UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
SCHEDULE
14A INFORMATION
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Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. 1)
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Filed
by the Registrant S
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Filed
by a Party other than the Registrant £
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Check
the appropriate box:
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S Preliminary
Proxy Statement
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£ Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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£ Definitive
Proxy Statement
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£ Definitive
Additional Materials
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£ Soliciting
Material Pursuant to §240.14a-12
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 CENTRAL
PACIFIC FINANCIAL CORP.
_________________________________________________________________________
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(Name
of Registrant as Specified In Its Charter)
_________________________________________________________________________
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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S No
fee required.
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£ Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1) Title of each
class of securities to which transaction applies:
_________________________________________________
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(2) Aggregate number
of securities to which transaction applies:
_________________________________________________
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(3) Per unit price or
other underlying value of transaction computed pursuant to Exchange Act
Rule
0-11 (set forth the amount on which the filing fee is calculated and state
how it was determined):
_________________________________________________
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(4) Proposed maximum
aggregate value of transaction:
_________________________________________________
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(5) Total fee
paid:
_________________________________________________
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£
Fee paid previously with preliminary materials.
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£
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration
statement number, or the Form
or Schedule and the date
of its filing.
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(1) Amount Previously
Paid:
_________________________________________________
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(2) Form, Schedule or
Registration Statement No.:
_________________________________________________
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(3) Filing
Party:
_________________________________________________
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(4) Date
Filed:
_________________________________________________
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CENTRAL
PACIFIC FINANCIAL CORP.
220
South King Street
Honolulu,
Hawaii 96813
(808)
544-0500
MAY
24, 2010 ANNUAL MEETING
YOUR
VOTE IS IMPORTANT
April __,
2010
Dear
Fellow Shareholder:
On behalf
of your Board of Directors, we cordially invite you to attend the 2010 Annual
Meeting of Shareholders of Central Pacific Financial Corp. The Annual
Meeting will be held on May 24, 2010, at 9:00 a.m., Hawaii time, in Room 1110 of
the Central Pacific Plaza building, 220 South King, Honolulu,
Hawaii. Your Board and management look forward to greeting those
shareholders able to attend the meeting.
The
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement
describe matters to be acted upon at the Annual Meeting. Please give
these materials your prompt attention. Then, we ask that you sign,
date and mail promptly the enclosed Proxy Card in the enclosed postage-paid
envelope, or use telephone or internet voting, to ensure that your shares are
represented and voted at the meeting. Shareholders who attend the
meeting may withdraw their proxy and vote in person if they wish to do
so. Your vote is important, so please act at your earliest
convenience.
We
appreciate your continued interest in Central Pacific Financial Corp. and are
confident that, as in the past, you will continue to vote your
shares.
Sincerely,
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____________________
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Name
Title
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CENTRAL
PACIFIC FINANCIAL CORP.
220
South King Street
Honolulu,
Hawaii 96813
(808)
544-0500
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD MAY 24, 2010
TO
THE SHAREHOLDERS OF CENTRAL PACIFIC FINANCIAL CORP.:
NOTICE IS
HEREBY GIVEN that, pursuant to its Bylaws (as amended) and the call of its Board
of Directors, the Annual Meeting of Shareholders (the “Meeting”) of Central
Pacific Financial Corp. (the “Company”) will be held in Room 1110 of the Central
Pacific Plaza building, 220 South King Street, Honolulu, Hawaii, on May 24,
2010, at 9:00 a.m., Hawaii time, for the purpose of considering and voting upon
the following matters:
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(i)
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Election of
Directors. To elect four (4) persons to the Board of
Directors for a term of one (1) year and to serve until their successors
are elected and qualified, as more fully described in the accompanying
Proxy Statement.
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(ii)
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Ratification of Appointment of
Independent Registered Public Accounting Firm. To ratify
the appointment of KPMG LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31,
2010.
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(iii)
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Executive
Compensation. To consider an advisory (non-binding)
proposal to approve the compensation of the Company’s executive
officers.
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(iv)
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Amendment to Restated Articles
of Incorporation to Effect a Reverse Stock Split of Common Stock.
To approve an amendment to our Restated Articles of Incorporation
to effect a reverse stock split of our Common Stock by a ratio of not less
than one-for-five and not more than one-for-twenty at any time prior to
April 30, 2011, with the exact ratio to be set at a whole number within
this range as determined by the Board of Directors in its sole discretion
(the “Reverse Stock Split”).
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(v)
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Other
Business. To transact
such other business as may properly come before the Meeting and at any and
all adjournments thereof.
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Only
those shareholders of record at the close of business on March 19, 2010 shall be
entitled to notice of and to vote at the Meeting.
YOUR
VOTE IS IMPORTANT. SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY
ALSO DELIVER YOUR VOTE BY TELEPHONE OR INTERNET BY FOLLOWING THE INSTRUCTIONS ON
YOUR PROXY CARD OR VOTING INSTRUCTION FORM. SHAREHOLDERS WHO ATTEND
THE MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON IF THEY WISH TO DO
SO.
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By
order of the Board of Directors,
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/s/ Glenn K.C. Ching
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GLENN
K. C. CHING
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Senior
Vice President and Corporate Secretary
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Dated:
April _, 2010
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CENTRAL
PACIFIC FINANCIAL CORP.
220
South King Street
Honolulu,
Hawaii 96813
(808)
544-0500
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
MAY
24, 2010
________________________
INTRODUCTION
This
Proxy Statement is furnished in connection with the solicitation of proxies by
the Board of Directors (the “Board”) of Central Pacific Financial Corp. (the
“Company”) for use at the Annual Meeting of Shareholders (the “Meeting”) of the
Company to be held in Room 1110 of the Central Pacific Plaza building, 220 South
King Street, Honolulu, Hawaii, on May 24, 2010, 9:00 a.m., Hawaii time, and at
any and all adjournments thereof. The approximate date on which this
Proxy Statement and accompanying Notice and form of proxy are first being mailed
to shareholders is April _, 2010.
Matters
to be Considered
The
matters to be considered and voted upon at the Meeting will be:
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(i)
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Election of
Directors.To elect four (4)
persons to the Board for a term of one (1) year and to serve until their
successors are elected and
qualified.
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(ii)
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Ratification of Appointment of
Independent Registered Public Accounting Firm. To ratify
the appointment of KPMG LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31,
2010.
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(iii)
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Executive
Compensation. To consider an advisory (non-binding)
proposal to approve the compensation of the Company’s executive
officers.
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(iv)
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Amendment to Restated Articles
of Incorporation to Effect a Reverse Stock Split of Common Stock.
To approve an amendment to our
Restated Articles of Incorporation to effect a reverse stock split of our
Common Stock by a ratio of not less than one-for-five and not more than
one-for-twenty at any time prior to April 30, 2011, with the exact ratio
to be set at a whole number within this range as determined by the Board
of Directors in its sole discretion (the “Reverse Stock
Split”).
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(v)
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Other
Business. To transact such other business as may
properly come before the Meeting and at any and all adjournments
thereof.
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Record
Date, Outstanding Securities and Voting Rights
The Board
fixed the close of business on March 19, 2010 as the record date (the “Record
Date”) for the determination of the shareholders of the Company entitled to
notice of and to vote at the Meeting. Only holders of record of shares of the
Company's Common Stock (“Common Stock”) at the close of business on the Record
Date will be entitled to vote at the Meeting and at any adjournment or
postponement of the Meeting. There were ___________ shares of the
Company’s Common Stock, no par value, issued and outstanding on the Record Date,
held by approximately _______ holders of record.
Each
holder of Common Stock will be entitled to one vote, in person or by proxy, for
each share of Common Stock standing in the holder’s name on the books of the
Company as of the Record Date on any matter submitted to the vote of the
shareholders.
Quorum
The
required quorum for the transaction of business at the Meeting is a majority of
the total outstanding shares of Common Stock entitled to vote at the Meeting,
either present in person or represented by proxy. Abstentions will be included
in determining the number of shares present at the Meeting for the purpose of
determining the presence of a quorum.
Broker
Authority to Vote
Under the
rules of the National Association of Securities Dealers, Inc., member brokers
generally may not vote shares held by them in street name for customers unless
they are permitted to do so under the rules of any national securities exchange
of which they are a member. Under the rules of the New York Stock
Exchange, Inc. (“NYSE”), a member broker who holds shares in street name for
customers has the authority to vote on certain “routine” items if it has
transmitted proxy soliciting materials to the beneficial owner but has not
received instructions from that owner. NYSE rules permit member
brokers that do not receive instructions from their customers to vote on
proposal number (ii) and (iv), discussed above in their
discretion. NYSE member brokers will not be permitted to vote on
proposal numbers (i), (iii) and (v) unless they receive instructions from their
customers.
Vote
Required to Approve the Proposals
The
following chart sets forth the required vote to approve each matter to be
considered and voted upon at the Meeting, and the effect of “Withhold” votes,
abstentions, and broker non-votes.
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Item/Proposal
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Required
Vote
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Effect
of “Withhold” Votes,
Abstentions,
Broker Non-Votes
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Item
1 - Election of
Directors
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Affirmative
vote of a plurality of the shares of common stock present in person or by
proxy and entitled to vote.
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·“Withhold”
votes will have the effect of a vote AGAINST the election of
directors.
·Broker
non-votes will have no effect on the voting for the election of
directors.
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Item
2 - Ratification of
the appointment of KPMG LLP as the Company’s independent registered public
accounting firm for fiscal year 2010
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Affirmative
vote of a majority of the shares of common stock cast on the
matter.
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·Abstentions
and broker non-votes will have no effect in calculating the votes on this
matter.
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Item
3 - Proposal
Relating to an Advisory (Non-Binding) Vote on Executive
Compensation
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Affirmative
vote of a majority of the shares of common stock cast on the
matter.
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·Abstentions
and broker non-votes will have no effect in calculating the votes on
this matter.
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Item
4 - Approval of
Amendment to Restated Articles of Incorporation to Effect a Reverse Stock
Split of Common Stock
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Affirmative
vote of a majority of the outstanding shares of common stock on the record
date.
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·Abstentions
and broker non-votes will have the effect of a vote AGAINST
approval.
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Additional
information regarding each of these items (also referred to as proposals) is
provided in the section titled DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
OF DIRECTORS (for Items/Proposals 1 through 4 above).
The
following is the Board’s recommendation with respect to each of the items to be
considered and voted upon at the Meeting:
Item
1 - The Board recommends a vote “FOR” the election of all nominees as
directors.
Item
2 - The Board recommends a vote “FOR” ratification of the appointment of KPMG
LLP as the Company’s independent registered public accounting firm for the
fiscal year ending December 31, 2010.
Item
3 - The Board recommends a vote “FOR” the compensation of the Company’s
executive officers.
Item 4
- The Board recommends a vote “FOR” the proposal to amend the Company’s Restated
Articles of Incorporation to effect a reverse stock split of the outstanding
Common Stock by a ratio of not less than one-for-five and not more than
one-for-twenty, with the exact ratio to be set at a whole number within this
range as determined by the Board in its sole discretion.
It is not
anticipated that any matters will be presented at the Meeting other than as set
forth in the accompanying Notice of the Meeting. If any other matters
are presented properly at the Meeting, however, the proxy will be voted by the
proxy holders in accordance with the recommendations of the Board.
Voting
Voting by
Mail. Shareholders can ensure that their shares are voted at
the Meeting by completing, signing, dating and mailing the enclosed proxy card
in the enclosed postage-prepaid envelope.
Voting by Telephone or the
Internet. Voting by telephone or the Internet is fast and
convenient and your vote is immediately confirmed and tabulated. If
you choose to vote by telephone or the Internet, instructions to do so are set
forth on the enclosed proxy card. The telephone and Internet voting
procedures are designed to authenticate votes cast by use of a personal
identification number, which appears on the proxy card. These
procedures allow stockholders to appoint a proxy to vote their shares and to
confirm that their instructions have been properly recorded. If you
vote by telephone or the Internet, you do not have to mail in your proxy card,
but your vote must be received by the voting deadline set forth on the proxy
card.
If your
shares are held by a bank, broker or other nominee, please follow the
instructions provided with your proxy materials to determine if telephone or
Internet voting is available. If your bank or broker does make
telephone or Internet voting available, please follow the instructions provided
on the voting form supplied by your bank or broker.
If you
vote by telephone or the Internet, you should not return your proxy
card.
Revocability
of Proxies
Any
shareholder who executes and delivers a proxy has the right to revoke it at any
time before it is exercised by filing with the Corporate Secretary of the
Company an instrument revoking it or a duly executed proxy bearing a later
date. A proxy may also be revoked by attending the Meeting and voting
in person at the Meeting. Subject to such revocation, all shares
represented by a properly executed proxy received in time for the Meeting will
be voted by the proxy holders in accordance with the instructions on the
proxy. If your shares are held in street name, you should follow the
instructions of your broker, bank or nominee regarding the revocation of
proxies.
Solicitation
of Proxies
This
solicitation of proxies is made on behalf of the Board and the Company will bear
the costs of the preparation of proxy materials and the solicitation of proxies
for the Meeting. It is contemplated that proxies will be solicited
principally through the mail, but directors, officers and regular employees of
the Company or its subsidiary, Central Pacific Bank (the “Bank”), may solicit
proxies personally, by telephone, electronically or by other means of
communication. Although there is no formal agreement to do so, the
Company may reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding these proxy materials to
beneficial owners. The Company has retained D.F. King & Co., Inc.
to assist it in connection with the solicitation of proxies for a fee of
approximately $11,000, plus reimbursement of expenses.
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to Be Held on May 24, 2010.
The
Company's Proxy Statement and Form 10-K Annual Report for the fiscal year
ended December 31, 2009 are available free of charge at
http://www.centralpacificbank.com/2010proxy.
In
addition, the Company will provide without charge upon the written request of
any shareholder a copy of the Company’s annual report on Form 10-K, including
the financial statements and the financial statement schedules, required to be
filed with the United States Securities and Exchange Commission (“SEC”) for the
fiscal year ended 2009. Requests should be directed to Central
Pacific Financial Corp., Attn: Investor Relations, P.O. Box 3590, Honolulu,
Hawaii 96811.
The Company will
also deliver promptly upon written or oral request a separate copy of the
Company's annual report on Form 10-K and the Company's Proxy
Statement, to any shareholder who shares an address with other shareholders
and where only one set of materials were sent to that address to be shared by
all shareholders at that address.
Principal
Shareholders
Based on
filings made under Section 13(d) and Section 13(g) of the United States
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the
Record Date, the following were the only persons known to management of the
Company to beneficially own more than 5% of the Company’s outstanding Common
Stock:
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Name
and Address of Beneficial Owner
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Amount
and Nature of Beneficial Ownership
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Percent
of Class
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BlackRock,
Inc.
40
East 52nd
Street
New
York, New York 10022
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1,723,892
(1)
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5.68%
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(1)
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According
to a Schedule 13G filed on January 29, 2010, BlackRock, Inc. has sole
voting power over 1,723,892 shares and sole dispositive power over
1,723,892 shares.
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Security
Ownership of Directors, Nominees and Executive Officers
The
following table sets forth certain information regarding beneficial ownership of
Common Stock by each of the current directors, and the Named Executive Officers
(as defined under “COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS,”
subheading “COMPENSATION DISCUSSION AND ANALYSIS”), as well as all directors and
executive officers as a group, as of the close of business on March 15,
2010. Unless otherwise noted, the address of each person is c/o
Central Pacific Financial Corp., 220 South King Street, Honolulu,
Hawaii 96813.
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Name of Beneficial
Owner
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Amount
and Nature of
Beneficial
Ownership (1)
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Percent
of Class (2)
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Directors
and Nominees
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Richard
J. Blangiardi
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11,223
(3)
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*
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Christine
H. H. Camp
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18,942
(4)
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*
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Earl
E. Fry
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29,186
(5)
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*
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B.
Jeannie Hedberg
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13,773
(6)
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*
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Dennis
I. Hirota
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45,082
(7)
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*
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Paul
J. Kosasa
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49,226
(8)
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*
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Colbert
M. Matsumoto
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41,331
(9)
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*
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Ronald
K. Migita
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335,676
(10)
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*
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Crystal
K. Rose
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24,689
(11)
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*
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Mike
K. Sayama
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26,101
(12)
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*
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Maurice
H. Yamasato
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37,975
(13)
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*
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Dwight
L. Yoshimura
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30,569
(14)
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*
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Named
Executive Officers(15)
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Blenn
A. Fujimoto
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47,602
(16)
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*
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Dean
K. Hirata
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46,110
(17)
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*
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Denis
K. Isono
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29,904
(18)
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*
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Mary
A. Weisman
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2,000
(19)
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*
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All
Directors and Executive Officers as a Group (16
persons)
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789,389
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%
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(*)
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Less
than one percent (1%).
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(1)
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Except
as otherwise noted below, each person has sole voting and investment
powers with respect to the shares listed. The numbers shown include the
shares actually owned as of March 15, 2010 and, in accordance with Rule
13d-3 under the Exchange Act, any shares of Common Stock that the person
has the right or will have the right to acquire within sixty (60) days of
March 15, 2010.
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(2)
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In
computing the percentage of shares beneficially owned by each person or
group of persons named above, any shares which the person (or group) has a
right to acquire within sixty (60) days after March 15, 2010 are deemed
outstanding for the purpose of computing the percentage of Common Stock
beneficially owned by that person (or group) but are not deemed
outstanding for the purpose of computing the percentage of shares
beneficially owned by any other
person.
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(3)
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6,922
shares of Common Stock are directly held by Mr. Blangiardi with full
voting power. 4,301 shares of Common Stock are those he has a
right to acquire by exercise of stock options vested pursuant to the
Company’s 2004 Stock Compensation
Plan.
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(4)
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5,908 shares
of Common Stock are directly held by Ms. Camp with full voting
power. 2,265 shares of Common Stock are held in her Simplified
Employee Pension Plan Individual Retirement Account. 6,468
shares of Common Stock are held in her account and benefit under the
Central Pacific Financial Corp. Directors’ Deferred Compensation
Plan. 4,301 shares of Common Stock are those she has a right to
acquire by exercise of stock options vested pursuant to the Company’s 2004
Stock Compensation Plan.
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(5)
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5,007
shares of Common Stock are directly held by Mr. Fry with full voting and
investment power. 5,000 shares of Common Stock are held in the
Fry Family Trust. 14,878 shares of Common Stock are held in the
Central Pacific Financial Corp. Directors’ Deferred Compensation
Plan. 4,301 shares of Common Stock are those he has a right to
acquire by exercise of stock options vested pursuant to the Company’s 2004
Stock Compensation Plan.
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(6)
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6,150 shares
of Common Stock are directly held by Ms. Hedberg with full voting
power. 125 shares of Common Stock are held as a custodian for
her grandson. 1,000 shares of Common Stock are held in a 401-K
Retirement Savings Plan. 1,247 shares of Common Stock are held
for her account and benefit under the Central Pacific Financial Corp.
Directors’ Deferred Compensation Plan. 750 shares of Common
Stock are held in her trust. 200 shares are held in her
daughter’s Individual Retirement Account. 4,301 shares of
Common Stock are those she has a right to acquire by exercise of stock
options vested pursuant to the Company’s 2004 Stock Compensation
Plan.
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(7)
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29,230
shares of Common Stock are directly held by Dr. Hirota with full voting
power. 11,520 shares of Common Stock are held jointly with his
wife for which he has shared voting and investment powers with his
wife. 31 shares of Common Stock are held by Dr. Hirota, as
President of Sam O. Hirota, Inc. 4,301 shares of Common Stock
are those he has a right to acquire by exercise of stock options vested
pursuant to the Company’s 2004 Stock Compensation
Plan.
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(8)
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44,925
shares of Common Stock are directly held by Mr. Kosasa with full voting
power. 4,301 shares of Common Stock are those he has a right
to acquire by exercise of stock options vested pursuant to the Company’s
2004 Stock Compensation Plan.
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(9)
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5,550 shares
of Common Stock are directly held by Mr. Matsumoto with full voting
power. 10,368 shares of Common Stock are held for his account
and benefit under the Central Pacific Financial Corp. Directors’ Deferred
Compensation Plan. 10,000 shares are held by Island Insurance
Foundation of which he serves as President and Director. 6,000
shares are held jointly with his wife for which he has shared voting and
investment powers with his wife. 9,413 shares of Common Stock
are those he has the right to acquire by the exercise of stock options
vested pursuant to the CB Bancshares, Inc. Directors Stock Option Plan,
the Agreement and Plan of Merger dated April 22, 2004 between Central
Pacific Financial Corp. and CB Bancshares, Inc., the Company’s 1997 Stock
Option Plan, and the Company’s 2004 Stock Compensation
Plan.
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(10)
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250,087
shares of Common Stock are held in Mr. Migita’s trust. 362
shares of Common Stock are directly held with full voting and investment
power. 85,227 shares of Common Stock are those he has a right
to acquire by exercise of stock options vested pursuant to the Company’s
2004 Stock Compensation Plan.
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(11)
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5,550 shares
of Common Stock are directly held by Ms. Rose with full voting
power. 2,000 shares of Common Stock are held by her as trustee
of her pension plan and 12,838 shares of Common Stock are held for her
account and benefit under the Central Pacific Financial Corp. Directors’
Deferred Compensation Plan. 4,301 shares of Common Stock are
those she has a right to acquire by exercise of stock options vested
pursuant to the Company’s 2004 Stock Compensation
Plan.
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(12)
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9,082 shares
of Common Stock are directly held by Dr. Sayama with full voting
power. 4,008 shares of Common Stock are held jointly with his
wife for which he has shared voting and investment powers with his
wife. 13,011 shares of Common Stock are those that he has the
right to acquire by the exercise of stock options vested pursuant to the
CB Bancshares, Inc. Directors Stock Option Plan, the Agreement and Plan of
Merger dated April 22, 2004 between Central Pacific Financial Corp. and CB
Bancshares, Inc., the Company’s 1997 Stock Option Plan, and the Company’s
2004 Stock Compensation Plan.
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(13)
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20,674 shares
of Common Stock are directly held by Mr. Yamasato with full voting
power. 13,000 shares are held jointly with his wife for which
he has shared voting and investment powers with his wife. 4,301
shares of Common Stock are those he has a right to acquire by exercise of
stock options vested pursuant to the Company’s 2004 Stock Compensation
Plan.
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(14)
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11,275 shares
of Common Stock are directly held by Mr. Yoshimura with full voting
power. 5,000 shares are held jointly with his wife for which he
has shared voting and investment powers. 14,294 shares of
Common Stock are those that he has the right to acquire by the exercise of
stock options vested pursuant to the CB Bancshares, Inc. Directors Stock
Option Plan, the Agreement and Plan of Merger dated April 22, 2004 between
Central Pacific Financial Corp. and CB Bancshares, Inc., the Company’s
1997 Stock Option Plan, and the Company’s 2004 Stock Compensation
Plan.
|
|
(15)
|
The
following includes information regarding all the Named Executive Officers
except for Mr. Migita, whose information is included in this table under
the section heading “Directors and
Nominees”.
|
|
(16)
|
4,019
shares of Common Stock are directly held by Mr. Fujimoto with full voting
and investment power. 4,075 shares of Common Stock are held
under his account under the Central Pacific Bank 401(k) Retirement Savings
Plan. 33,065 shares of Common Stock are those that he has the
right to acquire by the exercise of stock options vested pursuant to the
Company’s 1997 Stock Option Plan. 6,443 shares of Common Stock
are those that he has the right to acquire by the exercise of Stock
Appreciation Rights vested pursuant to the Company’s 2004 Stock
Compensation Plan
|
|
(17)
|
4,507
shares of Common Stock are held in Mr. Hirata’s Individual Retirement
Account. 2,114 shares of Common Stock are held under his
account under the Central Pacific Bank 401(k) Retirement Savings
Plan. 2,149 shares of Common Stock are directly held by Mr.
Hirata with full voting and investment power. 30,719 shares of
Common Stock are those that he has the right to acquire by the exercise of
stock options vested pursuant to the CB Bancshares, Inc. Stock
Compensation Plan, the Agreement and Plan of Merger dated April 22, 2004
between Central Pacific Financial Corp. and CB Bancshares, Inc., and the
Company’s 1997 Stock Option Plan. 6,621 shares of Common Stock
are those that he has the right to acquire by the exercise of Stock
Appreciation Rights vested pursuant to the Company’s 2004 Stock
Compensation Plan.
|
|
(18)
|
2,124
shares of Common Stock are directly held by Mr. Isono with full voting and
investment power. 10,463 shares of Common Stock are held
jointly with his wife for which he has shared voting and investment powers
with his wife. 300 shares of Common Stock are held by his sons
and wife jointly. 2,363 shares of Common Stock are held under
his account under the Central Pacific Bank 401(k) Retirement Savings
Plan. 8,388 shares of Common Stock are those that he has the
right to acquire by the exercise of stock options vested pursuant to the
Company’s 1997 Stock Option Plan. 6,266 shares of Common Stock
are those that he has the right to acquire by the exercise of Stock
Appreciation Rights vested pursuant to the Company’s 2004 Stock
Compensation Plan.
|
|
(19)
|
2,000
shares of Common Stock are directly held by Ms. Weisman with full voting
power, but no investment power.
|
Section
16(a) Beneficial Ownership Reporting Compliance
The
Company’s directors, executive officers and the beneficial holders of more than
10% of the Common Stock are required to file certain reports with the SEC
regarding the amount of and changes in their beneficial ownership of the
Company’s stock. Based on its review of copies of those reports, the
Company is required to disclose known failures to file required forms, or
failures to timely file required reports during the previous year. To
the best knowledge of the Company, there were no failures to file or timely file
such required reports during year 2009 by any person who was at any time during
year 2009 a director, officer, beneficial owner of more than 10% of the Common
Stock, or any other person subject to Section 16 of the Exchange Act with
respect to the Company, except for the following: Director Paul J. Kosasa had a
late Form 4 filing involving the purchase of 7,500 and 500 shares of Common
Stock.
ELECTION
OF DIRECTORS
The
Company currently has twelve (12) directors, equally divided among three
Classes, the four (4) Class I directors being Christine H. H. Camp, Dennis I.
Hirota, Ronald K. Migita, and Maurice H. Yamasato, the four (4) Class II
directors being Earl E. Fry, B. Jeannie Hedberg, Colbert M. Matsumoto, and
Crystal K. Rose, and the four (4) Class III directors being Richard J.
Blangiardi, Paul J. Kosasa, Mike K. Sayama, and Dwight L.
Yoshimura. On August 26, 2009, the Company’s Board adopted an
amendment to the Company’s Bylaws which will eliminate the Company’s classified
board structure. Directors that have been elected prior to the
Meeting will continue to hold office until the expiration of the three-year
terms for which they were elected. However, each director who is
elected or appointed at or after the Meeting will hold office only until the
next annual meeting of shareholders. Accordingly, there are four (4)
directors (being the Class I directors) to be elected at the Meeting to serve
one-year terms expiring at the 2011 Annual Meeting of Shareholders and until
their respective successors are elected and qualified, subject to their death,
resignation, retirement, disqualification or removal from office.
The
nominees to serve as Class I directors for election at the Meeting are Christine
H. H. Camp, Dennis I. Hirota, Ronald K. Migita, and Maurice H. Yamasato, all of
whom are currently directors of the Company. Director Hirota will
turn age 70 on April 4, 2010 and under the Company’s Corporate Governance
Guidelines, a non-employee director is required to retire from the Board upon
attaining the age of seventy. However, due to the Company’s current
and significant challenges, the Board has determined to nominate Director Hirota
to serve for another term of one-year or until the Board elects to appoint a
successor.
All
nominees have indicated their willingness to serve and unless otherwise
instructed, proxies will be voted for all of the nominees. However,
in the event that any of them should be unable to serve, the proxy holders named
on the enclosed proxy card will vote in their discretion for such persons as the
Board may recommend.
There are
no family relationships among directors or executive officers of the Company,
and, as of the date hereof, no directorships are held by any director or
director nominee with a company with a class of securities registered pursuant
to Section 12 of the Exchange Act, or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an investment company
under the Investment Company Act of 1940, except for director Crystal K. Rose,
who is a director of Hawaiian Holdings, Inc. (NASDAQ ticker “HA”).
The
Board recommends a vote “FOR” each of the Board nominees for
director.
DIRECTORS’
AND EXECUTIVE OFFICERS’ INFORMATION
The
following table sets forth certain information with respect to each of the
nominees, continuing directors, and Named Executive Officers:
|
Name
|
Principal
Occupationfor the
Past Five Years
|
Age
|
First
Year Elected or Appointed as Officer or Director of the Company (1)
|
Term
Expires
|
|
|
Nominees
|
|||||
|
CAMP,
Christine H. H.
|
President
and Chief Executive Officer, Avalon Group, LLC (2002-present) (real estate
consulting); Managing Director, Avalon Development Company LLC
(1999-present) (real estate development)
|
43
|
2004
|
2010
|
|
|
HIROTA,
Dennis I., Ph.D.
|
President,
Sam O. Hirota, Inc. (1986-present)
(engineering)
|
69
|
1980
|
2010
|
|
|
MIGITA,
Ronald K.
|
Chairman,
Chief Executive Officer and President, Central Pacific Financial Corp.
(8/2008-3/16/2010) (bank holding company); Chairman, Chief Executive
Officer and President, Central Pacific Bank (8/2008-3/16/2010) (bank);
Chairman, Central Pacific Financial Corp. and Central Pacific Bank
(9/2004-7/2008) (bank holding company/bank); Chairman, City Bank
(9/2004-2/2005) (bank); Director, Chief Executive Officer and President,
CB Bancshares, Inc. (1997-9/2004) (bank holding company); Vice Chairman
and Chief Executive Officer, City Bank (1997-9/2004)
(bank)
|
68
|
2004
|
2010
|
|
|
YAMASATO,
Maurice H.
|
President,
Yamasato, Fujiwara, Higa & Associates, Inc. (1987-present)
(architecture)
|
67
|
2004
|
2010
|
|
|
Continuing
Directors
|
|||||
|
BLANGIARDI,
Richard J.
|
General
Manager, KGMB and KHNL (10/26/09-present) (television); President and
General Manager, HITV Operating Co., Inc. dba KGMB9 (6/2007-10/25/09)
(television); Senior Vice President and General Manager, Emmis Operating
Company (2002-6/2007) (television)
|
63
|
2003
|
2012
|
|
|
FRY,
Earl E.
|
Chief
Financial Officer, Chief Administrative Officer and Executive Vice
President of Global Customer Support, Informatica Corporation
(2010-present); Executive Vice President, Chief Financial Officer and
Secretary, Informatica Corporation (2003-2009) (technology); Senior Vice
President, Chief Financial Officer and Secretary, Informatica Corporation
(2002-2003); Senior Vice President and Chief Financial Officer,
Informatica Corporation (1999-2002)
|
51
|
2005
|
2011
|
|
|
HEDBERG,
B. Jeannie, C.P.A.
|
Member,
Hedberg, Batara & Vaughan-Sarandi, LLC (11/2005-present) (accounting);
Partner, Hedberg, Freitas, King & Tom (1969-10/2005)
(accounting)
|
66
|
2003
|
2011
|
|
|
KOSASA,
Paul J.
|
President
and Chief Executive Officer, MNS, Ltd., dba ABC Stores (1999-present)
(retail)
|
52
|
2002
|
2012
|
|
|
MATSUMOTO,
Colbert M.
|
Chairman
and Chief Executive Officer, Island Insurance Company, Ltd. (1999-present)
(insurance)
|
57
|
2004
|
2011
|
|
|
ROSE,
Crystal K., J.D.
|
Partner,
Bays Deaver Lung Rose & Holma (1989-present)
(law)
|
52
|
2005
|
2011
|
|
|
SAYAMA,
Mike K., Ph.D.
|
Vice
President, Hawaii Medical Service Association (1997-present)
(insurance)
|
56
|
2004
|
2012
|
|
|
YOSHIMURA,
Dwight L.
|
Senior
Vice President and Senior General Manager, GGP Ala Moana L.L.C.
(1991-present) (retail and real estate management)
|
55
|
2004
|
2012
|
|
|
Named
Executive Officers (2)
|
|||||
|
FUJIMOTO,
Blenn A.
|
Vice
Chairman, Central Pacific Financial Corp. (4/2006-present); Vice Chairman,
Hawaii Market, Central Pacific Bank (1/2006-present); Executive Vice
President, Hawaii Market, Central Pacific Bank (9/2004-12/2005); Executive
Vice President, Hawaii Market, City Bank (9/2004-2/2005); Executive Vice
President and Chief Financial Services Officer, Central Pacific Bank
(2002-9/2004)
|
51
|
2006
|
N/A
|
|
|
HIRATA,
Dean K.
|
Vice
Chairman and Chief Financial Officer, Central Pacific Financial Corp.
(4/2006-present); Vice Chairman and Chief Financial Officer, Central
Pacific Bank (1/2006-present); Executive Vice President and Chief
Financial Officer, Central Pacific Financial Corp. (9/2004-4/2006);
Executive Vice President and Chief Financial Officer, Central Pacific Bank
(9/2004-12/2005); Executive Vice President and Chief Financial Officer,
City Bank (2002-2/2005); Senior Vice President and Chief Financial
Officer, CB Bancshares, Inc. (1999-9/2004) (bank holding
company)
|
52
|
2004
|
N/A
|
|
|
ISONO,
Denis K.
|
Vice
Chairman and Chief Operations Officer, Central Pacific Financial Corp. and
Central Pacific Bank (10/13/09-present); Executive Vice President,
Operations and Services, Central Pacific Financial Corp. and Central
Pacific Bank (9/2004-10/12/09); Executive Vice President, Operations and
Services, City Bank (9/2004-2/2005); Executive Vice President and Chief
Operations Officer, Central Pacific Bank
(2002-9/2004)
|
58
|
2002
|
N/A
|
|
|
WEISMAN,
Mary A.
|
Executive
Vice President, interim Chief Credit Officer, Central Pacific Financial
Corp. and Central Pacific Bank (6/1/09-present); Executive Vice President,
Credit Review Director, Central Pacific Bank (12/08-5/31/09); Senior Vice
President, Credit Risk Management Director, Central Pacific Bank
(7/07-12/08); Executive Vice President, Credit Review Director, Bank of
Hawaii (6/03-7/07)
|
51
|
2009
|
N/A
|
|
|
(1)
|
All
directors of the Company are also directors of the Bank. Dates
prior to the formation of the Company in 1982 indicate the year first
appointed director of the Bank. Dr. Hirota commenced service as
a director of the Company on February 1, 1982, the date of formation of
the Company. Dr. Hirota served as a director of the Company
until April 23, 1985 when the Company’s shareholders adopted a classified
Board and reduced the number of directors to nine (9). However,
Dr. Hirota continued to serve on the Bank’s Board until he was reelected
to the Company’s Board in 1986. Mr. Kosasa has been a director
of the Bank since 1994. Mr. Blangiardi and Ms. Hedberg have
been directors of the Bank since 2003. Ms. Camp, Mr. Matsumoto,
Mr. Migita, Ms. Rose, Dr. Sayama, Mr. Yamasato and Mr. Yoshimura have been
directors of the Bank since 2004. Mr. Fry has been a director
of the Bank since 2005.
|
|
(2)
|
The
following includes information regarding all the Named Executive Officers
except for Mr. Migita, whose information is included in this table under
the section heading “Nominees”.
|
Director
Background and Experience
Richard
J. Blangiardi – Mr. Blangiardi is a television and media veteran of thirty-three
(33) years, and throughout his career in television broadcasting, has served in
various executive positions at numerous television stations and networks
throughout the United States, many of which were owned by publicly-held
companies. Over the last eight (8) years, Mr. Blangiardi has been the
general manager of one or more Hawaii television stations. Prior to
his executive managerial career in television broadcasting, Mr. Blangiardi was
an Assistant and then Associate Head Football Coach and Defensive Coordinator
for the University of Hawaii’s Division I football team and program, for a
period of five (5) years. Mr. Blangiardi’s extensive knowledge and
experience of public media has been a tremendous resource to the Company’s and
Bank’s communications, advertising and public relations areas. Mr.
Blangiardi is well-versed with public company issues and as general manager of
numerous television stations is highly experienced at managing all aspects of a
business operation. Mr. Blangiardi’s natural ability to motivate and
inspire others is a positive force for both the Board and management.
This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Christine
H. H. Camp – Ms. Camp has over twenty (20) years experience in real estate, and
her company Avalon Group, is a full service real estate company which provides
detailed financial and market analysis to a wide range of investors involved in
various real estate transactions and development scenarios, and also real estate
brokerage, market and financial consulting. Prior to establishing
Avalon Group, Ms. Camp was Vice President of Development at A&B Properties,
Inc., a subsidiary of Alexander & Baldwin, Inc. (a publicly traded company
listed on NYSE), and was in charge of that company’s real estate development and
investment acquisition activities. Ms. Camp also was the Senior
Project Coordinator of Planning and Engineering at Castle & Cooke
Properties, Inc., where she handled site acquisition and development of
non-company owned properties. Ms. Camp’s real estate, financial, and
public company knowledge and experience gained from her prior and current
positions, makes her a valuable resource to the Board (Ms. Camp is Vice Chair of
the Bank’s Senior Loan Committee) and management in many areas, but particularly
in connection with the Company’s real-estate lending and other real-estate
related activities, to include the evaluation of real estate related risks,
investments, opportunities, and asset management oversight. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Earl E.
Fry – For the last ten (10) years, Mr. Fry has served as Chief Financial Officer
of Informatica Corporation (a publicly traded company listed on NASDAQ), a
company which provides data integration software and services, and which
reported for the year ended December 31, 2009, revenues of $500.7
million. As Chief Financial Officer of Informatica Corporation, Mr.
Fry has effected, among other things, a secondary offering of stock, an issuance
of convertible bonds, stock buyback plans, eight technology acquisitions, and
established development and support centers in Bangalore, India, Dublin,
Ireland, and Tel Aviv, Israel. In addition, Mr. Fry also oversees and
manages the Corporate Development, Human Resources, Legal and Contracts
Administration, Information Technology, Investor Relations and Finance areas of
Informatica Corporation. Prior to joining Informatica Corporation,
Mr. Fry was Chief Financial Officer of Omnicell Technologies, Inc. (a publicly
traded company listed on NASDAQ) for four (4) years, Chief Financial Officer of
C.ATS Software, Inc. for two (2) years, Chief Financial Officer of Weitek
Corporation for three (3) years, and also served at other technology companies
in various finance and other capacities. Mr. Fry began his
professional career at Ernst & Whinney, CPAs (now known as Ernst &
Young), where he held the position of Senior Auditor. Mr. Fry is a
Certified Public Accountant and a graduate of the Stanford Graduate School of
Business. Mr. Fry brings extensive finance, public company, and
auditing knowledge and experience to the Board and Company, and he thus is
highly qualified to Chair the Company’s and Bank’s Audit Committees. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
B.
Jeannie Hedberg, C.P.A. – Ms. Hedberg has been a Certified Public
Accountant (“CPA”) in public practice for almost forty (40)
years. She established her Certified Public Accounting firm
thirty-four (34) years ago, and on November 1, 2005, that firm (Hedberg,
Freitas, King & Tom, LLP) was dissolved and a new firm (Hedberg, Batara
& Vaughn-Sarandi LLC) was formed. Ms. Hedberg continues to be an
actively practicing CPA with Hedberg, Batara & Vaughn-Sarandi
LLC. In her nearly forty (40) years as a practicing CPA, Ms. Hedberg
assists her clients, most of which are professionals, with tax planning, tax
preparation and preparation of compiled financial statements, to include
discussing, counseling and advising clients respecting assessing various risks,
to include financial, reputational, tax, litigation, and other
risks. With her substantial financial experience and background, Ms
Hedberg has significantly contributed as a member and Vice Chair of the
Company’s and Bank’s Audit Committees. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Dennis I.
Hirota, Ph.D. – Mr. Hirota has been President of Sam O. Hirota, Inc. Engineering
and Surveying for twenty-four (24) years, and is a lifelong civil engineer, with
a Ph.D. in civil engineering and experience that includes both practical and
academic applications in the use of computers in engineering, planning and
architecture. Mr. Hirota has served as a director of the Company for
twenty-seven (27) years and as a director of the Bank for thirty (30) years,
longer than any other current Company or Bank director,
respectively. Mr. Hirota’s longevity on the Company and Bank Boards
has provided continuity and had a stabilizing effect, particularly in more
recent years as the Company and Bank merged with CB Bancshares, Inc. and City
Bank respectively. In addition, Mr. Hirota’s historical knowledge and
past experiences as the senior member of the Company’s and Bank’s Boards, and of
the vision, mission, values, and principles upon which the Company and the Bank
were founded, distinguishes him as the one Board member who has seen and
directed the Company through its evolution. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Paul J.
Kosasa – Mr. Kosasa has been President and Chief Executive Officer of MNS Ltd.,
doing business and more commonly known as ABC Stores, for the past eleven (11)
years, and has been with ABC Stores for thirty (30) years. As
President and Chief Executive Officer of ABC Stores, Mr. Kosasa oversees a
Hawaii-based retail convenience store operation with a major presence in Waikiki
and other tourist locations throughout the Hawaiian Islands, as well as in other
locations outside of Hawaii, such as Guam, Saipan, and Las Vegas,
Nevada. As President and Chief Executive Officer of a sizable retail
store chain which primarily serves the tourist industry, one of the largest
industries in Hawaii, Mr. Kosasa provides the Board and Company with significant
business and management knowledge and experience in all aspects of a business
operation, to include, business strategy and planning, financial management and
budgeting, employee compensation and benefits, labor, marketing, advertising,
and real estate, among other business expertise. In addition, Mr.
Kosasa provides a link and close connection to the Hawaii tourism industry, one
of Hawaii’s most profitable economic engines, and which provides a valuable
source of banking business with respect to Hawaii businesses who support the
Hawaii tourism industry, as well as retail customers from outside Hawaii who
require or may desire Hawaii banking services. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Colbert
M. Matsumoto – Mr. Matsumoto is the Chairman of the Board and Chief Executive
Officer of Island Insurance Company, Ltd., Hawaii’s largest locally owned and
managed property and casualty insurance company, and has served in that capacity
for the last ten (10) years. Mr. Matsumoto also serves as President
and a director of Tradewind Capital Group, Inc., an investment and asset
management company. Mr. Matsumoto is also a Hawaii licensed attorney,
has been a member of the Hawaii State Bar Association for over thirty-two (32)
years, and was a partner with the law firm of Fujiyama Duffy & Fujiyama
until 1994 when he established his own law firm named Matsumoto LaFountaine
& Chow until departing that firm to join Island Insurance Company,
Ltd. Mr. Matsumoto’s substantial knowledge and experience, as an
attorney, insurance executive, and investment professional, has been
instrumental in assisting the Board and management with assessing and managing
the Company’s legal and business risks and in corporate and business strategy
and planning. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Ronald K.
Migita – Mr. Migita has over forty (40) years of banking experience in the
Hawaii market. Before joining the Company and the Bank, Mr. Migita
was employed by other Hawaii financial institutions in various senior management
capacities, to include having served at Bank of Hawaii ($10 billion in assets)
for thirty (30) years where he held positions as Executive Vice President and
Manager of the Business Financial Services Group, the Corporate Hawaii Division,
and the Business Banking Division; then having served at International Savings
and Loan Association, Limited for three (3) years where he held the positions of
Vice Chairman and Chief Executive Officer, and City Bank for seven (7) years
(merged in February 2005 with the Bank) and its parent company CB Bancshares,
Inc. (merged in September 2004 with the Company), where he held the positions of
Vice Chairman and Chief Executive Officer for City Bank, and Chief Executive
Officer and President and Director for CB Bancshares, Inc. Mr. Migita
graduated from the Pacific Coast Banking School at the University of Washington
and the University of Hawaii Advanced Management Program. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Crystal
K. Rose, J.D. – Ms. Rose is a named partner in the law firm of Bays Deaver Lung
Rose Holma, and has been actively practicing law for twenty-eight (28) years,
specializing in the areas of real estate, trust and commercial litigation,
commercial real estate transactions, trusts and estates, and construction
law. Ms. Rose brings a wealth of legal and real estate knowledge and
experience to the Company’s Board and Bank’s Board, and her skills and expertise
are well-suited to her serving as the Company’s and the Bank’s Lead Director and
being a champion of Board corporate governance, and in providing guidance with
respect to the Company’s and the Bank’s real estate loans and other real estate
related matters and legal matters. Ms. Rose has been a director of
Hawaiian Holdings, Inc. (a publicly traded company listed on NASDAQ, and the
parent company of Hawaiian Airlines, Inc.) since June 2006, and serves as Chair
of the Compensation Committee, and is a member of the Governance and Nominating
Committee and the Executive Committee of its Board of
Directors. Given the limited number of publicly traded companies in
Hawaii, Ms. Rose brings additional experience as a director of another
Hawaii-based publicly traded company. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Mike K.
Sayama, Ph.D. – Dr. Sayama has had a distinguished career in the health care
industry for over thirty-three (33) years, and for the last eight (8) years has
been Vice President, Customer Relations, with Hawaii Medical Service
Association, the largest provider of health care coverage in the State of
Hawaii, which insures over half of Hawaii’s population. Dr. Sayama is
a graduate of Yale University (B.A. Psychology and Philosophy) and of the
University of Michigan (M.A. Clinical Psychology and Ph.D Clinical
Psychology). Before joining the Company’s Board and the Bank’s Board
as a director, Dr. Sayama served on the Board of Directors of City Bank for five
(5) years (City Bank was merged in February 2005 with the Bank). Dr.
Sayama’s expertise in human relations applied in the external context of
customer and public relations and in the internal corporate context of
management and leadership skills and development, provides the Company with a
human perspective and view, and enables the Company to better foster efficient
and effective use of human capital. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Maurice
H. Yamasato – Mr. Yamasato has over thirty-eight (38) years of architectural
knowledge and experience. After working for various architectural
firms in Hawaii, Mr. Yamasato founded his own company which has continued for
thirty-seven (37) years and is now known as Yamasato, Fujiwara, Higa &
Associates, Inc. Having successfully run a small business for
approaching four (4) decades, Mr. Yamasato has first-hand experience, knowledge
and the perspective of small business, and is thereby able to provide guidance
and advice to the Board and management regarding how the Bank can best serve its
small business customers and clients, which is a core niche and focus of the
Bank and its community bank mission. Before joining the Company’s
Board and the Bank’s Board as a director, Mr. Yamasato served on the Board of
Directors of City Bank for six (6) years (City Bank was merged in February 2005
with the Bank) and also served on the Board of Directors of Liberty Bank for
five (5) years. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Dwight L.
Yoshimura – Mr. Yoshimura has been with various of the Hawaii-based subsidiary
companies of General Growth Properties, Inc. (“GGP”) for the last nineteen (19)
years and currently serves as Senior Vice President and Senior General Manager
for GGP Ala Moana L.L.C., with management responsibility for a number of GGP
Hawaii owned and/or operated retail shopping complexes in the State of
Hawaii. Accordingly, Mr. Yoshimura has considerable commercial and
retail real estate management experience in Hawaii, and is a valuable resource
to the Company with respect to the Bank’s real estate, commercial and small
business lending activity. In addition, Mr. Yoshimura served for nine
(9) years in the Hawaii State Legislature, and has held managerial positions in
other Hawaii businesses. Before joining the Company’s Board and the
Bank’s Board as a director, Mr. Yoshimura served on the Board of Directors of
City Bank and its parent company CB Bancshares, Inc., for four (4) years (CB
Bancshares, Inc. was merged in September 2004 with the Company, and City Bank
was merged in February 2005 with the Bank), and also on the Board of Directors
of International Savings & Loan Association, Limited for three (3)
years. This
individual is also a director of the Bank, and together with other directors of
the Bank, consented to the issuance of a Consent Order, effective December 8,
2009, by the Federal Deposit Insurance Corporation and Hawaii Division of
Financial Institutions, relating to various deficiencies by the Bank, which the
Bank is currently working on addressing.
Executive
Officer Background and Experience
Ronald K.
Migita – Mr. Migita’s background and experience is listed under the section
“Director Background and Experience”.
Blenn A.
Fujimoto – Mr. Fujimoto has over twenty-nine (29) years of banking experience in
the Hawaii market. Before joining the Company and the Bank, Mr.
Fujimoto was employed by Bank of Hawaii ($10 billion in assets) for nineteen
(19) years and held various management positions to include Vice President,
District Manager. Mr. Fujimoto was first employed by the Bank in 2000
as Senior Vice President, and Retail Division Manager. Mr. Fujimoto
is a graduate of the Pacific Coast Banking School. This
individual is also an executive officer of the Bank, which is subject to a
Consent Order, effective December 8, 2009, by the Federal Deposit Insurance
Corporation and Hawaii Division of Financial Institutions, relating to various
deficiencies by the Bank, which the Bank is currently working on
addressing.
Dean K.
Hirata – Mr. Hirata has over twenty (20) years of banking experience in the
Hawaii market. Before joining the Company and the Bank, Mr. Hirata
was employed by other Hawaii financial institutions in various senior management
capacities, to include having served at First Hawaiian Bank ($13 billion in
assets) for nine (9) years where he held the position of Senior Vice President,
Controller; then having served at International Savings and Loan Association,
Limited for two (2) years where he held the positions of Senior Vice President
and Chief Financial Officer, and City Bank for three (3) years (merged in
February 2005 with the Bank) and its parent company CB Bancshares, Inc. (merged
in September 2004 with the Company), where he held the positions of Senior Vice
President and Chief Financial Officer for City Bank, and Senior Vice President
and Chief Financial Officer for CB Bancshares, Inc. Mr. Hirata also
spent ten (10) years with KPMG Peat Marwick and held the position of Senior
Manager. Mr. Hirata is a Certified Public Accountant. Mr.
Hirata has served on the Board of Directors of Hoku Scientific, Inc. (a publicly
traded company listed on NASDAQ) since January 2007, and also Chairs its Audit
Committee. This
individual is also an executive officer of the Bank, which is subject to a
Consent Order, effective December 8, 2009, by the Federal Deposit Insurance
Corporation and Hawaii Division of Financial Institutions, relating to various
deficiencies by the Bank, which the Bank is currently working on
addressing.
Denis K.
Isono – Ms. Isono has over thirty (30) years of banking experience in the Hawaii
market. Before joining the Company and the Bank, Mr. Isono was
employed by Bank of Hawaii ($10 billion in assets) for eighteen (18) years and
held various senior management positions to include Executive Vice President,
Operations, and Senior Vice President, Controller. In addition, Mr.
Isono also began his banking career at City Bank where he worked for four (4)
years. Mr. Isono is a Certified Public Accountant, Certified
Management Accountant, Certified Bank Auditor, Certified Internal Auditor, and a
graduate of the Stanford University Executive Program and the University of
Hawaii Advanced Management Program. Mr. Isono also spent six (6)
years with Ernst & Ernst, and held the position of Audit Supervisor.
This
individual is also an executive officer of the Bank, which is subject to a
Consent Order, effective December 8, 2009, by the Federal Deposit Insurance
Corporation and Hawaii Division of Financial Institutions, relating to various
deficiencies by the Bank, which the Bank is currently working on
addressing.
Mary A.
Weisman – Ms. Weisman has over twenty-eight (28) years of banking experience,
nearly twenty (20) years of banking experience in the Hawaii market, and
extensive banking credit-focused experience. Before joining the Bank in July
2007, Ms. Weisman spent eighteen (18) years at Bank of Hawaii ($10 billion in
assets), and served in numerous credit capacities, to include the following:
Executive Vice President, Credit Review Director (June 2003 - July 2007); Senior
Vice President, Credit Training Director and Risk Self-Assessments (2001-2003);
Vice President, Special Assets Advisory Group (2000-2001); Vice President,
Credit Policy (1998-2000); Vice President, Credit Review Manager (1995-1998);
Vice President, Credit Officer (1994-1995); Vice President, Senior Credit
Analyst (1993-1994); Assistant Vice President, Middle Market Lender (1992); and,
Assistant Vice President, Loan Review Examiner, (1989-1991). Prior to
working at Bank of Hawaii, Ms. Weisman served in various credit positions at two
other banks (1982-1989), to include as a Loan Review Examiner, Commercial
Lending Officer, and Credit Analyst. This
individual is also an executive officer of the Bank, which is subject to a
Consent Order, effective December 8, 2009, by the Federal Deposit Insurance
Corporation and Hawaii Division of Financial Institutions, relating to various
deficiencies by the Bank, which the Bank is currently working on
addressing.
CORPORATE
GOVERNANCE AND BOARD MATTERS
During
the fiscal year ended December 31, 2009, the Board held a total of sixteen (16)
meetings, including monthly, annual and special meetings. Each person
who was a director of the Company during year 2009 attended at least 75% of the
total number of these Board meetings and 75% of the total number of meetings
held by all committees of the Board on which he or she served during the
year. The Company expects directors to attend the annual meetings of
shareholders. All directors attended last year’s annual meeting of
shareholders.
The Board
has four (4) standing committees: an Audit Committee, a Compensation Committee,
a Corporate Governance and Nominating Committee, and an Executive
Committee.
The
following table sets forth the members of the Board as of the date of this Proxy
Statement and the committees of the Board on which they serve.
|
Name
of Director
|
Audit
Committee
|
Compensation
Committee
(1)
|
Corporate
Governance and
Nominating
Committee
|
Executive
Committee
(2)
|
|
Non-Employee
Directors:
|
||||
|
Richard
J. Blangiardi
|
C
|
|||
|
Christine
H. H. Camp
|
VC
|
*
|
||
|
Earl
E. Fry
|
C
|
*
|
*
|
|
|
B.
Jeannie Hedberg
|
VC
|
|||
|
Dennis
I. Hirota
|
*
|
*
|
||
|
Paul
J. Kosasa
|
*
|
C | ||
|
Colbert
M. Matsumoto
|
*
|
|||
|
Crystal
K. Rose
|
*
|
C
|
*
|
|
|
Mike
K. Sayama
|
||||
|
Maurice
H. Yamasato
|
*
|
|||
|
Dwight
L. Yoshimura
|
VC
|
|||
|
Employee
Directors:
|
||||
|
Ronald
K. Migita
|
|
|
* =
Member
|
|
|
C =
Chair
|
|
|
VC
= Vice Chair
|
|
|
(1)
Paul
J. Kosasa replaced Colbert M. Matsumoto as Chair of the Compensation
Committee effective October 28, 2009. Richard
J. Blangiardi replaced Paul
J. Kosasa as Chair of the Compensation Committee effective March 11,
2010. Christine H. H. Camp was appointed Vice Chair of the
Compensation Committee effective March 11,
2010.
(2) Paul
J. Kosasa was appointed Chair of the Executive Committee effective March
11, 2010.
|
Crystal
K. Rose, Chair of the Corporate Governance & Nominating Committee, has been
chosen by the Board to serve as the Lead Director and preside over all meetings
of the non-management or independent directors in executive
sessions. In Ms. Rose’s absence, Mr. Yoshimura, Vice Chair of the
Corporate Governance & Nominating Committee, would preside over these
sessions of the Board.
Interested
parties may communicate directly with the Lead Director or with the
non-management or independent directors as a group, by writing to: Crystal K.
Rose, Bays Deaver Lung Rose & Holma, 1099 Alakea Street, 16th Floor,
Honolulu, Hawaii 96813. Alternatively, concerns may be made
known and communicated directly to the Lead Director or to the non-management or
independent directors as a group, through procedures set forth in the Company’s
Complaint Policy which is available on the Company’s website (www.centralpacificbank.com).
Audit
Committee
The Audit
Committee held ten (10) meetings during 2009. The responsibilities of
the Audit Committee are described below under the subheading “Report of the
Audit Committee”. The Audit Committee operates under a Charter
adopted by the Board. The Charter of the Audit Committee is available
on the Company’s website (www.centralpacificbank.com). The members of
the Company’s Audit Committee are Earl E. Fry (Chair), B. Jeannie Hedberg (Vice
Chair), Dennis I. Hirota and Crystal K. Rose, each of whom is “independent”
within the meaning of the listing standards of the NYSE and the rules of the
SEC. The Board has also determined that each member is financially
literate, as such qualification is defined under the rules of the NYSE, and that
Mr. Fry, Ms. Hedberg and Ms. Rose have accounting or related financial
management expertise, as such qualification is defined under the rules of the
NYSE, and that Mr. Fry and Ms. Hedberg are “audit committee financial experts”
within the meaning of the rules of the SEC. No member of the Audit
Committee serves on the audit committee of any other publicly registered
company.
Pursuant
to the Company’s Audit Committee Charter, the Audit Committee reviews and
evaluates all related party transactions that are material to the financial
statements pursuant to the Company’s Policy Regarding Transactions with Related
Persons, and determines conflicts of interest pursuant to the Company’s Code of
Conduct & Ethics and pursuant to its Code of Conduct & Ethics for Senior
Financial Officers. In addition, certain loans to directors and
executive officers and their related interests are subject to the lending
restrictions set forth in Federal Reserve Board Regulation O and the lending
policies and procedures of the Bank. Each director and executive
officer is required to report to the Company transactions with the Company in
which they have an interest.
Compensation
Committee
The
Compensation Committee held nine (9) meetings during 2009. The
Compensation Committee’s primary purpose is to assist the Board in discharging
the Board’s responsibilities relating to compensation of the Company’s executive
officers by evaluating and recommending to the Board approval of executive
officer benefit, bonus, incentive compensation, severance, equity-based or other
compensation plans, policies and programs of the Company and providing all
required disclosures on executive compensation for inclusion in the Company’s
proxy statement. The functions of the Compensation Committee are
further described in “COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS” below,
under the subheading “Compensation Discussion and Analysis.” The
Charter of the Compensation Committee is available on the Company’s website
(www.centralpacificbank.com). The members of the Company’s
Compensation Committee are Richard J. Blangiardi (Chair), Christine H. H. Camp
(Vice Chair), Earl E. Fry, Paul J. Kosasa, and Maurice H. Yamasato, each of whom
is “independent” within the meaning of the listing standards of the NYSE, is a
“non-employee director” within the meaning of Rule 16b-3 of the Exchange Act and
is an “outside director” within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended. Effective October 28, 2009, Colbert M.
Matsumoto resigned as Chair of the Compensation Committee and was replaced by
Paul J. Kosasa as Committee Chair. Effective March 11, 2010, Richard J.
Blangiardi was elevated from Vice Chair to Chair of the Compensation Committee,
replacing Paul J. Kosasa as Committee Chair; and, Christine H. H. Camp was
elevated to Vice Chair of the Committee. Mr. Kosasa remains a member of
the Committee.
Corporate
Governance and Nominating Committee
The
Corporate Governance and Nominating Committee held seven (7) meetings during
2009. The Corporate Governance and Nominating Committee is
responsible for promoting the best interests of the Company and its shareholders
through the implementation of sound corporate governance principles and
practices, including identifying individuals qualified to become Board members,
recommending nominees for directors of the Company, reviewing the qualifications
and independence of the members of the Board and its committees, reviewing and
monitoring the Company’s Corporate Governance Guidelines, monitoring the Board’s
and the Company’s compliance regarding changes in corporate governance practices
and laws and leading the Board in its annual review of the performance of the
Board. The Charter of the Corporate Governance and Nominating
Committee and the Company’s Corporate Governance Guidelines are available on the
Company’s website (www.centralpacificbank.com). The members of the
Company’s Corporate Governance and Nominating Committee are Crystal K. Rose
(Chair), Dwight L. Yoshimura (Vice Chair), and Dennis I. Hirota, each of whom is
“independent” within the meaning of the listing standards of the
NYSE.
Executive
Committee
The
Executive Committee held fifteen (15) meetings during 2009. The
Executive Committee provides an efficient means of considering such matters and
taking such actions as may require the attention of the Board or the exercise of
the Board’s powers or authority in the intervals between meetings of the Board
and typically when the majority of the Board and its directors are generally
unavailable. The Executive Committee is authorized to have and
exercise all the powers of the Board in the management of the business and
affairs of the Company to the extent permitted by law while the Board is not in
session, not in conflict, however, with any prior directions given, decisions
made, or actions taken by the Board, and provided, further, that the Committee
should only consider meeting when the majority of the Board and its directors
are generally unavailable, or otherwise as may be permitted by the Board or by
the Board approved and adopted Executive Committee Charter, such as, for
example, to perform such other duties and responsibilities as may be requested
by the Board. During year 2009, the Executive Committee met jointly
with the Bank’s Senior Loan Committee on a monthly basis to discuss various
credit-related matters. The members of the Executive Committee
are Paul J. Kosasa (Chair), Christine H. H. Camp, Earl E. Fry, Colbert
M. Matsumoto, and Crystal K. Rose. Effective March 11, 2010, Mr. Kosasa
replaced Ronald K. Migita as Chair of this Committee.
Director
Resignation Policy
On
January 28, 2009, the Board adopted a “Director Resignation Policy” which
provides for the following: At any shareholder meeting at which directors are
subject to an uncontested election, any nominee for director who receives a
greater number of votes "withheld" from his or her election than votes "for"
such election shall tender a letter of resignation to the Board for
consideration by the Corporate Governance and Nominating
Committee. The Corporate Governance and Nominating Committee shall
recommend to the Board the action to be taken with respect to such offer of
resignation. The Board shall act promptly with respect to each such
letter of resignation and shall notify the director concerned of its
decision. Any director who tenders his or her resignation pursuant to
this provision shall not participate in the Corporate Governance and Nominating
Committee or Board action regarding whether to accept his or her resignation
offer.
Director/Executive
Officer Stock Ownership Guidelines
The
Company has Board approved Stock Ownership Guidelines applicable to all
directors and executive officers of the Company and the Bank. The
Guidelines generally provide that: (i) any non-management Company or Bank
director should own, within five (5) years, Company Common Stock having a market
value equal to five (5) times the director’s annual cash retainer; (ii) that the
Chief Executive Officer and President of the Company or Bank should own, within
five (5) years, Company Common Stock having a market value equal to four (4)
times his annual base salary; (iii) that any Vice Chairman (officer/non-director
position) of the Company or Bank should own, within five (5) years, Company
Common Stock having a market value equal to three (3) times his annual base
salary; and (iv) that any Executive Vice President of the Company or Bank should
own, within five (5) years, Company Common Stock having a market value equal to
two (2) times his/her annual base salary. For those directors and
executive officers who were serving as of the date of the initial adoption of
the Guidelines on July 27, 2005, they have until August 1, 2010 to accumulate
the amount of Common Stock set forth in the Guidelines as applicable to their
position. For any director or executive officer appointed after
August 1, 2005, they have five (5) years from the date of their appointment to
accumulate the amount of Common Stock set forth in the Guidelines as applicable
to their position. These Guidelines are currently being reevaluated
in light of the Company’s precipitous decline in the price of its Common
Stock.
Equity
Grant Guidelines
The
Company has Board approved Equity Grant Guidelines which apply to all grants of
Company equity whether in the form of Company stock, stock options, or other
forms of equity grants, made by the Company to directors, officers or employees
of the Company or any of its subsidiaries. The Guidelines set forth
the process by which grants will be made, including how grants will be approved,
when grants will be made, and how grants will be documented.
Director
Independence and Relationships
The Board
has determined, in accordance with our Standards Regarding Director
Independence, that all of the members of the Board who are not also officers or
employees of the Company or any of its affiliates, are “independent” within the
meaning of the rules of the NYSE. All of the directors, other than
Ronald K. Migita (Chairman, President and Chief Executive Officer of the Company
and Bank), are non-employee directors. All committees of the Board
are comprised solely of independent directors. A copy of our
Standards Regarding Director Independence is attached as Appendix A to this
Proxy Statement.
With
respect to those directors who were determined independent by the Board, the
following transactions, relationships and arrangements were considered by the
Board in its determination of a director’s independence and none were found to
be material as they relate to director independence:
During
2009, the following directors either directly and/or indirectly through
companies in which they have a business interest or affiliation, received and/or
had outstanding loans with the Bank: Richard J. Blangiardi, B.
Jeannie Hedberg, Dennis I. Hirota, Paul J. Kosasa, Colbert M. Matsumoto, Crystal
K. Rose, Mike K. Sayama, Maurice H. Yamasato and Dwight L.
Yoshimura.
During
2009, the following directors either directly and/or indirectly through
companies in which they have a business interest or affiliation, opened and/or
maintained deposit, trust, investment and/or other banking accounts with the
Bank: Richard J. Blangiardi, Christine H. H. Camp, Earl E. Fry, B.
Jeannie Hedberg, Dennis I. Hirota, Paul J. Kosasa, Colbert M. Matsumoto, Crystal K. Rose, Mike K.
Sayama, Maurice H. Yamasato, and Dwight L. Yoshimura.
During
2009, the following directors served on boards of non-profit, community,
charitable and/or cultural organizations, which received monetary donations from
the Bank: Richard J. Blangiardi, Dennis I. Hirota, Paul J. Kosasa,
Colbert M. Matsumoto, Crystal K. Rose, Mike K. Sayama, Maurice H. Yamasato, and
Dwight L. Yoshimura. For 2009, the Company did not pay to any
charitable or non-profit organization in which one of the Company’s Board
members serves on that organization’s board, any amount greater than $1,000,000
or 2% of the recipient organization’s gross annual revenues, and the amount
received by such organizations ranged from a low of $156 to a high of $71,280
received by the University of Hawaii Foundation, with, however, the average
donation being substantially less.
During
2009, the following directors served on boards of companies that either directly
or indirectly had business relationships with the Bank in the ordinary course of
the Bank’s business, in which the directors had no involvement and which are on
no more favorable terms than for other similarly situated
matters: Colbert M. Matsumoto and Crystal K. Rose.
During
year 2009, the following directors served as officers of companies that either
directly or indirectly had business relationships with the Bank in the ordinary
course of the Bank’s business, in which the directors had no involvement and
which are on no more favorable terms than for other similarly situated matters:
Richard J. Blangiardi, Paul J. Kosasa, Colbert M. Matsumoto, Mike K. Sayama, and
Dwight L. Yoshimura.
Company director Richard J. Blangiardi is General
Manager of KGMB and KHNL television stations. In 2009, the Bank paid
KGMB $145,980, and KHNL $1,650, totaling $147,630, for the purchase of
television advertising. Mr. Blangiardi had no direct
involvement in these transactions and they were made on no more favorable terms
than for other similarly situated
transactions.
Company
director Colbert M. Matsumoto is the President and a director of Tradewind
Capital Group, Inc. (“TCG”) which is the sole member of Island-Waiphau, LLC
(“Island-Waipahu”). Island-Waipahu and M&M Investments, Inc.
(“M&M”) each hold 50% membership interests in Plantation Town Apartments LLC
(“PTA”). PTA has a construction loan to develop a residential
condominium project in Waipahu, Hawaii. Regarding said construction
loan, the largest aggregate amount of principal outstanding during 2009 was
$16,765,398 (as of February 5, 2009); the amount outstanding as of March 1,
2010, was $15,660,401; the amount of principal paid during 2009 was $2,865,048;
the amount of interest paid during 2009 was $807,602; and, the rate of interest
was 5.50% (effective December 5, 2009). Demand for this project has
been adversely impacted by restrictive affordable-housing criteria, weakened
economic conditions, and tightened credit markets. Mr. Matsumoto is
President and a director and holds <5% ownership interest in, Island
Holdings, Inc., which owns TCG. TCG is a minority passive investor
(35%) in Century Computers, Inc. (“CCI”) and Mr. Matsumoto serves as a director
of CCI. Prior to TCG’s investment in CCI and Mr. Matsumoto’s election
as a Director of CCI, CCI was a vendor to the Bank and provided various
information technology and business process services, and in 2009 was paid
$230,000 for such services. Mr. Matsumoto had no direct involvement
in these transactions and they were made on no more favorable terms than for
other similarly situated transactions.
Company
director Colbert M. Matsumoto is Chief Executive Officer and Chairman of the
Board of Island Insurance Company, Ltd. (“Island”) which wholly owns Atlas
Insurance Agency, Inc. (“Atlas”). Mr. Matsumoto is a director and
Chairman of the Board of Atlas. In 2009, the Company and the Bank
collectively paid $138,474 to Island in premiums for insurance policies ($6,986
of which was paid to Atlas in commissions), and the Company and the Bank also
collectively paid $170,930 to Atlas in commissions for insurance policies that
Atlas placed on behalf of the Company and the Bank with various insurance
companies. In addition, Atlas paid the Bank $45,127 in rent for space
in the Bank’s Hilo office building. Mr. Matsumoto had no direct
involvement in these transactions and they were made on no more favorable terms
than for other similarly situated transactions.
Company
director Mike K. Sayama is a Vice President of Hawaii Medical Service
Association (“HMSA”). In 2009, the Company and the Bank collectively
paid $1,332,594 to HMSA in premiums for health insurance for the Company’s and
the Bank’s employees, which amount, however, comprises significantly less than
2% of HMSA’s 2009 gross revenues. In 2009, the Bank paid $212,289 to
HMSA in rent for the Bank’s Keeaumoku Branch which is located in one of HMSA’s
buildings, which amount, however, when combined with all other amounts paid to
HMSA in 2009, comprises significantly less than 2% of HMSA’s 2009 gross
revenues. In 2009, Integrated Services, Inc., an HMSA subsidiary,
paid $695,236 to the Bank for the rental of space in one of the Bank’s
buildings. Mr. Sayama had no direct involvement in these transactions
and they were made on no more favorable terms than for other similarly situated
transactions.
Company
director Dwight L. Yoshimura, is a Senior Vice President and Senior General
Manager with GGP Ala Moana L.L.C., which is a subsidiary of GGP Ala Moana
Holdings L.L.C., which is a subsidiary of GGPLP L.L.C., which is a subsidiary of
GGP Limited Partnership, which is a subsidiary of General Growth Properties, Inc
(“GGP”). The Bank was a $10 million participant in a $650 million
term loan to GGP, GGP Limited Partnership and GGPLP L.L.C. made in February 2006
and maturing on February 2010, with a one (1) year extension
option. The loan was classified due to GGP’s financial
condition. During 2009, interest only was due and payable on this
credit facility, which interest payments to the Bank totaled $39,978 (January
2009 – February 2009, after two payments, further payments stopped due to GGP
filing bankruptcy) based on an interest rate which adjusts according to GGP’s
leverage ratio and the LIBOR rate. In July 2009, the Bank sold its
loan participation interest at a 48% discount and took a charge-off of
approximately $4.85 million. The Bank’s $10 million participation
comprises significantly less than 2% of GGP’s 2009 gross
revenues. The Bank has four (4) equipment (tax) leases to GGP Ala
Moana L.L.C. with the largest aggregate amount outstanding during 2009 being
$239,346 (the equipment leases being in amounts of $37,590, $181,571, $30,024,
and $36,887) and with the aggregate amount outstanding as of December 31, 2009
being approximately $173,996 (original amounts of $37,590 – lease of 2-way
radios, $181,571 – lease of solar photovoltaic system, $30,024 – lease of ATV
motorcycles and Motorola portable radios, and $36,887 – lease of electric
mobility vehicle), and with outstanding amounts as of March 1, 2010, being
$9,724, $128,056, $10,318, and $17,906). Two of the equipment leases
had one payment each suspended when GGP filed bankruptcy, but those two past due
payments ($494 and $1,076) will be paid on March 31, 2010. These
credits are being reported due to the filing of bankruptcy by GGP and its impact
on these credits. Mr. Yoshimura had no direct involvement in these
transactions and they were made on no more favorable terms than for other
similarly situated transactions.
Loans
to Related Persons
The Bank,
which is a wholly owned subsidiary of the Company, has made (in addition to the
loans specified in the “Director Independence and Relationships” section
immediately preceding this section) loans to directors and executive officers,
their immediate family members, and companies in which they have an interest, in
the ordinary course of its business as a bank. These loans were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable loans with persons not related to
the Bank and do not involve more than the normal risk of collectibility or
present other unfavorable features, excepting, however, those loans and credits
specifically described in the preceding “Director Independence and
Relationships” section.
Policy
Regarding Transactions with Related Persons
The
Company has a Board approved written policy (“Policy Regarding Transactions with
Related Persons”) which sets forth the process and procedures for the review,
approval, ratification and disclosure of any transaction with a related person
(“transaction” and “related person” being as defined by Item 404 of SEC
Regulation S-K). Transactions with related persons that affect a
director’s independence are reviewed by the Company’s Corporate Governance &
Nominating Committee. Transactions with related persons that involve
loans are reviewed by the Bank’s Board Senior Loan Committee. All
other transactions with related persons that are material to the financial
statements are reviewed by the Company’s Audit Committee.
Board
Leadership Structure and Risk Oversight
The Company’s Board has no policy with
respect to the separation of the offices of Chairman, President and Chief
Executive Officer. It is the Board’s view that rather than having a
rigid policy, the Board, with the advice and assistance of its Corporate
Governance & Nominating Committee, and upon consideration of all relevant
factors and circumstances, will determine, as and when appropriate, whether the
offices of Chairman, President and Chief Executive Officer should be
separate. From September 15, 2004 through July 31, 2008, the Chairman
of the Board and the executive positions of President and Chief Executive
Officer were not held by the same individual. However, on August 1,
2008, upon the retirement of the then President and Chief Executive Officer
Clint Arnoldus, Mr. Ronald K. Migita, who was then Chairman of the Board, was
appointed as President and Chief Executive Officer of both the Company and the
Bank due to his extensive banking experience in the Hawaii market, among other
reasons. The Board believes that it was appropriate for Mr.
Migita to serve as combined Chairman of the Board, President and Chief
Executive Officer given the Company’s challenges and that having one
individual serve in combined roles facilitated enhanced communications and
interactions between the Board and management, and fostered more efficient and
effective discussion and decision-making. The Company has an
independent Lead Director (Crystal K. Rose) and all members of the Board are
outside (non-management) directors with the sole exception of Mr.
Migita. As the Board’s Lead Director during 2009, Ms. Rose, who also
Chairs the Board’s Corporate Governance & Nominating Committee, presided
over all meetings of the non-management directors in executive sessions, acted
as liaison and facilitated communications between the Board and the
President/Chief Executive Officer, and ensured independent Board governance and
oversight of management. In addition, all members of the Board’s
Audit Committee, Compensation Committee, and Corporate Governance &
Nominating Committee are comprised of independent, non-management
directors.
On March 16, 2010, the Company announced that Mr. Migita will be
retiring as Chairman of the Board, President and Chief Executive Officer of the
Company and the Bank and that the Company and the Bank Boards have appointed Mr.
John C. Dean as acting Executive Chairman of the Board for both the Company
and the Bank, subject to regulatory approval. Mr Dean,
age 62, has served in various capacities in the banking industry
during the last thirty five years, including the Chief Executive
Officer and then Chairman of the Board of Silicon Valley Bancshares and Silicon
Valley Bank, the President and Chief Executive Officer of Pacific First Bank,
the Chairman and Chief Executive Officer of First Interstate Bancorp and First
Intersate Bank of Washington, the Chairman and Chief Executive
Officer of First Interstate Bank of Oklahoma and as an executive of
First Interstate System, Inc., National Funding Corporation and Bank of America.
Since 2003, he has been the managing general partner of Startup Capital Ventures
and has served as managing director of Tuputele Ventures Fund, a small private
equity firm investing in early-stage technology companies and venture capital
funds.
The
Company is a one-bank holding company, with the Bank being the Company’s only
bank subsidiary. All of the directors on the Company’s Board also
serve on the Bank’s Board of Directors. In addition, all of the
Company’s directors who serve on the Company’s Audit Committee, Compensation
Committee, Corporate Governance & Nominating Committee, and Executive
Committee, also serve on those same board level committees at the
Bank. The Company’s and Bank’s Director of Internal Audit reports
directly to the Company’s and Bank’s respective Audit Committees. In
addition, the Bank also has an additional board level Trust Committee and Senior
Loan Committee which provide board level oversight over the Bank’s trust
activities and lending activities respectively. The Company’s and
Bank’s Audit Committees perform the required and customary risk oversight
functions of an Audit Committee, to include, overseeing accounting, auditing,
internal controls, legal and regulatory matters, financial reporting and
financial risk. The Company’s and the Bank’s Compensation Committees
perform the required and customary risk oversight functions of a Compensation
Committee, to include, overseeing the Company’s and Bank’s compliance with any
laws, rules and regulations applicable to the Company’s and Bank’s compensation
practices, plans and programs, and to ensure that compensation is not structured
in a way which will encourage unnecessary or excessive risk
taking. The Company’s and Bank’s Chief Financial Officer, General
Counsel, and Compliance Manager report regularly to the Company’s and Bank’s
Audit Committees. The Company’s and Bank’s Chief Credit Officer
reports regularly to the Bank’s Senior Loan Committee. All Company
and Bank executive officers report regularly to the Company’s and Bank’s Board
of Directors.
Code
of Conduct & Ethics
The
Company is committed to promoting and fostering ethical conduct and sound
corporate governance principles. The Company has a Code of Conduct
& Ethics applicable to all employees, officers and directors of the
Company. In addition, the Company also has a supplemental Code of
Conduct & Ethics For Senior Financial Officers, which is applicable to the
Chief Executive Officer, President, Chief Financial Officer, Controller, any
other principal financial officer or principal accounting officer and any other
person fulfilling and/or performing any similar role, function or
capacity. Both of the aforementioned Codes of Conduct & Ethics
are available on the Company’s website
(www.centralpacificbank.com).
Director
Nomination Process
Director Qualifications. The
Corporate Governance and Nominating Committee is responsible for reviewing the
qualifications and independence of director nominees in accordance with the
criteria set forth in the Company’s Corporate Governance
Guidelines. The general criteria considered include qualification as
independent, diversity, age, skills, experience and other relevant
considerations in the context of the needs of the Board. Diversity
is considered and desired and is viewed in a broad context, to include aspiring
to having individuals serving on the Board representing different professions,
industries, backgrounds, experiences, cultures, ethnicities, races, and gender,
representative of Hawaii’s multi-cultural, multi-ethnic, and multi-racial
population and community.
Identifying and Evaluating
Nominees. The Board seeks to identify candidates for director positions
that are best qualified and suited to meet the needs of the Company and to
present these candidates for shareholder approval, as and when director
positions become open and available. The Corporate Governance and
Nominating Committee will first identify, review, evaluate and recommend to the
Board, nominees for director positions. The Board will then vote
whether or not to recommend such nominees to the Company’s shareholders for
election.
In
identifying potential director nominees, the Corporate Governance and Nominating
Committee will search within the State of Hawaii and may search outside the
State of Hawaii for any potential director candidates, and in this regard, may
utilize the services of a professional search firm. While the same
general criteria set forth above shall be applied in evaluating a candidate’s
qualifications, it is difficult to enumerate all of the attributes, skills and
qualities that the Corporate Governance and Nominating Committee and/or Board
may, at any given point in time, determine, consider and value in evaluating,
selecting and recommending director nominees. Accordingly, the
Corporate Governance and Nominating Committee and the Board exercise their
discretion and consider any circumstances, experiences, attributes, skills,
qualities, and factors applicable to any director nominee with the intent and
purpose of having the best qualified and best suited directors serving on the
Board at all times, as well as ensuring that the Board as a whole is diverse and
well rounded. The Board may enlist the services of a third party to
conduct a background check or other investigation in order to determine whether
a candidate meets any criteria.
Shareholder Nominees. In
accordance with the policies set forth in the Company’s Corporate Governance
Guidelines and the Company’s Bylaws (as amended), the Corporate Governance and
Nominating Committee will consider properly submitted director nominees for
election at the year 2011 Annual Meeting of Shareholders recommended by
shareholders if such recommendations are received in writing not less than
ninety (90) calendar days nor more than one hundred twenty (120) calendar days
prior to the first anniversary date of the annual meeting for the preceding
year, and comply with all other applicable requirements set forth in said
Corporate Governance Guidelines and Bylaws (as amended). Shareholder
recommendations should be addressed to the Company’s Corporate Secretary, P.O.
Box 3590, Honolulu, Hawaii 96811.
Communications
with the Board
Shareholders
of the Company and others may send written communications directly to the Board,
addressed to: Board of Directors of Central Pacific Financial Corp., 220 South
King Street, 22nd Floor, Honolulu, Hawaii 96813. Any such
communication may be directed to the attention of the Chairman of the Board or
the Chair of any Board Committee (such as, for example, the Chair of the Audit
Committee or the Chair of the Corporate Governance and Nominating Committee) or
to the non-management or independent directors. Shareholders and
others sending such communications should include the following in their written
communication: (a) such shareholder(s) and others should identify
himself/herself/itself/themselves, and if a shareholder, provide reasonably
satisfactory proof of their ownership of the Company’s stock; (b) such
shareholder(s) and others should state in reasonable detail and communicate with
reasonable clarity and specificity their issue or concern; and (c) such
shareholder(s) and others should include their contact information (at a
minimum, phone number and address). Shareholders and others who wish
to communicate anonymously with the Board or any group of the Board should refer
to the Company’s Complaint Policy. However, nothing that is stated in
this paragraph shall override any requirements imposed on any shareholder
communications under the Company’s Articles of Incorporation (as amended) or
Bylaws (as amended) or other governing documents or by any law, rule or
regulation.
REPORT
OF THE AUDIT COMMITTEE
The
following Report of the Audit Committee does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filings under the United States Securities Act of 1933, as amended, or
under the United States Securities Exchange Act of 1934, as amended, except to
the extent we specifically incorporate this Report by reference.
The Audit
Committee is comprised of four (4) non-management directors and operates
pursuant to a written charter that was readopted by our Board on January 27,
2010. The charter is also available on our website at http://www.centralpacificbank.com. During
2009, the Audit Committee held ten (10) meetings, including four (4) private
sessions with executive management, six (6) private sessions with the
independent auditors, and five (5) private sessions with the Director of
Internal Audit. The Audit Committee’s primary purposes are
to: (a) assist the Board in its oversight of (i) the integrity of the
Company’s financial statements, (ii) the Company’s compliance with legal and
regulatory requirements, (iii) the Company’s independent auditors’
qualifications and independence, and (iv) the performance of the Company’s
internal audit function and independent auditors; (b) decide whether to appoint,
retain or terminate the Company’s independent auditors and to pre-approve all
audit, audit-related and other services, if any, to be provided by the
independent auditors; and (c) prepare this Report. The Board has
determined, upon the recommendation of the Corporate Governance and Nominating
Committee, that each member of the Audit Committee is “independent” within the
meaning of the rules of the NYSE and the SEC. The Board has also
determined that each member is financially literate, that three (3) members have
accounting or related financial management expertise, as such qualifications are
defined under the rules of the NYSE, being Earl E. Fry, B. Jeannie Hedberg, and
Crystal K. Rose, and that two (2) members are “audit committee financial
experts” within the meaning of the rules of the SEC, being Earl E. Fry, Chair of
the Audit Committee, and B. Jeannie Hedberg, Vice Chair of the Audit
Committee. The Audit Committee is established in accordance with
Section 3(a)(58)(A) of the United States Securities Exchange Act of 1934,
as amended.
Management
is responsible for the preparation, presentation and integrity of the Company’s
financial statements, accounting and financial reporting principles and the
establishment and effectiveness of internal controls and procedures designed to
assure compliance with accounting standards and applicable laws and
regulations. The independent auditors are responsible for performing
an independent audit of the financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), expressing an opinion as to the conformity of such financial
statements with generally accepted accounting principles and auditing the
effectiveness of internal control over financial reporting. The
independent auditors have free access to the Audit Committee to discuss any
matters they deem appropriate.
In
performing its oversight role, the Audit Committee has considered and discussed
the audited financial statements with management and the independent
auditors. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 114, The Auditor's Communication With Those Charged With Governance adopted
by the PCAOB. The Committee has received the written disclosures and
the letter from the independent accountants required by Independence Standards
Board Standard No. 1, Independent Discussions with Audit Committees, as adopted
by the PCAOB, and has discussed with the independent accountant the independent
accountant’s independence. All non-audit services performed by the
independent auditors must be specifically pre-approved by the Audit Committee or
a member thereof.
During
2009, the Audit Committee performed all its duties and responsibilities under
the Audit Committee Charter. In addition, based on the reports and
discussions described in this Report, the Audit Committee recommended to the
Board that the audited financial statements of the Company for 2009 be included
in the Company’s Annual Report on Form 10-K for such fiscal year.
Respectfully
submitted by the members of the Audit Committee of the Board:
|
Earl
E. Fry, Chair
|
|
|
B.
Jeannie Hedberg, Vice Chair
|
|
|
Dennis
I. Hirota
|
|
|
Crystal
K. Rose
|
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR
COMPENSATION
The
following table shows, for the year ending December 31, 2009, information on
compensation earned by or awarded to each non-employee director who served on
the Company’s Board during 2009.
|
Fees
Earned or Paid
in Cash
|
Stock Awards(1)
|
Options
Awards
|
Non-Equity Incentive Plan Compensation |
Change
in Pension Values & Nonqualified Deferred Compensation
Earnings
|
All
Other
Compensation
|
Total
|
|
|
Name
|
($)
|
($) | ($) |
($)
|
($)
|
($)
|
($)
|
|
(a)
|
(b)
|
(c )
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
Richard
J. Blangiardi
|
$36,867
|
na |
$8,000
|
na |
$0
|
$0
|
$44,867
|
|
Christine
H. H. Camp
|
$53,667
|
na |
$8,000
|
na |
$0
|
$0
|
$61,667
|
|
Earl
E. Fry
|
$63,667 | na |
$8,000
|
na |
$0
|
$0
|
$71,667
|
|
B.
Jeannie Hedberg
|
$41,867
|
na |
$8,000
|
na |
$0
|
$0
|
$49,867
|
|
Dennis
I. Hirota
|
$45,267
|
na |
$8,000
|
na |
$0
|
$0
|
$53,267
|
|
Paul
J. Kosasa
|
$37,200
|
na |
$8,000
|
na |
$0
|
$0
|
$45,200
|
|
Colbert
M. Matsumoto
|
$56,133
|
na |
$8,000
|
na |
$0
|
$0
|
$64,133
|
|
Crystal
K. Rose
|
$61,667
|
na |
$8,000
|
na |
$0
|
$0
|
$69,667
|
|
Mike
K. Sayama
|
$46,067
|
na |
$8,000
|
na |
$0
|
$0
|
$54,067
|
|
Maurice
H. Yamasato
|
$41,267
|
na |
$8,000
|
na |
$0
|
$0
|
$49,267
|
|
Dwight
L. Yoshimura
|
$49,667
|
na |
$8,000
|
na |
$0
|
$0
|
$57,667
|
|
Note:
|
“na”
means “not applicable” in this table and all other tables throughout this
Proxy Statement.
|
|
|
|
|
Note:
|
The
Chairman of the Board, President and CEO, Ronald K. Migita’s annual
compensation is reported with the other Named Executive Officers (“NEOs”)
in the Summary Compensation Table. Paul J. Kosasa
was appointed Chair of the Compensation Committee effective October 28,
2009, replacing Colbert M.
Matsumoto.
|
|
(1)
|
Non-employee
directors of the Company and Bank have been eligible to participate in the
company’s 1997 Stock Option Plan and continue to be eligible to
participate in the Company’s 2004 Stock Compensation Plan. The
table below shows the aggregate number of unexercised option awards and
unvested stock awards for each director as of December 31,
2009.
|
|
Unexercised
Stock
Options
|
Unvested
Restricted
Stock
|
Outstanding
Equity Awards
at
Fiscal Year End
|
|
|
(a)
|
(b)
|
(c
)
|
(d)
|
|
Richard
J. Blangiardi
|
4,301
|
335
|
335
|
|
Christine
H. H. Camp
|
4,301
|
335
|
335
|
|
Earl
E. Fry
|
4,301
|
0
|
0
|
|
B.
Jeannie Hedberg
|
4,301
|
335
|
335
|
|
Dennis
I. Hirota
|
4,301
|
335
|
335
|
|
Paul
J. Kosasa
|
4,301
|
335
|
335
|
|
Colbert
M. Matsumoto
|
9,413
|
335
|
335
|
|
Crystal
K. Rose
|
4,301
|
335
|
335
|
|
Mike
K. Sayama
|
13,011
|
335
|
335
|
|
Maurice
H. Yamasato
|
4,301
|
335
|
335
|
|
Dwight
L. Yoshimura
|
14,294
|
335
|
335
|
|
(b)
|
The
4,301 in vested unexercised stock options represent options that were
granted on March 11, 2009 to each non-employee director as their Company
annual retainer in lieu of cash. In addition, Colbert M.
Matsumoto has vested, unexercised stock options of 1,725 and 3,387, Mike
K. Sayama has vested, unexercised stock options of 1,598, 3,725 and 3,387
and Dwight L. Yoshimura has vested, unexercised stock options of 4,508,
4,098 and 1,387, all granted under the 1997 Stock Option Plan on September
15, 2004 related to the merger with CB Bancshares,
Inc.
|
The
following table shows the grant date, the grant price, the Black Scholes grant
date fair value, and the Black Scholes input assumptions employed to value the
stock options granted on March 11, 2009:
|
Grant
|
Grant
Price
|
Black-Scholes
Grant
Date
Fair
Value
|
Volatility
|
Risk-Free
Rate
|
Expected
Life
|
Dividend
Yield
|
||||||||||||||
|
3/11/2009
|
$ | 3.95 | $ | 1.86 | 63.60 | % | 2.13 | % | 3.5 | 0.30 | % | |||||||||
|
(c)
|
The
335 in unvested restricted stock represent a grant of Common Stock on
March 15, 2005 to non-employee directors under the Company’s 2004 Stock
Compensation Plan, which vests on March 15, 2010. Earl E. Fry
was not on the Board at the time of
grant.
|
Retainer
& Meeting Fees
The
Company and the Bank respectively paid each of their non-employee directors $800
per Board meeting attended and $600 per Board committee meeting attended in
2009. In addition, an annual retainer of $8,000 was provided to each
non-employee Company director and $12,000 to each non-employee Bank director during
2009. As noted above, for 2009 the Company annual retainer of $8,000
was paid in the form of stock options granted on March 11, 2009 to better align
the longer-term interests of the Board with those of our
shareholders.
The Chair
of the Audit Committee (Earl E. Fry) receives an additional $12,000 annually,
the Chair of the Compensation Committee (Colbert M. Matsumoto, former Chair;
Paul J. Kosasa, former Chair; Richard J. Blangiardi, current Chair as of March
11, 2010) an additional $8,000 annually, and the Chair of the Corporate
Governance and Nominating Committee (Crystal K. Rose) an additional $8,000
annually.
Effective
January 1, 2010, the Company Board and Bank Board approved a 37.5% reduction in
annual Retainer fees for non-employee directors to $5,000 and $7,500
respectively. The Company Board annual retainer fee of $5,000
would be received in equity to be granted on March 10, 2010. The
Chairman of the Board received a 37.5% reduction in annual CPF and CPB Chair
Retainer Fees from $160,000 to $100,000. The Company Board and
Bank Board also approved effective January 1, 2010, a 50% reduction in Committee
Chair Fees as follows:
|
·
|
CPF/CPB
combined Audit Committee Chair fee of
$6,000
|
|
·
|
CPF/CPB
combined Compensation Committee Chair fee of
$4,000
|
|
·
|
CPF/CPB
combined Corporate Governance & Nominating Committee Chair fee of
$4,000
|
Directors
Stock Opportunity
Non-employee
directors of the Company and the Bank are eligible to participate in the
Company’s 2004 Stock Compensation Plan. The Company determines annually if
any grants will be made under the Plan. For 2009 and 2010, the
non-employee directors of both the Company and the Bank determined that any
grants of equity, other than the Company retainer fee, which was paid in form of
stock options in 2009 and full value shares in 2010, were not
appropriate.
Directors
Deferred Compensation Plan
The
Company maintains a Directors Deferred Compensation Plan under which each
non-employee director of the Company and the Bank may elect to defer all or a
portion of his or her annual retainer and/or chair and meeting
fees. Under the Directors Deferred Compensation Plan, a participating
director may elect from various payment alternatives, but full payout must occur
by no later than the tenth (10th) anniversary of separation from
service. Under the Directors Deferred Compensation Plan, deferred
amounts are valued based on corresponding investments in certain investment
funds offered by the Bank’s Trust Division which are selected by the
director. No Plan earnings are considered to be “above-market” or
“preferential” and as such no amounts are reported in column (f) of the
Directors Compensation table on the previous page. The Directors
Deferred Compensation Plan is a nonqualified deferred compensation plan under
which distributions are made from the general assets of the Company under the
direction and oversight of the Compensation Committee.
COMPENSATION
COMMITTEE REPORT
The
following Compensation Committee Report does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filings under the United States Securities Act of 1993, as amended, or
under the United States Securities and Exchange Act of 1934, as amended, except
to the extent we specifically incorporate this Report by reference.
In March 2009, the Compensation
Committee met with the Committee’s designated senior risk officer (SRO), our
Director of Internal Audit, to discuss the review of executive incentive
compensation arrangements for our senior executive officers (SEOs, aka NEOs) to
ensure these arrangements do not encourage the SEOs to take unnecessary and
excessive risks that threaten the financial value of the company. In
completing the review, the SRO utilized the input and perspective of other
non-SEO officers with risk oversight, including our Controller, Treasurer,
Director of Credit Review, and Division Manager, Commercial
Banking. The review covered the following incentive
compensation arrangements:
|
·
|
The
compensation arrangement for Chairman, President, and CEO Ronald K. Migita
for period August 1, 2008 through June 30,
2009.
|
|
·
|
Central
Pacific Financial Corp’s 2004 Annual Executive Incentive Plan, accompanied
by 2009 target performance
objectives
|
|
·
|
Central
Pacific Financial Corp’s 2004 Stock Compensation
Plan
|
|
·
|
Central
Pacific Financial Corp’s Long Term Executive Incentive Plan accompanied by
2008 – 2011 target performance objectives and 2009 target performance
objectives.
|
The Compensation Committee’s review and
discussions of the risks that face the Company concluded that the Company’s and
Bank’s executive compensation philosophy, complemented by the appropriate
balance and mix of compensation incentives, payment plans (cash and equity),
short and long term initiatives and stock ownership requirements are adequate
and the senior executive incentive plans are reasonably unlikely to encourage
unnecessary and excessive risk that may threaten the overall value of the
financial institution.
Summary
of the specific findings from the review included:
|
1)
|
Observation
that some individual performance measures on a stand alone basis in Mr.
Migita’s compensation agreement may be considered to contain elements of
unnecessary and/or excessive risk that could have a negative impact on the
value of the Bank. These elements were related to (1)
achieving a reduction in the California loan portfolio without
consideration of the credit quality or impact on earnings, (2) achieving a
specific loan-to-deposit ratio without consideration of net interest
margin, and (3) a significant weighting of Mr. Migita’s plan towards a
short term incentive versus a more balanced fixed salary and short and
long term incentives. However in evaluating Mr.
Migita’s entire compensation package, the senior risk officer noted there
were mitigating factors which offset the individual risk elements,
including (1) Mr. Migita’s ownership of over 200,000 shares of CPF stock
and his long standing vested interest in CPF, (2) the total performance
objectives appeared appropriately weighted and collectively balanced the
overall risk, (3) incentive payments were split between cash and equity,
and (4) reasonable maximum caps were established for
awards.
|
|
2)
|
Observation
that the following current incentive plan features and changes to the
Company’s and Bank’s compensation philosophy helped reduce or eliminate
unnecessary and excessive risks:
|
|
·
|
Update
of compensation peer group from only high performing banks to a mix of
peer banks aligned with our size, business model, and geographic
location,
|
|
·
|
No
annual cash incentive plans for the remaining four SEOs for
2009,
|
|
·
|
2009
Long Term Incentive Plan (“LTIP”) for the non-CEO SEOs contained holdback
provisions,
|
|
·
|
LTIP
pay opportunities for non-CEO SEOs were
lowered,
|
|
·
|
LTIP
had a better balance of objectives,
|
|
·
|
SEOs
have stock ownership requirements,
and
|
|
·
|
CPF
2004 Stock Compensation Plan is shareholder
approved.
|
In October 2009, the Compensation
Committee met with the SRO designee to discuss the review of non-SEO incentive
compensation plans to ensure these arrangements do not encourage employees to
take unnecessary and excessive risks that could reasonably likely have a
material adverse affect on the safety and soundness of the Company and/or to
manipulate earnings which could reasonably likely have a material adverse affect
on financial value of the Company. The review identified and included
37 different employee compensation arrangements that provide for variable cash
compensation bonus, commission or incentive payments. Each
arrangement is available to a different group of employees or individual, and
the amounts that may be earned vary depending on the job and targeted
objectives. Incentive and commission plans for Central Pacific
Homeloans (CPHL), the Bank’s mortgage subsidiary represented over half of the
arrangements. The substantial majority of the incentive
payments made by the Bank is in the form of sales commissions paid to mortgage
loan officers in lieu of a base salary. The other compensation
arrangements included nominal product referral and sales commissions and cash
incentive programs focused on deposit growth for 2009 for the Community Banking,
Commercial Banking, Commercial Real Estate, and Wealth groups For groups that
had responsibility for asset quality, deposit incentive payments were negatively
affected by the level of delinquent and/or non-performing assets.
The Compensation Committee’s review and
discussions of the risks that faced the Company concluded that these
arrangements do not encourage unnecessary and excessive risk that may reasonably
likely have a material adverse affect on the Company and/or to manipulate
earnings which could reasonably likely have a material adverse affect on the
financial value of the Company. The SRO also made the
following recommendations for further mitigating any potential adverse risk to
the Company:
|
·
|
For
arrangements involving CPHL underwriters and management personnel who have
loan approval authority, the criteria for payment should not be for loans
approved but rather should consider the total number of loans underwritten
and the quality of the
underwriting.
|
|
·
|
For
arrangements involving CPHL Secondary Marketing personnel, the criteria
for payment should require interest rate locks be properly hedged with
appropriate forward sales commitments, thereby reducing the Company’s
interest rate risk.
|
|
·
|
All
future plans should include clawback provisions for the recovery of any
incentive payment based on materially inaccurate statements of earnings,
revenues, gains, or criteria.
|
The
Compensation Committee discussed and concurred with these recommendations and
has directed management to take steps to include these recommendations into the
appropriate 2010 incentive plans.
The
Compensation Committee certifies that:
(1) It
has reviewed with the senior risk officers the Senior Executive Officers’
(“SEOs”, also known as NEOs) compensation plans and has made all reasonable
efforts to ensure that these plans do not encourage SEOs to take unnecessary and
excessive risks that threaten the value of the Company;
(2) It
has reviewed with the senior risk officers the employee compensation plans and
has made all reasonable efforts to limit any unnecessary risks these plans pose
to the Company; and
(3) It
has reviewed the employee compensation plans to eliminate any features of these
plans that would encourage reasonably likely manipulation of reported earnings
of the Company to enhance the compensation of any employee.
The
Compensation Committee has reviewed and discussed with executive management the
Compensation Discussion and Analysis that immediately follows this report,
required by Item 402(b) of SEC Regulation S-K. Based on the review
and discussion, the Compensation Committee recommended to the Board that the
2009 Compensation Discussion and Analysis be included in the Proxy Statement and
incorporated as referenced in our Annual Report on Form 10-K for the year ending
December 31, 2009. Respectfully submitted by the members of the Board
Compensation Committee:
|
Richard
J. Blangiardi, Chair from March 11, 2010 to present
Committee
Member from May 19, 2004 to March 10, 2010
|
|
Paul J. Kosasa,
Chair from October 28, 2009 to present
|
|
Committee Member from
2005 to October 27, 2009
|
|
Colbert M.
Matsumoto, Chair from March 1, 2005 to October 27, 2009
|
|
Christine H. H.
Camp, Vice Chair from March 11, 2010 to present
Committee
Member from May 28, 2008 to March 10, 2010
|
|
Earl E.
Fry
|
|
Maurice H.
Yamasato
|
COMPENSATION
DISCUSSION AND ANALYSIS
Set forth
below is a discussion of the Company’s compensation policies for 2009 and
anticipated 2010 changes, applicable to the Company’s Chief Executive Officer
(“CEO”), Chief Financial Officer (“CFO”) and the three (3) other most highly
paid executives. We refer to these five (5) executive positions as
our Named Executive Officers (“NEOs”).
Executive
Summary
The
Company’s and Bank’s overall financial performance experienced a steep decline
in 2009 primarily due to continued deterioration in the Bank’s commercial real
estate portfolios both in California and Hawaii. The collective
decision by management, the Compensation Committee and the Board to
not award any annual and long term incentives for eligible NEOs for 2009
reflects our under performance and emphasizes the Board’s commitment to pay for
performance, in alignment with the interests of our shareholders.
The
compensation decisions and actions in 2009 recommended by the Compensation
Committee and approved by the Board were impacted by the following key
factors:
|
1)
|
Continued
decline in the financial condition of the Company and the Bank and the
Board’s commitment to make difficult, yet sound and rational business
decisions relative to the compensation of our
executives,
|
|
2)
|
Increasing
and changing regulatory restrictions and guidance regarding executive
compensation, and
|
|
3)
|
Increased understanding of the
Company’s and Bank’s risk management practices and increased direction by
the Compensation Committee and the Board to ensure that the Company’s
compensation practices, policies, and programs do not encourage
unnecessary and excessive risks that could reasonably likely have a
material adverse affect on the safety and soundness of the Company and/or
manipulation of earnings which could reasonably likely have a material
adverse affect on the financial value of the
Company.
|
Compensation
Philosophy and Objectives
The central principle of our
compensation philosophy is that executive compensation should align with
shareholders’ interest, without encouraging excessive and unnecessary risk that
could threaten the overall value of the Company. The executive
compensation program is designed to:
|
§
|
Drive
performance relative to our strategic plan and goals, including financial
performance;
|
|
§
|
Balance
the risk of short-term operational objectives with the need to build
long-term sustainable value;
|
|
§
|
Align
executives’ long-term interests with those of shareholders by placing a
portion of total compensation at risk, contingent on the Company’s
performance, without encouraging unnecessary and excessive risks that
threaten the overall value of the
Company;
|
|
§
|
Attract
and retain highly-qualified executives needed to achieve our goals and to
maintain an executive management group that can provide success
and stability in leadership;
|
|
§
|
Deliver
compensation effectively, providing value to the executive in an
appropriately risk controlled and cost efficient
manner;
|
|
§
|
Allow
flexibility in responding to changing laws, accounting standards, and
business needs, as well as the constraints and dynamic conditions in the
markets in which we do business.
|
Our compensation program has multiple
pay components, including a fixed annual salary, variable annual cash incentive
pay, variable long-term equity incentives, executive retirement benefits for
selected NEOs and other benefits. We believe that over the long term a
combination of pay components is essential to drive executives to achieve
different goals. Our compensation structure sets base compensation at
approximately the 50th
percentile relative to peer banks and the other short and long term cash and
equity pay components allow us to develop the appropriate total compensation
opportunity for our executives. There is no set formula to determine
the mix of the various pay components and the use of the components may change
from year-to-year based on the Company’s circumstances, market conditions, and
competitive market for executive talent. The Company currently
participates in the U.S. Treasury’s Capital Purchase Program under the Troubled
Asset Relief Program (“TARP”). As a result of the Company's
participation in TARP, in accordance with the Emergency Economic Stabilization
Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009,
certain restrictions apply to our NEOs’ total compensation. We
discuss each of the pay components, and the role they play in our overall
compensation structure, in the Compensation Framework section, and describe the
TARP restrictions in the Other Issues Relevant to Executive Compensation
section.
Role
of the Compensation Committee
The
Compensation Committee is responsible for assisting the Board in overseeing the
design and administration of our executive compensation program and the
Company’s compensation policies, practices, and incentive plans for
non-executives. Such oversight includes evaluating and
monitoring the Company’s compensation programs, policies, and practices which
could have a material adverse affect on the risk profile of the overall
Company. Appropriate reviews would include at least semi-annual
discussions with the Committee appointed senior risk officer to ensure all
incentive and bonus compensation plans, structures and arrangements, including
those for NEOs’, do not have a reasonable likelihood to encourage
excessive and unnecessary risk taking and do not pose a threat to the
Company’s safety and soundness or the Company’s financial
stability. The Committee also evaluates and recommends to the Board
appropriate policies and decisions relative to executive officer compensation
and benefits, including determination of performance and payout targets under
the Company’ annual and long-term incentive plans. It also oversees
preparation of executive compensation disclosures for inclusion in our Proxy
Statement.
As a
result of the Company participating in the United States Department of the
Treasury’s Capital Purchase Program, the Compensation Committee’s role has
expanded to ensure compliance with its requirements. For further
information see the Other Issues Relevant to Executive Compensation
section.
Role
of Executives in Compensation Committee Deliberations
The
Compensation Committee frequently requests the CEO to be present at Committee
meetings to discuss executive compensation and evaluate the performance of both
the Company and individual executives. Other executives may be requested to
attend Committee meetings to provide pertinent financial, legal, or operational
information. Executives in attendance may provide their insights and
suggestions, but only independent Compensation Committee members may vote on
decisions regarding changes in executive compensation and other Company
compensation matters under their purview for recommendation to the full
Board.
The CEO
does not provide recommendations for changes in his own compensation. The
Compensation Committee discusses the CEO’s compensation with him, but the
Committee makes final deliberations and all votes regarding the recommendation
of his compensation to the full Board are made in an executive session, without
the CEO present. The Committee initiates any changes in the CEO’s compensation
based on a variety of factors including but not limited to Company performance,
regulatory restrictions/guidance, periodic market reviews, and recommendations
from independent external executive compensation consultants. For executives
other than the CEO, the Committee uses the CEO’s proposals and input from
outside advisors in making its recommendations to the full Board.
Interaction
with Consultants
From time
to time, the Compensation Committee seeks advice from outside experts in the
executive compensation field. The Committee has historically engaged
a compensation consultant to provide input on both Board and executive
compensation issues. In 2009, the Committee retained Amalfi
Consulting, LLC (“Amalfi Consulting”) to assist with several
projects.
Amalfi
Consulting's consultants report directly to the Compensation Committee and the
Committee discusses, reviews, and approves all consulting projects performed by
Amalfi Consulting. The Compensation Committee periodically reviews
the relationship with Amalfi Consulting and considers competitive proposals from
other firms. In 2009, Amalfi Consulting fees were less than $120,000
and they provided strictly executive and director compensation related services
and did not provide any other non-executive compensation services.
Compensation
Committee Activity and Key Initiatives During 2009
The
Compensation Committee evaluates existing compensation program components on an
ongoing basis to maintain the Company’s competitive position to meet the goal of
attracting, retaining, and motivating key executives without encouraging
unnecessary and excessive risk that could pose a threat to the Company’s safety
and soundness, and financial stability. In 2009, the Compensation
Committee met nine (9) times and completed the following initiatives and
actions:
|
|
·
|
Overall Compensation for
Executive Management – In coordination with Amalfi Consulting,
the Compensation Committee reviewed and updated the compensation
philosophy and structure, as well as the compensation peer group for the
Company to reflect the present financial outlook. Amalfi
Consulting completed and the Compensation Committee reviewed and discussed
a market analysis of NEO compensation in order to design the 2009
compensation programs.
|
|
|
·
|
Review of Annual Incentive
Plan (“AIP”) – The Compensation Committee reviewed the Bank-wide
performance against performance measures for 2008, determined threshold
goals were not met and as such, determined that no annual cash incentive
would be paid under this Plan for 2008. Management presented
and the Compensation Committee accepted a recommendation that eligible
non-CEO NEOs forgo any Annual Incentive Plan payments for 2009 due to the
financial condition of the Company and to further support the Company’s
expense reduction efforts.
|
|
|
·
|
Design and Implementation of
2009 Long-Term Incentive Plan (“LTIP”) – The Compensation Committee
worked with Amalfi Consulting to design and implement a new LTIP for key
executives. The new plan incorporated the following
features:
|
|
|
1)
|
A
discretionary grant of equity up to the one third of annual compensation
limits allowed under TARP, to be granted following the 2009 performance
period of January 1, 2009 through December 31, 2009, considering actual
performance results against a framework of goals and
targets.
|
|
|
2)
|
Awards
consisting of 100% restricted stock with a minimum two years of time
vesting following grant date subject to additional restrictions on
transferability tied to the redemption of TARP
securities.
|
|
|
·
|
Review of TARP on NEO Total
Compensation Opportunity – Amalfi
Consulting presented to the Compensation Committee the impact of the June
2009 TARP compensation regulations on executive pay and NEOs’ total
compensation opportunity. The presentation included
considerations for adjusting base salary in 2009 either through cash or
equity grants, which the Compensation Committee discussed and deliberated
on. While the opportunity to make base salary adjustments would
have been within acceptable market parameters, given the financial
circumstances of the Company, the Compensation Committee decided to
withhold any market salary adjustment for
2009.
|
|
|
·
|
Base Salaries – The
Compensation Committee reviewed the NEOs’ base pay and recommended to the
Board the salary adjustments described in the Salary Adjustments made in
2009 section.
|
|
|
·
|
CEO Compensation Review
– Evaluated CEO performance for the
period of August 1, 2008 to June 30, 2009 and recommended to the Board the
incentive award payment for this period. Working with
Amalfi Consulting, developed and recommended to the Board a new CEO
compensation arrangement for July 1, 2009 through December 31,
2009. Reviewed the CEO compensation and recommended to
the Board no salary increase and no variable pay component for the 2010
CEO compensation
arrangement.
|
|
|
·
|
Review of Executive
Compensation and all Incentive Plans for Unnecessary and Excessive Risk
with Senior Risk Officer – The Compensation Committee met with the
senior risk officer (SRO) in March and October to discuss findings from
the SRO review of executive compensation plans and non-executive incentive
compensation plans for unnecessary and excessive
risk. The overall finding from the discussions was that
the Company’s plans did not individually or in its entirety encourage any
unnecessary and excessive risks that may threaten the overall value of the
financial institution. The reviews and discussions did,
however, identify recommendations for further decreasing unintended risk
in future plans. Such recommendations and follow-up
actions are detailed in the Compensation Committee
Report.
|
|
|
·
|
Policy Prohibiting Excessive
or Luxury Expenditures – The
Compensation Committee reviewed, discussed, and recommended to the Board
the adoption of the Company’s Policy Prohibiting Luxurious and Excessive
Expenditures.
|
|
|
·
|
Board Retainer Fees –
The Compensation Committee reviewed and the Board accepted the
Committee’s recommendation to reduce, effective January 1, 2010, (1) all
non-employee directors’ and the Board Chairman’s annual retainers by 37.5%
and (2) all Committee Chair fees by
50%.
|
|
|
·
|
Staying Abreast of Changing
Regulations – The Compensation
Committee participated in various Amalfi Consulting briefings detailing
(1) the changing regulatory environment impacting executive compensation
and (2) the Committee’s expanded responsibilities for and oversight of
company-wide compensation risk
management.
|
Pay
Level and Benchmarking
Benchmarking
is an important part of our executive compensation review process. It
includes an external review against peer companies and internal review based on
pay equity, job scope, responsibility and experience. For 2009, prior
to the decision to remove both the annual and long term incentive opportunity,
we designed our compensation structure to position an executive’s total direct
compensation at target at about the 50th
percentile of our peer group.
Selection Criteria for the Company's
Compensation Peer Group – We worked with Amalfi Consulting to identify
the peer group and selected nineteen (19) banks based upon the following
criteria:
|
|
1)
|
Publicly-traded
United States banks with executive compensation reported in public
filings.
|
|
|
2)
|
Prior
year annual assets must be between $3 billion and $11
billion.
|
|
|
3)
|
Community
banks serving both commercial and consumer
business.
|
|
|
4)
|
Headquartered
in a major U.S. metropolitan area, primarily on the west coast of the
United States.
|
The
Compensation Committee reviews the Compensation Peer Group’s composition on an
annual basis and modifies the group as necessary to ensure alignment with the
Company’s compensation philosophy, structure, and targeted performance
levels. In determining the actual pay level of each NEO, the
Compensation Committee compares comparable positions in the peer group and also
considers issues of internal pay equity, scope of responsibilities and
experience.
Target
Total Executive Compensation
The
Committee compares NEO base salary, total cash and total direct compensation to
the Compensation Peer Group. Due to the decisions to forgo annual
incentive payments and any Long Term Incentive Plan equity grants for 2009 the
comparison below only shows how average base salary levels for the NEOs compared
to the Compensation Peer Group for 2009.
|
Comparison
of the Company to Compensation Peer Group
|
|
|
Salary
|
|
|
2009
Target Percentile Rank to Peers
|
50th Percentile
|
|
Average
difference for all NEOs, other than
Mr.
Migita, between Company and Peers
|
-7%
|
The
average difference noted above for 2009 reflects the compensation for Messrs.
Hirata, Fujimoto, Isono & Chinn. Due to Mr. Migita’s special
compensation arrangement, which was an individualized performance-based plan
designed upon his August 1, 2008 hire and its distortion of Target Level
Performance, he was not included in this comparison. Also, Ms.
Weisman replaced Mr. Chinn after this analysis was completed.
Compensation
Peer Group
The
following peer group was created in late 2008, based on the identified criteria,
and was used in coordination with the Company’s compensation philosophy to help
establish the 2009 compensation structure for the NEOs, including salaries, and
opportunity levels under the annual incentive and long-term incentive
plans. However, due in part to the declining financial
performance of the Company, the decision was subsequently made to forgo the
annual incentive opportunity, and new regulatory executive compensation
restrictions impacted the long-term incentive opportunity.
|
Rank
|
Company
Name
|
Ticker
|
City
|
State
|
Total
Assets
|
|
as
of 9/30/2008
|
|||||
|
($000)
|
|||||
|
1
|
Bank
of Hawaii Corporation
|
BOH
|
Honolulu
|
HI
|
10,335,047
|
|
2
|
Wintrust
Financial Corporation
|
WTFC
|
Lake
Forest
|
IL
|
9,864,920
|
|
3
|
Umpqua
Holdings Corporation
|
UMPQ
|
Portland
|
OR
|
8,327,633
|
|
4
|
SVB
Financial Group
|
SIVB
|
Santa
Clara
|
CA
|
8,070,945
|
|
5
|
Pacific
Capital Bancorp
|
PCBC
|
Santa
Barbara
|
CA
|
7,688,648
|
|
6
|
Prosperity
Bancshares, Inc.
|
PRSP
|
Houston
|
TX
|
6,787,909
|
|
7
|
CVB
Financial Corp.
|
CVBF
|
Ontario
|
CA
|
6,421,786
|
|
8
|
Western
Alliance Bancorporation
|
WAL
|
Las
Vegas
|
NV
|
5,228,970
|
|
9
|
Glacier
Bancorp, Inc.
|
GBCI
|
Kalispell
|
MT
|
5,173,109
|
|
10
|
Sterling
Bancshares, Inc.
|
SBIB
|
Houston
|
TX
|
4,947,229
|
|
11
|
Banner
Corporation
|
BANR
|
Walla
Walla
|
WA
|
4,650,259
|
|
12
|
PacWest
Bancorp
|
PACW
|
San
Diego
|
CA
|
4,363,217
|
|
13
|
Frontier
Financial Corporation
|
FTBK
|
Everett
|
WA
|
4,244,963
|
|
14
|
Imperial
Capital Bancorp, Inc.
|
IMP
|
La
Jolla
|
CA
|
4,105,458
|
|
15
|
Westamerica
Bancorporation
|
WABC
|
San
Rafael
|
CA
|
4,089,482
|
|
16
|
Hanmi
Financial Corporation
|
HAFC
|
Los
Angeles
|
CA
|
3,765,991
|
|
17
|
First
State Bancorporation
|
FSNM
|
Albuquerque
|
NM
|
3,468,774
|
|
18
|
First
Financial Bankshares, Inc.
|
FFIN
|
Abilene
|
TX
|
3,148,588
|
|
19
|
Columbia
Banking System, Inc.
|
COLB
|
Tacoma
|
WA
|
3,104,980
|
|
Average
|
5,673,048
|
||||
|
25th
Percentile
|
4,097,470
|
||||
|
50th
Percentile
|
4,947,229
|
||||
|
75th
Percentile
|
7,238,279
|
||||
|
Central
Pacific Financial Corp.
|
CPF
|
Honolulu
|
HI
|
5,504,304
|
|
|
Percent
Rank
|
62.30%
|
||||
Compensation
Framework
Mix of Compensation –
Historically, our compensation structure has been designed with a balance
between salary and variable compensation with a majority of an executive’s
direct compensation at-risk. We intended for 2009 to follow that same mix
of compensation, however, due to the continued financial challenges faced by the
Company, as well as restrictions placed on incentive compensation released in
the Interim Final Rule under TARP, the Company reduced base salaries, eliminated
the Annual Incentive Plan opportunity and restricted the Long Term Incentive
Plan opportunity to one-third of total annual compensation.
Compensation Structure for CEO
Migita – For his first year of employment during which he transitioned
from Chairman to Chairman, President, and CEO, the Compensation Committee
recommended and the Board approved a compensation structure for Mr. Migita that
differed from the other NEOs, and covered the performance period August 1, 2008
through June 30, 2009. Mr. Migita’s initial compensation arrangement
was a base salary of $1, a Chairman retainer of $160,000 per year (with no
director meeting fees), with all other compensation variable and
performance-based. The decision to weight a substantial portion of
compensation on performance was made to drive focus toward improving the near
term financial performance of the Company and the Bank. The achievement
levels for those goals were based on the Company's earlier financial
projections. Given the rapidly changing and challenging economic
environment, those goals were considered difficult to achieve. Mr.
Migita’s subsequent compensation arrangement for the period July 1, 2009 to
December 31, 2009, was designed to comply with the issuance of the June 2009
TARP regulations regarding executive compensation, even though he was not
designated as a Most Highly Compensated Employee for the Company in
2009. As such, the cash incentive compensation opportunity for Mr.
Migita was eliminated and his base salary for this six month compensation period
was $250,000, with an incentive equity grant opportunity of restricted stock up
to a maximum of one-third of his total compensation for the same
period.
Elements of Compensation –
Generally, our executive compensation program consists of the following
components to be used in the appropriate combination to meet our compensation
philosophy and objectives including responding to changing financial conditions
and regulatory restrictions and guidance.
|
|
·
|
Salary — Fixed base pay
that reflects each executive’s position, individual performance,
experience, and expertise.
|
|
|
·
|
Annual Cash Incentive —
Pay that varies based on performance against annual business objectives;
we communicate the associated performance metrics, goals, and award
opportunities (expressed as a percentage of salary) to the executives at
the beginning of the year.
No
annual incentives were paid in 2009 with the exception of the CEO, whose
base pay was one dollar, ($1), for the period he earned the
incentives. In 2010, no Annual Incentive Plan opportunity is
available to any existing
NEO.
|
|
|
·
|
Long-Term Incentives —
Equity-based awards with values driven by achievement of goals with a long
term focus. All equity will be limited to restricted stock
grants with a maximum award of 1/3rd
of total annual compensation.
|
|
|
·
|
Executive Retirement Benefits
— Two Vice Chairs have grandfathered Supplemental Executive
Retirement Plan (“SERP”) agreements. The Company does not
intend to enter into any new SERP
agreements.
|
|
|
·
|
Other Compensation —
Includes perquisites, consistent with industry practices in comparable
banking companies, as well as broad-based employee benefits such as
medical, dental, disability, 401(k) Retirement Savings Plan and life
insurance coverage. Certain executives have vested participation in our
frozen Defined Benefit Pension Plan, as discussed in the narrative in the
Pension Benefits section.
|
Salary
We pay
our executives cash salaries intended to be competitive and consider the
executive’s experience, performance, responsibilities, and past and potential
contribution to the Company. The objective of paying salary is to provide a base
level of compensation to fairly reflect the executive’s job and scope of the
role performed within the Company. There is no specific weighting
applied to the factors considered in setting the level of base salaries, and the
Compensation Committee uses its own judgment and expertise in determining
appropriate salaries within the parameters of our compensation philosophy and
objectives, with the guidance and support from an independent executive
compensation consultant. For 2009, given the financial performance of the
Company, we targeted salaries at about the 50th
percentile of the Compensation Peer Group, down from a previous benchmark at the
60th to
65th
percentile.
In making
salary decisions, the Compensation Committee also considers the positioning of
projected total compensation with target-level performance
incentives. Because we set incentive opportunities as a percentage of
salary, changes in salary have an effect on total
compensation. Before recommending salary changes to the Board, the
Committee reviews the projected total compensation based on the proposed
salaries.
Salary Adjustments Made in 2009
– For 2009, given the financial performance of the Company, the
Compensation Committee determined no general market adjustment in salary was
appropriate and the ten percent (10%) reduction in pay taken voluntarily in 2008
by Vice Chairs Dean Hirata and Blenn Fujimoto was maintained. Ronald
Migita’s compensation arrangement covering the period of August 1, 2008 to June
30, 2009 ended and a new arrangement was entered into in which salary was
adjusted to align with the Compensation Peer Group market analysis and annual
cash incentive opportunity was eliminated. Effective, January
1, 2009, Denis Isono, then EVP Operations, voluntarily took a ten percent (10%)
reduction in base salary. On October 13, 2009, Denis Isono was
promoted to Vice Chairman and Chief Operations Officer and he received a
corresponding increase in base salary to align with his new expanded
responsibilities. In August 2009, former NEO, Curtis Chinn, Chief
Risk Officer left the Company and the position of Chief Credit Officer was
filled on an interim basis by Mary Weisman. Ms. Weisman received an
assignment premium of $60,000, annually, for her new expanded
responsibilities. The table below summarizes the NEOs’
salaries as of January 1, 2009 compared to January 1, 2010.
|
Name
|
Position
|
||
|
1-Jan-09
|
1-Jan-10
|
||
|
Ronald
K. Migita(1)
|
Chairman
of the Board, President & CEO
|
$ 1.00
|
$ 500,000
|
|
Dean
K. Hirata
|
Vice
Chairman & Chief Financial Officer
|
$ 274,500
|
$ 274,500
|
|
Blenn
A. Fujimoto
|
Vice
Chairman
|
$ 265,500
|
$ 265,500
|
|
Denis
K. Isono
|
Vice
Chairman, Chief Operations Officer
|
$ 211,500
|
$ 250,000
|
|
Mary
A. Weisman
|
EVP,
Chief Credit Officer
|
$ 180,000
|
$ 240,000
|
|
(1)
|
In
addition to his compensation arrangement as President and CEO, Mr. Migita
received an annual retainer as Chairman of the Board for the Company and
Bank of $160,000 in 2009. When Mr. Migita’s original
compensation arrangement covering the period of August 1, 2008 through
June 30, 2009 ended, a new arrangement was entered into in which his base
salary was adjusted to align with the Compensation Peer Group market
analysis and his annual incentive cash incentive opportunity was
eliminated. Effective January 1, 2010, Mr. Migita’s
compensation consisted of base pay only, no variable cash or equity
incentive opportunity, and his annual Chairman of the Board retainer was
reduced to $100,000.
|
Annual
Cash Incentives
Generally,
we use annual incentives to focus executives’ attention on current strategic
priorities and drive achievement of short-term corporate objectives.
With the exception of what was already provided for in Mr. Migita’s
compensation arrangement for the period August 1, 2008 through June 30, 2009,
management presented and the Compensation Committee accepted a recommendation to
forgo any eligible Annual Incentive Plan payments for 2009 due to the financial
condition of the Company and to further support the Company’s expense reduction
efforts. Mr. Migita also agreed to forgo any cash incentive for the
compensation period July 1, 2009 through December 31, 2009.
2010 Annual Incentive Plan
– Management presented and the Compensation Committee accepted a
recommendation to forgo Annual Incentive Plan payments for 2010 performance to
continue to support the Company’s expense reduction efforts.
Special Annual Incentive Arrangement
for CEO – Mr. Migita was hired as CEO and President effective August
1, 2008 and as such his initial annual incentive period was from August 1, 2008
to June 30, 2009.
The goals
for Mr. Migita’s incentive opportunity for this initial period were selected
based on their ability to focus short-term performance on delivering near term
financial results. The achievement levels for these goals were based on
the Company’s earlier financial projections. Given the rapidly
changing and challenging economic environment the goals were considered
difficult to achieve.
The
criteria for determining an award under this arrangement included the
following: (1) Raise a minimum of $75 million dollars in
new capital through the issuance of CPF convertible preferred stock and/or
common stock by December 31, 2008 and maintain a “well-capitalized” regulatory
designation through June 30, 2009; (2) Reduce California loan portfolio to $750
million dollars or lower as of June 30, 2009; (3) Increase total shareholder
return (adjusted for the effect of any capital raise) by at least fifteen 15% as
of June 30, 2009, over the closing CPF stock price on July 31, 2008; (4) Reduce
the efficiency ratio for CPF and CPB to 50% or lower as of June 30, 2009; (5)
Reduce the total loans to deposits ratio to 100% or lower as of June 30, 2009;
and, (6) Increase the net interest margin to 4.15% or higher as of June 30,
2009. Criterion one (1) was weighted at 25% and the other
five criteria, (2-6), were weighted at 15% each. Criterion one (1)
had only a target award opportunity of $62,500 in cash and $187,500 in equity
and no maximum opportunity. The target award opportunity for each of
the remaining criteria was $37,500 in cash and $112,500 in equity with a maximum
award opportunity for each criterion of $75,000 in cash and $225,000 in
equity. Meeting criterion one was a requirement to earn a maximum
award opportunity for any of the other criteria.
The
actual results achieved and award earned by Mr. Migita were as
follows: (1) While the capital raise dollar target was exceeded, no
award was earned because the completion date was not met; (2) A reduction in the
California loan portfolio to $683,900,000 was achieved by June 30, 2009 and an
award of $37,500 in cash and $112,500 in equity was earned; (3) This criterion
was not met; (4) This criterion was not met; (5) A reduction in the total loans
to deposits ratio 93% was achieved and an award of $37,500 in cash and $112,500
in equity was earned; and, (6) This criterion was not met.
Long-Term
Incentives
We use
long-term incentives (“LTIs”) to encourage ownership, foster retention, and
align executives’ interests with the long-term interests of
shareholders.
2008 Long-Term Incentive Plan
(“LTIP”) – With the assistance of Amalfi Consulting, the Compensation
Committee designed the 2008 LTIP to align with changing priorities in the Bank’s
longer-term strategic goals and consisted of equity awards in the form of Stock
SARs and Performance Shares. The NEOs received equity grants evenly
split between the two forms. In addition, the award opportunity was
increased to align with the compensation framework at that time.
|
2008
Long-Term Incentive Plan Payout Levels (% of Salary)
|
|||
|
Executive
|
Threshold
|
Target
|
Maximum
|
|
Dean
K. Hirata
|
72%
|
90%
|
135%
|
|
Blenn
A. Fujimoto
|
72%
|
90%
|
135%
|
|
Denis
K. Isono
|
56%
|
70%
|
105%
|
Performance Metrics – The
Compensation Committee selected the single performance measure of stock price
for the 2008 LTIP to address the Company’s strategic needs and to create a close
alignment of NEOs’ and shareholders’ interests. In the table below,
we present the structure of the plan with respect to the goals for this
measure.
|
2008
Long-Term Incentive Plan Performance Requirements and Impact on
Awards
|
|||
|
Type
of Award
|
Level
of Award Granted
|
||
|
Threshold
|
Target
|
Maximum
|
|
|
Stock
SARs
|
There
is no award at a performance level below target. If the Bank fails to meet
target, the executive will not earn Stock SARs.
|
Stock
price has to achieve the previous 12-month average stock price ($27.52) at
least once during the 5 stock trading days immediately preceding the end
of the 3-year performance period, and it has to have hit that level for at
least 20 consecutive stock trading days during the 3-year performance
period.
|
Stock
price has to achieve an annualized 7.0% increase over the 3-year period
from the 12-month average stock price from the date of grant (being
$33.71) at least once during the 5 stock trading days immediately
preceding the end of the 3-year performance period, and it has to have hit
that level for at least 20 consecutive stock trading days during the
3-year performance period.
|
|
Performance
Shares
|
1/3
of the target level of performance shares will vest with time on the third
anniversary of the grant. This is strictly time vesting and
will occur regardless of stock price
performance.
|
||
Review of Prior Amounts Granted and
Realized. We intend to motivate and reward our executives to
achieve superior future performance, and consider prior gains (or losses) from
stock compensation to determine if future equity awards at the chosen
opportunity levels are appropriate for retention and realignment with
shareholder value.
2009 Long Term Incentive Plan
(“LTIP”) Design and Goals – In February 2009, the Committee reviewed and
approved the 2009 LTIP design for the NEOs. Target opportunity and
threshold were reduced to align total compensation with the revised 2009
Compensation Peer Group, as noted in the table below. While payout
levels were modified, types of awards continued to be all equity. Any
equity to be awarded was to be based on 2009 annual performance in a mix of 50%
Stock SARS and Restricted Stock with the exception of Mary Weisman, who was not
an NEO at the time of the initial plan design and therefore eligible for 100%
Restricted Stock consistent with other non NEO-officers. Then
in June 2009, the U.S. Treasury released regulations in an Interim Final Rule
that set standards for complying with the executive compensation and corporate
governance provisions for TARP recipients contained in the Emergency Economic
Stabilization Act of 2008 (EESA) as amended by the American Recovery &
Reinvestment Act of 2009 (ARRA). These required a modification
to the original 2009 LTIP design for the NEOs. The type of equity to
be awarded was limited to restricted stock and the maximum award capped at
one-third (1/3) of total compensation for
the year in which the grant is made. The equity awarded would be
based on performance and granted in March 2010 followed by two (2) years of
service vesting ending in March 2012.
|
2009
Long-Term Incentive Plan Payout Levels (% of Salary)
|
|||
|
Executive
|
Threshold
|
Target
|
Maximum
|
|
Dean
K. Hirata
|
35%
|
70%
|
105%
|
|
Blenn
A. Fujimoto
|
35%
|
70%
|
105%
|
|
Denis
K. Isono
|
30%
|
60%
|
90%
|
|
Mary
Weisman
|
15%
|
30%
|
50%
|
As noted above, these payout levels
were subsequently modified due
to regulatory
restrictions.
The
actual level of payout, up to regulatory restrictions, was to be left to the
Compensation Committee’s discretion and would consider the performance
achievement of the 2009 objectives as outlined below:
|
|
·
|
Maintain
Compliance with Regulatory Capital
Requirements.
|
|
|
·
|
Increase
Shareholder Return.
|
|
|
·
|
Increase
Revenue Diversification and Manage
Expenses.
|
|
|
·
|
Retain
and Grow Core Deposits.
|
|
|
·
|
Manage
Net Interest Margin.
|
|
|
·
|
Manage
Asset Quality
|
Working
with external compensation consultants the Compensation Committee selected this
long term incentive plan design because:
|
|
1)
|
Given
the unprecedented environment affecting financial institutions,
establishing a long term goal that was achievable, yet drove high
performance was unrealistic;
|
|
|
2)
|
Management
had no Annual Incentive Plan for 2009;
and
|
|
|
3)
|
The
requirement of an additional two (2) year vesting period would continue to
focus management performance on increasing shareholder value over the long
term.
|
In
January 2010, the Compensation Committee reviewed and discussed the performance
achievement of the 2009 objectives. While some of the stated goals
were met, the Committee determined a payout under the 2009 LTIP would be
inappropriate given the overall financial performance of the Company in
2009.
Executive
Retirement Benefits
We
provide Supplemental Executive Retirement Plan (“SERP”) benefits for Dean Hirata
and Blenn Fujimoto as a part of their overall compensation
package. The grandfathered SERPs were intended to help support the
objective of maintaining a stable, committed, and qualified team of key
executives through the inclusion of retention and non-compete
provisions. The Compensation Committee’s analyses of competitive
positioning of total compensation take into account the value of executive
retirement benefits. For Messrs. Hirata and Fujimoto,
SERP benefits vest over ten (10) years beginning on July 1, 2005, with
relatively low vesting increments initially to encourage retention: 0% vesting
before four (4) years, 10% vesting per year in years four through six, 15%
vesting per year in years seven and eight, and 20% vesting per year in years
nine and ten. Mr. Hirata previously had two (2) SERPS; one (1) plan
through CB Bancshares, Inc. (CBBI) and one (1) through the
Company. Both SERPs were combined into one (1) plan for
administrative ease and did not change any benefit amounts, including his
entitlement to the full vested amounts under the CBBI Plan until such time that
benefit is exceeded by the benefit provided under the new combined Company
plan. Mr. Fujimoto is also entitled to benefits under the
Company’s Defined Benefit Pension Plan. This Plan was frozen and
closed to new participants effective December 31, 2002. We provide
additional details regarding our Defined Benefit Pension Plan and SERP
arrangements in the Pension Benefits section.
Other
Compensation
The NEOs
participate in our broad-based employee benefit plans, such as medical, dental,
401(k) and profit sharing, deferred compensation plan, supplemental disability
and term life insurance programs. All of the NEOs received an
automobile allowance and most receive payment of fees for social and/or country
club memberships, which are used for business development and business retention
purposes. Mr. Migita also receives a retainer fee as Chairman
of the Board for the Company and the Bank. The total amounts of these
items are reflected in the “All Other Compensation” column of the Summary
Compensation Table. The Compensation Committee believes that these
items enhance the effectiveness of our key executives and are consistent with
industry practices in comparable banking companies. The Compensation Committee
regularly reviews the perquisites we provide.
Other
Issues Relevant to Executive Compensation - Emergency Economic
Stabilization Act of 2008 (“EESA”) and American Recovery and Reinvestment Act of
2009 (“ARRA”)
On
January 9, 2009, as part of the Capital Purchase Program under TARP in
accordance with the Emergency Economic Stabilization Act of 2008, and pursuant
to the terms of a Letter Agreement, dated January 9, 2009 and the related
Securities Purchase Agreement—Standard Terms (collectively, the “Securities
Purchase Agreement”), the Company issued and sold to the U.S. Treasury (i)
135,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock,
Series B, without par value and having a liquidation preference of $1,000 per
share, and (ii) a ten-year warrant to purchase up to 1,585,748 shares of the
Company’s common stock, no par value, at an exercise price of $12.77 per share,
for an aggregate purchase price of $135 million in cash.
Executive
Compensation Limitations under EESA, ARRA and the Securities Purchase
Agreement. Under EESA, ARRA and the Securities Purchase
Agreement, the Company will be subject to certain restrictions with respect to
the compensation of its Senior Executive Officers and other specified employees
until such time as the U.S. Treasury ceases to own any equity or debt securities
acquired from the Company pursuant to TARP (the “Securities”). The specific
impact of the restrictions and limitations continue to evolve, and issuances of
regulations by the U.S. Treasury have helped to define the new restrictions and
limitations on the Company’s compensation practices. It is the Company’s intent
to fully comply with applicable restrictions as issued by the U.S. Treasury,
FDIC, SEC and any other governing body. In addition, it is the intent
of the Company to comply with recently distributed guidance from the FRB and
FDIC with respect to sound incentive compensation policies.
For
purposes of these restrictions and guidance, “Senior Executive Officers” or
“SEOs” are defined as (1) the principal executive officer, (2) the principal
financial officer and (3) the three most highly compensated executive officers
other than the principal executive and financial officers as determined under
applicable SEC rules. The Company has determined the following executive
officers of the Company constitute “SEOs”: Mr. Migita, Mr. Hirata,
Mr. Fujimoto, Mr. Isono and Ms. Weisman, and they are the same group of
executives included in the Company’s definition of Named Executive Officers,
(NEOs).
Unnecessary and Excessive
Risk. In accordance with the regulatory restrictions and
guidance, the Company has taken and will continue to take the appropriate steps
to prevent incentivizing SEOs from taking unnecessary and excessive risks that
threaten the value of the Company during the period the U.S. Treasury holds the
Securities:
|
—
|
The
Compensation Committee (i) by 90 days after the purchase under TARP
reviewed the SEOs’ incentive and bonus compensation arrangements with the
senior risk officer (or other personnel that act in a similar capacity) to
ensure that the SEO incentive arrangements did not encourage SEOs to take
such unnecessary and excessive risks and (ii) made reasonable efforts to
limit any features of the SEOs’ incentive arrangements that would lead the
SEO to take such unnecessary and excessive
risks;
|
|
—
|
The
Compensation Committee met with the senior risk officer to review the
relationship between the institution’s risk management policies and the
SEO incentive arrangements;
|
|
—
|
The
Compensation Committee, comprised entirely of independent directors, met
twice in 2009 with the senior risk officer to discuss and evaluate
employee compensation plans in light of an assessment of any risk posed
from such plans; and
|
|
—
|
The
Compensation Committee certified and will take appropriate action to be
able to continue to certify in the Compensation Committee Report, included
in the Company’s proxy statement, that it has completed the reviews
discussed in the prior two bullet
points.
|
General
Prohibition. ARRA included an additional compensation standard
prohibiting the use of any compensation plan that encourages manipulation of
reported earnings.
Prohibition on Bonus, Retention
Awards or Incentive Compensation. During the period the U.S.
Treasury holds the Securities, the Company will be prohibited from paying or
accruing any bonus, retention award or incentive compensation to the top five
(5) most highly compensated employees (MHCEs) for the applicable
period. While the Company’s SEOs and MHCEs are not always the
identical group, in the desire to demonstrate good faith compliance with this
restriction, the Company has taken the position that all SEOs will be treated as
though they were MHCEs. These restrictions do not apply to “long
term” restricted stock that (1) does not “fully” vest while the Securities
remain outstanding, (2) has a value that is one-third or less of the total
amount of annual compensation of the employee receiving the restricted stock and
(3) is subject to such other terms and conditions as U.S. Treasury may determine
is in the public interest.
Clawbacks. Any
incentive or bonus payments paid to an SEO and the next twenty most
highly-compensated employees during the period that the U.S. Treasury holds the
Securities must be subject to a “clawback” if the payments were based on
materially inaccurate financial statements or any other materially inaccurate
financial performance metric criteria.
Golden Parachute Payment
Prohibition. The Company may not make any “golden parachute
payments” to SEOs or the next five most highly compensated employees during the
period the U.S. Treasury holds the Securities. For these purposes, the term
“golden parachute payment” generally means any payment to a subject individual
made on account of any termination from employment.
Deduction
Limitations. EESA also applies an amended deduction limitation
under Section 162(m) of the Internal Revenue Code to the Company for the period
that U.S. Treasury holds the Securities. Under this new deduction
limitation, the deduction limit for remuneration paid to SEOs during any taxable
years was reduced from $1 million to $500,000. The $500,000 deduction
limit is computed without regard to “performance-based compensation” and certain
deferrals of income.
Limitation on Luxury
Expenditures. ARRA requires the Board, during the period that
U.S. Treasury holds the Securities, to have in place a Company-wide policy
prohibiting excessive or luxury expenditures, as identified by the U.S.
Treasury.
CEO and CFO Certifications of
Compliance. ARRA requires the CEO and CFO to provide to the
SEC, written certifications of compliance with the EESA and AARA executive
compensation and corporate governance requirements.
As the
Compensation Committee reviews the Company’s compensation arrangements going
forward, it will continue to take into account, and the Company will comply
with, the restrictions set forth in EESA and ARRA and related regulations, as
they are promulgated.
Letter Agreements
of the SEOs. In connection with the issuance of the
Securities, each of the named executive officers that was or is a SEO for
purposes of the Capital Purchase Program executed a letter agreement
acknowledging and agreeing to the following:
|
—
|
The
officer will not be entitled to receive certain golden parachute payments
during the period in which the U.S. Treasury holds the Securities
under the Capital Purchase Program (the “Capital Purchase Program Covered
Period”).
|
|
—
|
The
officer will be required to and shall return to the Company any bonus or
incentive compensation paid to the officer by the Company during the
Capital Purchase Program Covered Period if such bonus or incentive
compensation is paid to the officer based on materially inaccurate
financial statements or any other materially inaccurate performance metric
criteria.
|
|
—
|
Each
of the Company’s compensation, bonus, incentive and other benefit plans,
arrangements and agreements (the “Benefit Plans”) applicable to the
officer is amended to the extent necessary to give effect to the
immediately preceding bullet
points.
|
|
—
|
To
the extent that the Company determines that the Benefit Plans must be
revised to ensure that the Benefit Plans do not encourage SEOs to take
unnecessary and excessive risks that threaten the value of the Company,
the officer and the Company will agree to negotiate and effect such
changes promptly and in good faith.
|
Additionally,
each SEO executed a letter agreement setting forth the order in which payments
and benefits will be reduced in the event required in connection with “golden
parachute” limitations required in connection with the Company’s participation
in the Capital Purchase Program.
Adjustment
or Recovery of Awards
Although
we do not have a separate policy regarding recovery or clawback of incentive
awards in the event of misstated or restated financials results, with our
participation in the Capital Purchase Program, as discussed above, we are
required to ensure that any executive incentive compensation plan does include
such a provision for inaccurate financial statements or incentive
criteria. The Company has complied with this requirement for plans
that have been reviewed and finalized and will continue to update the language
for all other incentive plans. Our long-term incentive plan currently
permits us to cancel or terminate outstanding awards for any reason (which would
include misstated or restated financial results). In addition,
Section 304 of the Sarbanes-Oxley Act provides the ability to recover incentive
awards if we are required to restate our financial statements due to
noncompliance with any financial reporting requirements as a result of
misconduct. In that case, the CEO and CFO must reimburse us for (1)
any bonus or other incentive- or equity-based compensation received during the
twelve (12) months following the first public issuance of the non-complying
document, and (2) any profits realized from the sale of our securities during
those twelve (12) months.
Timing
of Equity Grants
On
October 25, 2006, we adopted formal guidelines regarding the equity grant
process and related controls. The guidelines, which were reviewed and
readopted (with minor changes) on January 30, 2008 are to help ensure that all
equity grants are reported and disclosed correctly and accurately, are properly
accounted for, and receive proper tax treatment. The grant guidelines
are designed to avoid making regular grants during a regularly scheduled Company
blackout period, to avoid having the timing of grant dates be affected by
material nonpublic information, and to confirm the use of no less than the
closing price of our stock on the grant date.
Stock
Ownership Guidelines
On July
27, 2005, the Board adopted stock ownership guidelines applicable to all
directors and executive officers of the Company and the Bank, which were
reviewed and readopted (with minor changes) on January 30, 2008. The
guidelines are discussed in more detail under the Corporate Governance and Board
Matters - Director/Executive Officer Stock Ownership Guidelines
section. These guidelines have been established to more closely align
NEOs’ interest with shareholders as well as for retention
purposes. The ownership multiples vary based on the level of the
position within the Company.
Employment
Agreements
None of
the current NEOs have an employment agreement with the Company and are employed
on an “at will” basis.
Change-In-Control
Agreement
Mr. Isono does not participate in a
SERP agreement and his previous employment agreement with the Company expired in
2008. In order to promote retention and provide continuity throughout
our management team in the event of a potential merger or acquisition, the
Company entered into a change-in-control agreement with Mr. Isono in
2008. The terms of the agreement were determined based on a review of
peer benefit practices and a review of potential payments provided to the
Company’s other NEOs in the event of a change-in-control. However,
regulatory restrictions prohibiting the award of any “golden parachute payment”
during the period the U.S. Treasury holds securities has precedence over this
agreement. Additional details regarding Mr. Isono’s change-in-control
agreement can be found in the narrative in the Compensation and Change-In-
Control Agreements section
Tax
and Accounting Considerations
We
consider tax and accounting implications in designing our compensation
programs. For example, in selecting long-term incentive compensation
elements, the Compensation Committee reviews the projected expense amounts and
expense timing associated with alternative types of awards. Under
current accounting rules (i.e., Financial Accounting Standard ASC Topic 718), we
must expense the grant-date fair value of share-based grants such as restricted
stock, performance shares, and SARs settled in our stock. The
grant-date fair value is amortized and expensed over the service period or
vesting period of the grant. In contrast, awards that are not
share-based (e.g., phantom stock) are expensed based on a value that may
fluctuate widely over the vesting period and is not fixed at grant
date. In selecting appropriate incentive devices, the Compensation
Committee reviews extensive modeling analyses and considers the related tax and
accounting issues. Section 162(m) of the Internal Revenue Code
generally places a limit on the tax deduction for compensation in excess of $1
million paid to the chief executive officer and four most highly compensated
executive officers of a corporation in a taxable year. In addition,
our participation in the Capital Purchase Program has reduced this limit to
$500,000 for our NEOs and expanded the definition of what is includable in
“compensation”. The Committee has retained the flexibility, however,
to pay compensation which is not deductible for tax purposes because it believes
that doing so permits it to take into consideration factors that are consistent
with good corporate governance and the best interests of our
shareholders.
Conclusion
Two
thousand and nine was an absolutely difficult year for the Company and the
overall financial results were far below acceptable
performance. As such, management, the Compensation Committee,
and the Board collectively agreed: (1) To forgo the 2009 annual incentive
opportunity for all eligible NEOs and (2) That any discretionary awards under
the Long Term Incentive Plan were inappropriate, and not in alignment with the
interests of our shareholders.
While the
Company’s goal is to achieve steady and sustainable profitability, in the near
term the focus continues to be on achieving and maintaining necessary levels of
capital, improving the overall quality of our asset portfolio, and managing our
liquidity and expenses. In this environment, and with the
desire to demonstrate fiscally prudent executive compensation decisions,
management, the Compensation Committee, and the Board fully support forgoing the
annual incentive opportunity for all existing and eligible NEOs in 2010 and to
defer any awards of long term equity grants until the financial condition of the
Company improves.
The
Compensation Committee and the Board, however, still believe in the longer term
it is important to provide market based compensation that will attract and
retain highly talented executives with the appropriate competencies and skills
necessary for the Company’s success. Such compensation would
include the full range of compensation components, including incentive awards
that would vary with our financial performance based on achieving our strategic
plan and goals without encouraging excessive and unnecessary risk that could
threaten the overall value of the Company. Equally important is
the need to maintain shareholder confidence and comply with regulatory executive
compensation restrictions and guidance by developing appropriate compensation
structures.
Therefore,
the Compensation Committee evaluates our compensation program and its related
components on an ongoing basis. Adjustments are made to the
compensation structure as appropriate to maintain the Company’s competitive
position for executive talent, consistent with our compensation philosophy and
objectives, and within the parameters of regulatory restrictions and
guidance. The Committee intends this Compensation Discussion and Analysis
to provide full, transparent disclosure of what we believe to be a thoughtfully
designed compensation structure which focuses on the achievement of short term
objectives, and affirms the philosophy for driving long-term shareholder
value.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of
December 31, 2009, the Compensation Committee of the Company was composed
entirely of the following five (5) independent directors: Paul J. Kosasa
(Chair), Richard J. Blangiardi (Vice Chair), Christine H. H. Camp, Earl E. Fry,
and Maurice H. Yamasato. This list of directors reflects a change in
composition to the Committee effective October 28, 2009, when Colbert M.
Matsumoto resigned as Chair of the Committee and was replaced by Paul J. Kosasa
as Committee Chair. The Compensation Committee was changed on March
11, 2010 and is now constituted as follows: Richard J. Blangiardi (Chair),
Christine H. H. Camp (Vice Chair), Earl E. Fry, Paul J. Kosasa, and Maurice H.
Yamasato. None of the Compensation Committee members are or were former
officers or employees of the Company. Relationships that members of
the Compensation Committee have had and/or maintain with the Company are
described in the foregoing Corporate Governance and Board Matters, Director
Independence and Relationships section.
EXECUTIVE
COMPENSATION
The table
below summarizes the total compensation earned by each of the NEOs for the
fiscal year ended December 31, 2009. The material terms of
compensation and change-in-control agreements to which some of the NEOs are a
party are discussed in the Compensation and Change-In-Control Agreements
narrative following the Option Exercises and Stock Vested table.
SUMMARY COMPENSATION
TABLE
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
Change
in Pension Value & Non-Qualified Deferred Compensation
Earnings
|
All
Other Compensation
(8)
|
Total
|
|||||||||||||||||||||||
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|||||||||||||||||||||||||
|
(a)
|
(b)
|
(c
)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|||||||||||||||||||||||
|
Ronald
K. Migita, Chairman of the Board, President & CEO
|
2009
|
$ | 250,000 | (1) | $ | 0 | $ | 112,500 | $ | 112,500 | $ | 75,000 | (6) |
na
|
$ | 193,332 | $ | 743,332 | ||||||||||||||
|
2008
|
$ | 1 | $ | 0 |
na
|
na
|
na
|
na
|
$ | 217,133 | $ | 217,134 | ||||||||||||||||||||
|
Dean
K. Hirata, Vice Chairman & Chief Financial Officer
|
2009
|
$ | 274,500 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | (7) | $ | 32,929 | $ | 307,429 | ||||||||||||||
|
2008
|
$ | 294,834 | $ | 0 | $ | 137,239 | (3) | $ | 137,249 | (4) | $ | 0 | $ | 267,512 | $ | 39,965 | $ | 876,799 | ||||||||||||||
|
2007
|
$ | 274,350 | $ | 0 | $ | 0 | $ | 32,855 | (5) | $ | 9,486 | $ | 0 | $ | 25,465 | $ | 342,156 | |||||||||||||||
|
Blenn
A. Fujimoto, Vice Chairman
|
2009
|
$ | 265,500 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | (7) | $ | 27,317 | $ | 292,817 | ||||||||||||||
|
2008
|
$ | 285,167 | $ | 0 | $ | 132,745 | (3) | $ | 132,748 | (4) |
na
|
$ | 204,603 | $ | 29,808 | $ | 785,071 | |||||||||||||||
|
2007
|
$ | 257,850 | $ | 0 | $ | 0 | $ | 31,974 | (5) | $ | 9,233 | $ | 19,298 | $ | 28,850 | $ | 347,205 | |||||||||||||||
|
Denis
K. Isono, Vice Chairman, Chief Operations Officer
|
2009
|
$ | 219,965 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
na
|
$ | 22,465 | $ | 242,430 | ||||||||||||||||
|
2008
|
$ | 235,000 | $ | 0 | $ | 82,241 | (3) | $ | 82,250 | (4) | $ | 0 |
na
|
$ | 22,830 | $ | 422,321 | |||||||||||||||
|
2007
|
$ | 217,800 | $ | 46,000 | (2) | $ | 0 | $ | 31,092 | (5) | $ | 8,976 |
na
|
$ | 22,666 | $ | 326,534 | |||||||||||||||
|
Mary
A. Weisman, Executive Vice President, Chief Credit Officer
|
2009
|
$ | 202,500 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
na
|
$ | 16,500 | $ | 219,000 | ||||||||||||||||
|
Note:
|
Amounts
in parentheses “( )” when used in the foregoing table and any
other tables mean negative amounts.
|
|
(1)
|
When
Mr. Migita’s original compensation arrangement covering the period of
August 1, 2008 to June 30, 2009 ended, a new arrangement was entered into
in which his base salary was adjusted to align with the Compensation Peer
Group market analysis and his cash incentive opportunity was
eliminated. Effective January 1, 2010, Mr. Migita’s
compensation consisted of base pay only, no variable cash or equity
incentive opportunity, and his annual Chairman of the Board retainer was
reduced to $100,000.
|
|
(2)
|
Mr.
Isono received a one-time discretionary cash award in 2007 due to his
leadership in helping the Bank comply with a regulatory order related to
the Bank Secrecy Act.
|
|
(3)
|
For
Messrs Hirata, Fujimoto and Isono, these figures for 2008 represent the
grant date fair value of performance shares, assuming the number of shares
associated with target performance levels vest. These shares
cover the period 2008 through 2010. The grant date fair value
associated with maximum performance levels for each of Messrs. Hirata,
Fujimoto and Isono is $205,868, $199,108 and $123,362,
respectively.
|
|
(4)
|
For
Messrs. Hirata, Fujimoto and Isono, these figures for 2008 represent the
grant date fair value of SARs assuming the number of shares associated
with target performance levels vest. These shares cover the
period from 2008 to 2010. The grant date fair value associated
with maximum performance levels for each of Messrs. Hirata, Fujimoto, and
Isono is $205,874, $199,122 and $123,375,
respectively.
|
|
(5)
|
For
Messrs. Hirata, Fujimoto and Isono, these figures for 2007 represent the
grant date fair value of SARs assuming the number of shares associated
with target performance levels was earned. These SARs were
granted in 2007 based on performance during the year, subject
to a three year service vesting period. Using the grant date
fair value per share of $10.49, the value of the SARs actually earned for
2007 performance was $6,231, $6,063 and $5,895 for Messrs. Hirata,
Fujimoto and Isono respectively. Had maximum performance levels
been achieved, the grant date fair value associated with the 2007 SARs
granted for Messrs. Hirata, Fujimoto and Isono would have been $52,586,
$51,181 and $49,765, respectively.
|
The
following table shows the grant date, the grant price, the Black-Scholes grant
date fair value, and the Black-Scholes input assumptions employed to value the
SARs awards under the 2005 & 2008 LTI Plans as well as stock options granted
to Mr. Migita under his Special Annual Incentive arrangement on September 9,
2009.
|
Grant
|
Grant
Price
|
Black-Scholes
Grant
Date
Fair
Value
|
Volatility
|
Risk-Free
Rate
|
Expected
Life
|
Dividend
Yield
|
|||||||||||
|
3/14/2007
|
$ | 35.90 | $ | 10.49 | 31.70 | % | 4.50 | % |
6.5
years
|
2.80 | % | ||||||
|
3/14/2007
|
$ | 35.90 | $ | 10.49 | 31.70 | % | 4.50 | % |
6.5
years
|
2.80 | % | ||||||
|
3/12/2008
|
$ | 18.88 | $ | 3.50 | 32.00 | % | 2.80 | % |
6.5
years
|
5.30 | % | ||||||
|
9/09/2009
|
$ | 2.25 | $ | 1.32 | 63.59 | % | 3.11 | % |
6.5
years
|
1.00 | % | ||||||
|
(6)
|
Only
Mr. Migita received a cash incentive in 2009, based on performance as
summarized in the table under the Annual Cash Incentives
section.
|
|
(7)
|
We
have SERP agreements with Messrs. Hirata and Fujimoto (“SERPs”) and we
have a Defined Benefit Pension Plan benefit for Mr.
Fujimoto. The change in pension value between 2008 and 2009 was
-$126,179 for Mr. Hirata and -$197,793 for Mr. Fujimoto, and is reported
as $0 in the Summary Compensation Table.
In
July 2008, we implemented a non-qualified deferred compensation plan for
all eligible Company employees with total annual compensation of $90,000
or greater. Under this plan, deferred amounts are valued based
on corresponding investments in certain measurement funds which may be
selected by any eligible participating employee. In addition,
for 2009, no plan earnings were considered to be “above-market” or
“preferential” for participating NEOs and as such no amount is
reported.
|
|
(8)
|
This
column includes the incremental cost of perquisites, including automobile
allowance, club dues, Company contributions to the 401(k) Retirement
Savings Plan, dividends, and Board Chairman retainer, as well as, Medicare
premium reimbursement for Mr. Migita in lieu of his participation in the
Company provided health plan.
|
The table
below details the Other Compensation further including 401(k) Company
contributions, automobile allowance, and social and/or country club amounts for
each NEO during 2009. Mr. Migita’s Board Compensation includes a retainer
as the Chairman of the Board for the Company and the Bank.
|
Name
|
401(k)
Retirement Savings Plan
|
Automobile
Allowance
|
Club
Dues
|
Board
Compensation
|
Other
Compensation
|
Total
All Other Compensation
|
|
Ronald
K. Migita
|
$9,800
|
$12,000
|
$6,140
|
$160,000
|
$5,392
|
$193,332
|
|
Dean
K. Hirata
|
$9,800
|
$8,400
|
$14,479
|
na
|
$250
|
$32,929
|
|
Blenn
A. Fujimoto
|
$9,800
|
$8,400
|
$8,617
|
na
|
$500
|
$27,317
|
|
Denis
K. Isono
|
$8,800
|
$8,400
|
$5,265
|
na
|
$0
|
$22,465
|
|
Mary
A. Weisman
|
$8,100
|
$8,400
|
$0
|
na
|
$0
|
$16,500
|
NON-QUALIFIED
DEFERRED COMPENSATION
On July
1, 2008, the Company implemented a non-qualified deferred compensation plan that
allows employees (including the NEOs) with an annual base salary of $90,000 or
greater to defer up to 80% of base pay and/or 100% of annual bonuses and
commissions earned for a specified year on a pre-tax basis. The plan
does not feature any matching or other contributions from the
Company. In 2009, Mr. Fujimoto was the only NEO who deferred amounts
under the Central Pacific Bank Deferred Compensation Plan.
A
participant is always 100% vested in his or her deferred
amounts. Deferred amounts under the Central Pacific Bank Deferred
Compensation Plan are subject to adjustment for appreciation or depreciation in
value based on hypothetical measurement funds in one or more of the available
measurement funds chosen by the participant. The participant’s
deferred amounts are generally payable beginning on the earliest to occur of (a)
a specified time chosen by the participant, or if none, for key employees the
date that is six months following a separation from service, (b) the
participant’s death, (c) the participant’s disability or (d) an “unforeseeable
emergency”. For distributions upon a separation from service or at a
specified time chosen by a participant, the participant may choose to receive
deferred amounts as a lump sum cash payment or in annual installments over a
period not to exceed five years. For distributions on all other
events, payments will be made as a cash lump sum.
Central
Pacific Bank’s obligations with respect to the deferred amounts under the
Central Pacific Bank Deferred Compensation Plan are payable from its general
assets. The assets are at all times subject to the claims of the
Company’s general creditors.
Set forth
below is information regarding the amounts deferred by or for the benefit of the
NEOs in 2009.
|
Name
|
Executive
Contributions
in
Last FY
|
Registrant
Contributions
in
Last FY
|
Aggregate
Earnings
in
Last
FY
|
Aggregate
Withdrawals/
Distributions
|
Aggregate
Balance
at
Last
FYE
|
|
Ronald
K. Migita
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Dean
K. Hirata
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Blenn
A. Fujimoto
|
$18,585
|
$0
|
$4,190
|
$0
|
$31,885
|
|
Denis
K. Isono
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Mary
A. Weisman
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
|
|
Note: During
2009, Mr. Fujimoto deferred $18,585 in base salary under the Central
Pacific Bank Deferred Compensation Plan. The table below shows
the funds available under the Central Pacific Bank Deferred Compensation
Plan and their annual rate of return for the calendar year ending December
31, 2009, as reported by the administrator of the
Plan.
|
|
Name
of Fund
|
Rate
of Return
|
|
Fixed
Income Vanguard VIF Money Market
|
0.62%
|
|
Vanguard
VIF Short Term Investment Grade
|
13.86%
|
|
Vanguard
VIF Total Bond Index
|
5.94%
|
|
Vanguard
VIF High Yield Bond
|
38.85%
|
|
Large
Cap Vanguard VIF Diversified Value
|
26.92%
|
|
Vanguard
VIF Equity Income
|
16.77%
|
|
Vanguard
VIF Total Stock Market Index
|
28.26%
|
|
Vanguard
VIF Equity Index
|
26.44%
|
|
Vanguard
VIF Capital Growth
|
34.30%
|
|
Vanguard
VIF Growth
|
35.05%
|
|
MidCap
Vanguard VIF MidCap Index
|
40.37%
|
|
Small
Cap Vanguard VIF Small Company Growth
|
39.38%
|
|
Foreign/Global
Vanguard VIF International
|
42.57%
|
|
Balanced
Vanguard VIF Balanced
|
22.90%
|
|
Specialty
Vanguard VIF REIT Index
|
29.14%
|
GRANTS
OF PLAN-BASED AWARDS
|
Name
|
Grant
Date
|
Type
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards
|
All
Other Stock Awards: Number of Shares or Stock or Units
|
All
Other Option Awards: Number of Securities Underlying
Options
|
Exercise
or Base Price of Awards
|
Grant
Date Fair Value of Stock and Option Awards
|
||||
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
|||||||
|
$
|
$
|
$
|
#
|
#
|
#
|
#
|
#
|
$
|
$
|
|||
|
(a)
|
(b)
|
(c
)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
|
|
Ronald
K. Migita
|
09/09/09
|
8/1/08
- 6/30/09 Annual Incentive
|
na
|
250,000
|
375,000
|
|
|
|
||||
|
09/09/09
|
Stock
|
50,000
|
2.25
|
112,500
|
||||||||
|
09/09/09
|
Incentive
Stock Options
|
44,443
|
2.25
|
58,665
|
||||||||
|
09/09/09
|
Non-Qualified
Stock Options
|
40,784
|
2.25
|
53,835
|
||||||||
Note: The
cash and equity earned by Mr. Migita in 2009 were a result of achievement of
goals set under his Special Annual Incentive Arrangement for the period August
1, 2008 to June 30, 2009. Mr. Migita’s actual award based
performance to stated goals was $75,000 in cash, $112,500 in stock options and
$112,500 in performance shares.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
Name
|
Option
Awards
|
Stock
Awards
|
||||||||
|
#
of Securities Underlying Unexercised
Options
Exercisable
|
#
of Securities
Underlying
Unexercised
Options
Unexercisable
|
Equity
Incentive
Plan:
# of
Unearned
Options
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Option
Vesting
Date
|
#
of Shares/
Units
of
Stock
Not
Vested
|
Market
Value
of
Shares/Units
Not
Vested
($)
|
Equity
IP:
#
of
Unearned
Shares,
Units,
or
Other
Rights
Not
Vested
|
Equity
IP:
Market/Pay-
out
Value of
Unearned
Shares,
etc.
Not Vested ($)
|
|
|
(a)
|
(b)
|
(c
)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
|
Ronald
K. Migita
|
44,443
|
|
|
$2.25
|
9/9/2019
|
9/9/2009
|
||||
|
40,784
|
|
|
$2.25
|
9/9/2019
|
9/9/2009
|
|||||
|
Dean
K. Hirata
|
5,293
|
|
|
$6.33
|
1/26/2010
|
9/15/2004
|
||||
|
15,266
|
|
|
$6.55
|
1/11/2011
|
9/15/2004
|
|||||
|
10,160
|
|
|
$18.19
|
9/29/2013
|
9/15/2004
|
|||||
|
3,160
|
|
|
$32.60
|
3/15/2015
|
3/15/2008
|
|||||
|
2,867
|
|
$35.10
|
3/15/2016
|
3/15/2009
|
||||||
|
|
594
|
|
$35.90
|
3/15/2017
|
3/15/2010
|
|||||
|
|
39,214
|
$18.88
|
3/12/2018
|
3/12/2011
|
7,269
|
9,522
|
||||
|
Blenn
A. Fujimoto
|
13,200
|
|
|
$13.08
|
11/7/2010
|
11/7/2005
|
||||
|
6,924
|
|
|
$16.84
|
3/12/2012
|
3/12/2007
|
|||||
|
8,916
|
|
|
$27.82
|
1/1/2013
|
1/1/2004
|
|||||
|
4,025
|
|
|
$27.82
|
1/1/2013
|
1/1/2004
|
|||||
|
3,075
|
|
|
$32.60
|
3/15/2015
|
3/15/2008
|
|||||
|
2,790
|
|
$35.10
|
3/15/2016
|
3/15/2009
|
||||||
|
|
578
|
|
$35.90
|
3/15/2017
|
3/15/2010
|
|||||
|
|
37,928
|
$18.88
|
3/12/2018
|
3/12/2011
|
7,031
|
9,211
|
||||
|
Denis
K. Isono
|
8,388
|
|
|
$27.82
|
1/1/2013
|
1/1/2008
|
||||
|
2,990
|
|
|
$32.60
|
3/15/2015
|
3/15/2008
|
|||||
|
2,714
|
|
$35.10
|
3/15/2016
|
3/15/2009
|
||||||
|
|
562
|
|
$35.90
|
3/15/2017
|
3/15/2010
|
|||||
|
|
23,500
|
$18.88
|
3/12/2018
|
3/12/2011
|
4,356
|
5,706
|
||||
|
Mary.
A. Weisman
|
$29.17
|
8/15/2017
|
8/15/2010
|
2,000(2)
|
2,620
|
|
||||
|
1,500(1)
|
|
$18.88
|
3/12/2018
|
3/12/2011
|
1,986
|
2,602
|
||||
|
(1)
|
This
amount represents a retention stock option award provided in 2008 to key
non-NEOs. Mary Weisman participated in this award as she was
not an NEO at the time of grant.
|
|
(2)
|
This
amount represents 2,000 shares of restricted stock issued as part of Mary
Weisman’s employment agreement.
|
OPTION
EXERCISES AND STOCK VESTED
|
Executive
Name
|
Grant
Date
|
Option
Awards
|
Stock
Awards
|
||
|
#
of Shares Acquired
on
Exercise
|
Value
Realized
on
Exercise
|
#
of Shares Acquired
on
Vesting
|
Value
Realized
on
Vesting
|
||
|
Ronald
K. Migita
|
9/9/2009
|
na
|
na
|
50,000
(1)
|
$112,500
(1)
|
|
Dean
K. Hirata
|
3/15/2006
|
0
|
na
|
2,867
(2)
|
$13,790
(2)
|
|
Blenn
A. Fujimoto
|
3/15/2006
|
0
|
na
|
2,790(2)
|
$13,420(2)
|
|
Denis
K. Isono
|
3/15/2006
|
0
|
na
|
2,714(2)
|
$13,054(2)
|
Note: Messrs.
Migita, Hirata, Fujimoto and Isono did not exercise any stock options or SARs
during the fiscal year ended December 31, 2009.
|
(1)
|
These
values represent stock awarded and earned by Mr. Migita under his Special
Annual Incentive Arrangement for the period August 1, 2008 to June 30,
2009.
|
|
(2)
|
These
values represent performance shares granted under the 2005 – 2007 LTIP to
the NEOs, which vested on March 15,
2009.
|
PENSION BENEFITS
|
Executive
Name
|
Plan
Name
|
#
of Years Credited Service
|
Present
Value of
Accumulated
Benefit
|
2009
Payments
|
|
Ronald
K. Migita
|
na
|
na
|
na
|
na
|
|
Dean
K. Hirata
|
CPF
SERP (1)
|
5.0
|
$1,341,126
|
$0
|
|
Blenn
A. Fujimoto
|
CPB
Defined Benefit Pension Plan (Frozen)
|
2.8
|
$14,249
|
$0
|
|
CPF
SERP
|
5.0
|
$384,827
|
$0
|
|
|
Denis
K. Isono
|
na
|
na
|
na
|
na
|
|
Mary
A. Weisman
|
na
|
na
|
na
|
na
|
|
(1)
|
In
2008, Mr. Hirata’s CB Bancshares, Inc. SERP and Company SERP were combined
under a new restated Company
SERP.
|
Material
Terms of Pension Benefits
We
currently have SERP agreements with Messrs. Hirata and
Fujimoto. SERPs are provided to the executives in order to retain and
promote the NEO’s loyalty, diligence, and performance, and support the NEO’s
economic security during retirement.
SERP
benefits for Messrs. Hirata and Fujimoto vest over ten (10) years beginning on
July 1, 2005, with relatively low vesting increments initially to encourage
retention. The following table illustrates the vesting schedule for
these officers.
|
Years
of Service
|
Cumulative
Vesting Percentage
|
|
Less
than 4 years
|
0%
|
|
4
years
|
10%
|
|
5
years
|
20%
|
|
6
years
|
30%
|
|
7
years
|
45%
|
|
8
years
|
60%
|
|
9
years
|
80%
|
|
10
years or more
|
100%
|
For
Messrs. Hirata and Fujimoto, the SERPs provide for a benefit equal to an annuity
payable for life starting at age 65. The SERPs, after twenty (20)
years of service, are designed to provide a retirement benefit of 65% of the
final three-year average of salary and bonus, reduced by other company-funded
retirement benefits. Messrs. Hirata and Fujimoto have both elected to
receive their benefits in equal monthly installments over a period of 10
years. The annuity amount on which the SERP benefit will be based is
equal to (A) 65% of final average compensation, defined as the average base
salary plus annual bonuses paid during the three years prior to termination,
adjusted for years of service, not to exceed 75% of final average compensation,
reduced by (B) the actuarial equivalent of 50% of the monthly benefit under the
Social Security Act and any other retirement benefits provided by the
Company. Mr. Hirata, however, is entitled to a minimum benefit equal
to the benefit calculated under the terms of the former CB Bancshares, Inc.
SERP. This minimum benefit has been integrated as part of the
benefits provided by his new restated Company SERP.
Mr.
Fujimoto is a participant in our Defined Benefit Pension Plan, which was frozen
in December 2002. Mr. Fujimoto no longer continues to accrue credited
years of service in the Plan.
The
present values of accumulated benefits payable to each of the NEOs are
determined using interest rate and mortality rate assumptions consistent with
those used in our financial statements, except that the values in this proxy
assume no pre-retirement death.
Compensation
and Change-In-Control Agreements
The
following narrative summarizes the material terms of compensation and
change-in-control agreements with our NEOs. See the Potential
Payments upon Termination or Change-in-Control section for additional detail
regarding payments under these agreements.
Mr.
Migita’s Compensation Agreement
On
January 28, 2009, the Company and the Bank entered into an agreement with Ronald
K. Migita, Chairman of the Board, President and CEO of the Company and the Bank
confirming the terms of his compensation for the period beginning August 1, 2008
and ending June 30, 2009. The agreement provided that Mr. Migita
would continue to receive an annual retainer as Chairman of the Board of the
Company and the Bank of $160,000 per annum but would not receive any Board or
committee meeting fees. As President and CEO of the Company and the
Bank, Mr. Migita’s agreement also provided for an annual salary of $1.00 and
entitled him to standard employee benefits and perquisites available to
executives of the Company including an automobile allowance of $1,000 per month
and payment of country club membership dues. In addition, Mr. Migita
was eligible to receive both an annual performance-based incentive cash payment
and an annual performance-based incentive equity grant subject to performance
measured during the period August 1, 2008 to June 30, 2009.
On August
5, 2009, the Company and the Bank entered into an agreement with Mr. Migita,
confirming the terms of his compensation for the period July 1, 2009 through
December 31, 2009. The agreement provided that Mr. Migita would
continue to receive his current retainer as Chairman of the Board of Directors
of the Company and Bank totaling $80,000 for the 6-month period, but would not
receive any Board or committee meeting fees. As President and CEO of
the Company and Bank, Mr. Migita would receive a total salary of $250,000 for
the 6-month period (prorated and paid semi-monthly) and would be entitled to
standard employee benefits and perquisites available to executives of the
Company including an automobile allowance of $1,000 per month and payment of
country club membership dues. In addition, during this period Mr.
Migita was eligible to receive performance-based incentive equity grants in the
form of restricted stock of up to $165,000, based upon an assessment of his
performance against certain performance measures by the Compensation
Committee.
On
December 31, 2009, the Company and the Bank entered into an agreement with Mr.
Migita confirming the terms of his compensation for the period January 1, 2010
through December 31, 2010. The agreement provides that Mr. Migita
will receive a retainer as Chairman of the Board of Directors of the Company and
the Bank of $100,000 per annum, reduced from his current annual retainer of
$160,000, and will continue to not receive any Board or committee meeting
fees. As President and Chief Executive Officer of the Company and the
Bank, Mr. Migita will receive a salary of $500,000 per annum (earned and paid
semi-monthly) and will be entitled to employee benefits and perquisites
available to executives, including an automobile allowance of $1,000 per month
and payment of monthly country club membership dues. Mr. Migita will
not be entitled to any short or long term cash or equity incentive plan payments
based on 2010 performance.
None of
Mr. Migita’s compensation agreements provide for any payments at, following, or
in connection with any termination or change-in-control of the Company beyond
those available generally to all salaried employees subject to NEO regulatory
restrictions.
Mr.
Isono’s Change-In-Control Agreement
The
Company entered into a change-in-control agreement with Mr. Isono in
2008. The agreement provide that if, within the two (2) years after a
change-in-control the Company terminates Mr. Isono’s employment without “Cause”
or Mr. Isono resigns for “Good Reason” (each as defined in the agreement) the
Company will pay a cash payment equal to three (3) times the sum of the Mr.
Isono’s base salary and average bonus earned for the three (3) preceding
years. The agreement also provides that the Company pay any accrued,
earned and unpaid compensation and other accrued benefits, a pro-rata bonus and
that the vesting of outstanding equity awards will accelerate. Mr.
Isono will be subject to a non-solicitation and non-competition covenant for two
(2) years after such termination of employment. Receipt of benefits
under the agreement is conditioned on Mr. Isono’s execution of a general release
of claims in favor of the Company.
If,
within two (2) years after a change-in-control, Mr. Isono’s employment is
terminated due to death or disability, the agreement provides for the payment of
any accrued and unpaid compensation and other accrued benefits, a pro-rata bonus
and that the vesting of outstanding equity awards will
accelerate. Mr. Isono’s cash severance benefits would be reduced if
they became non-deductible under Section 280G of the Internal Revenue
Code.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The
Company has entered into agreements with certain NEOs and maintains certain
plans that require it to provide compensation to the NEOs in the event of a
termination of employment or a change-in-control of the Company. The
estimated amounts payable to each NEO under various termination scenarios,
assuming they had occurred on December 31, 2009, are summarized in the narrative
and tables below.
Impact
of the Company’s Participation in the Troubled Asset Relief Program
As a
participant in the Troubled Asset Relief Program (“TARP”) established by the
Department of the Treasury, the Company is subject to restrictions on
post-termination compensation which prohibit “golden parachute payments” during
the TARP period to its NEOs and any of the next five most highly compensated
employees. For purposes of this restriction, golden parachute
payments include payments for departure for any reason, except for payments for
services performed or benefits accrued. Excluded from the
restrictions are payments made in the event of an employee’s death or
disability. Each of the affected officers voluntarily signed waivers
releasing claims against the Company for any modification to compensation or
benefit plans, arrangements, policies, or agreements that are required to comply
with these restrictions.
Our
presentation of potential post-termination payments reflects our participation
in TARP and the associated restrictions, which will be effective for as long as
U.S. Treasury holds an equity or debt position in the
Company. However, given that the Company will no longer be subject to
these restrictions after the repayment of the TARP financial assistance, we also
present estimated post-termination payment amounts assuming the Company was not
subject to these restrictions.
Payments
Upon Termination for Good Reason, Termination without Cause, or
Resignation
If a
change-in-control has not occurred and Mr. Hirata or Mr. Fujimoto terminate
their employment for Good Reason, are terminated by the Company without Cause,
or voluntarily resign, they are entitled to their vested SERP benefit, accrued
through their termination date and payable at age 65. At December 31,
2009, the present value of Mr. Hirata’s total vested SERP benefit was $1,341,126
and the present value of Mr. Fujimoto’s vested SERP benefit was
$8,069.
None of
the NEOs are covered under employment agreements that provide for any additional
payments or benefits beyond those generally available to other employees if they
terminate their employment for Good Reason, are terminated by the Company
without Cause, or they voluntarily resign, assuming a change-in-control has not
occurred.
Payments
Upon Termination for Cause
If we
terminate any NEO’s employment for Cause, we will not make any payments or
provide any benefits beyond what is generally available to other employees in
this termination scenario. No SERP benefits are payable to an officer
upon termination of employment for Cause.
Potential
Payments Upon Termination Associated with a Change-in-Control
We
entered into a Change-in-Control agreement with Mr. Isono in March 2008, as
discussed in the Compensation and Change in Control Agreements
narrative. Receipt of the payments and benefits associated with this
agreement is conditioned on Mr. Isono’s execution of a general release of claims
in favor of the Company and adherence to non-competition and non-solicitation
covenants for a period of two (2) years. For purposes of this
agreement, “Change-in-Control” generally means a merger, sale of assets or
deposits, or change in Board membership resulting in the loss of a majority of
the total voting power to new owners or new directors, or any outside person
acquiring 25% or more of our outstanding shares.
As of
December 31, 2009 Messrs. Hirata, Fujmoto, Isono and Ms. Weisman held unvested
shares granted under the Company’s 2004 Stock Compensation Plan. The
Plan provides accelerated vesting in the event of a
change-in-control. In addition, Mr. Hirata and Mr. Fujimoto have SERP
agreements which provide additional benefits upon termination associated with a
change-in-control. Mr. Migita did not hold unvested equity awards as
of December 31, 2009 and is not covered under any agreement providing for
additional or accelerated payments triggered by a change-in-control or
associated termination.
|
·
|
The
benefits payable under Mr. Isono’s Change-in-Control Agreement would be
provided only if employment is terminated without Cause or if Mr. Isono
resigns for Good Reason, as defined in his plan, within two (2) years
after a
change-in-control. .
|
|
·
|
Additional
SERP benefits payable to Mr. Hirata and Mr. Fujimoto would be provided if
employment is terminated without Cause or if the NEO resigns for Good
Reason, as defined in their plans, within three (3) years after a
change-in-control.
|
|
·
|
Outstanding
equity awards granted under the 2004 Stock Compensation Plan will vest
upon a change-in-control, whether or not the NEO’s employment
terminates.
|
The table
below shows the estimated benefits to which each NEO is entitled upon a
change-in-control as of December 31, 2009. These benefits represent
amounts beyond what each NEO would be entitled to receive upon voluntary
termination as of December 31, 2009.
PAYMENTS MADE UPON TERMINATION
ASSOCIATED WITH A CHANGE-IN-CONTROL
|
Mr.
Migita
(1)
|
Mr.
Hirata (2)
|
Mr.
Fujimoto (3)
|
Mr.
Isono
(4)
|
Ms.
Weisman
|
|
|
Accelerated
Vesting of Long-term Incentives
|
--
|
$14,284
|
$13,815
|
$8,560
|
$6,782
|
|
Cash
Severance
|
--
|
--
|
--
|
$765,293
|
--
|
|
Accrued
Bonus
|
--
|
--
|
--
|
$43,598
|
--
|
|
Accrued
but Unused Vacation
|
--
|
--
|
--
|
$7,321
|
--
|
|
SERP
Acceleration
|
--
|
$69,286
|
$1,307,998
|
--
|
--
|
|
Excise
Tax Gross-Up (5)
|
--
|
$0
|
$482,897
|
--
|
--
|
|
Total
|
$0
|
$83,570
|
$1,804,710
|
$824,771
|
$6,782
|
|
Reduction
Due to TARP
|
$0
|
($83,570)
|
($1,804,710)
|
($824,771)
|
($6,782)
|
|
Total
Allowable Under TARP (6)
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
(1)
|
Mr.
Migita is not currently covered by any agreement that would provide
payments or benefits following termination in association with a
change-in-control. Furthermore, Mr. Migita did not hold
unvested equity as of December 31, 2009 under the 2004 Stock Compensation
Plan.
|
|
(2)
|
The
value of Mr. Hirata’s SERP acceleration is the difference between the
present value of the SERP benefit in the event of a change-in-control
($1,410,412) and the SERP benefit to which he is otherwise entitled upon
voluntary termination as of December 31, 2009 ($1,341,126). In
the absence of a change-in-control, Mr. Hirata’s SERP benefit is generally
payable when he reaches age 65.
|
|
(3)
|
The
value of Mr. Fujimoto’s SERP acceleration is the difference between the
present value of the SERP benefit in the event of a change-in-control
($1,316,067) and the SERP benefit to which he is otherwise entitled upon
voluntary termination as of December 31, 2009 ($8,069). In the absence of
a change-in-control, Mr. Fujimoto’s SERP benefit is generally payable when
he reaches age 65.
|
|
(4)
|
The
severance benefit for Mr. Isono is calculated as three (3) times base
salary plus the average of the bonuses earned for the three (3) preceding
years. Under Mr. Isono’s change-in-control Agreement, this
severance benefit and other benefits payable under the agreement would be
reduced such that the total payments are deductible under Section 280G of
the Internal Revenue Code. The severance benefit payable to Mr.
Isono’s as of December 31, 2009 would not require a reduction to remain
deductible under the Code.
|
As
provided for in his change-in-control Agreement, if Mr. Isono’s employment
terminates due to death or disability within two (2) years after a
change-in-control, he would be entitled to the accelerated vesting of
outstanding equity awards, accrued bonus, and payments for accrued but unused
vacation. No cash severance would be payable in this termination
scenario.
|
(5)
|
The
tax gross-up is the amount needed to cover excise taxes imposed by Section
4999 of the Internal Revenue Code if total payments provided in connection
with a change-in-control would be non-deductible under Section 280G of the
Internal Revenue Code. Gross-up payments are required under the SERP
Agreements with Messrs. Hirata and Fujimoto if their SERP acceleration
benefit, excluding any other severance payments, would be subject to
excise tax imposed under Section 4999 of the Code.
As
of December 31, 2009, Mr. Hirata was more substantially vested in his SERP
benefit compared to Mr. Fujimoto. As a result, the incremental
value of the accelerated portion of Mr. Fujimoto’s SERP benefit is greater
than the accelerated portion of Mr. Hirata’s SERP. Calculated
under Section 280G of the Internal Revenue Code, the value of Mr.
Fujimoto’s accelerated SERP benefit would be subject to excise tax for a
termination on December 31, 2009. The gross-up payment is
provided to cover the excise tax imposed upon Mr. Fujimoto including all
taxes incurred upon the gross-up payment itself.
The Company does not intend to grant tax gross-ups in
the normal course of business.
|
|
(6)
|
While
subject to the TARP restrictions, we are prohibited from making any
change-in-control or termination-related payments, except for payments for
services performed or benefits accrued. See “Impact of the
Company’s Participation in the Troubled Asset Relief
Program”. Each of the amounts listed in the table are payable
contingent upon termination associated with a change-in-control and
therefore would not be payable as of December 31, 2009 under
TARP.
|
Payments
Upon Death or Disability
Each
officer (or the officer’s estate) will receive benefits under our disability
plan or payments under our life insurance plan, as appropriate. These
benefits are generally available to all employees of the Company. The
table below lists other benefits and amounts payable upon death or disability
for each officer above what they would otherwise be entitled to receive upon
voluntary termination as of December 31, 2009. The TARP prohibitions
on golden parachute payments exclude payments made for a departure on account of
an employee’s death or disability. Therefore, the Company’s
participation in the Troubled Asset Relief Program would not affect amounts
payable to each NEO upon death or disability.
PAYMENTS
UPON DEATH OR DISABILITY
|
Mr.
Migita
|
Mr.
Hirata
|
Mr.
Fujimoto
|
Mr.
Isono
|
Ms.
Weisman
|
|
|
Accelerated
Vesting of Long-term Incentives (1)
|
na
|
na
|
na
|
na
|
$2,620
|
|
Incremental
SERP Payment – Death (2)
|
na
|
$0
|
$1,125,310
|
na
|
na
|
|
Incremental
SERP Payment – Disability (3)
|
na
|
$0
|
$754,778
|
na
|
na
|
|
(1)
|
The
Company granted Ms. Weisman 2,000 shares of restricted stock on August 15,
2007, which vest on August 15, 2010. Under the terms of her
2007 Restricted Stock Grant Agreement, if Ms. Weisman dies or becomes
disabled during the vesting period, all outstanding restricted shares will
immediately vest. No other NEO held unvested restricted shares
as of December 31, 2009.
|
|
(2)
|
Per the terms of their SERP
agreements, if Messrs. Hirata or Fujimoto die during their employment,
their beneficiaries are entitled to a Pre-retirement Death Benefit equal
to the SERP benefit credited with the years of service that they would
have otherwise earned if they continued employment through age 65 and
received annual compensation increases of 4.5%. The
Pre-retirement Death Benefit will be paid in equal monthly installments
over a twenty-year term, starting on the first day of the month after the
date of the officer’s death.
|
Mr.
Hirata’s vested SERP benefit is equal to his Death Benefit calculated on
December 31, 2009. Therefore, there is no incremental value
associated with the SERP benefit if Mr. Hirata dies during active service of the
Company.
The lump
sum present value of the SERP death benefits are calculated using the same
assumptions used to value SERP benefits with respect to termination for Good
Reason or without Cause. The value shown for Mr. Fujimoto represents
an amount above what he would otherwise be entitled to receive upon voluntary
termination.
|
(3)
|
Per
the terms of their SERP agreements, if Messrs. Hirata or Fujimoto
terminate employment due to disability, they are entitled to a Disability
Benefit, equal to the SERP benefit credited with the years of service that
Mr. Hirata or Mr. Fujimoto would have otherwise earned if they continued
employment through age 65 without any compensation
increases.
|
Mr.
Hirata’s vested SERP benefit is equal to his Disability Benefit calculated on
December 31, 2009. Therefore, there is no incremental value
associated with the SERP benefit if his employment terminates due to
disability. The Disability Benefit will start on the first day of the
month after the officer reaches age 65.
The lump
sum present value of the SERP disability benefits are calculated using the same
assumptions used to value SERP benefits with respect to termination for Good
Reason or without Cause. The value shown for Mr. Fujimoto represents
an amount above what he would otherwise be entitled to receive upon voluntary
termination.
DISCUSSION
OF PROPOSALS RECOMMENDED BY THE BOARD OF DIRECTORS
PROPOSAL
1:
ELECTION
OF DIRECTORS
The Board
recommends the election of the four (4) nominees listed below as directors, to
serve a one-year term expiring at the 2011 Annual Meeting of Shareholders and
until their respective successors are elected and qualified or until their
earlier death, resignation or removal.
Christine
H. H. Camp
Dennis I.
Hirota
Ronald K.
Migita
Maurice
H. Yamasato
For more
information regarding the background of each of the nominees for director, see
the section titled “ELECTION OF DIRECTORS” and “DIRECTORS’ AND EXECUTIVE
OFFICERS’ INFORMATION”. The persons named as “proxy” in the enclosed
form of proxy will vote the shares represented by all valid returned proxies in
accordance with the specifications of the shareholders returning such
proxies. If at the time of the Meeting any of the nominees named
above should be unable to serve, which event is not expected to occur, the
discretionary authority provided in the proxy will be exercised to vote for such
substitute nominee or nominees, if any, as shall be designated by the
Board.
The
election of directors requires a plurality of the votes cast “FOR” the election
of the directors by the shares entitled to vote in the election at a meeting at
which a quorum is present. Accordingly, the four (4) directorships to
be filled at the meeting will be filled by the four (4) nominees receiving the
highest number of “FOR” votes.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL FOUR (4) NOMINEES.
PROPOSAL
2:
RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board
has appointed KPMG LLP as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2010. KPMG LLP audited
the Company’s financial statements for the fiscal year ended December 31, 2009,
and has audited the Company’s financial statements since the Company’s inception
in 1982. Representatives of KPMG LLP are expected to attend the
Meeting. The representatives are expected to be available to respond
to appropriate questions and will have an opportunity to make a statement, if
they desire to do so.
The
Company is asking its shareholders to ratify the selection of KPMG LLP as its
independent registered public accounting firm (as it has done in prior years)
because it believes it is a matter of good corporate practice. If the
Company’s shareholders do not ratify the selection, the Audit Committee will
reconsider whether to retain KPMG LLP, but may still retain
them. Even if the selection is ratified, the Audit Committee, in its
discretion, may change the appointment at any time during the year if it
determines that such a change would be in the best interests of the Company and
its shareholders.
Services Rendered By And Fees Paid To
Independent Registered Public Accounting Firm. The following
sections describe the services rendered by KPMG LLP to the Company, and fees
paid by the Company to KPMG LLP for such services, for the fiscal years ended
December 31, 2008 and December 31, 2009. KPMG LLP acted as
independent registered public accounting firm for the Company for the fiscal
years ended December 31, 2008 and December 31, 2009 and performed the Company’s
audit services in fiscal years 2008 and 2009.
|
Audit
Fees. The audit fees include only fees that are
customary under generally accepted auditing standards as established by
the Auditing Standards Board (United States) and in accordance with the
auditing standards of the Public Company Accounting Oversight Board
(United States) and are the aggregate fees the Company incurred for
professional services rendered for the audit of the Company’s annual
financial statements, the audit of internal controls over financial
reporting, reviews of the financial statements included in the Company’s
Quarterly Reports on Form 10-Q, and regulatory and statutory engagements
related to the aforementioned statements. Audit fees were
$1,197,000 for the fiscal year ended December 31, 2008, and $1,107,000 for
the fiscal year ended December 31, 2009.
Audit-Related
Fees. Audit-related fees include fees for assurance and
related services that are related to the performance of the audit of the
financial statements, but are not reported under audit
fees. These services include audits of the Company’s retirement
plans and audits of financial statements and internal controls for
the mortgage banking activities of Central Pacific HomeLoans,
Inc. Audit-related fees were $146,800 for the fiscal year ended
December 31, 2008, and $104,000 for the fiscal year ended December 31,
2009.
Tax Fees. Tax
fees include only fees the Company incurred for professional services
rendered for preparation of the Company’s tax return, tax filings, and tax
consulting. Tax fees were $1,700 for the fiscal year ended December 31,
2008, and $3,200 for the fiscal year ended December 31, 2009.
All Other
Fees. All other fees include the fees billed for
services rendered by KPMG LLP other than those services covered
above. There were no such fees for the fiscal year ended
December 31, 2008. For the fiscal year ended December 31, 2009,
fees were $55,300 for an Enterprise Risk Management
assessment.
|
The Audit
Committee of the Board established a policy in 2003 to pre-approve all services
provided by KPMG LLP. Each service to be provided by KPMG LLP is
presented for pre-approval at the Audit Committee’s regular meeting or presented
to the Chair of the Audit Committee for pre-approval under delegated authority
and presented to the Audit Committee at their next regular meeting. All
engagements with KPMG LLP that commenced during 2004 and since then have been
pre-approved in accordance with the pre-approval policy.
The Audit
Committee considered whether the provision of audit-related services, tax
services, and all other services is compatible with maintaining the independence
of KPMG LLP.
The Board
has submitted its appointment of KPMG LLP for ratification by the Company’s
shareholders. The affirmative vote of the holders of at least a
majority of the outstanding shares of Common Stock represented and entitled to
vote at the Meeting will be required for passage of this proposal.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
PROPOSAL
3:
ADVISORY
(NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
As a
participant in the Capital Purchase Program, the Company is required pursuant to
the Emergency Economic Stabilization Act of 2008 to permit a separate
non-binding stockholder vote to approve the compensation of its executives, as
disclosed pursuant to the compensation disclosure rules of the SEC (which
disclosure includes the Compensation Discussion and Analysis, the compensation
tables and any related material).
This
proposal, commonly known as a “Say-On-Pay” proposal permits stockholders to
endorse or not endorse the Company’s executive compensation program through the
following resolution:
“Resolved,
that the stockholders approve the compensation of the Company’s executives, as
disclosed pursuant to the compensation disclosure rules of the Securities and
Exchange Commission (which disclosure includes the Compensation Discussion and
Analysis, the compensation tables and any related materials).”
Because
the stockholders' vote is advisory, it will not be binding on the
Board. However, the Compensation Committee will take into account the
outcome of the vote when considering future executive compensation
arrangements.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
PROPOSAL
4:
AMENDMENT
TO RESTATED ARTICLES OF INCORPORATION TO
EFFECT
A REVERSE STOCK SPLIT OF COMMON STOCK
The Board
has adopted resolutions (i) declaring that an amendment to our Restated
Articles of Incorporation to effect a reverse stock split, as described below
(the “Reverse Stock Split”), was advisable and (ii) directing that a
proposal to approve the Reverse Stock Split be submitted to the holders of the
Company’s Common Stock for their approval at the Meeting.
The form
of a proposed amendment to the Company’s Restated Articles of Incorporation to
effect the Reverse Stock Split is attached to this proxy statement as Appendix
B. If approved by our shareholders, the Reverse Stock Split would permit (but
not require) the Board to effect a reverse stock split of Common Stock at any
time prior to April 30, 2011 by a ratio of not less than one-for-five and
not more than one-for-twenty, with the exact ratio to be set at a whole number
within this range as determined by the Board in its sole discretion. We believe
that enabling the Board to set the ratio within the stated range will provide us
with the flexibility to implement the Reverse Stock Split in a manner designed
to maximize the anticipated benefits for our shareholders. In determining a
ratio, if any, following the receipt of shareholder approval, the Board may
consider, among other things, factors such as:
|
•
|
the
historical trading price and trading volume of our Common
Stock;
|
|
•
|
the
number of shares of our Common Stock
outstanding;
|
|
•
|
the
then-prevailing trading price and trading volume of our Common Stock and
the anticipated impact of the Reverse Stock Split on the trading market
for our Common Stock;
|
|
•
|
the
anticipated impact of a particular ratio on our ability to reduce
administrative and transactional costs;
and
|
|
•
|
prevailing
general market and economic
conditions.
|
The Board
reserves the right to elect to abandon the Reverse Stock Split, including any or
all proposed reverse stock split ratios, if it determines, in its sole
discretion, that the Reverse Stock Split is no longer in the best interests of
the Company and its shareholders.
Depending
on the ratio for the Reverse Stock Split determined by the Board, between five
and twenty shares of existing Common Stock will be combined into one share of
Common Stock. The number of shares of Common Stock issued and outstanding will
therefore be reduced, depending upon the reverse stock split ratio determined by
the Board. The amendment to our Restated Articles of Incorporation that will be
filed to effect the Reverse Stock Split, if any, will include only the split
ratio determined by the Board to be in the best interests of our shareholders
(the “Split Ratio”) and all of the other proposed amendments at different ratios
will be abandoned. Although the number of issued and outstanding shares of
Common Stock will be reduced by the Reverse Stock Split, the number of
authorized shares of Company Common Stock will be unaffected by the Reverse
Stock Split and accordingly will remain the same.
No fractional shares will be issued as a result of the
Reverse Stock Split. For each holder of Common Stock, the number of shares held
prior to the Reverse Stock Split will be multiplied by the Split Ratio
and, if the resulting number is not a whole
number, then such number will be rounded up to the next nearest whole
number.
Background
and Reasons for the Reverse Stock Split
The Board
is submitting the Reverse Stock Split to our shareholders for approval with the
principal intent of avoiding the risk of the Common Stock being delisted by the
NYSE. In addition, we believe that an increased market price of our Common Stock
resulting from a Reverse Stock Split would also make our Common Stock more
attractive to a broader range of institutional and other investors. Accordingly,
we believe that effecting the Reverse Stock Split is in the Company’s and our
shareholders’ best interests.
The
Common Stock is listed on the NYSE. The primary purpose of the Reverse Stock
Split is to prevent a per share trading price deficiency that would result in
delisting of our Common Stock by the NYSE. To stay listed, the Company must
maintain certain listing standards imposed by the NYSE. If the Company fails to
maintain compliance with the NYSE continued listing standards, the NYSE may
initiate suspension and delisting procedures, which will have a material adverse
effect on the liquidity of our Common Stock. The Company is subject to the
NYSE’s continued listing requirements, including, among other things, the
requirement that the Company maintain an average closing per share price equal
to at least $1.00 over each consecutive 30-day trading period. During the last
year, the share price of the Company’s Common Stock has declined and
occasionally it has closed below $1.00 per share.
Generally,
a company’s failure to meet the NYSE price requirement will not automatically
subject the listed stock to the NYSE’s delisting procedures. The NYSE Company
Manual provides that, after a company is notified by the NYSE that its stock is
“below criteria” (i.e., less than $1.00 per share), the company will have six
(6) months to cure the price deficiency (subject to a potentially extended
period if shareholder approval is required for the proposed cure).
Shareholder
approval of an amendment to the Restated Articles of Incorporation of the
Company providing for implementation of a Reverse Stock Split as discussed below
will provide the Company the means and flexibility to avoid or respond to an
NYSE price deficiency notice and prevent delisting. The Board would have the
authority to implement a Reverse Stock Split which would result in a decreased
number of outstanding shares of Common Stock and a proportionately higher per
share price (depending on the reverse stock split ratio determined by the
Board).
In
addition to avoiding the risk of delisting of our Common Stock by the NYSE, we
believe that the Reverse Stock Split will make our Common Stock more attractive
to a broader range of institutional and other investors. Many investment funds
and institutional investors have investment guidelines and internal policies and
practices that either prohibit them from investing in low-priced stocks or tend
to discourage individual brokers from recommending low-priced stocks to their
customers. Moreover, because brokers’ commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on
higher-priced stocks, the current average price per share of Common Stock may
result in individual shareholders paying transaction costs representing a higher
percentage of their total share value than would be the case if the share price
were substantially higher. We believe that the Reverse Stock Split could address
these concerns by making our Common Stock a more attractive and cost effective
investment for many investors, which will enhance the liquidity of the holders
of our Common Stock.
Reducing
the number of outstanding shares of our Common Stock through the Reverse Stock
Split is intended, absent other factors, to avoid the risk of delisting by
increasing the per share market price of our Common Stock in order to continue
to comply with the NYSE price requirement. However, other factors, such as our
financial results, market conditions and the market perception of our business
may adversely affect the market price of our Common Stock. As a result, there
can be no assurance that the Reverse Stock Split, if completed, will result in
the intended benefits described above, that the market price of our Common Stock
will increase following the Reverse Stock Split or that the market price of our
Common Stock will not decrease in the future. Additionally, we cannot assure you
that the market price per share of our Common Stock after a Reverse Stock Split
will increase in proportion to the reduction in the number of shares of our
Common Stock outstanding before the Reverse Stock Split. Accordingly, the total
market capitalization of our Common Stock after the Reverse Stock Split may be
lower than the total market capitalization before the Reverse Stock
Split.
Procedure
for Implementing the Reverse Stock Split
The
Reverse Stock Split, if approved by our shareholders, would become effective
upon the filing (the “Effective Time”) of an amendment to the Company’s Restated
Articles of Incorporation (the “Amendment”) with the Department of Commerce and
Consumer Affairs of the State of Hawaii (the “DCCA”). The exact timing of the
filing of the Amendment that will effect the Reverse Stock Split will be
determined by the Board based on its evaluation as to when such action will be
the most advantageous to the Company and our shareholders. In addition, the
Board reserves the right, notwithstanding shareholder approval and without
further action by the shareholders, to elect not to proceed with the Reverse
Stock Split if, at any time prior to filing the Amendment, the Board, in its
sole discretion, determines that it is no longer in the Company’s best interest
and the best interests of our shareholders to proceed with the Reverse Stock
Split. If the Amendment effecting the Reverse Stock Split has not been filed
with the DCCA by the close of business on April 30, 2011, the Board will abandon
the Reverse Stock Split.
Effect
of the Reverse Stock Split on Holders of Outstanding Common Stock
Depending
on the ratio for the Reverse Stock Split determined by the Board, between five
and twenty shares of existing Common Stock will be combined into one new share
of Common Stock. The overall effect will be a reduction of the number of shares
of Common Stock issued and outstanding depending upon the reverse stock split
ratio determined by the Board. There will be no change in the
185,000,000 authorized shares of Common Stock or the number of shares which may
be available for issue. Any issuance of Common Stock after the Reverse Stock
Split will have the effect of diluting the percentage of stock ownership and
voting rights of the holders of Common Stock immediately prior to the Effective
Time.
The table
below illustrates the effect, as of _____________, 2010, of the Reverse Stock
Split at certain hypothetical ratios on the number of issued (or reserved for
issuance) shares of Common Stock (without giving effect to the treatment of
fractional shares). The authorized shares of Common Stock would
remain unchanged at 185,000,000.
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Reverse
Stock Split Ratio
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Approximate
number of issued (or reserved
for
issuance) shares of Common Stock
following
the Reverse
Stock Split
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1-for-5
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[6,591,400]
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1-for-10
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[3,295,700]
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1-for-15
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[2,197,133]
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1-for-20
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[1,647,850]
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The
actual number of shares outstanding after giving effect to the Reverse Stock
Split, if implemented, will depend on the reverse stock split ratio that is
ultimately determined by the Board.
The Reverse Stock Split will affect all holders of our Common
Stock uniformly and will not affect any shareholder’s percentage ownership
interest in the Company, except that the rounding up of fractional shares
as described above will effect a small change in the relative percent ownership
of the respective holders of Common Stock. The Reverse Stock Split will not
affect any shareholder’s proportionate voting power (except to the extent of fractional shares rounding
described above).
The number of shareholders of record will not be affected by the
proposed Reverse Stock Split. The Reverse Stock Split may result in some
shareholders owning “odd lots” of less than 100 shares of Common Stock. Odd lot
shares may be more difficult to sell, and brokerage commissions and other costs
of transactions in odd lots are generally somewhat higher than the costs of
transactions in “round lots” of even multiples of 100 shares.
After the
Effective Time, our Common Stock will have new Committee on Uniform Securities
Identification Procedures (CUSIP) numbers, which is a number used to identify
our equity securities, and stock certificates with the older CUSIP numbers will
need to be exchanged for stock certificates with the new CUSIP numbers by
following the procedures described below.
The
Company is subject to the periodic reporting and other requirements of the
Exchange Act. After the Effective Time, the Company will continue to be subject
to the periodic reporting and other requirements of the Exchange
Act.
Beneficial
Holders of Common Stock (i.e. shareholders who hold in street name)
Upon the
implementation of the Reverse Stock Split, we intend to treat shares held by
shareholders through a bank, broker, custodian or other nominee in the same
manner as registered shareholders whose shares are registered in their names.
Banks, brokers, custodians or other nominees will be instructed to effect the
Reverse Stock Split for their beneficial holders holding our Common Stock in
street name. However, these banks, brokers, custodians or other nominees may
have different procedures than registered shareholders for processing the
Reverse Stock Split and dealing with fractional shares. Shareholders who hold
shares of our Common Stock with a bank, broker, custodian or other nominee and
who have any questions in this regard are encouraged to contact their banks,
brokers, custodians or other nominees.
Registered
“Book-Entry” Holders of Common Stock (i.e. shareholders that are registered on
the transfer agent’s books and records but do not hold stock
certificates)
Certain
of our registered holders of Common Stock may hold some or all of their shares
electronically in book-entry form with the transfer agent. These shareholders do
not have stock certificates evidencing their ownership of the Common Stock. They
are, however, provided with a statement reflecting the number of shares
registered in their accounts.
Shareholders who hold registered shares in book-entry form with
the transfer agent will be sent a transaction statement by the transfer agent
after the Effective Time and do not need to take any action to receive
post-split shares.
Holders
of Certificated Shares of Common Stock
Shareholders
holding shares of our Common Stock in certificated form will be sent a
transmittal letter by the transfer agent after the Effective Time. The letter of
transmittal will contain instructions on how a shareholder should surrender his
certificate(s) representing shares of Common Stock (the “Old Certificates”) to
the transfer agent in exchange for certificates representing the appropriate
number of whole shares of post-Reverse Stock Split Common Stock (the “New
Certificates”). No New Certificates will be issued to a shareholder until such
shareholder has surrendered all Old Certificates, together with a properly
completed and executed letter of transmittal, to the transfer agent. No
shareholder will be required to pay a transfer or other fee to exchange his Old
Certificates. Shareholders will then receive New Certificate(s) representing the
number of whole shares of Common Stock that they are entitled as a result of the
Reverse Stock Split. Until surrendered, we will deem outstanding Old
Certificates held by shareholders to be cancelled and only to represent the
number of whole shares of post-Reverse Stock Split Common Stock to which these
shareholders are entitled. Any Old Certificates submitted for exchange, whether
because of a sale, transfer or other disposition of stock, will automatically be
exchanged for New Certificates. If an Old Certificate has a restrictive legend
on the back of the Old Certificate, the New Certificate will be issued with the
same restrictive legends that are on the back of the Old
Certificate.
SHAREHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK
CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Effect
of the Reverse Stock Split on Options, Warrants, Convertible Securities and
Other Equity-Based Securities
Based
upon the reverse stock split ratio determined by the Board, proportionate
adjustments are generally required to be made to the per share exercise price
and the number of shares issuable upon the exercise or conversion of all
outstanding options, warrants, convertible or exchangeable securities entitling
the holders to purchase, exchange for, or convert into, shares of Common Stock.
This would result in approximately the same aggregate price being required to be
paid under such options, warrants, convertible or exchangeable securities upon
exercise, and approximately the same value of shares of Common Stock being
delivered upon such exercise, exchange or conversion, immediately following the
Reverse Stock Split as was the case immediately preceding the Reverse Stock
Split. The number of shares of Common Stock issuable upon exercise or vesting of
stock option awards will be rounded down to the nearest whole share and no cash
payment will be made in respect of such rounding. For some of the Company’s
equity plans, the Board or Compensation Committee is obligated to make these
adjustments after a reverse stock split. For other Company equity plans, the
Board or Compensation Committee has the discretion to make such equitable
adjustments and intends to make them if the proposed Reverse Stock Split is
approved.
Accounting
Matters
The
proposed amendment to our Restated Articles of Incorporation will not affect the
par value of our Common Stock per share, which will remain without par value.
Reported per share net income or loss will be higher because there will be fewer
shares of Common Stock outstanding.
Certain
Federal Income Tax Consequences of the Reverse Stock Split
The
following summary describes certain material U.S. federal income tax
consequences of the Reverse Stock Split to holders of our Common
Stock.
Unless
otherwise specifically indicated herein, this summary addresses the tax
consequences only to a beneficial owner of our Common Stock that is a citizen or
individual resident of the United States, a corporation organized in or under
the laws of the United States or any state thereof or the District of Columbia
or otherwise subject to U.S. federal income taxation on a net income basis in
respect of our Common Stock, or a trust over which a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust (a “U.S. holder”). This summary does not
address all of the tax consequences that may be relevant to any particular
investor, including tax considerations that arise from rules of general
application to all taxpayers or to certain classes of taxpayers or that are
generally assumed to be known by investors. This summary also does not address
the tax consequences to (i) persons that may be subject to special
treatment under U.S. federal income tax law, such as banks, insurance companies,
thrift institutions, regulated investment companies, real estate investment
trusts, tax-exempt organizations, U.S. expatriates, persons subject to the
alternative minimum tax, traders in securities that elect to use a
mark-to-market method of accounting and dealers in securities or currencies,
(ii) persons as to whom our Common Stock or an option to purchase our
Common Stock is part of a position in a “straddle” or is part of a “hedging,”
“conversion,” “wash sale” or other integrated investment transaction for federal
income tax purposes, or (iii) persons that do not hold our Common Stock as
“capital assets” (generally, property held for investment).
If a
partnership (or other entity classified as a partnership for U.S. federal income
tax purposes) is the beneficial owner of our Common Stock, the U.S. federal
income tax treatment of a partner in the partnership will generally depend on
the status of the partner and the activities of the partnership. Partnerships
that hold our Common Stock, and partners in such partnerships, should consult
their own tax advisors regarding the U.S. federal income tax consequences of the
Reverse Stock Split.
This
summary is based on the provisions of the Internal Revenue Code of 1986, as
amended, U.S. Treasury regulations, administrative rulings and judicial
authority, all as in effect as of the date of this Proxy
Statement. Subsequent developments in U.S. federal income tax law,
including changes in law or differing interpretations, which may be applied
retroactively, could have a material effect on the U.S. federal income tax
consequences of the Reverse Stock Split.
PLEASE
CONSULT YOUR OWN TAX ADVISOR REGARDING TAX CONSEQUENCES OF A REVERSE STOCK SPLIT
IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF
ANY OTHER TAXING JURISDICTION.
U.S.
Holders
The
Reverse Stock Split should be treated as a recapitalization for U.S. federal
income tax purposes. Therefore, no gain or loss will be recognized upon the
Reverse Stock Split. Accordingly, the aggregate tax basis in the Common Stock
received pursuant to the Reverse Stock Split should equal the aggregate tax
basis in the Common Stock surrendered, and the holding period for the Common
Stock received should include the holding period for the Common Stock
surrendered.
Non-U.S.
Holders
The
discussion in this section is addressed to a beneficial owner of our Common
Stock who is a foreign corporation or a non-resident alien individual (“non-U.S.
holders”). Generally,
non-U.S. holders will not recognize any gain or loss upon the Reverse Stock
Split.
Tax
Consequences to the Company
The
Company will not recognize any gain or loss as a result of any reverse stock
split.
Vote
Required to Approve the Amendment and Recommendation
Under
Hawaii law and our Restated Articles of Incorporation, the affirmative vote of
holders of a majority of the shares of Common Stock outstanding as of the Record
Date is required to approve the Reverse Stock Split.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL.
PROPOSALS
OF SHAREHOLDERS
Shareholder
proposals intended to be considered for inclusion in the Company's proxy
statement and voted on at the Company’s regularly scheduled 2011 annual meeting
of shareholders must be received at the Company’s offices at 220 South King
Street, Honolulu, Hawaii 96813, Attention: Corporate Secretary, by no later than
one hundred twenty (120) calendar days before the first anniversary date of the
release of this Proxy Statement, (i.e. by no later than December __, 2010)
pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as
amended. Applicable SEC rules and regulations govern the submission
of shareholder proposals and the Company’s consideration of them for inclusion
in next year’s proxy statement and form of proxy.
The
Company’s Restated Bylaws contain procedures that shareholders must follow to
present business at a meeting of shareholders if such business is not specified
in the proxy statement. A shareholder may obtain a copy of these
procedures from the Company’s Corporate Secretary. In addition to
other applicable requirements, for business to be properly brought before the
2011 annual meeting of shareholders, a shareholder must give notice of the
matter to be presented at the meeting in a proper written form to the Company’s
Corporate Secretary. The Corporate Secretary must receive this
written notice at the principal offices of the Company not less than ninety (90)
calendar days nor more than one hundred twenty (120) calendar days prior to the
anniversary date of the preceding year’s annual meeting. Shareholder
proposals not made in accordance with these requirements may be disregarded by
the chairperson of the meeting.
OTHER
BUSINESS
The Board
knows of no other business that will be presented for consideration at the
Meeting other than as stated in the Notice of Meeting. If, however,
other matters are properly brought before the Meeting, it is the intention of
the persons named in the accompanying form of proxy to vote the shares
represented thereby on such matters in accordance with the recommendation of the
Board.
Incorporation
by Reference
To the
extent that this Proxy Statement is incorporated by reference into any other
filing by the Company under the United States Securities Act of 1933, as
amended, or the United States Securities Exchange Act of 1934, as amended, the
sections of this Proxy Statement entitled “Compensation Committee Report” and
“Report of the Audit Committee” will not be deemed incorporated, unless
specifically provided otherwise in such filing.
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Dated: April
_, 2010
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CENTRAL
PACIFIC FINANCIAL CORP.
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__________________________
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Name
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Title
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APPENDIX
A
CENTRAL
PACIFIC FINANCIAL CORP.
STANDARDS
REGARDING DIRECTOR INDEPENDENCE
A. In
order to qualify as independent, a Director (“Director”) of Central Pacific
Financial Corp. (“CPF”) or Central Pacific Bank (“CPB”) must meet all of the
following criteria:
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1.
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The
Board of Directors of CPF and CPB must affirmatively determine that the
Director has no material relationship with CPF, either directly or as a
partner, shareholder or officer of an organization that has a relationship
with CPF.
Note:
Under the NYSE Corporate Governance Standards, in order for any Director
to qualify as “independent” the Board must affirmatively determine that
the Director has no material relationship with the Company (either
directly or as a partner, shareholder or officer of an organization that
has a relationship with the Company or any subsidiary of the
Company). In making its independence determination, the Board
should broadly consider all relevant facts and circumstances. In
particular, when assessing the materiality of a Director’s relationship
with the Company, the Board should consider the issue not merely from the
standpoint of the Director, but also from that of persons or organizations
with which the Director has an affiliation. Material
relationships can include commercial, industrial, banking, consulting,
legal, accounting, charitable and familial relationships, among
others. Ownership of a significant amount of stock in the
Company is not, by itself, however, a bar to an independence
finding. The identity of the independent Directors and the
basis for the Board’s determination that a relationship is not material
must be disclosed in the Company’s annual proxy statement.
None
of the following relationships shall be considered to be a material
relationship that would cause a director not to be independent (provided
such relationships do not otherwise conflict with any independence
standards set by the New York Stock Exchange, the Securities and Exchange
Commission, or by any other applicable law, rule or
regulation):
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a.
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Service
by a Director as an executive officer, employee or equity owner of a
company that has made payments to or received payments from CPF or CPB or
any subsidiary or affiliate of CPF or CPB, so long as the payments made or
received during such other company’s last three fiscal years are not in
excess of the greater of $1 million or 2% of such other company’s
consolidated gross revenues for such other company’s fiscal year in which
the payments were made.
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b.
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Service
by a Director solely in the position of director, trustee, advisor or
similar position, of a business or entity that engages in a transaction
with CPF or CPB or any subsidiary or affiliate of CPF or CPB, provided a
majority of the directors of that business or entity do not comprise a
majority of the directors of CPF or CPB or any subsidiary or affiliate of
CPF or CPB.
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c.
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Extensions
of credit by CPB to a Director, or a company of which a Director is an
executive officer, employee or equity owner, or maintenance at CPB by a
Director, or a company of which a Director is an executive officer,
employee or equity owner, of deposit, checking, trust, investment, or
other accounts with CPB, in each case on terms that are substantially
similar to those available to similarly situated customers of
CPB.
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d.
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e.
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Service
by a Director solely in the position of director, trustee, advisor or
similar position of a tax-exempt organization to which CPF or CPB or any
subsidiary or affiliate of CPF or CPB makes
contributions.
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f.
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Any
other transaction or relationship between a Director and CPF or CPB or any
subsidiary or affiliate of CPF or CPB in which the amount involved does
not exceed $10,000.
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2.
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The
Director is not employed by CPF nor was employed by CPF within the last 3
years.
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3.
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None
of the Director’s immediate family members is an executive officer of CPF
nor was an executive officer of CPF within the last 3
years.
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4.
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Within
the last 3 years, the Director has not received more than $120,000 during
any twelve-month period in direct compensation from CPF, other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued
service).
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5.
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Within
the last 3 years, none of the Director’s immediate family members has
received more than $120,000 during any twelve-month period in direct
compensation from CPF, other than director and committee fees and pension
or other forms of deferred compensation for prior service (provided such
compensation is not contingent in any way on continued
service).
Note: Compensation received by an immediate family
member for service as a non-executive employee of CPF need not be
considered in determining
independence.
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6.
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The
Director is not a current partner of a firm that is CPF’s internal or
external auditor.
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7.
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None
of the Director’s immediate family members are a current partner of a firm
that is CPF’s internal or external
auditor.
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8.
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The
Director is not a current employee of a firm that is CPF’s internal or
external auditor.
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9.
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The
Director does not have an immediate family member who is an employee of a
firm that is CPF’s internal or external auditor, and who personally works
on CPF’s audit.
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10.
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Within
the last 3 years, the Director was not a partner or employee of a firm
that is or was CPF’s internal or external auditor, who personally worked
on CPF’s audit within that
time.
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11.
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Within
the last 3 years, no immediate family member of the Director was a partner
or employee of a firm that is CPF’s internal or external auditor, who
personally worked on CPF’s audit within that
time.
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12.
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The
Director does not serve, and within the last 3 years has not served, as an
executive officer of another company (excluding CPF companies) in which
any present CPF executive officer serves on that other company’s
compensation
committee.
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13.
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None
of the Director’s immediate family members is, nor within the last 3 years
has been, employed as an executive officer of another company (excluding
CPF companies) in which any present CPF executive officer serves on that
other company’s compensation
committee.
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14.
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The
Director is not a current employee of a company that has made payments to,
or received payments from, CPF for property or services in an amount
which, in any of the last 3 fiscal years, exceeds the greater of $1
million or 2% of such other company’s consolidated gross
revenues.
Note:
Both the payments and the consolidated gross revenues to be measured shall
be those reported in the last completed fiscal year of such other company.
The look-back provision for this test applies solely to the financial
relationship between CPF and the director or immediately family member’s
current employer; a listed company need not consider former employment of
the director or immediate family member.
Note:
Contributions to tax exempt organizations shall not be considered
“payments”, provided however, that CPF must disclose in its annual proxy
statement, any such contributions made by CPF to any tax exempt
organization in which any independent director serves as an executive
officer if, within the preceding 3 years, contributions in any single
fiscal year from CPF to the organization exceeded the greater of $1
million or 2% of such tax exempt organization’s consolidated gross
revenues.
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15.
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None
of the Director’s immediate family members is a current executive officer
of a company that has made payments to, or received payments from, CPF for
property or services in an amount which, in any of the last 3 fiscal
years, exceeds the greater of $1 million or 2% of such other company’s
consolidated gross revenues.
Note: Same “Notes” in number 14 above apply to this
number 15.
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B. In order
to qualify as independent for purposes of the audit committee, a Director must
meet all of the following additional independence
criteria:
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1.
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Other
than in his or her capacity as a member of the Board or any Board
committee, a Director must not accept or have accepted, directly or
indirectly, any consulting, advisory, or other compensatory fee from
CPF.
Note: Compensatory
fees do not include the receipt of fixed amounts of compensation under a
retirement plan (including deferred compensation) for prior service with
CPF (provided that such compensation is not contingent in any way on
continued service).
Note: The
term indirect acceptance by a member of an audit committee of any
consulting, advisory or other compensatory fee includes acceptance of such
a fee by a spouse, a minor child or stepchild or a child or stepchild
sharing a home with the member of by an entity in which such member is a
partner, member, an officer such as a managing director occupying a
comparable position or executive officer, or occupies a similar position
(except limited partners, non-managing members and those occupying similar
positions who, in each case, have no active role in providing services to
the entity) and which provides accounting, consulting, legal, investment
banking or financial advisory services to CPF or any of its
subsidiaries.
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2.
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A
Director must not be affiliated with CPF or any subsidiary of
CPF.
Note: An
audit committee member that sits on the board of directors of a listed
issuer and an affiliate of the listed issuer is exempt from this
requirement if the member, except for being a director on each such board
of directors, otherwise meets the independence requirements for each such
entity, including the receipt of only ordinary-course compensation for
serving as a member of the board of directors, audit committee or any
other board committee of each such
entity.
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When used
above the following terms shall have the following meanings:
“affiliate
of” or “affiliated with”, a specified person, means a person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the person specified. A person is not
deemed to be in control of a specified person if the person is not the
beneficial owner, directly or indirectly, of more than 10% of any class of
voting equity securities of the specified person, and is not an executive
officer of the specified person. The following are deemed affiliates:
an executive officer of an affiliate; a director who is also an employee of an
affiliate; a general partner of an affiliate, and a managing member of an
affiliate. The term “affiliate” also includes a subsidiary, sibling
company, predecessor, parent company, or former parent company.
“Company”
and “CPF” means and includes Central Pacific Financial Corp. and its affiliates
and subsidiaries.
“executive
officer” means and includes as to Central Pacific Financial Corp., its chief
executive officer, president, chief financial officer, principal financial
officer, principal accounting officer (or if there is no such accounting
officer, the controller), any vice president in charge of a principal business
unit, division or function (such as sales, administration or finance), any other
officer who performs a policy-making function or any other person who performs
similar policy-making functions for Central Pacific Financial
Corp. Executive officers of affiliates and subsidiaries of Central
Pacific Financial Corp. may be deemed executive officers of Central Pacific
Financial Corp. if they perform such policy-making functions for Central Pacific
Financial Corp. Policy-making function is not intended to include
policy-making functions that are not significant.
“immediate
family member(s)” means and includes a person’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) who share such
person’s home (when applying the look-back provisions, one need not consider
individuals who are no longer immediate family members as a result of legal
separation or divorce, or those who have died or become
incapacitated).
APPENDIX
B
FORM
OF ATTACHMENT TO ARTICLES OF AMENDMENT
OF
CENTRAL
PACIFIC FINANCIAL CORP.
Article
IV of the Restated Articles of Incorporation of Central Pacific Financial Corp.
(the “Corporation”), as amended, is hereby amended to add to Item 1 of Article
IV the following paragraph:
“Upon the filing and effectiveness (the
“Effective Time”) pursuant to the Hawaii Business Corporation Act of these
Articles of Amendment, each
[ ]*
shares of Common Stock issued and outstanding immediately prior to the Effective
Time shall be combined into one (1) validly issued, fully paid and
non-assessable share of Common Stock without any further action by the
Corporation or the holder thereof (the “Reverse Stock Split”). No
fractional shares of Common Stock will be issued in connection with the Reverse
Stock Split. For each holder of Common Stock, the number of shares held
before the Reverse Stock Split will be divided by [ ]*
and, if the resulting number is not a whole number, then such number will be
rounded up to the next nearest whole number. Each certificate that
immediately prior to the Effective Time represented shares of Common Stock (“Old
Certificates”), shall thereafter represent that number of shares of Common Stock
into which the shares of Common Stock represented by the Old Certificate shall
have been combined, subject to the rounding of fractional numbers as described
above.”
|
Number
of Votes Cast for the
Foregoing
Amendment
|
Number
of Votes Cast against the
Foregoing
Amendment
|
|
|
____________________________
|
____________________________
|
* Whole
number between five (5) and twenty (20) as determined by the Board of Directors
in its sole discretion.
ANNUAL
MEETING OF SHAREHOLDERS
Monday,
May 24, 2010
9:00
a.m. Hawaii time
Room
1110
Central
Pacific Bank
Central
Pacific Plaza
220
South King Street
Honolulu,
Hawaii
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to be Held on May 24, 2010.
Central Pacific Financial
Corp.'s Proxy Statement and Form 10-K Annual Report for the fiscal year
ended December 31, 2009 are available at http://www.centralpacificbank.com/2010proxy.
 |
Annual Meeting Proxy |
This
proxy is solicited by the Board of Directors for use at the Annual Meeting on
May 24, 2010.
If no
choice is specified, the proxy will be voted “FOR” Items 1, 2, 3,
and 4.
By signing the proxy, you
revoke all prior proxies and appoint Dean K. Hirata and Glenn K. C. Ching
and each of them with full power of substitution, to vote your shares on the
matters shown on the reverse side and any other matters which may properly come
before the Annual Meeting and at any and all adjournments thereof.
See
reverse for voting instructions.
| |
Shareholder
Services
P.O. Box 64945
St. Paul, MN 55164-0945
|
COMPANY
#
|
|
|
Vote
by Internet, Telephone or Mail
24
Hours a Day, 7 Days a Week
|
|||
|
|
Your
phone or Internet vote authorizes the named
proxies
to vote your shares in the manner as if
you
marked, signed and returned your proxy card.
|
||
|
· INTERNET
- www.eproxy.com/cpf
Use
the Internet to vote your proxy until 12:00 p.m. (CT) on May 21,
2010.
|
|||
|
· PHONE
- 1-800-560-1965
Use
a touch-tone telephone to vote your proxy until 12:00 p.m. (CT) on May 21,
2010.
|
|||
|
· MAIL
- Mark, sign and date your proxy card and return it in the
postage-paid envelope provided.
|
|||
|
If
you vote your proxy by Internet or by Telephone, you do NOT need to mail
back your Proxy
Card.
|
TO VOTE
BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW,
SIMPLY
SIGN, DATE, AND REUTRN THIS PROXY CARD.
Please
detach here |
The
Board of Directors Recommends a Vote FOR Items 1, 2, 3
and 4.
|
||||||||||||||
| 1. |
Election
of
directors:
|
01
02
|
Christine
H. H. Camp
Dennis
I. Hirota
|
03
04
|
Ronald K.
Migita
Maurice H.
Yamasato
|
o |
Vote FOR
all nominees
(except as
marked)
|
o |
Vote
WITHHELD
from all
nominees
|
|||||
|
(Instructions:
To withhold authority to vote for any indicated nominee, write the
number(s) of the nominee(s) in the box provided to the
right.)
|
||||||||||||||
| 2. | To ratify the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2010. | o | For | o | Against | o | Abstain | |||||||
| 3. | To consider an advisory (non-binding) proposal to approve the compensation of the Company's executive officers. | o | For | o | Against | o | Abstain | |||||||
| 4. | To approve an amendment to our Restated Articles of Incorporation to effect a reverse stock split of our Common Stock by a ratio of not less than one-for-five and not more than one-for-twenty at any time prior to April 30, 2011, with the exact ratio to be set at a whole number within this range as determined by the Board of Directors in its sole discretion. | o | For | o | Against | o | Abstain | |||||||
| 5. |
To
transact such other business as may properly come before the Meeting and
at any and all adjourments thereof.
|
|||||||||||||
|
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
|
||||||||||||||
|
Address
Change? Mark Box o
Indicate
changes below:
|
Date ___________________________ | |||||||||||||
|
|
||||||||||||||
| Signature(s) in Box | ||||||||||||||
|
Please
sign exactly as your name(s) appear on Proxy. If held in joint
tenancy, all persons should sign. Trustees, administrators, etc., should
include title and authority. Corporations should provide full name of
corporation and title of authorized officer signing the
Proxy.
|
||||||||||||||
ANNUAL
MEETING OF SHAREHOLDERS
Monday,
May 24, 2010
9:00
a.m. Hawaii time
Room
1110
Central
Pacific Bank
Central
Pacific Plaza
220
South King Street
Honolulu,
Hawaii
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to be Held on May 24, 2010.
Central Pacific Financial
Corp.'s Proxy Statement and Form 10-K Annual Report for the fiscal year
ended December 31, 2009 are available at http://www.centralpacificbank.com/2010proxy.
|
Annual
Meeting Proxy
Voting
Instructions to Trustee
|
Central
Pacific Bank
401(k)
Retirement Savings Plan
I hereby
direct the Vanguard Fiduciary Trust Company, as Trustee of the Central Pacific
Bank 401(k) Retirement Savings Plan (the “Plan”), to vote at the Annual Meeting
of Shareholders of Central Pacific Financial Corp. (the “Company”) as indicated
on the reverse side of this card, all shares allocated to my account in the
Plan. The Trustee will vote these shares as I direct. If no direction is given
to the Trustee, the Plan’s Trustee will vote my shares held in the Plan in the
same proportion as votes received from other participants in the
Plan.
This
voting instruction card is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company. I understand this card must be
returned to the Trustee by noon Central Time on May 21, 2010 if my voting
instructions are to be honored. If it is not received by the Trustee, or if it
is received but the voting instructions are invalid, the shares of stock with
respect to which I could have directed the Trustee shall be voted by the Trustee
in accordance with the terms of the Plan. The Trustee is hereby directed to vote
as indicated on the following proposals which are more fully described in the
Company’s
Notice of Annual Meeting of Shareholders and Proxy Statement. The undersigned
hereby acknowledges receipt of the Proxy Statement for the Annual
Meeting.
See
reverse for voting instructions.
| |
Shareholder
Services
P.O. Box 64945
St. Paul, MN 55164-0945
|
COMPANY
#
|
|
|
Vote
by Internet, Telephone or Mail
24
Hours a Day, 7 Days a Week
|
|||
|
|
Your
phone or Internet vote authorizes the named
proxies
to vote your shares in the manner as if you
marked,
signed and returned your voting instruction card.
|
||
|
· INTERNET
- www.eproxy.com/cpf
Use
the Internet to vote your proxy until 12:00 p.m. (CT) on May 21,
2010.
|
|||
|
· PHONE
- 1-800-560-1965
Use
a touch-tone telephone to vote your proxy until 12:00 p.m. (CT) on May 21,
2010.
|
|||
|
· MAIL
- Mark, sign and date your voting instruction card and return it in
the postage-paid envelope provided.
|
|||
|
If
you vote your proxy by Internet or by Telephone, you do NOT need to mail
back your Voting Instruction
Card.
|
TO VOTE
BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW,
SIMPLY
SIGN, DATE, AND REUTRN THIS VOTING INSTRUCTION CARD.
Please
detach here |
The
Board of Directors Recommends a Vote FOR Items 1, 2, 3
and 4.
|
||||||||||||||
| 1. |
Election
of
directors:
|
01
02
|
Christine
H. H. Camp
Dennis
I. Hirota
|
03
04
|
Ronald K.
Migita
Maurice H.
Yamasato
|
o |
Vote FOR
all nominees
(except as
marked)
|
o |
Vote
WITHHELD
from all
nominees
|
|||||
|
(Instructions:
To withhold authority to vote for any indicated nominee, write the
number(s) of the nominee(s) in the box provided to the
right.)
|
||||||||||||||
| 2. | To ratify the appointment of KPMG LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2010. | o | For | o | Against | o | Abstain | |||||||
| 3. | To consider an advisory (non-binding) proposal to approve the compensation of the Company's executive officers. | o | For | o | Against | o | Abstain | |||||||
| 4. | To approve an amendment to our Restated Articles of Incorporation to effect a reverse stock split of our Common Stock by a ratio of not less than one-for-five and not more than one-for-twenty at any time prior to April 30, 2011, with the exact ratio to be set at a whole number within this range as determined by the Board of Directors in its sole discretion. | o | For | o | Against | o | Abstain | |||||||
| 5. |
To
transact such other business as may properly come before the Meeting and
at any and all adjourments thereof.
|
|||||||||||||
|
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
|
||||||||||||||
|
Address Change?
Mark Box o
Indicate
changes below:
|
Date ___________________________ | |||||||||||||
|
|
||||||||||||||
| Signature(s) in Box | ||||||||||||||
|
Please
sign exactly as your name(s) appear on Proxy. If held in joint
tenancy, all persons should sign. Trustees, administrators, etc., should
include title and authority. Corporations should provide full name of
corporation and title of authorized officer signing the
Proxy.
|
||||||||||||||