Plan, as amended.amended, provides that (i) 1,700,000 shares of Common Stock may be issued under awards in the form of ISOs, and (ii) 1,700,000 shares of Common Stock may be issued under awards in the form of NQSOs. If a participant's employment or service with the Company or any of its subsidiaries or affiliates terminates, the participant's options are exercisable in the manner determined by the Compensation Committee and provided under the award agreement. However, for purposes of complying with tax qualification requirements, ISOs may be granted only to employees of the Company (or of any parent corporation or subsidiary corporation, as defined in Section 424 of the Code, in respect of the Company), may not be granted following the tenth anniversary of the Effective Date, must have a term of ten years or less, and shall be subject to an exercise price no less than fair market value of Common Stock as of the date of grant. Further, following a participant's termination of employment (other than due to death or disability) ISOs are generally exercisable only within three months after such termination, and the aggregate fair market value (determined at the time of grant) of Common Stock, with respect to which ISOs are exercisable for the first time by a participant during any calendar year, may not exceed $100,000. Upon exercise of an option, the exercise price is payable in cash, by tendering shares having a fair market value equal to the exercise price, or by any other method as determined by the Compensation Committee and provided under the award agreement. The Compensation Committee may also permit certain forms of "cashless exercise" of an option, including an arrangement under which the participant instructs a registered securities broker to sell a sufficient number of shares to cover the costs and expenses associated with the exercise of the option. As soon a practicable following payment of the exercise price, the option shares are delivered to the participant and, as may be determined by the Compensation Committee and provided under the award agreement, the option shares acquired may comprise restricted stock as described below.
SARs. SARs are granted either by themselves ("freestanding") or in connection with options ("tandem SARs"). Upon exercise of an SAR, the participant is entitled to receive an amount based upon the appreciation in the Common Stock over the grant price. The Compensation Committee, at its discretion, determines the number of SARs, duration of the SARs (but generally not later than the tenth anniversary of the date of grant), grant price (e.g., equal to, greater than fair market value, or indexed), vesting, form of payment (in cash or equivalent value in shares), rights to dividend equivalents, and other terms and conditions not inconsistent with the Stock Plan. If a participant's employment or service with the Company or any of its subsidiaries or affiliates terminates, the participant's SARs are exercisable in the manner determined by the Compensation Committee and provided under the award agreement. However, the grant price of tandem SARs is equal to the exercise price of the related option, and tandem SARs granted in connection with ISOs are subject generally to the terms and conditions relating to the underlying ISOs. The Compensation Committee may, at its discretion, substitute SARs for outstanding options granted to a participant, provided that the substituted SARs are at least equivalent to the terms and economic benefit of the options.
Restricted Stock and Restricted Stock Units. Restricted stock is Company commona stock grant to participants that generally remain nontransferable and subject to transferforfeiture until the satisfaction of specified conditions. Restricted stock units are similar to restricted stock except that restricted stock units represent defined units of value and not shares of Common Stock. The Compensation Committee, at its discretion, determines the number of restricted stock or restricted stock units, term of the restriction period, applicable restrictions (e.g., vesting conditioned on service or attainment of performance goals, and riskholding requirements or sale restrictions upon vesting), any applicable purchase price, voting rights during the restriction period (although voting rights do not apply to restricted stock units), rights to dividends (or dividend equivalents in the case of forfeiture. RSUs entitle granteesrestricted stock units) during the restriction period, form of payment, custody of restricted stock certificates during the restriction period, and other terms and conditions not inconsistent with the Stock Plan. If a participant's employment or service with the Company or any of its subsidiaries or affiliates terminates, the participant is entitled to the deliveryrestricted stock or restricted stock units in manner determined by the Compensation Committee and provided under the award agreement. Upon satisfaction or lapse of unrestrictedapplicable conditions, restricted stock generally becomes freely transferable and nonforfeitable in favor of the participant, and restricted stock units become payable in cash, shares, or a combination of cash and shares as may be determined by the Compensation Committee and provided under the award agreement.
Performance Shares and Performance Units. A performance share is a hypothetical share unit with an initial value equal to the fair market value of a share of Common Stock as of the date of grant, and a performance unit is a unit of value with an initial value as of the date of grant as may be established by the Compensation Committee and provided under the award agreement. The Compensation Committee, at its discretion, determines the number of performance shares or performance units granted to a participant, term of the performance period, applicable performance goals, any applicable purchase price, rights to dividend equivalents during the performance period, form of payment, and other terms and conditions not inconsistent with the Stock Plan. If a participant's employment or service with the Company common stock (oror any of its subsidiaries or affiliates terminates, the cash equivalent thereof) on a specified payment dateparticipant is entitled to the performance share or performance units in the future. The Current Director Stock Plan does not authorizemanner determined by the Compensation Committee and provided under the award agreement. Upon satisfaction of RSUs. Each awardthe performance goals, the performance shares and the performance units become payable in cash, shares, or a combination of cash and shares as may be determined by the Compensation Committee and provided under the Restated Director Stock Plan willaward agreement.
Cash-Based Awards and Stock-Based Awards. The Compensation Committee maintains the flexibility to provide for cash-based awards and stock-based awards in the amount and manner that it may determine at its discretion. Such awards may be evidencedvalued and conditioned upon performance periods and goals, and may be payable in cash, shares, or a combination of cash and shares as may be determined by an agreement, specifyingthe Compensation Committee. If a participant's employment or service with the Company or any of its subsidiaries or affiliates terminates, the participant shall be entitled to payment of cash-based awards and stock-based awards in the manner determined by the Compensation Committee and provided under the award agreement. Cash-based awards and stock-based awards may serve as the basis for formulating short-term or long-term performance-based bonus arrangements.
Performance Goals. As determined at the discretion of the Compensation Committee, the terms and conditions of awards under the award.Stock Plan (e.g., relating to amount, measurement, vesting, and payment) may be conditioned upon the attainment of certain performance goals. In the case of awards that are intended to comprise qualified performance-based compensation to covered employees under Section 162(m) of the Code, the performance goals are limited to being based on one or more, separately or in combination, of the following: (a) earnings per share (actual or targeted growth); (b) net income after capital charge; (c) net income (before or after taxes); (d) return measures (including, but not limited to, return on average assets, risk-adjusted return on capital, or return on average equity); (e) efficiency ratio; (f) full-time equivalency control; (g) stock price (including, but not limited to, growth measures and total shareholder return); (h) noninterest income compared to net interest income ratio; (i) expense targets;
(j) margins; (k) operating efficiency; (1) EVA®; (economic value added) and (m) customer satisfaction. The Board will determineperformance goals may apply to the exercise priceCompany as a whole or any subsidiary, affiliate, or business unit of any stock options granted under the Restated Director Stock Plan; however,Company, or as compared to the exercise price will not be less than fair market value on the dateperformance of grant. The Board will also determine the option period, provideda group of comparable companies, or published or special index that the Compensation Committee deems appropriate, or as compared to various stock optionmarket indices. In an award, the Compensation Committee may include or exclude any of the following events that occurs during a performance period: (a) asset-write downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions regarding financial reporting, (d) reorganizations or restructurings, (e) certain extraordinary or nonrecurring items, (f) acquisitions or divestitures, or (g) foreign exchange gains or losses. Any performance based awards may not be adjusted upwards, but may be adjusted downwards.
Change in Control. In the event of a "change in control" of the Company within the meaning of the Stock Plan, unless prohibited by law or otherwise determined by the Compensation Committee and provided under the award agreement: (a) options and SARs are immediately vested and, if the participant is terminated without "cause" (within the meaning of the Stock Plan) from employment or service within one year of the change in control, such options and SARs are exercisable after ten years from its grant. Any awardwithin one year of such termination (or, if lesser, the remaining term of the options and SARs); (b) restricted stock will consistand restricted stock units are immediately vested; and (c) performance shares and performance units, and other awards conditioned upon performance goals or restrictions, become payable based on the assumed achievement or satisfaction of shares that are restricted as to transfer, subject to forfeitureapplicable performance goals or restrictions and subject to other terms and conditions asbased on a proration in accordance with completion of the Board may specify. Any award of RSUs will provide for the issuance of shares (or the cash equivalent thereof) at a time(s) specified by the Board subject to such other terms and conditionsapplicable performance periods.
Nontransferability. Except as may be specifiedprovided under an award agreement, any award granted is not transferable other than will or by the Board. The termslaws of any award underdescent and distribution and, further, the Restated Director Stock Plan may provide a Director with the rightrights to receive dividend payments or dividend equivalent payments with respect to shares covered by the award as the Board may specify. The payments may be made either currently or creditedapply to an account established on behalf of the Director and may be settled in cash or shares.exercised by, during the participant's lifetime, only by the participant.
Amendment and Termination. The Restated DirectorCompensation Committee or the Board may amend or terminate the Stock Plan in whole or in part at any time. However, no amendment can be made without shareholder approval as may be required by law, regulation, or stock exchange rule. Further, options may not be repriced, replaced, or regranted through cancellation without prior shareholder approval. An amendment may not adversely affect in a material way any outstanding award without the written consent of the participant. Unless terminated sooner by action of the Compensation Committee or Bank, the Stock Plan will terminate ten years afterfollowing the 2005 annual meeting unless the Board terminates the Plan at an earlier time. The Board may amend the Restated Director Stock Plan at any time, subject to shareholder approval if required by law or the rules of the principal exchange or interdealer quotation system on which Company common stock is listed or quoted. In addition, no termination or amendment of the Restated Director Stock Plan may adversely affect the rights of a Director under an outstanding award without the consent of such Director.Effective Date.
Proposed Awards.Tax Withholding. If shareholders approve the Restated Director Stock Plan, the Board willThe Company shall have the flexibilitypower and right to setdeduct, withhold, or require the form and terms of awards.participant to remit to the Company, an amount necessary to satisfy all applicable tax withholding requirements in connection with an award. The Board currently anticipates that approximately half ofCompany may require, or a participant may elect if permitted by the total annual equity-based awardsCompensation Committee, to Directors will be paidsatisfy, in whole or in part, any tax withholding obligation by withholding shares of restricted stock, and half will be granted inCommon Stock from shares otherwise issuable to the formparticipant.
Summary of stock options, valued using an option-pricing model such as Black-Scholes. Options are expected to have a ten-year term and vest in one-third annual increments. Shares of restricted stock will vest after three years. Board compensation for 2005 has not yet been determined.
The Board does not expect to award any RSUs in 2005, but it may do so in the future in accordance with the terms of the Restated Director Stock Plan.
Certain Federal Income Tax ConsequenceConsiderations.
The following discussion is a brief summary ofbriefly summarizes certain United States federal income tax aspects of awards granted pursuant to the Plan. State, local and foreign tax consequences under current federal income tax laws relating to awards under the Restated Director Stock Plan. This summary is not intended to be exhaustive and, among other things, does not describe state, local or foreign income and other tax consequences.may differ.
Nonqualified Stock Options.ISOs. A granteeparticipant will not recognize income on the grant or exercise of an incentive stock option. However, the difference between the exercise price and the fair market value of the stock on the date of exercise is an adjustment item for purposes of the alternative minimum tax. If a participant does not exercise an incentive stock option within certain specified periods after termination of employment, the participant will recognize ordinary income on the exercise of an incentive stock option in the same manner as on the exercise of a nonqualified stock option, as described below. The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an incentive stock option will be treated as capital gain or loss. If certain holding period requirements are not satisfied, however, the participant generally will recognize ordinary income at the time of the disposition. Gain recognized on the disposition
in excess of the ordinary income resulting there from will be capital gain, and any loss recognized will be a capital loss.
NQSOs, SARs, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, Stock-Based Awards and Dividend Equivalents. A participant generally is not required to recognize income on the grant of a nonqualified stock option.option, a stock appreciation right, restricted stock units, performance shares, a performance unit, a cash-based award, a stock based award, or dividend equivalents. Instead, ordinary income generally is required to be recognized on the date the nonqualified stock option or stock appreciation right is exercised.exercised, or in the case of restricted stock units, performance shares, performance units, cash-based awards, stock-based awards and dividend equivalents, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized, (a) in the case of a nonqualified stock option, is an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price, (b) in the case of a stock appreciation right, the amount of cash and/or the fair market value of any shares received upon exercise plus the amount of taxes withheld from such amounts, minus the amount, if any, paid for the award, and (c) in the case of restricted stock units, performance shares, performance units, cash-based awards, stock-based awards and dividend equivalents, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts, minus the amount, if any, paid for the award.
Restricted Stock. Unless a participant who receives an award of restricted stock makes an election under Section 83(b) of the Code as described below, the participant generally is not required to recognize ordinary income on the award of restricted stock. Instead, on the date the shares vest (i.e. become transferable or no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a participant makes a Section 83(b) election to recognize ordinary income on the date the shares are awarded, the amount of ordinary income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares of Company common stock on the exercise date over the exercise price.
Restricted Stock. A grantee of shares of restricted stock awarded under the Restated Director Stock Plan is not required to recognize income with respect to the shares until the shares vest, unless the grantee makes a special tax election to recognize income upon award of the shares. In either case, the amount of income the grantee recognizes equals the fair market value of the shares of Company common stock at the time the shares vest.
RSUs. A grantee generally is not required to recognize income on the grant of a RSU. Instead, ordinary income generally is recognized on the date of payment of the RSU in cash or shares of Company common stock. In general,award over the amount, ofif any, paid for such shares. In such case, the participant will not be required to recognize additional ordinary income recognized is equal towhen the amount of cash or the fair market value of any shares of Company common stock received.vest.
Gain or Loss on Sale or Exchange of Shares. In general, gain or loss from the sale or exchange of shares of Company common stockgranted or awarded under the Restated Director Stock Plan will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an incentive stock option (a "disqualifying disposition"), a participant generally will be required to recognize ordinary income upon such disposition.
Deductibility by Company. The Company generally is not allowed a deduction in connection with the grant or exercise of an incentive stock option. However, if a participant is required to recognize income as a result of a disqualifying disposition, the Company will be entitled to a deduction equal to the amount of ordinary income so recognized. In general, in the case of a nonqualified stock option (including an incentive stock option that is treated as a nonqualified stock option, as described above), a stock appreciation right, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, stock-based awards and dividend equivalents, the Company will be allowed a deduction in an amount equal to the amount of ordinary income recognized by the grantee of a nonqualified stock option, restricted stock, or an RSU,participant, provided that certain income tax reporting requirements are satisfied.
Performance-Based Compensation. Subject to certain exceptions, Section 162(m) of the Code disallows federal income tax deductions for compensation paid by a publicly-held corporation to certain executives to the extent the amount paid to an executive exceeds $1 million for the taxable year. The Stock Plan has been designed to allow the grant of awards that qualify under an exception to the deduction limit of Section 162(m) for "performance-based compensation."
Parachute Payments. Where payments to a person that are contingent on a change in control exceed limits specified in the Code, the person generally is liable for a 20 percent excise tax on, and the corporation or other entity making the payment generally is not entitled to any deduction for, a specified portion of such payments. The Compensation Committee may make awards under the Stock Plan as to which the vesting of such awards is accelerated by a change of control. Such accelerated vesting would be relevant in determining whether the excise tax and deduction disallowance rules would be triggered with respect to certain participants.
New Tax Rules Affecting Nonqualified Deferred Compensation Plans.Plan. Awards under the Restated Director Stock Plan may be subject to newNew federal income tax rules that apply to "nonqualified deferred compensation plans" that were enacted under Section 409A of the Code as part of the American Jobs Creation Act of 2004, (the "Act"), and which became effective on January 1, 2005. FailureIf an award for any reason failed to comply with, the new rules or to qualify for an exemption from, the new rules, such failure could result in significant adverse tax results to grantees of awards under the Restated Director Stock Plan, includingaward recipient. Such adverse tax results include immediate taxation of benefitsthe award upon vesting (and possibly immediate taxation upon vesting of the participant's awards under certain other plans), an award, a penaltyadditional income tax of 20 percent of the benefits under the award,amount of income so recognized, plus a special interest payment.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THERESTATED DIRECTOR STOCK PLAN.
Equity Compensation Plan Information.
The following table contains information with respect to all of the Company's compensation plans (including individual compensation arrangements) under which securities are authorized for issuance:
Equity Compensation Plan Information
December 31, 20042005
Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights a | Weighted-average exercise price of outstanding options, warrants and rights b | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) c | Number of Securities to be issued upon exercise of outstanding options, warrants and rights a | Weighted-average exercise price of outstanding options, warrants and rights b | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) c | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | 3,961,574 | $26.03 | 855,244 | 3,011,653 | $29.71 | 443,763 |
THE BOARD RECOMMENDS A VOTE "FOR" THE FOREGOING PROPOSAL.
PROPOSAL 3: RATIFICATION OF SELECTION OF AN
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Subject to shareholder election, theThe Audit Committee has selected Ernst & Young LLP as the Company's independent registered public accountantaccounting firm for 2005.2006. The Board recommends that the shareholders makeratify this election.selection. Ernst & Young LLP has been the Company's independent registered public accountantaccounting firm since its incorporation in 1971. We expect representatives of Ernst & Young LLP to attend the annual meeting. Ernst & Young LLP has indicated that they will have no statement to make but will be available to respond to questions. If this Proposal 3 does not pass, the selection of the independent registered public accountantaccounting firm will be reconsidered by the Audit Committee and the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOREGOING PROPOSAL
The following table summarizes Ernst & Young LLP audit fees for 20042005 and 2003.2004.
Service | 2004 | 2003 | 2005 | 2004 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Audit Fees | $ | 1,063,900 | $ | 734,800 | $ | 1,129,100 | $ | l,063,900 | ||||
Audit Related Fees | $ | 166,300 | $ | 160,000 | $ | 141,600 | $ | 166,300 | ||||
Tax Fees | 25,200 | $ | 41,000 | $ | 28,900 | $ | 25,200 | |||||
All Other Fees | $ | 6,000 | — | $ | 6,000 | $ | 6,000 | |||||
Total | $ | 1,261,400 | $ | 935,800 | $ | 1,305,600 | $ | 1,261,400 |
Audit Fees
The aggregate fees billed for professional services rendered for the audit of the Company's annual consolidated financial statements, statutory and subsidiary audits, reports on internal controls and the reviews of the Company's financial statements included in the quarterly reports on Form 10-Q and out-of-pocket expenses were $1,063,900$1,129,100 and $734,800$1,063,900 for fiscal years 2005 and 2004, and 2003, respectively. The fees for 2004 include professional services rendered for Sarbanes Oxley Act Section 404 attestation and Form S-8 Registration Statement for the 2004 Stock & Incentive Compensation Plan reports.
Audit Related Fees
The Audit Related Fees for 20042005 and 20032004 include fees for benefit plan audits and other attestation reports.
Tax Fees
The Tax Fees for 20042005 and 20032004 were primarily related to expatriate tax services and other advisory services.
All Other Fees
The All Other Fees category for 2005 and 2004 include fees billed for copyrighted and other professional on-line publication services provided by an affiliate of Ernst & Young LLP. There
Audit Committee Pre-Approval
All audit and non-audit services rendered by our independent registered public accounting firm were no feespre-approved by the Audit Committee in accordance with the pre-approval policies discussed further in the category "All Other Fees" in 2003.Audit Committee Report.
The Board knows of no other business for consideration at the annual meeting. Your signed proxy or proper telephone or Internet vote gives authority to the proxies to vote at their discretion on other matters properly presented at the annual meeting, or adjournment or postponement of the meeting.
A copy of the Company's Annual Report on Form 10-K, including the related financial statements and schedules filed with the SEC, is available without charge to any shareholder who requests a copy in writing. Any exhibit to Form 10-K is also available upon written request at a reasonable charge for copying and mailing. Written requests should be made to the Corporate Secretary at 130 Merchant Street, Honolulu, Hawaii 96813. A copy of the Company's Annual report on Form 10-K is also available on the Company's internet site atwww.boh.com.
AMENDMENT NO. 2006-1 TO
THE BANK OF HAWAII CORPORATION
2004 STOCK AND INCENTIVE COMPENSATION PLAN
In accordance with the provisions of Article 16 of the Bank of Hawaii CorporationAudit Committee Charter
Statement 2004 Stock and Incentive Compensation Plan ("Plan"), and conditioned upon the approval of Policy
The Audit Committee (the "Committee") will provide assistance toshareholders no later than one year after the date of adoption by the Board of Directors (the "Board") in fulfilling their oversight responsibility to the shareholders of Bank of Hawaii Corporation, the Plan is hereby amended, effective as of the date of shareholder approval, as follows:
The first paragraph of Section 4.1 of the Plan shall be amended to increase the total number of shares reserved and available for grant under the Plan, and to increase the limit on the number of shares which may be issued as ISOs and NQSOs, by adding the following paragraph at the end thereof:
The Share Authorization shall be increased by one million (1,000,000) Shares effective as of the date of shareholder approval of this increase. Accordingly, as of such effective date and subject to applicable adjustments under Sections 4.1 and 4.2, the aggregate Share Authorization under the Plan shall be one million seven hundred thousand (1,700,000) Shares. Furthermore, as of such effective date, the maximum number of Shares that may be issued pursuant to Awards in the form of ISOs shall be increased by one million (1,000,000) Shares to one million seven hundred thousand (1,700,000) Shares, and the maximum number of Shares that may be issued pursuant to Awards in the form of NQSOs shall be increased by one million (1,000,000) Shares to one million seven hundred thousand (1,700,000) Shares.
To record the adoption of this amendment to the Plan, the Bank of Hawaii Corporation has executed this document as of this day of , 2006.
BANK OF HAWAII CORPORATION | ||||
By | ||||
Its | ||||
By | ||||
Its |
Bank of Hawaii Corporation
2004 Stock and Incentive Compensation Plan
Article 1. Establishment, Purpose, and Duration
1.1Establishment of the Plan. Bank of Hawaii Corporation, a Delaware corporation (hereinafter referred to as the "Company"), establishes an incentive compensation plan to be known as the Bank of Hawaii Corporation 2004 Stock and Incentive Compensation Plan (hereinafter referred to as the "Plan"), as set forth in this document.
The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights ("SARs"), Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Stock-Based Awards.
The Plan shall become effective upon shareholder approval of the Plan (the "Company""Effective Date"). and shall remain in effect as provided in Section 1.3 hereof.
1.2Purpose of the Plan. The purpose of the Committee will be to:
In fulfilling its purpose, it is the responsibility of the Committee to maintain free and open communications between the Committee, independent auditors, internal auditors and management of the Company. In discharging its oversight role, the Committee shall be empowered to conduct or authorize investigations into any matter within the scope of its responsibilities. The Committee may employ one or more independent auditors, outside counsel or other experts as it deems appropriate, at the Company's expense. The Committee shall have full access to the independent auditors and all records, facilities or personnel of the Company. The Company shall provideby providing Participants with an incentive for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditors, experts hired by the Committee, and necessary or appropriate Committee expenses.
Organizationoutstanding performance.
The CommitteePlan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest, and special effort the successful conduct of its operation largely is dependent.
1.3Duration of the Plan. Unless sooner terminated as provided herein, the Plan shall terminate ten (10) years from the Effective Date. After the Plan is terminated, no future Awards may be appointedgranted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of (a) the adoption of the Plan by the Board, and shall be comprised of at least three members consisting entirely of independent directors of(b) the Board and meet any and all other requirements for audit committee members set forth in the listing requirement of the New York Stock Exchange and Rule 10A-3 of the Securities Exchange Act of 1934. Each Committee memberEffective Date.
1.4Successor Plan. This Plan shall be or must become financially literate at or within a reasonable period of time following his or her appointment. At least one member of the Committee must have accounting or related financial management expertise. Members shall not serve on more than two other public audit committees simultaneously. The Committee will meet at least quarterly. The Board shall appoint one of the members of the Audit Committee to serve as Chair. The Chair shall prepare or approve an agenda and distribute itthe successor to the membersPacific Century Financial Corporation Stock Option Plan of the Committee in advance of each meeting.
The Committee may perform the duties required to be performed by the financial audit committee of its subsidiary, Bank of Hawaii1994 (the "Bank""Predecessor Plan"), and any other bankno further grants can be made under the Predecessor Plan on or non-bank subsidiary exercising fiduciary powers that does not have its own audit committee,after January 1, 2004. All outstanding Awards under the Predecessor Plan immediately prior to the extent permittedEffective Date of this Plan are hereby incorporated into this Plan and shall accordingly be treated as Awards under this Plan. However, each such Award shall continue to be governed solely by the terms and conditions of the instrument evidencing such grant or issuance and, except as otherwise expressly provided herein, no provision of this Plan shall affect or otherwise modify the rights or obligations of holders of such incorporated Awards. Any Shares of common stock reserved for issuance under the Predecessor Plan in excess of the number of Shares as to which Awards have been awarded as of January 1, 2004 thereunder shall be deemed available for grant under Section 4.1 of the Plan. Any Shares as to which Awards granted or issued under the Predecessor Plan that may lapse, expire, terminate, or be cancelled, are settled in cash in lieu of common stock, are tendered (either by actual delivery or attestation) to pay the Option Price, or satisfy any tax withholding requirements also shall be deemed available for issuance or reissuance under Section 4.1 of the Plan.
Article 2. Definitions
Whenever used in the manner requiredPlan, the following terms shall have the meaning set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
such Award.
Board and the Company's shareholders. The independent auditors will report directly to the Committee. The Committee"Beneficial Owner or Beneficial Ownership" shall have the sole authoritymeaning ascribed to hire and fire, to determine the compensation and direct the payment of, and to oversee the independent auditors (including the resolution of any disagreements regarding financial reporting). Annually, the Committee will review and select the independent auditors for the upcoming fiscal year, subject to the shareholders' approval. The Committee shall set clear hiring policies for employees or former employees of the independent auditors that meet the SEC regulations and NYSE listing standards.
of the accounting principles applied, the reasonableness of significant judgments and the clarity of the disclosures in the financial statements. The Committee will discuss the results of the annual audit and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards.
Limitation of the Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in this charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent auditor.
BANK OF HAWAII CORPORATIONAMENDED AND RESTATEDDIRECTOR STOCK COMPENSATION PLAN
As of the Effective Date, the Change in Control definition described in this Section 2.8 shall constitute an amendment to Section 2.1(f) of the Predecessor Plan and shall replace the definition thereunder.
Individuals described in the first sentence of this definition who are foreign nationals or are employed outside of the United States, or both, are considered to be Employees and may be granted Awards on the terms and conditions set forth in the Plan, or on such other terms and conditions as may, in the judgment of the Committee, be necessary or desirable to further the purpose of the Plan
Unless the context expressly requires the contrary, references in this Plan to (a) the term "Section" refers to the sections of this Plan, and (b) the word "including" means "including (without limitation)."
Article 3. Administration
3.1General. The Committee shall be responsible for administering the Directors with those ofPlan. The Committee may employ attorneys, consultants, accountants, and other persons, and the stockholders ofCommittee, the Company, and its Affiliatesofficers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by encouragingthe Committee shall be final, conclusive, and enabling Directors to acquirebinding upon the Participants, the Company, and retain Common Stock.
all other interested parties.
3.
3.3Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company, its Affiliates and/or its Subsidiaries, or to one or more agents or advisors such administrative duties as it may deem advisable, and the Committee or any person to whom it grantshas delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. Except with respect to Awards to Insiders, the terms (which terms need notCommittee may, by resolution, authorize one or more officers of the Company to do one or both of the following: (a) designate officers, Employees, or Independent Contractors of the Company, its Affiliates, and/or its Subsidiaries to be identical)recipients of all Awards, includingAwards; and (b) determine the Exercise Pricesize of Options, the time or times at which Awards are granted or vest,Award; provided, however, that the resolution providing such authorization sets forth the total number of Shares covered by Awards and any exceptions to nontransferability.such officer or officers may grant.
Article 4. Shares Subject to the provisions of this Plan, the Board shall have plenary authority to interpret this Plan and Agreements, prescribe, amend and rescind rules and regulations relating to them, and make all other determinations deemed necessary or advisableMaximum Awards
4.1Number of Shares Available for the administration of this Plan and Awards granted hereunder. The determinations of the Board on the matters referred to in this Section 3 shall be binding and final.
Plan. Moreover, if the Option Price of any Option granted under the Plan or the tax withholding requirements with respect to any Award granted under the Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if an SAR is 471,900 (as adjustedexercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan. The maximum number of Shares available for issuance under the Plan shall not be reduced to reflect all Commonany dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Restricted Stock, splits prior to January 1, 2005).Restricted Stock Units, Performance Shares, issuedor Stock-Based Awards. The Shares available for issuance under thisthe Plan may in whole or in part, be authorized butand unissued Shares or treasury Shares.
Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an "Annual Award Limit," and collectively, "Annual Award Limits") shall apply to grants of such Awards under the Plan:
4.2Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, Stock dividend, Stock split, reverse Stock split, split up, spin-off, or other distribution of Stock or property of the Company, combination of securities, exchange of securities, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants' rights under the Plan, shall substitute or adjust, in an equitable manner, as applicable, the number and kind of Shares that may be issued under the Plan, the number and kind of Shares subject to
outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Award Limits, and other value determinations applicable to outstanding Awards.
Appropriate adjustments may also be made by the CompanyCommittee in the open market,terms of any Awards under the Plan to reflect such changes or distributions and to modify any other terms of outstanding Awards on an equitable basis, including modifications of performance goals and changes in private transactions, or otherwise.
Subject to the provisions of Article 15 and any applicable law or settled exercise Award shall again beregulatory requirement, without affecting the number of Shares reserved or available forhereunder, the grantCommittee may authorize the issuance, assumption, substitution, or conversion of Awards under this Plan.
6.Article 5. Eligibility and Participation
Options5.1.
5.2Actual Participation. Subject to the provisions of the Plan, the Committee may from time to time, select from all eligible Employees and Independent Contractors, those to whom Awards shall be granted and shall determine the nature and amount of each Award.
Article 6. Stock Options
6.1Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, provided that ISOs shall not be granted to Independent Contractors.
6.2Award Agreement.Each Option grantedgrant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.
6.3Option Price. The Option Price for each grant of an Option under this Plan shall be clearlydetermined by the Committee and specifically designated asshall be specified in the Award Agreement. The Option Price may include (but not beingbe limited to) an incentive stock option under Section 422Option Price based on one hundred percent (100%) of the Code, and eachFMV of the Shares on the date of grant, an Option Price that is set at a premium to the FMV of the Shares on the date of grant, or is indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion, however, if the Option is an ISO the Option Price must be at least equal to one hundred percent (100%) of the FMV of the Shares on the date of grant.
6.4Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be evidenced by an Agreementexercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, for Options granted to Participants outside the United States, the Committee has the authority to grant Options that specifies the termshave a term greater than ten (10) years.
6.5Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and conditions of the Option. Options shall be subject to the termssuch restrictions and conditions set forth in this Section 6 and such other terms and conditions not inconsistent with this Plan as the Board may specify.
6.6Payment. Options granted under this PlanArticle 6 shall not be less than 100% ofexercised by the Fair Market Valuedelivery of a Share on the Datewritten notice of Grant.
The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate FMV at the time of exercise equal to the total Option Price (provided, if required to maintain favorable accounting treatment for the Options granted, the Shares that are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price or have been purchased on the open market); (c) by a combination of (a) and (b); or (d) any other method approved by the Committee in its sole discretion at the time of grant and as set forth in the Award Agreement.
The Committee also may allow cashless exercise as permitted under the Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law.
Subject to Section 6.7 and any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, Share certificates or evidence of book entry Shares, in an appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
6.7Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, requiring the Participant to hold the Shares acquired pursuant to exercise for a specified period of time, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
6.8Termination of Employment. Each Participant's Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment with the Company, its Affiliates, and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
6.9Transferability of Options.
6.10Notification of Disqualifying Disposition. The Participant will notify the extent providedCompany upon the disposition of Shares issued pursuant to the exercise of an ISO. The Company will use such information to determine whether a disqualifying disposition as described in Section 421(b) of the Code has occurred.
6.11Dividend Equivalents. At the discretion of the Committee, Participants holding Options may be entitled to receive dividend equivalents with respect to dividends declared with respect to the Shares. Such dividend equivalents may be in the applicable Agreement or otherwise authorized by the Board, payment may be made by delivery (including constructive delivery)form of unencumberedcash, Shares, (provided that if the Shares were acquired pursuant to an option or other award granted hereunder or under any other compensation plan maintained by the Company or any Affiliate, the Shares shall have been held for such period, if any, as the Board may specify) valued at Fair Market Value on the Date of Exercise.
Article 7. Stock Appreciation Rights
7.1Grant of SARs. Subject to the terms and conditions of the Award. Restricted StockPlan, SARs may be granted under this Planto Participants at any time and from time to time as shall consistbe determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of Shares that are restricted asthese forms of SARs.
Subject to transfer, subject to forfeiture, and subject to such otherthe terms and conditions asof the Board may specify.
The SAR Grant Price for each grant of Restricted Stock Units under this Plana Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement. The SAR Grant Price may include (but not be limited to) a Grant Price based on one hundred percent (100%) of the FMV of the Shares on the date of grant, a Grant Price that is set at a premium to the FMV of the Shares on the date of grant, or is indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.
7.2SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.
7.3Term of SAR. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Committee has the authority to grant SARs that have a term greater than ten (10) years.
7.4Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.
7.5.Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) providesthe Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the issuancedifference between the Option Price of the underlying ISO and the FMV of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (c) the Tandem SAR may be exercised only when the FMV of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.6Payment of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent thereof)value, in some combination thereof, or in any other manner approved by the Committee at its sole discretion. The Committee's determination regarding the form of SAR payout shall be set forth or reserved for later determination in the Award Agreement pertaining to the grant of the SAR.
7.7Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with the Company, its Affiliates, and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
7.8Nontransferability of SARs. Except as otherwise provided in a Participant's Award Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided that the Board or Committee may permit further transferability, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability. Further, except as otherwise provided in a Participant's Award Agreement or otherwise unless the Board or the Committee decides to permit further transferability, all SARs granted to a Participant under this Article 7 shall be exercisable during his or her lifetime only by such Participant.
7.9Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable. This includes, but is not limited to, requiring the Participant to hold the Shares received upon exercise of an SAR for a specified period of time.
7.10Substituting SARs. In the event the Company no longer uses APB Opinion 25 to account for equity compensation and is required to or elects to expense the cost of Options pursuant to FAS 123 (or a successor standard), the Committee shall have the ability to substitute, without receiving Participant permission, SARs paid only in Stock (or SARs paid in Stock or cash at such time(s)the Committee's discretion) for outstanding Options; provided, the terms of the substituted Stock SARs are the same as the Boardterms for the Options and the difference between the Fair Market Value of the underlying Shares and the Grant Price of the SARs is equivalent to the difference between the Fair Market Value of the underlying Shares and the Option Price of the Options. If, in the opinion of the Company's auditors, this provision creates adverse accounting consequences for the Company, it shall be considered null and void.
7.11Dividend Equivalents. At the discretion of the Committee, Participants holding SARs may be entitled to receive dividend equivalents with respect to dividends declared with respect to the Shares. Such dividend equivalents may be in the form of cash, Shares, Restricted Stock, or Restricted Stock Units, and may be subject to accrual, forfeiture, or payout restrictions as determined by the Committee in its sole discretion.
Article 8. Restricted Stock and Restricted Stock Units
8.1Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts, as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the date of grant.
8.2Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction,
the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and (b) contains such other termsprovisions as the Committee shall determine.
8.3Transferability. Except as provided in this Article 8, the Shares of Restricted Stock and/or Restricted Stock Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Award Agreement (and in the case of Restricted Stock Units until the date of delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the BoardCommittee, in its sole discretion, and set forth in the Award Agreement. All rights with respect to the Restricted Stock and/or Restricted Stock Units granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant.
8.4Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may specify.
deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, restrictions under applicable federal or state securities laws, or any holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse, and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.
10.8.5
The sale or other transfer of the Shares of Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Bank of Hawaii Corporation's 2004 Equity and Incentive Compensation Plan, and in the associated Restricted Stock Award Agreement. A copy of the Plan and such Restricted Stock Award Agreement may be obtained from the Bank of Hawaii.
8.6Voting Rights. To the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
8.7Dividends and Dividend EquivalentsEquivalents.. During the Period of Restriction, Participants holding Shares of Restricted Stock or Restricted Stock Units granted hereunder may, if the Committee so determines, be credited with dividends paid with respect to Restricted Stock or dividend equivalents with respect to Restricted Stock Units while they are so held in a manner determined by the Committee in its sole discretion. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, Shares, Restricted Stock, or Restricted Stock Units and such dividends or dividend equivalents may be subject to accrual, forfeiture, or payout restrictions as determined by the Committee.
8.8Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant's employment with the Company, its Affiliates, and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
8.9Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.
Article 9. Performance Shares and Performance Units
9.1Grant of Performance Shares and Performance Units. Subject to the terms of the Plan, Performance Shares and/or Performance Units may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.
9.2Value of Performance Shares and Performance Units. Each Performance Share shall have an initial value equal to the FMV of a Share on the date of grant. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Shares/Performance Units that will be paid out to the Participant.
9.3Earning of Performance Shares and Performance Units. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Shares/Performance Units shall be entitled to receive payout on the value and number of Performance Shares/Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. Notwithstanding the foregoing, the Company has the ability to require the Participant to hold the Shares received pursuant to such Award for a specified period of time.
9.4Form and Timing of Payment of Performance Shares and Performance Units. Payment of earned Performance Shares/Performance Units shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Shares/Performance Units in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Shares/Performance Units as soon as practicable after the end of the applicable Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
9.5Dividend Equivalents. At the discretion of the Committee, Participants holding Performance Shares may be entitled to receive dividend equivalents with respect to dividends declared with respect to the Shares. Such dividends may be subject to accrual, forfeiture, or payout restrictions as determined by the Committee in its sole discretion.
9.6Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Shares and/or Performance Units following termination of the Participant's employment with the Company, its Affiliates, and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance
Shares or Performance Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
9.7Nontransferability. Except as otherwise provided in a Participant's Award Agreement, Performance Shares/Performance Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during his or her lifetime only by such Participant.
Article 10. Cash-Based Awards and Stock-Based Awards
10.1Grant of Cash-Based Awards. Subject to the terms of the Plan, Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.
10.2Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the BoardCommittee shall determine. Such Awards may specify, provideentail the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.3Value of Cash-Based and Stock-Based Awards. Each Cash-Based Award shall have a value as may be determined by the Committee. Each Stock-Based Award shall have a value based on the value of a Share, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based and Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
10.4Earning of Cash-Based and Stock-Based Awards. Subject to the terms of this Plan, the holder of Cash-Based and Stock-Based Awards shall be entitled to receive payout on the number and value of Cash-Based Awards and Stock-Based Awards earned by the Participant, to be determined as a function of the extent to which applicable performance goals, if any, have been achieved.
10.5Form and Timing of Payment of Cash-Based and Stock-Based Awards. Payment of earned Cash-Based and Stock-Based Awards shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Cash-Based Awards or earned Stock-Based Awards in the form of cash or in Shares (or in a combination thereof) that have an aggregate FMV equal to the value of the earned Cash-Based Awards or to the value of the earned Stock-Based Awards. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
10.6Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive Cash-Based Awards and Stock-Based Awards following termination of the Participant's employment with the Company, its Affiliates, and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Cash-Based Awards and Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
10.7Nontransferability. Except as otherwise provided in a Participant's Award Agreement, Cash-Based Awards and Stock-Based Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant.
10.8Dividend Equivalents At the discretion of the Committee, Participants holding Stock-Based Awards may be entitled to receive dividend equivalents with respect to dividends declared with respect to the Shares. Such dividends may be subject to accrual, forfeiture, or payout restrictions as determined by the Committee in its sole discretion.
Article 11. Performance Measures
Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 11, the performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
Any Performance Measure(s) may be used to measure the performance of the Company as a whole or any business unit of the Company or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (h) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 11.
The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) reorganization or restructuring programs; (e) extraordinary or nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered
Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
Awards that are designed to qualify as Performance-Based Compensation, and that are held by Covered Employees, may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward.
In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m).
Article 12. Beneficiary Designation
A Participant's "beneficiary" is the person or persons entitled to receive payments or dividend equivalentother benefits or exercise rights that are available under the Plan in the event of the Participant's death. A Participant may designate a beneficiary or change a previous beneficiary designation at any time by using forms and following procedures approved by the Committee for that purpose. If no beneficiary designated by the Participant is eligible to receive payments or other benefits or exercise rights that are available under the Plan at the Participant's death the beneficiary shall be the Participant's estate.
Notwithstanding the provisions above, the Committee may in its discretion, after notifying the affected Participants, modify the foregoing requirements, institute additional requirements for beneficiary designations, or suspend the existing beneficiary designations of living Participants or the process of determining beneficiaries under this Article 12, or both. If the Committee suspends the process of designating beneficiaries on forms and in accordance with procedures it has approved pursuant to this Article 12, the determination of who is a Participant's beneficiary shall be made under the Participant's will and applicable state law.
Article 13. Deferrals and Share Settlements
Notwithstanding any other provision under the Plan, the Committee may permit or require a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, or with respect to the lapse or waiver of restrictions with respect to Restricted Stock or Restricted Stock Units or the satisfaction of any requirements or performance goals with respect to Performance Shares, Performance Units, Cash-Based Awards, or Stock-Based Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals.
Article 14. Rights of Employees and Independent Contractors
14.1Employment. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries to terminate any Participant's employment or other service relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company, its Affiliates, and/or its Subsidiaries.
Neither an Award nor any benefits arising under this Plan shall constitute part of an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company, its Affiliates, and/or its Subsidiaries for severance payments.
For purposes of the Plan, transfer of employment of a Participant between the Company, its Affiliates, and/or its Subsidiaries shall not be deemed a termination of employment. Additionally, the Committee shall have the ability to stipulate in a Participant's Award Agreement that a transfer to a company that is spun-off from the Company shall not be deemed a termination of employment with the Company for purposes of the Plan until the Participant's employment is terminated with the spun-off company.
14.2Participation. No Employee or Independent Contractor 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.
14.3Rights as a Shareholder. A Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 15. Change in Control
Upon the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, or unless the Committee shall determine otherwise in the Award which payments may be either made currently or credited to an account establishedAgreement:
11.
16.1.
lowering the amendment or termination would adversely affect the Participant's rights or obligations under any Awardexercise price of a previously granted prior to the dateOption. No amendment of the amendmentPlan shall be made without shareholder approval if shareholder approval is required by law, regulation, or termination.stock exchange rule.
16.2
16.3Awards Previously Granted. Notwithstanding any other provision of the Plan to the Board may modify the terms of any outstanding Awards; provided, that (a)contrary, no termination, amendment, suspension, or modification of anthe Plan shall adversely affect in any material way any Award shall,previously granted under the Plan, without the written consent of the Participant alterholding such Award.
Article 17. Withholding
17.1Tax Withholding. The Company shall have the power and the right to deduct or impairwithhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign (including the Participant's FICA obligation), required by law or regulation to be withheld with respect to any taxable event arising or as a result of this Plan.
17.2Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock or Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of Awards granted hereunder, the Company may require or Participants may elect, subject to the approval of the Participant's rightsCommittee, to satisfy the withholding requirement, in whole or obligations underin part, by having the Award,Company withhold Shares having a FMV of a Share on the date the tax is to be determined equal to the tax that could be imposed on the transaction, provided that if required by the accounting rules and (b)regulations to maintain favorable accounting treatment for the Awards, the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to Section 11,any restrictions or limitations that the Committee, in no event may (i) an Option be modified to reduce the Exercise Price of the Option, or (ii) an Option be cancelled or surrendered in consideration for the grant of a new Option with a lower Exercise Price.
its sole discretion, deems appropriate.
14.Article 18. Successors
All obligations of the Company atunder the next annual or special meeting of stockholders following adoption by the Board.
Article 19. General Provisions
19.1Forfeiture Events. The Committee may specify in an Award Agreement that the Participant's rights, payments, and unencumbered Shares.
19.2Legend. The certificates for the Shares may include any legend whichthat the BoardCommittee deems appropriate to reflect any restrictions on transfer. All certificatestransfer of such Shares.
19.3Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:
19.4Investment Representations. The Committee may require each Participant receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the Participant is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
19.5Employees Based Outside of the United States. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees or Independent Contractors, the Committee, in its sole discretion, shall have the power and authority to:
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be subject to such stock transfer orders andgranted, that would violate the Exchange Act, the Code, any securities law, or governing statute or any other restrictions as the Board may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or interdealer quotation system upon which the Common Stock is then quoted, and any applicable federal or state securities laws. The Board may place a legend or legends on certificates for Shares to make appropriate reference to the restrictions.
19.6Uncertificated Shares.To the extent that thisthe Plan provides for issuance of stock certificates to reflect the issuancetransfer of Shares, the issuancetransfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchangeexchange.
19.7Unfunded Plan. Participants shall have no right, title, or automated dealer quotation system on whichinterest whatsoever in or to any investments that the Shares are traded.Company, its Affiliates, and/or its Subsidiaries may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company, its Affiliates, and/or its Subsidiaries and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company, its Affiliates, and/or its Subsidiaries under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to ERISA.
19.8No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to thisthe Plan or any award.Award. The BoardCommittee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of any fractional Shares or whether anysuch fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
19.9Retirement and Welfare Plans. The Awards under this Plans will not be included as "compensation" for purposes of computing benefits payable to any Participant under the Company's retirement plans (both qualified and nonqualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant's benefit.
Article 20. Legal Construction
20.1Gender 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.
20.2Severability. 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.
20.3Requirements of Law. The granting of Awards and the issuance of Shares under the Plan priorshall 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. The Company shall receive the consideration required by law for the issuance of Awards under the Plan.
The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the datelawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the 2005 annual meetingfailure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
20.4Securities Law Compliance. The Company may use reasonable endeavors to register Shares allotted pursuant to the exercise of an Award with the United States Securities and Exchange Commission or to effect compliance with the registration, qualification, and listing requirements of any national or foreign securities laws, stock exchange, or automated quotation system. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Company's stockholdersPlan 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.
20.5Governing Law. The Plan and each Award Agreement shall be governed by the termslaws of the State of Hawaii, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan in effect immediately prior to the datesubstantive law of such annual meeting.
Notice of the Annual Meeting of Shareholders
April 28, 2006
Shareholders of record of Bank of Hawaii Corporation common stock at the close of business on February 28, 2006 are entitled to attend the meeting and vote on the business brought before it. The meeting will be held on Friday, April 28, 2006 at 8:30 a.m. on the Sixth Floor of the Bank of Hawaii Building, 111 South King St., Honolulu, Hawaii.
We look forward to seeing you at the meeting. However, if you cannot attend the meeting, your shares may still be voted if you complete, sign, date, and return the enclosed proxy card in the enclosed postage-paid return envelope. You also may vote by telephone or electronically via the Internet. By voting your proxy each year, you can keep your account active and avoid the potential escheatment of uncashed dividends and stock holdings to the state. The accompanying proxy statement, also available online at www.boh.com, provides certain background information that will be helpful in deciding how to cast your vote on business transacted at the meeting.
By Order of the Board of Directors
CYNTHIA G. WYRICK
Executive Vice President and Corporate Secretary
Bank of Hawaii Corporation
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON
APRIL 28, 2006
The undersigned hereby constitutes and appoints MICHAEL J. CHUN, ROBERT HURET and DONALD M. TAKAKI, and each of them, the proxy of the undersigned, with full powers of substitution, to vote all common stock of Bank of Hawaii Corporation, that the undersigned may be entitled to vote at the annual meeting of shareholders of Bank of Hawaii Corporation to be held on April 28, 2006, or any adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR ALL NOMINEES AND PROPOSALS, AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
INSTRUCTIONS FOR VOTING YOUR PROXY
Bank of Hawaii Corporation is offering shareholders of record three alternative ways of voting your proxies:
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you had returned your proxy card. We encourage you to use these cost effective and convenient ways of voting, 24 hours a day, 7 days a week.
TELEPHONE VOTING
Available only until 5:00 p.m. Eastern time on Thursday, April 27, 2006
•
INTERNET VOTING
Available only until 5:00 p.m. Eastern time on Thursday, April 27, 2006.INTERNET VOTINGAvailable only until 5:00 p.m. Eastern time on Thursday, April 28, 2005.
•
VOTING BY MAIL
•
COMPANY NUMBER CONTROL NUMBER
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
X Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE FOLLOWING PROPOSALS:
FOR ALL nominees listed | WITHHOLD AUTHORITY | FOR ALL EXCEPT | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
1. |
(To withhold authority for any nominee, write his name on the line below.)
*Exception
Class II | o | o | o | |||||
S. Haunani Apoliona, Clinton R. Churchill, David A. Heenan, Allan R. Landon | ||||||||
Class I Kent T. Lucien | ||||||||
(To withhold authority for any nominee, write his name on the line below.) | ||||||||
*Exception | ||||||||
FOR | AGAINST | ABSTAIN | ||||||
---|---|---|---|---|---|---|---|---|
2. | Approve an Amendment to the Bank of Hawaii Corporation 2004 Stock and Incentive Compensation Plan | o | o | o |
FOR | AGAINST | ABSTAIN | ||||||
---|---|---|---|---|---|---|---|---|
3. | Ratification of Selection of Independent Registered Public Accounting Firm. | o | o | o |
DATE: | , 2006 | ||
SIGNATURE | |||
SIGNATURE (JOINT OWNERS) | |||
Please date, sign exactly as your name appears on the form and mail the proxy promptly. When signing as an attorney, executor, administrator, trustee or guardian, please give your full title. If shares are held jointly, both owners must sign. |
Notice of the Annual Meeting of ShareholdersApril 29, 2005
Shareholders of record of Bank of Hawaii Corporation common stock at the close of business on February 28, 2005 are entitled to attend the meeting and vote on the business brought before it. The meeting will be held on Friday, April 29, 2005 at 8:30 a.m. on the Sixth Floor of the Bank of Hawaii Building, 111 South King St., Honolulu, Hawaii.
We look forward to seeing you at the meeting. However, if you cannot attend the meeting, your shares may still be voted if you complete, sign, date, and return the enclosed proxy card in the enclosed postage-paid return envelope. You also may vote by telephone or electronically via the Internet. By voting your proxy each year, you can keep your account active and avoid the potential escheatment of uncashed dividends and stock holdings to the state. The accompanying proxy statement, also available online at www.boh.com, provides certain background information that will be helpful in deciding how to cast your vote on business transacted at the meeting.
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THEBOARD OF DIRECTORS FOR THEANNUAL MEETING OFSHAREHOLDERS TO BE HELD ONAPRIL 29, 2005
The undersigned hereby constitutes and appoints S. HAUNANI APOLIONA, MARY G. F. BITTERMAN, and ROBERT W.WO, JR., and each of them, the proxy of the undersigned, with full powers of substitution, to vote all common stock of Bank of Hawaii Corporation, that the undersigned may be entitled to vote at the annual meeting of shareholders of Bank of Hawaii Corporation to be held on April 29, 2005, or any adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR ALL NOMINEES AND PROPOSALS, AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.