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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
First Hawaiian Inc.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(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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Notes:
[LOGO OF FIRST HAWAIIAN, INC. APPEARS HERE]
P.O. Box 3200
Honolulu, Hawaii 96847
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF FIRST HAWAIIAN, INC.
The Annual Meeting of the Stockholders of First Hawaiian, Inc. (the
"Corporation") will be held on April 16, 1998 at 9:30 o'clock A.M. in the 30th
floor Board Room of First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii,
for the following purposes:
1. To elect 5 directors for a term of 3 years until the Annual Meeting of
Stockholders in 2001, or until their successors are elected and
qualified.
2. To fix the total number of Directors at 15.
3. To approve the 1998 Stock Incentive Plan.
4. To elect the Auditor of the Corporation.
5. To transact such other business as may properly be brought before the
meeting and any adjournments thereof.
Only stockholders of record at the close of business on February 20,
1998, will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS:
Herbert E. Wolff
Senior Vice President and Secretary
Dated: March 4, 1998
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. PLEASE MARK,
DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING POSTAGE-
PAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE
IN PERSON IF YOU WISH TO DO SO.
[LOGO OF FIRST HAWAIIAN, INC. APPEARS HERE]
P.O. Box 3200
Honolulu, Hawaii 96847
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of First Hawaiian, Inc. (the "Corporation") of proxies to
be used in the voting at the Annual Meeting of Stockholders of the Corporation
to be held on April 16, 1998, and any adjournments thereof.
The annual report of the Corporation, containing consolidated financial
statements at and for the year ended December 31, 1997, is being mailed to all
stockholders simultaneously with the mailing of this proxy statement. This proxy
statement and the form of proxy are first being distributed to stockholders on
or about March 4, 1998.
First Hawaiian, Inc. is a holding company for First Hawaiian Bank (the
"Bank"), First Hawaiian Creditcorp, Inc., FHL Lease Holding Company, Inc., FHI
International, Inc., and Pacific One Bank.
OUTSTANDING SHARES; VOTING RIGHTS
At the close of business on February 20, 1998 (the "record date") there
were 31,132,989 shares of common stock (the "Common Stock") of the Corporation
outstanding. Each outstanding share is entitled to one vote on each matter
submitted to a vote of stockholders; there is no cumulative voting.
The following table sets forth information as of the record date for each
person known by the Corporation to be the beneficial owner of more than 5% of
the Common Stock:
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Owner Ownership Class
---------- ---------------- -------
David M. Haig, Fred C. Weyand, Paul Mullin Ganley and 7,900,000 shares 25.37
Walter A. Dods, Jr., as Trustees under the Will and of the
Estate of S.M. Damon, 999 Bishop Street,
Honolulu, Hawaii 96813/(1)/
Trust and Investments Division, First Hawaiian Bank, 2,558,448 shares/(2)/ 8.22
P.O. Box 3200, Honolulu, Hawaii 96847
Alexander & Baldwin, Inc., 822 Bishop Street 1,692,894 shares 5.43
Honolulu, Hawaii 96813/(3)/
The Capital Group Companies, Inc. 1,679,800 shares 5.39
333 South Hope Street
Los Angeles, CA 90071/(4)/
- -------------
/(1)/ Messrs. Haig, Weyand, Ganley and Dods are Directors of the Corporation.
Mr. Dods is the Chairman and Chief Executive Officer of the Corporation.
The Trustees have shared voting and investment power as to shares owned by
the Damon Estate.
/(2)/ The shares held by the Trust and Investments Division in fiduciary
accounts include: 1,058,150 shares as to which it has sole voting power
and 974,186 shares as to which it has sole investment power; 1,276,666
shares as to which it has shared voting power and 1,330,688 shares as to
which it has shared investment power; 224,632 shares as to which sole
voting power is retained by the settlors of the trusts; and 254,574 shares
as to which sole investment power is held by outside investment advisers.
/(3/) Mr. John C. Couch, a Director of the Corporation,is the Chairman of the
Board of Directors of Alexander & Baldwin,Inc. Alexander & Baldwin, Inc.
has sole voting and investment power as to shares shown in the above
table.
/(4)/ The Capital Group Companies, Inc. disclaims investment or voting power
over securities reported but may be deemed to"beneficially own" such
securities by virtue of Rule 13d-3 under the Investment Advisers Act of
1934.
2
PROXY VOTING
Proxies in the accompanying form duly executed and received by the
Corporation at any time before the Annual Meeting, and not revoked or superseded
before being voted, will be voted at the Annual Meeting. Where a specification
is indicated in the proxy, it will be voted in accordance with the
specification. Where no specification is indicated, the proxy will be voted in
accordance with the recommendations set forth in this Proxy Statement and in the
discretion of the proxies named therein on all other matters properly to come
before the meeting or any adjournment thereof.
Proxies in the accompanying form may be revoked or superseded at any time
before they are voted by a proxy of a later date, or by written notification
received by the Secretary of the Corporation prior to the Annual Meeting.
Attendance in person at the Annual Meeting does not of itself revoke a proxy
previously given, but any stockholder who attends the Annual Meeting in person
is free to revoke any proxy previously given and vote his or her shares in
person.
The Corporation will pay the cost of solicitation of proxies for the
Annual Meeting. In addition to solicitation by use of the mails, proxies may be
solicited personally or by telephone, facsimile or telegraph by certain officers
and regular employees of the Corporation, who will not receive any added
compensation for so doing. The Corporation may reimburse brokers and others
holding shares in their names as nominees for their expenses in sending proxy
material to beneficial owners.
ELECTION OF DIRECTORS
The Bylaws of the Corporation provide that the Board of Directors is
divided into 3 equal classes of Directors. Each class of Directors is elected to
serve a 3 year staggered term, with the term of one class expiring at each
Annual Meeting. The total number of Directors on the current Board is fixed at
15. The Board of Directors recommends that the stockholders again fix the total
number of Directors at 15.
Directors are elected by a plurality of the votes cast by the holders of
the Corporation's Common Stock at the Annual Meeting at which a quorum is
present. Under the Corporation's Certificate of Incorporation and Bylaws and
under Delaware law, abstentions and broker non-votes will not have the effect of
votes in opposition to election of a Director.
Proxies in the accompanying form will (unless a contrary direction is
indicated on the proxy) be voted to elect the nominees named below (who have
been nominated by the present Board of Directors) as Directors to serve subject
to the Certificate of Incorporation and Bylaws of the Corporation. If elected,
each will serve for a term of 3 years or until a successor is duly elected and
qualified.
If any of the nominees listed are not available for election at the
Annual Meeting (a contingency which the Board of Directors of the Corporation
does not now foresee), the Board of Directors intends to recommend the election
of such other persons as the Board may select in order to fill the vacancies.
Proxies in the accompanying form will be voted for the election of such other
persons unless authority to vote the proxies in the election of Directors has
been withheld.
The nominees designated by the Board of Directors are named below, with
brief statements setting forth their present principal occupations and other
information, including directorships in public companies:
Nominees for a Term of Shares of Common Percent
Three Years Stock of the Corporation of
Until the Annual Meeting Beneficially Owned
of Stockholders in 2001 at February 20, 1998 Class
------------------------- ------------------------ ------
Dr. Julia Ann Frohlich, 57, has been a Director 1,200 *
of the Corporation since 1992 and a Director of
the Bank since August, 1991. She has been a
Director of First Hawaiian Creditcorp, Inc.
since 1990, and FHL Lease Holding Company, Inc.
from 1990 to June 1, 1997. She has been President
of the Blood Bank of Hawaii since 1985.
3
Nominees for a Term of Shares of Common
Three Years Stock of the Corporation Percent
Until the Annual Meeting Beneficially Owned of
of Stockholders in 2001 at February 20, 1998 Class
------------------------- ------------------------ -------
John A. Hoag, 65, was President of the 38,953 *
Corporation from 1991 until April 20, 1995
and was an Executive Vice President of the
Corporation from 1982 to 1991. He has been
a Director of the Corporation since 1991.
He has been a Director of the Bank since
October, 1989. From 1989 until June 30,
1994, Mr. Hoag was President of the Bank;
from that date until his date of retirement,
June 1, 1995, he was Vice Chairman of the Bank.
He has been with the Bank since 1960. His
reported beneficial ownership of the Common
Stock includes 19,020 shares in his wife's
revocable living trust as to which Mr. Hoag
disclaims beneficial ownership and 1,795
shares held jointly with his wife. Mr. Hoag is
Chairman of the Board of Hawaii Reserves, Inc.,
a land management corporation, and he is on the
Board of Castle Medical Center.
Bert T. Kobayashi, Jr., 57, has been a Director 4,640 *
of the Corporation since 1991 and a Director of
the Bank since 1974. He is a principal of the
law firm of Kobayashi, Sugita & Goda. He is
a Director of Schuler Homes, Inc., a land
development company. His reported beneficial
ownership of common stock includes 589 shares
held in his wife's IRA account and 1,325
shares held in his wife's RLT as to which
he disclaims ownership.
Fred C. Weyand, 81, has been a Director of the 7,921,710 25.44
Corporation since 1986 and a Director of the
Bank since 1981. He was Vice President of the
Corporation from 1976 to 1982; Senior Vice
President of the Bank from 1980 to 1982 and
Corporate Secretary from 1978 to 1981. He
served as a commissioned officer in the
United States Army from 1940 to 1976 and held
the office of Chief of Staff from 1974 to 1976.
He is a Trustee under the Will and of the
Estate of S.M. Damon. His reported beneficial
ownership of the Common Stock includes
7,900,000 shares owned by the Estate of
S.M. Damon as to which he shares voting and
investment powers and 11,710 shares in his
wife's revocable living trust as to
which he shares voting and investment powers.
Robert C. Wo, 72, was a Director of the 15,349 *
Corporation from 1974 to 1989
and again since 1992 and has been a
Director of the Bank since 1963. He has been
President and Secretary of BJ Management
Corp., a management consulting company,
since 1979. He has been Chairman of C.S.
Wo & Sons, Ltd., a manufacturer and
retailer of home furnishings, since 1973.
His reported beneficial ownership of
the Common Stock includes 8,000 shares in
the Betty and Bob Wo Foundation as to
which he shares voting and investment
powers, and 300 shares held jointly with
his wife.
*The percentage of shares beneficially owned, including shares that can be
acquired within 60 days through the exercise of stock options, does not exceed
1% of the shares currently outstanding.
Each of the foregoing nominees attended 75% or more of the combined total
number of meetings held during 1997 of the Board and Committees on which he
sits. The Board of Directors met 12 times in 1997.
The Board of Directors recommends a vote to fix the total number
of Directors at 15 and a vote FOR the above nominees.
4
DIRECTORS CONTINUING IN OFFICE AND EXECUTIVE OFFICERS
The Directors continuing to serve on the Board of Directors, pursuant to
their prior elections, and the named executive officers listed in the Summary
Compensation Table below, are listed here. The Directors will serve subject to
the Certificate of Incorporation and the Bylaws of the Corporation until the
annual meeting of stockholders in the year shown parenthetically after each name
and until their respective successors have been duly elected and qualified.
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Serve at February 20, 1998 Class
----------------------------- ------------------------ -------
John W. A. Buyers, 70, (2000) has been a 2,012 *
Director of the Corporation since 1994
and a Director of the Bank since 1976.
He has been Chairman of the
Board and Chief Executive Officer of C.
Brewer and Company, Limited, a diversified
agribusiness and specialty food company,
since 1992. From 1982 to 1992, he was
Chairman and President of C. Brewer and
Company, Limited, Hawaii's oldest company.
From 1975 to 1982, he was President and
Chief Executive Officer of C. Brewer and
Company, Limited. From 1971 to 1975,
Mr. Buyers was President and Chief
Executive Officer of General
Waterworks Company in Philadelphia,
Pennsylvania. Since 1986, he has been
Chairman of Mauna Loa Resources, the
managing general partner of Mauna Loa
Partners, a master limited partnership
trading on the New York Stock Exchange.
The partnership is engaged in agribusiness.
In 1993, he was elected Chairman of
C. Brewer Homes, Inc., a publicly-traded
real estate development company. He is
also a Director of John B. Sanfilippo &
Sons, Inc. located in Elk Grove Village,
Illinois.
John C. Couch, 58, (2000) has been a 9,852 *
Director of the Corporation since 1991
and a Director of the Bank since 1985.
He has been Chairman of the Board of
Alexander & Baldwin, Inc. ("A&B") since
April 1, 1995 and has been President
and Chief Executive Officer of that
company since April, 1992. He was
President and Chief Operating Officer
of A&B from October, 1985 until April,
1989 and from April, 1991 to March, 1992.
From April, 1989 to December, 1996, he
was Chief Executive Officer of A&B-Hawaii,
Inc., a wholly-owned subsidiary of A&B.
He was President from April, 1989 until
April, 1995, when he became Chairman. He
has been a Director of A&B since 1985.
He was President and Chief Operating
Officer of Matson Navigation Company, Inc.,
a wholly-owned subsidiary of A&B, from January,
1985 to September, 1985 and Executive Vice
President and Chief Operating Officer from
January, 1984 to December, 1984. From April, 1992
to April, 1995, he had been Vice Chairman and
since April, 1995 he has been Chairman of Matson
Navigation Company, Inc. A&B, which is engaged
in ocean transportation, agribusiness,
property development and property management,
holds 1,692,894 shares of Common Stock, as to
which Mr. Couch disclaims beneficial ownership.
5
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Serve at February 20, 1998 Class
----------------------------- ------------------------ -------
Walter A. Dods, Jr., 56, (1999) has been 8,274,930 26.57
Chairman of the Board and Chief Executive
Officer of the Corporation and the Bank
since September, 1989. He was President
of the Corporation from March, 1989 to
March, 1991. He was President of the Bank
from November, 1984 to October, 1989 and
has been a Director of the Bank since
1979. He was an Executive Vice President
of the Corporation from 1982 to 1989 and
has been a Director of the Corporation since
1983. He has been with the Bank since 1968.
His reported beneficial ownership of
the Common Stock includes 924 shares held
in his wife's individual retirement
account as to which Mr. Dods disclaims
beneficial ownership, and 105,550 shares
that Mr. Dods has the right to acquire
within 60 days through the exercise of
stock options. He is a Trustee under the
Will and of the Estate of S. M. Damon
and his reported beneficial ownership of
the Common Stock includes 7,900,000
shares owned by the Estate of S. M. Damon
as to which Mr. Dods shares voting and
investment powers. He is a Director of
Alexander & Baldwin, Inc., which holds
1,692,894 shares of the Common Stock, as to
which Mr. Dods disclaims beneficial
ownership. He is a Trustee of Punahou
School, which owns 210,271 shares of the
Common Stock; he has shared voting and
investment powers with respect to such
shares and disclaims beneficial
ownership thereof.
Paul Mullin Ganley, 58, (1999) has been a 7,936,121 25.49
Director of the Corporation since 1991
and a Director of the Bank since 1986. He
is a Trustee under the Will and of the
Estate of S.M. Damon and a partner in
the Carlsmith Ball Wichman Case & Ichiki
law firm. His reported beneficial
ownership of the Common Stock includes
7,900,000 shares owned by the Estate of
S.M. Damon as to which Mr. Ganley shares
voting and investment powers; 19,434
shares in his revocable living trust as to
which he has sole voting and investment
powers; 12,336 shares in a money purchase
pension plan as to which he has sole
voting and investment powers; 4,159 shares
in an individual retirement account as to
which he has sole voting and investment
powers; and 165 shares for which he has
shared voting and investment powers, as
successor trustee.
David M. Haig, 46, (2000) has been a 7,911,967 25.41
Director of the Corporation since 1989
and a Director of the Bank since 1983.
Mr. Haig is a beneficiary and, since 1982,
a Trustee, under the Will and of the
Estate of S. M. Damon. His reported
beneficial ownership of the Common Stock
includes 7,900,000 shares owned by the
Estate of S. M. Damon as to which Mr. Haig
shares voting and investment powers. He is
beneficiary of an HR-10 plan which holds
5,620 shares of the Common Stock as to
which he has sole voting and
investment powers.
Dr. Richard T. Mamiya, 73, (1999) has 4,476 *
been a Director of the Corporation since
1994 and a Director of the Bank since
1980. He is on the active staff of Queen's
Medical Center for thoracic, cardiovascular,
and general surgery.
6
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Directors Continuing to Serve at February 20, 1998 Class
----------------------------- ------------------------ -------
Dr. Fujio Matsuda, 73, (1999) has been a 3,062 *
Director of the Corporation since 1987 and
a Director of the Bank since 1985. Since
July 1996, he has been Chairman, Pacific
International Center for High Technology
Research. He was President of the Japan-
America Institute of Management Science
from September 1994 to June 1996. He was
Executive Director of the Research
Corporation of the University of Hawaii
from 1984 until 1994; he was the President
of the University of Hawaii from 1974
to 1984.
Dr. Roderick F. McPhee, 69, (2000) has been 13,387 *
a Director of the Corporation since 1972,
and a Director of the Bank since 1972. From
1968 through 1994, he was President of
Punahou School, a kindergarten through 12th
grade college preparatory school. Dr. McPhee
was President and ex-officio non-voting
member of the Board of Trustees of Punahou
School, which owns 210,271 shares of
the Common Stock. He has no voting or
investment powers with respect to such
shares and disclaims beneficial ownership
thereof.
George P. Shea, Jr., 59, (1999) has been a 2,545 *
Director of the Corporation since March,
1993 and the Bank since March, 1989. He was
Chairman, President and Chief Executive
Officer of First Insurance Company of Hawaii,
Ltd. ("First Insurance") from 1988 until his
retirement on March 1, 1995. He was a
Certified Public Accountant with the public
accounting firm, Peat Marwick Mitchell &
Company, from 1965 to 1971 when he joined
First Insurance and was promoted to
Treasurer. He was Vice President, Secretary
and Treasurer of First Insurance from 1978
to 1982 and President and Chief Executive
Officer from 1982 to 1988.
John K. Tsui, 59, (2000) was elected as a 46,726 *
Director of the Corporation to fill the
unexpired term of Mr. Robert J. Pfeiffer on
July 20, 1995 (Mr. Pfeiffer retired as a
Director of the Corporation on June 30,
1995). He has been a Director of the Bank
since July 1994. He was Executive Vice
President of Bancorp Hawaii, Inc. (now known
as Pacific Century Financial Corporation)
from 1986 to June 1994 and Vice Chairman at
Bank of Hawaii from 1984 to 1994. He became
President and Chief Operating Officer of
First Hawaiian Bank on July 1, 1994. He has
been President of the Corporation since
April 20, 1995. His reported beneficial
ownership of the Common Stock includes
34,660 shares that Mr. Tsui has the right
to acquire within 60 days through the
exercise of stock options, and 250 shares
as Trustee of his daughter's Trust.
Executive Officers
------------------
Donald G. Horner--His reported beneficial 46,592 *
ownership of the Common Stock includes 24,122
shares that Mr. Horner has the right to
acquire within 60 days through the exercise
of stock options.
Howard H. Karr--His reported beneficial 49,932 *
ownership of the Common Stock includes
28,620 shares that Mr. Karr has the right
to acquire within 60 days through the
exercise of stock options, and 78 shares
owned by his wife directly or as custodian
as to which he disclaims beneficial
ownership.
7
Shares of Common
Stock of the Corporation Percent
Beneficially Owned of
Executive Officers at February 20, 1998 Class
------------------ ------------------------ -------
Gerald M. Pang--His reported beneficial 15,641 *
ownership of the Common Stock includes
13,447 shares that Mr. Pang has the right
to acquire within 60 days through the
exercise of stock options.
Nominees, Directors Continuing to Serve and Executive Officers
- --------------------------------------------------------------
Beneficial Ownership of all Nominees, 8,577,159 27.55
Directors, and Executive Officers as a
Group (18 persons).
- -----------
*The percentage of shares beneficially owned does not exceed 1% of the shares
currently outstanding, including shares that can be acquired within 60 days
through the exercise of stock options.
Each of the foregoing Directors attended 75% or more of the combined
total number of meetings held during 1997 of the Board and Committees on which
he or she sits. The Board of Directors met 12 times in 1997.
Beneficial Ownership Reporting Compliance
To the Corporation's knowledge, which is based solely on a review of
reports of changes in ownership of the Common Stock as received by the
Corporation from directors, executive officers and other persons owning more
than 10% of the Common Stock, the Corporation believes that all such reports
required to be filed in 1997 and to date in 1998 were timely filed.
Committees of the Board
Among the standing committees of the Board are the Executive Committee,
Executive Compensation Committee and the Joint Audit Committee. The Executive
Committee also acts as the Nominating Committee.
The Executive Committee, acting as the Nominating Committee, advises the
Board of Directors with respect to the total number of Directors to be elected
to the Board and recommends the persons to be nominated for election as
Directors. The Committee will consider nominees recommended by the stockholders
for election as Director. Any such recommendation, together with the nominee's
qualifications and consent to be considered as a nominee, should be sent to the
Secretary of the Corporation in a sufficient time prior to the Annual Meeting of
the Corporation's stockholders for the Committee to consider and act upon such
recommendation. The Committee, acting as the Nominating Committee, met one time
in 1997. It met two additional times for other matters. Its members are Bert T.
Kobayashi, Jr. (Chairman), Walter A. Dods, Jr., Fred C. Weyand and Robert C. Wo.
The Executive Compensation Committee acts upon the executive compensation
program of the Corporation and its subsidiaries. The Committee administers the
Incentive Plan for Key Executives (the "IPKE"), the Long-Term Incentive Plan
(the "LTIP"), the Stock Incentive Plan approved by the stockholders in 1992 and
effective November 22, 1991 (the "1991 SIP"), and the Deferred Compensation Plan
(the "DCP"). It reviews the performance and salaries of the Corporation's Chief
Executive Officer and other senior management officers of the Corporation and
its subsidiaries. The Committee also makes recommendations to the Board of
Directors with respect to the appropriate senior management compensation
structure. The Committee met 5 times in 1997. Its members are Fujio Matsuda
(Chairman), John C. Couch, Julia Ann Frohlich, David M. Haig, Richard T. Mamiya
and Roderick F. McPhee.
The Joint Audit Committee, which met 5 times during 1997, determines on
behalf of the Board whether the performance and examination of the independent
public accounting firm and the Corporation's internal auditor are satisfactory
and adequate to meet the Board's supervisory responsibility. The Committee
reviews internal auditing reports, the adequacy of internal financial and
accounting controls, the work of the external and internal auditors and
management's responses to their audit reports and recommendations. It
recommends the independent public accounting firm proposed for election as
Auditor of the Corporation. It also reviews the Corporation's reports to
stockholders and other financial statements. The Committee reviewed and approved
the 1997 audit plan. The members of the Joint Audit Committee are George P.
Shea, Jr. (Chairman), John W.A. Buyers, Warren
8
H. Haruki, Howard K. Hiroki, Glenn A. Kaya and Stuart A. Hall. Messrs. Haruki
and Hiroki are Directors of the Bank and hold certified public accountant's
certificates, as does Mr. Shea. Mr. Kaya is a Director of the Bank and of First
Hawaiian Creditcorp, Inc., a subsidiary of the Corporation. Mr. Hall is a
Director of Pacific One Bank.
Compensation of Directors
In 1997, the Corporation paid a quarterly retainer of $3,000 to each
member of the Board of Directors who was not an employee of the Corporation or
its subsidiaries. All such non-employee members of the Board received a fee of
$800 and reimbursement for transportation expenses for each Board meeting
attended and $700 for each committee meeting attended. As chairman of the Joint
Audit Committee which involves numerous other meetings with the external and
internal auditors and evaluation of operations, procedures and controls, Mr.
Shea is paid an additional $2,000 per month. For periods after 1996, Directors
who are also employees of the Corporation or one of its subsidiaries do not
receive Board and committee fees.
The Corporation has a Directors' Retirement Plan for non-employee
Directors of the Corporation and the Bank who are not covered by the
Corporation's employees' retirement programs. Following retirement from the
Board after reaching age 55 and at least 10 years of service, the retired
Director or his or her beneficiary will be entitled to receive monthly payments
for a 10 year period at an annual rate equal to one-half of the annual retainer
fee in effect at the time of the Director's retirement.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation for the Chief Executive
Officer and the other four most highly compensated executive officers for the
years ended December 31, 1997, 1996 and 1995.
Long-Term Compensation
-------------------------------
Annual Compensation(1) Awards Payouts(1)
----------------------------------- -------------------- ----------
Name Other
and Annual Restricted Securities All Other
Principal Compen- Stock Underlying LTIP Compen-
Position Year Salary(2) Bonus(3) sation(4) Awards(5) Options Payouts(6) sation(7)
- ------------------------ ----- ---------- -------- --------- ---------- ---------- ---------- ---------
Walter A. Dods, Jr. 1997 $851,167 $498,483 $32,054 -- 80,000 None $76,268
Chairman of the 1996 $825,267 $462,691 $29,463 -- 22,000 None $78,500
Board of Directors, 1995 $776,100 $336,666 $23,761 -- 21,000 None $59,408
Chief Executive
Officer, and Director
of the Corporation
and Bank
John K. Tsui 1997 $566,334 $273,512 $25,444 -- 50,000 None $25,462
President and 1996 $547,133 $131,437 $25,220 $110,006 11,680 None $26,562
Director of the 1995 $501,733 $ 7,733 $28,658 $100,011 11,760 None $12,029
Corporation and
President and Chief
Operating Officer and
Director of the Bank
Howard H. Karr 1997 $337,834 $130,648 $14,146 -- 25,000 None $16,349
Executive Vice 1996 $321,033 $124,914 $14,044 -- 5,840 None $17,034
President and 1995 $296,033 $109,520 $13,210 -- 5,880 None $11,324
Treasurer of the
Corporation and
Vice Chairman of
the Bank
Donald G. Horner 1997 $305,833 $115,355 $13,332 -- 25,000 None $11,080
Executive Vice 1996 $287,633 $111,791 $16,036 -- 5,310 None $12,966
President of the 1995 $262,633 $ 98,641 $14,375 -- 5,290 None $ 9,633
Corporation and
Vice Chairman of
the Bank
9
Long-Term Compensation
-------------------------------
Annual Compensation(1) Awards Payouts(1)
----------------------------------- -------------------- ----------
Name Other
and Annual Restricted Securities All Other
Principal Compen- Stock Underlying LTIP Compen-
Position Year Salary(2) Bonus(3) sation(4) Awards(5) Options Payouts(6) sation(7)
- ------------------------ ----- ---------- -------- --------- ---------- ---------- ---------- ---------
Gerald M. Pang 1997 $176,700 $ 67,050 $12,732 -- 5,000 None $ 7,797
Senior Vice 1996 $170,863 $ 66,761 $13,235 -- 2,950 None $ 9,270
President and 1995 $165,680 $ 62,062 $12,188 -- 3,150 None $ 6,595
Chief Credit Officer
of the Corporation
and Executive Vice
President and Chief
Credit Officer of
the Bank
Notes to Summary Compensation Table:
Note (1) Includes amounts earned but deferred under the DCP.
Note (2) Includes the following for the above-named executive officers:
Base Director and Total
Year Salary Committee Fees* Salary
--------------------------------------------------
Dods................1997 $851,167 $ -- $851,167
1996 $741,667 $83,600 $825,267
1995 $687,500 $88,600 $776,100
Tsui................1997 $566,334 $ -- $566,334
1996 $473,333 $73,800 $547,133
1995 $433,333 $68,400 $501,733
Karr................1997 $337,834 $ -- $337,834
1996 $295,833 $25,200 $321,033
1995 $270,833 $25,200 $296,033
Horner..............1997 $305,833 $ -- $305,833
1996 $270,833 $16,800 $287,633
1995 $245,833 $16,800 $262,633
Pang................1997 $176,700 $ -- $176,700
1996 $170,863 $ -- $170,863
1995 $165,680 $ -- $165,680
*For periods after 1996, employees of the Corporation or its
subsidiaries do not receive director or committee fees. Effective
January 1, 1997, the Executive Compensation Committee increased the
base salary of inside directors to replace the board and/or committee
fees no longer received. The amount of this adjustment was reduced to
avoid the effect that a base salary increase would have on other bonus
and incentive programs measured in part by base salary. The
adjustments to base salary for named executive officers were Mr. Dods,
$57,000; Mr. Tsui, $53,000; Mr. Karr, $17,000; and Mr. Horner,
$10,000.
Note (3) Includes cash payments under the Corporation's Cash Bonus Plan
("Cash Bonus Plan") for all three years and cash payments under the
IPKE for 1996 and 1995. IPKE payments for the calendar year 1995 were
paid in 1996 and for calendar year 1996 in 1997. IPKE payments for
calendar year 1997 are in the process of being calculated and will be
reported in the Proxy Statement for the 1999 annual meeting.
Note (4) Includes primarily imputed income, including "gross-up" for income
taxes, related to social club memberships and dues and automobile
allowances. Also includes above-market interest earned on amounts
deferred under the DCP in 1996. The amounts of Other Annual
Compensation for the above-named executive officers in each of the
three most recent years were less than $50,000 or 10% of Salary and
Bonus.
10
Note (5) The Executive Compensation Committee may, at its sole discretion, pay
IPKE awards in restricted Common Stock with a fair market value equal
to the payment amount, in lieu of cash. As of December 31, 1997, the
aggregate number of non-vested restricted shares by the year of vesting
of such shares for each of the above-named executive officers and
aggregate market value (based on the market price of the stock at
December 31, 1997) follow:
Number of Market
Shares Vesting In Value
1998 12/31/97
----------------- ----------
Dods.......................... -- $ --
Tsui.......................... 7,816 310,686
Karr.......................... -- --
Horner........................ 17,666 702,224
Pang.......................... -- --
----------------- ----------
Total..................... 25,482 $1,012,910
Dividends are paid to the above-named executive officers on their
restricted stock holdings. Participants are entitled to vote the
restricted shares. Restricted IPKE shares become vested upon the
participant attaining 60 years of age, completion of 20 full years of
employment, retirement, death, or termination of employment prior to
retirement with the approval of the Corporation, whichever occurs
earliest. For those participants who had previously met the minimum
restrictions for vesting by completion of 20 full years of employment
or attaining 60 years of age, the Committee imposes a five-year
minimum waiting period from the date of any subsequent stock awards.
The IPKE also provides for forfeiture by the participant and reversion
to the Corporation of all non-vested shares previously awarded in
certain cases of termination of employment.
Note (6) Because the Corporation did not exceed its minimum threshold average
return on equity ("ROE") of 15% for the 1993-1995 performance cycle,
its minimum threshold ROE of 14% for the 1994-1996 performance cycle
and its other performance standards for the 1995-1997 performance
cycle, no awards were paid in 1996 or 1997, or will be payable in 1998,
for the cycles which ended December 31, 1995, 1996 and 1997,
respectively.
Note (7) Includes (i) premiums for term life insurance, including "gross-up"
for income taxes; (ii) amounts related to split dollar insurance
agreements as discussed below; and (iii) Corporation contributions for
the account of the above-named executive officers to the Corporation's
Profit Sharing Plan ("Profit Sharing Plan") and amounts credited to
the accounts of such executive officers under the profit-sharing
portion of the Corporation's nonqualified, unfunded Supplemental
Executive Retirement Plan (the "SERP") that provides benefits that
would have been provided under the Profit Sharing Plan but for Internal
Revenue Code restrictions on such benefits. (In determining profit-
sharing benefits under the SERP, the participant's covered
compensation includes base pay, commissions, overtime, short-term
incentive pay, and the annual cash bonus earned under IPKE; a
participant's covered compensation does not include the cash portion
of the Corporation's Cash Bonus Plan.) Details of All Other
Compensation for each of the above-named executive officers for 1997
are as follows:
Profit Sharing Plan
Term Split Dollar (including SERP)
Insurance Insurance Contributions Total
--------- ------------ ------------------- -------
Dods....................... $32,483 $5,302 $38,483 $76,268
Tsui....................... $ -- $5,125 $20,337 $25,462
Karr....................... $ -- $2,991 $13,358 $16,349
Horner..................... $ -- $1,175 $ 9,905 $11,080
Pang....................... $ -- $ 847 $ 6,950 $ 7,797
The Corporation has split dollar insurance agreements with the
above-named executive officers, as well as certain other senior
officers. The Corporation pays the insurance premium and imputes the
economic benefit to the executive utilizing the PS58 table published
by the Internal Revenue Service. Under the agreement, the executive
owns a policy with a death benefit equal to three times final salary
and the Corporation owns an interest in the policy on the life of the
executive sufficient to recover all insurance premiums previously
paid plus any foregone interest, net of the income tax
11
benefit, on such premium payments upon the death of the executive. The
amount for each named executive officer under this split dollar
insurance agreement included in the above table represents the foregone
interest, net of applicable income tax benefit. The Corporation also
has a $1,000,000 whole life insurance policy on the life of Mr. Dods.
The premium and related "gross-up" for income taxes on this policy are
included under the Term Insurance column. The death benefit under this
policy is deducted from the death benefit under Mr. Dods' split dollar
policy.
Option Grants in Last Fiscal Year
The following table sets forth the stock options granted during 1997 to
each of the above-named executive officers under the 1991 SIP. The table also
lists the potential realizable values of such options on the basis of assumed
annual compounded stock appreciation rates of 5% and 10% over the life of the
options, which is set at 10 years.
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants/1/ for Option Term/2/
----------------------------------------------------- -----------------------------
Number of Percent of
Securities Total Options Exercise
Underlying Granted to or Expira-
Options Employees in Base Price tion
Name Granted/3/ Fiscal Year Per Share Date 5% 10%
- ---------------------------------- ---------- ------------- ---------- ------- ---------- ----------
Walter A. Dods, Jr................ 80,000 26.0% $33.25 3/05/07 $1,672,860 $4,239,355
John K. Tsui...................... 50,000 16.3% $33.25 3/05/07 $1,045,537 $2,649,597
Howard H. Karr.................... 25,000 8.1% $33.25 3/05/07 $ 522,769 $1,324,798
Donald G. Horner.................. 25,000 8.1% $33.25 3/05/07 $ 522,769 $1,324,798
Gerald M. Pang.................... 5,000 1.6% $33.25 3/05/07 $ 104,554 $ 264,960
Notes to Option Grants in Last Fiscal Year:
Note (1) Options under the 1991 SIP are granted at 100% of the market value of
the stock on the date of the grant. Options vest 25% per year after the
first anniversary of the date of grant. No option may be exercised
prior to vesting (and in no event earlier than 6 months after the date
of grant) or later than 10 years after the date of grant. The exercise
price of an option is payable either in cash, by tendering previously
acquired shares by the optionee, or by a combination of cash and
previously acquired shares. In the event of a change in control, as
defined in the 1991 SIP, all options granted and held at least 6
months become immediately exercisable and vested. In the event of
death, disability or retirement, the Committee has the discretion to
accelerate the vesting of options previously granted. The 1991 SIP
provides for the shortening of the exercise period for vested options
if termination is due to death, disability or retirement. The 1991 SIP
also provides for the Corporation to withhold statutory income taxes
upon the exercise of the options by the option holder paying cash or
tendering previously acquired Common Stock or by the Corporation
withholding the appropriate number of option shares which would have
been issued following the option exercise. Without the approval of the
stockholders of the Corporation, the 1991 SIP cannot be terminated,
amended, or modified to (a) increase the total amount of shares which
may be issued except as provided in the 1991 SIP; (b) change the class
of eligible employees; (c) materially increase the cost of the 1991
SIP or benefits to the participants; (d) extend the maximum period
after the date of grant during which the options may be exercised; or
(e) change the provisions of the exercise price.
Note (2) The potential realizable value is reported net of the option exercise
price, but before income taxes associated with exercise. These amounts
represent assumed annual compounded rates of appreciation of the
underlying stock of 5% and 10% from the date of grant to the end of
the option. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Corporation's Common Stock,
overall stock market conditions, and the optionees' continued
employment through the vesting period. The amounts reflected in these
columns may not necessarily be achieved.
Note (3) None of the options granted represents a reload option.
12
Option Values at December 31, 1997
The following table reflects the securities underlying unexercised
options and the value of these options as of December 31, 1997:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1997 December 31, 1997
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
-------------------------------------- ----------------- -----------------
Walter A. Dods, Jr.................... 69,300/112,500 $861,000/$932,250
John K. Tsui.......................... 16,300/67,140 $207,370/$539,530
Howard H. Karr........................ 18,025/33,735 $222,826/$273,514
Donald G. Horner...................... 14,254/32,596 $177,026/$258,822
Gerald M. Pang........................ 9,914/9,546 $123,346/$90,437
There were no options exercised by the above-named executive officers in
1997.
Ten-Year Option Repricings
For the year ended December 31, 1997, there was no adjustment or
amendment to the exercise price of the stock options previously awarded.
Long-Term Incentive Plans-Awards in Last Fiscal Year
The LTIP applies to a group of key executives approved by the Executive
Compensation Committee, much smaller than the group eligible for IPKE and 1991
SIP awards. It is intended to provide incentive compensation to participants
based on the Corporation's ability to sustain a target level of performance over
a 3-year performance cycle. The LTIP is administered by the Executive
Compensation Committee and has no expiration date.
Under the LTIP, no "awards" of shares, units or other rights, as such,
are granted. Instead, at the beginning of each 3-year performance cycle, the
Executive Compensation Committee designates which key executives will be
eligible to participate in the LTIP for the cycle. Additional key executives may
be declared eligible during the cycle. The Committee also establishes target
amounts of individual payouts and corporate performance standards to be met over
the 3-year performance cycle.
In 1997, the Executive Compensation Committee established the formula for
LTIP awards for the 3-year cycle 1997 through 1999. Under the formula for this
cycle, LTIP payouts are based on target percentages (ranging from 10% to 50%) of
each participant's average base salary over the 3-year performance cycle. If the
Corporation does not achieve a minimum threshold average annual return on assets
("ROA") of 1% over the 3-year performance cycle, no payouts will be due under
the LTIP. When the Corporation's ROA exceeds the minimum threshold level, the
target awards to participants are adjusted by a factor (ranging from 0% to 140%)
based on the Corporation's financial performance compared to a peer group, as
measured by relative return on average equity ("ROE"), and based upon the
relative Total Stockholder Return ("TSR"). Relative ROE and relative TSR are
equally weighted in the payout calculation. In addition, LTIP payouts to
participants may be adjusted by the Executive Compensation Committee based on
that individual's performance (from 0% to 140% of the individual's targeted
amount as adjusted for the Corporation's performance).
The peer group used in the LTIP for comparison of ROE is comprised of
regional bank holding companies similar to the Corporation in size, performance
and nature of operations. The group is updated and approved annually by the
Executive Compensation Committee. The peer group for TSR comparison is the S&P
Major Regional Bank Index. The former group includes some, but not all, of the
companies in the S&P Major Regional Bank Index.
Cash payouts are made after each 3-year performance cycle. There were no
payouts in 1997 for the three-year cycle 1994-1996 because the Corporation did
not achieve the minimum threshold average ROE required for that cycle. (For
3-year performance cycles ending in years before 1997, the minimum threshold
performance measure was average ROE rather than average ROA.) A participant can
elect to have the cash award deferred for future payment under the DCP.
13
The following table reflects the estimated future payouts, with respect to
the named executive officers, at threshold, target and maximum award levels for
the 3-year performance cycle beginning in 1997 and ending in 1999. Actual
payouts are contingent upon the Corporation meeting its minimum threshold ROA
and are subject to adjustment by the Executive Compensation Committee as
described above, based upon corporate and individual performances, which will be
determined in 2000 for the 1997-1999 performance cycle.
Performance Estimated Future Payouts
Number of or Other under Non-Stock Price-Based Plans/2/
Shares, Units Period Until -------------------------------------------------
or Other Maturation or
Name Rights Payout/1/ Threshold/3/ Target Maximum/4/
- --------------------------- ------------- ------------- ----------- -------- ----------
Walter A. Dods, Jr......... None 12/31/99 None $425,584 $851,168
John K. Tsui............... None 12/31/99 None $198,217 $396,434
Howard H. Karr............. None 12/31/99 None $ 84,459 $168,918
Donald G. Horner........... None 12/31/99 None $ 76,458 $152,916
Gerald M. Pang............. None 12/31/99 None $ 35,340 $ 70,680
Notes to Long-Term Incentive Plans--Awards in Last Fiscal Year:
Note (1) Performance period beginning January 1, 1997 and ending December 31,
1999.
Note (2) Estimated future payouts under the Target and Maximum columns are
based upon the above-named executive officer's salary for the year
ended December 31, 1997.
Note (3) If the Corporation does not meet its minimum threshold average ROA or
the participant receives a 0% individual performance rating, there is
no payout.
Note (4) Under the current formula, the maximum individual payout is limited to
200% of the target amount.
Defined Benefit Pension Plans
The Corporation has an Employees' Retirement Plan (the "ERP") for
employees of the Corporation and participating subsidiaries. Under the ERP,
covered compensation includes salary, including overtime, but excluding bonuses.
Pension compensation is also limited to the maximum allowable under the Internal
Revenue Code. Retirement benefits become payable effective upon an employee's
retirement at the normal retirement age of 65 years. Normal retirement benefits
payable under the ERP are based on total or final compensation and years of
credited service. Under specified circumstances, an employee who has attained a
certain age and length of service may retire early with reduced benefits. The
ERP was "frozen" as of December 31, 1995 and no participant accrues benefits
under the ERP for service after December 31, 1995.
The Corporation also maintains a pension portion of the SERP under which
the above-named executive officers continue to earn benefits based on the ERP
formula. In determining pension benefits under the SERP, the participant's
covered compensation includes base pay, commissions, overtime, short-term
incentive pay, and the annual cash bonus earned under IPKE; a participant's
covered compensation does not include the cash portion of the Corporation's Cash
Bonus Plan or any LTIP bonus. The pension benefit payable under the SERP is
reduced by the participant's "frozen" accrued benefit under the ERP.
The following table illustrates the estimated annual pension benefits
payable under the ERP and the SERP to an executive officer at age 65. Whether
these amounts become payable depends on the contingencies and conditions set
forth in the ERP and the SERP.
14
Years of Service/(2)/
---------------------------------------------------------------
Average
Compensation/(1)/ 15 20 25 30 35 40
- --------------- -------- -------- -------- -------- -------- ----------
$ 200,000 $ 50,082 $ 66,777 $ 83,471 $100,165 $116,859 $ 133,553
300,000 76,332 101,777 127,221 152,665 178,109 203,553
400,000 102,582 136,777 170,971 205,165 239,359 273,553
500,000 128,832 171,777 214,721 257,665 300,609 343,553
600,000 155,082 206,777 258,471 310,165 361,859 413,553
700,000 181,332 241,777 302,221 362,665 423,109 483,553
800,000 207,582 276,777 345,971 415,165 484,359 553,553
900,000 233,832 311,777 389,721 467,665 545,609 623,553
1,000,000 260,082 346,777 433,471 520,165 606,859 693,553
1,100,000 286,332 381,777 477,221 572,665 668,109 763,553
1,200,000 312,582 416,777 520,971 625,165 729,359 833,553
1,300,000 338,832 451,777 564,721 677,665 790,609 903,553
1,400,000 365,082 486,777 608,471 730,165 851,859 973,553
1,500,000 391,332 521,777 652,221 782,665 913,109 1,043,553
1,600,000 417,582 556,777 695,971 835,165 974,359 1,113,553
Notes to Defined Benefit Pension Plans Table:
Note (1) Final average compensation represents the average annual compensation
during the highest 60 consecutive calendar months in the last 120
calendar months of creditable service. Compensation for the purpose of
this table includes base salary plus the value of awards under the
IPKE as shown on the Summary Compensation Table (but not bonuses under
the LTIP or the Cash Bonus Plan). The amount of the IPKE bonus
included in compensation for any year for purposes of the ERP and the
SERP is the amount earned for the performance year, though not paid
until March of the following year. The estimated annual benefits are
computed on the basis of a straight-life annuity form of payment with
no social security offset.
Note (2) As of December 31, 1997, the number of years of creditable service
under the Corporation's defined benefit plans for each of the executive
officers named in the Summary Compensation Table was as follows: Mr.
Dods, 29 years; Mr. Tsui, 14 years (4 years actual service plus 10
years added by the Executive Compensation Committee when Mr. Tsui was
hired); Mr. Karr, 25 years; Mr. Horner, 19 years; and Mr. Pang, 22
years.
Change in Control Arrangements
There are no employment contracts, change-in-control arrangements (other
than in the LTIP, 1991 SIP and DCP) or termination of employment arrangements
with the above-named executive officers.
Compensation Committee Interlocks and Insider Participation
The members of the Executive Compensation Committee are Fujio Matsuda
(Chairman), John C. Couch, Julia Ann Frohlich, David M. Haig, Richard T. Mamiya
and Roderick F. McPhee.
No member of the Executive Compensation Committee was, at any time during
the last completed fiscal year, an officer or employee of the Corporation or any
of its subsidiaries.
The Corporation has in the ordinary course of business extended credit to
Messrs. Couch and Haig, and to Doctors Matsuda, Mamiya and McPhee (consisting of
real estate mortgages and consumer credit lines) as follows:
Largest Aggregate Interest
Aggregate Indebtedness Rate
Indebtedness Outstanding Per
Name in 1997 December 31, 1997 Annum
----------------------------- ------------ ----------------- --------------
John C. Couch................ $1,832,182 $1,579,061 5.000%--8.500%
David M. Haig................ $1,408,658 $ 965,639 8.125%--8.750%
Richard T. Mamiya............ $ 444,444 $ 435,710 8.625%
Fujio Matsuda................ $ 326,919 $ 292,974 5.000%--8.375%
Roderick F. McPhee........... $ 276,248 $ 272,068 8.125%--8.375%
15
Mr. Couch is Chairman of the Board and a director of A&B, which owns 5.43%
of the Corporation's out standing Common Stock. Mr. Dods is a director of A&B
and the Trust and Investments Division of First Hawaiian Bank holds 2,449,734
shares of A&B's common stock in a fiduciary capacity. Mr. Dods does not serve on
the executive compensation committee (or other board committee performing the
equivalent function) of A&B.
The Bank has (a) made loans to, and issued letters of credit on behalf
of, A&B and its wholly-owned subsidiary, A&B-Hawaii, Inc., (b) made loans to,
and issued a letter of credit on behalf of, Matson Navigation Company, Inc., a
subsidiary of A&B, and (c) made loans to, and issued letters of credit on behalf
of, California and Hawaiian Sugar Company, Inc., a subsidiary of A&B-Hawaii,
Inc. These loans and the letters of credit were made in the ordinary course of
business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risks of collectibility or
present other unfavorable features.
Report of Executive Compensation Committee.
The Executive Compensation Committee of the Board of Directors (the
"Committee") is composed of independent, outside Directors of the Corporation.
The Board of Directors has delegated responsibility for administering the
executive compensation program of the Corporation and its subsidiaries to the
Committee.
The executive compensation philosophy of the Corporation is to provide
remuneration to top performers that is consistent with the quality of their
contributions and the sacrifices they make on behalf of the organization. We
believe that the overall compensation package of executives who contribute to
the long-term advancement of the company should reflect their influence on that
growth. The Corporation intends to make it rewarding for these key executives to
remain until retirement. Key objectives of this philosophy include:
. providing a pay system designed to attract, retain and motivate
executives;
. establishing compensation plans which emphasize performance-based pay
opportunities, as measured by strategic, financial and operating
objectives and goals; and
. providing longer-term, equity-based incentives for executives to ensure
they are motivated and rewarded for growth in equity value and enhanced
value to the stockholders.
The compensation program administered by the Committee includes three
components designed to implement the foregoing objectives: (1) base salaries;
(2) annual incentives; and (3) long-term incentives. Each of these components of
compensation is discussed separately below.
Base Salaries
Base salaries of executive officers are set annually. Factors such as
varying levels of responsibility, individual performance, consistency and
fairness, cost of living factors, the Corporation's operating results and
financial performance and cost control are considered. No particular weight is
placed on, or relative importance given to, any single factor in adjusting base
salaries.
Annual Incentives
Annual incentives for executive officers are provided pursuant to the
IPKE, which provides cash and deferred bonuses based upon the Corporation's
profitability and the executive's performance over the course of the year. The
IPKE promotes the Corporation's pay-for-performance philosophy by providing
executives with direct financial incentives, in the form of annual cash bonuses
or restricted stock awards, to achieve corporate and individual performance
goals. Moreover, annual bonus opportunities allow the Corporation to communicate
specific goals that are of primary importance during the coming year and to
motivate executives to achieve these goals. The IPKE was originally approved by
the stockholders in 1969 and has subsequently been amended several times by the
stockholders.
The total amount available for bonuses under the IPKE is a bonus pool
equal to 21/2% of consolidated income before income taxes and securities gains
for the performance year. Guideline percentages of base salary are set,
increasing as an executive's pay grade increases. The Chief Executive Officer,
at his discretion, allocates a portion of the annual bonus pool to each business
unit. The manager of each business unit recommends how this allocated amount
should be distributed to individual participants in the business unit.
Individual awards above or below guideline percentages are generally based upon
the participant's grade level
16
and performance during the performance period. The business unit manager's
recommendations are reviewed and approved or adjusted by the Chief Executive
Officer. These recommendations are then presented to the Committee for final
review and approval. The Committee grants individual bonuses above or below
guideline percentages based upon the Committee's judgment, after reviewing the
recommendation of the Chief Executive Officer, as to individual performance and
relative levels of responsibility.
The IPKE performance year is the fiscal year of the Corporation, which is
the calendar year. Calculation and award of IPKE bonuses for each year's
performance are deferred until the following March. This allows management and
the Committee to base the awards upon final performance results for the year.
Therefore, no IPKE awards for the 1997 performance year have been calculated and
they are not reported in this Proxy Statement. IPKE awards granted in 1996 and
1997 for 1995 and 1996 performances for the named executive officers are
reported in "Executive Compensation - Summary Compensation Table."
Executive officers are also eligible to receive annual contributions and
bonuses under the Corporation's Profit Sharing Plan and Cash Bonus Plan, which
are plans with fixed profit sharing formulas in which all eligible employees of
the Corporation participate and which are not administered by the Committee.
Long-Term Incentives
Long-term incentives are provided in the form of cash awards under the
Corporation's LTIP and grants of stock options under the 1991 SIP. In keeping
with the Corporation's commitment to provide a total compensation package which
places a significant amount of pay "at-risk", long-term incentives, together
with awards under the IPKE, generally comprise approximately 40% of the value of
an executive's total compensation package if the Corporation meets its target
performance levels.
The Corporation's LTIP applies to a group of key executives approved by
the Committee that is much smaller than the group eligible for IPKE and 1991 SIP
awards. It is intended to provide incentive compensation to participants based
on the Corporation's ability to sustain target levels of performance over 3-year
performance cycles. Under the formula in effect for the 3-year cycle ending in
1997, LTIP awards were based on target percentages (ranging from 10% to 50%) of
each participant's average base salary over the 3-year performance cycle. If the
Corporation did not achieve a threshold average ROA of 1.00% over the 3-year
performance cycle, no payouts were to be made under the LTIP. When the
Corporation's average ROA exceeded the threshold level, the target payouts to
participants were to be adjusted by a factor (ranging from 0% to 140%) based on
the Corporation's financial performance compared to peer groups, as measured by
ROE, and based upon the Corporation's total stockholder return ("TSR") over the
period. Relative ROE and TSR were equally weighted in the payout determination.
In addition, LTIP awards to participants were to be adjusted by the Committee
based on each individual's performance (from 0% to 140% of the individual's
targeted amount as adjusted for the Corporation's performance). In the
Committee's judgment, these performance measures were closely linked to
stockholder value creation and reinforced desired long-term strategies and
performance.
For a description of the peer groups used for comparison of ROE and TSR
see "Long-Term Incentive Plans--Awards in Last Fiscal Year."
The Corporation has completed the 1995-1997 performance cycle. The
Corporation's average ROA for the period met the minimum threshold level.
However, the Corporation's performance factors did not compare favorably enough
with those of the peer groups to support an award for the period. Accordingly,
no awards will be payable for the 1995-1997 cycle.
Under the 1991 SIP, applicable in 1997, stock options are granted at an
option exercise price not less than the fair market value of the Common Stock on
the date of grant. Accordingly, stock options have value only if the stock price
appreciates from the date the options are granted. This design focuses
executives on the enhancement of stockholder value over the long term and
encourages equity ownership in the Corporation.
Guidelines for setting the size of stock option grants were set by the
Committee at the time the 1991 SIP was established, based on the recommendation
of an independent consultant. The guideline for stock option grants is a
percentage of base salary (ranging from 10% to 85%), based upon officer grades
(increasing as grade increases), resulting in a dollar target which is then
converted into the target number of shares by dividing the dollar target by the
Corporation's stock price on the date of grant. The size of individual annual
awards is increased or decreased from the guideline level based on individual
performance at the sole discretion of the Committee.
17
The Committee recommended and the Board of Directors approved a new stock
incentive plan which is described under "Approval of the 1998 Stock Incentive
Plan" in this Proxy Statement. If approved by the stockholders, the 1998 Stock
Incentive Plan would apply to option grants in 1998 and thereafter.
Chief Executive Officer's Compensation
Base Salary In March, 1997, the Committee reviewed Mr. Dods' performance
for 1996. The Committee considered that corporate earnings had increased in 1996
under Mr. Dods' leadership, notwithstanding the continuing Hawaii economic
slowdown. The Committee also noted several outstanding achievements during the
year, including: successful expansion and geographical diversification into the
Pacific Northwest; the merger of Pioneer Federal Savings Bank into First
Hawaiian Bank; and other re-engineering and cost cutting initiatives. Based on
these factors, the Committee concluded that a merit increase in base salary was
warranted and accordingly set his salary at $860,000 effective March 1, 1997.
Mr. Dods' base salary included $57,000 paid as salary in lieu of board and
committee fees he received under prior policies. See Note 2 to Summary
Compensation Table.
Mr. Dods' salary will be reviewed by the Committee in March 1998.
However, in view of the economic conditions facing the Corporation in Hawaii,
Mr. Dods has instituted further cost control initiatives. The program includes
Mr. Dods' request to the Committee that his base salary and the base salaries of
the other four executive officers listed in the Summary Compensation Table, as
well as 52 other senior officers of the Corporation, be frozen at 1997 levels
for the balance of 1998.
Annual Incentives As stated above, IPKE payments for 1997 have not yet
been determined. The IPKE payment for Mr. Dods to be granted in 1998 for 1997
performance will be reflected in the proxy statement for the 1999 annual
meeting. As a result of the Corporation's and his performance for 1996, the
Committee awarded him $460,000 under the IPKE, which was paid in 1997.
Long-Term Incentives In March, 1997, Mr. Dods received options to
purchase 80,000 shares pursuant to the 1991 SIP, as set forth in the Summary
Compensation Table under the section "Option Grants in Last Fiscal Year." This
award was based upon the 1991 SIP's guideline percentage of base salary. The
number of shares awarded was then substantially increased over the target amount
for Mr. Dods and approximately 15 other senior officers of the Corporation. This
increase was based not only upon individual performance, but also to make a
larger portion of total compensation "at risk" and conditioned upon enhancement
of future stockholder value.
Based on the Corporation's financial performance for the 1993-1995 and
1994-1996 performance cycles, no LTIP payouts were made to Mr. Dods in 1996 and
1997. As discussed above, Mr. Dods will not receive an LTIP payout in 1998 for
the 1995-1997 performance cycle because the corporate performance factors were
not met.
Policy with Respect to the $1 Million Deduction Limit
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation in excess of $1,000,000 paid to certain executive officers, unless
certain requirements are met. The Corporation's pay philosophy is performance
focused and the Committee believes in retaining discretion to increase as well
as decrease incentive awards based on the Committee's assessment of individual
performance and other relevant factors. The Committee will continue to review
its compensation programs for the executive officers subject to the
deductibility limit while preserving its focus on performance-driven
compensation.
Executive Compensation Committee
Fujio Matsuda, Chairman
John C. Couch
Julia Ann Frohlich
David M. Haig
Richard T. Mamiya
Roderick F. McPhee
18
Stockholder Return Performance Graph
The attached Comparison of Five-Year Cumulative Total Stockholder Return
performance graph shows the cumulative total stockholder return (stock price
appreciation and reinvestment of dividends) on the Common Stock during the last
five years as compared to the S&P Major Regional Bank Index and the broader S&P
500 Index.
Comparison of Five-Year
Cumulative Total Stockholder Return*
- -------------------------------------------------------------------------------
Among First Hawaiian, Inc. Common Stock, S&P 500 Index and S&P Major Regional
Bank Index (companies appear in published industry index).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG FIRST HAWAIIAN, INC., S&P 500 INDEX AND S&P MAJOR REGIONAL BANK INDEX
PERFORMANCE GRAPH APPEARS HERE
S&P MAJOR
Measurement Period FIRST S&P REGIONAL
(Fiscal Year Covered) HAWAIIAN 500 INDEX BANK INDEX
- ------------------- ---------- --------- ----------
Measurement Pt- 1992 $100 $100 $100
FYE 1993 $ 90 $110 $106
FYE 1994 $ 90 $112 $100
FYE 1995 $118 $153 $158
FYE 1996 $144 $189 $216
FYE 1997 $169 $252 $325
*Total return assumes reinvestment of dividends and $100 invested on
December 31, 1992 in the First Hawaiian, Inc. Common Stock, S&P 500 Index
and S&P Major Regional Bank Index.
19
Certain Transactions
The total amount of loans outstanding to directors and executive officers
of the Corporation from the Bank aggregated $3,979,844, at December 31, 1997.
These loans were made in the ordinary course of business, on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and did not involve more
than normal risks of collectibility or present other unfavorable features.
The following schedule shows detailed information on loans made by the
Corporation to those Directors (including nominees) and executive officers of
the Corporation whose aggregate indebtedness exceeded $60,000 at any time during
1997. All loans are secured by real estate mortgages or are consumer credit
lines:
Aggregate
Largest Indebtedness Interest
Aggregate Outstanding Rate
Indebtedness December 31, Per
Name and Title in 1997 1997 Annum
- ----------------------- ------------ ------------ --------------
John W. A. Buyers $ 942,867 $ 929,829 5.000%--8.875%
Director
John C. Couch $1,832,182 $1,579,061 5.000%--8.500%
Director
Walter A. Dods, Jr. $ 500,000 0 7.625%--9.600%
Chairman,
Chief Executive Officer
and Director
David M. Haig $1,408,658 $ 965,639 8.125%--8.750%
Director
John A. Hoag $ 100,000 0 9.600%
Director
Donald G. Horner $ 374,129 $ 321,969 5.000%--9.600%
Executive Vice President
Howard H. Karr $ 196,289 $ 194,297 7.250%--8.000%
Executive Vice President
and Treasurer
Bert T. Kobayashi, Jr. $ 792,824 $ 770,347 5.000%--8.000%
Director
Richard T. Mamiya $ 444,444 $ 435,710 8.625%
Director
Fujio Matsuda $ 326,919 $ 292,974 5.000%--8.375%
Director
Roderick F. McPhee $ 276,248 $ 272,068 8.125%--8.375%
Director
John K. Tsui $ 445,260 $ 440,512 7.750%
President and Director
The Bank leases a parcel of land, on which a branch of the Bank is
located, from the Estate of S.M. Damon pursuant to a lease commencing July 1,
1967. This lease is for a term of 50 years, requiring the payment of a fixed
annual rent of $156,800 annually from July 1, 1997 to June 30, 2002. Rents
thereafter are to be fixed for each of two succeeding 10-year periods by
agreement or failing agreement by appraisal. Messrs. Haig, Weyand, Ganley and
Dods are Directors of the Corporation and the Bank and Trustees of the Estate.
Management of the Corporation believes that this transaction is as favorable to
the Corporation and the Bank as that which would have been obtainable in
transactions with persons or companies not affiliated with the Corporation or
the Bank.
The Bank leases 6,074 square feet of office space to the Estate of S.M.
Damon in the downtown Honolulu headquarters building of the Bank. The Estate now
pays rent for the space at the same rate as would be paid
20
by unrelated parties for the same space. The rent is a minimum of $3.12 per
square foot per month ($227,410 per annum) until December 7, 2002. Rents
thereafter are to be fixed by agreement or, failing agreement, by appraisal. The
lease will expire in December 2007. The Estate leased space in a prior
headquarters building at $2.00 per square foot per month for the period ended
April 30, 1997. In consideration of the Estate and other tenants of the old
headquarters building agreeing to temporarily relocate their offices to allow
for construction of the present building, the Bank offered the Estate and 3
other unrelated tenants comparable space in the new building at the same
aggregate rent as previously applied in the old building. Thus, for the period
ended April 30, 1997, the Estate paid rent to the Bank at the rate of $2.00 per
square foot on 4,200 square feet, comparable to its space in the old building,
and $3.12 per square foot on the additional 1,874 square feet of space taken in
the new building. Management of the Corporation believes that the arrangements
made for the Estate described above were as favorable to the Corporation and the
Bank as those that would have been obtainable in a similar transaction with
persons or companies not affiliated with the Corporation or the Bank.
Mr. Kobayashi is a director of the Corporation and the Bank and his law
corporation is a partner of the law firm of Kobayashi, Sugita & Goda. In 1997
the Corporation and its subsidiaries paid legal fees to Kobayashi, Sugita & Goda
in the amount of $2,068,254. Kobayashi, Sugita & Goda leases from the Bank
26,788 square feet of office space in the headquarters building. The rent is set
at annual amounts ranging from $1,307,838 per annum in 1998 to $1,730,679 per
annum in the final year, 2006.
APPROVAL OF THE 1998 STOCK INCENTIVE PLAN
At the Annual Meeting held on March 19, 1992, stockholders approved the
adoption of the 1991 SIP. The 1991 SIP provided for the granting of incentive
stock options, nonqualified stock options, reload stock options, and restricted
stock.
The 1991 SIP was adopted to support the achievement of the Corporation's
business objectives by providing incentives linking key employees' interests to
stockholder interests through equity-based awards. These awards are key aspects
of the Corporation's compensation programs, which are designed to attract,
retain, and motivate the best possible employees to accomplish the Corporation's
business objectives.
Management continues to believe that it is in the Corporation's best
interest to utilize equity-based awards as an integral part of its compensation
programs. The Board of Directors considers the above-outlined purposes for these
programs to be key contributors to the Corporation's on-going success.
The First Hawaiian, Inc. 1998 Stock Incentive Plan (the "1998 SIP")
represents a continuation of the 1991 SIP, of which only 76,979 shares of Common
Stock remain available for award. For the most part, the 1998 SIP retains the
1991 SIP provisions and practices. Revisions have been made to create an
"omnibus" plan that authorizes any form of equity-based awards similar to plans
adopted by other corporations (see "Award Forms" below) and to reflect changes
in tax laws.
With regard to the tax laws, the Omnibus Budget Reconciliation Act of
1993 added Section 162(m) to the Internal Revenue Code (the "Code"). Section
162(m) limits the deductibility of compensation that the Corporation pays to
each of the Chief Executive Officer and the four highest paid executives of the
Corporation to $1,000,000 unless certain requirements are met. For compensation
over $1,000,000 paid to any of these executives to be deductible, it must be (i)
performance related; (ii) administered by outside, independent directors; and
(iii) paid pursuant to stockholder approved plans. The Section 162(m)
regulations specify a number of other items that must be satisfied to comply
fully with these criteria.
The Corporation intends to structure awards under the 1998 SIP so that
compensation resulting therefrom would be deductible performance-based
compensation. Accordingly, the Corporation is seeking approval of the 1998 SIP.
Plan Provisions
A copy of the 1998 SIP is included in this Proxy Statement as Appendix A
and the following description is qualified in its entirety by reference to the
1998 SIP.
Plan Administration. The 1998 SIP will be administered by a Committee
composed of at least two members of the Board of Directors. The Board intends
that the Committee will be composed entirely of non-employee directors who meet
the criteria of "outside director" under Section 162(m) of the Code and "non-
21
employee director" under Section 16 of the Securities Exchange Act of 1934
(the "Exchange Act"). Initially, the Executive Compensation Committee will
serve as the Committee.
The Committee will select the officers and key employees who will receive
awards, the form of those awards, the number of shares or dollar targets of the
awards, and all terms and conditions of the awards. Currently, approximately 229
officers and key employees are eligible to receive awards under the 1998 SIP. It
is anticipated that approximately 175 to 200 officers and key employees will
receive awards in any calendar year.
Award Forms. The 1998 SIP authorizes the Committee to enter into any type
of arrangement with an eligible employee that, by its terms, involves or might
involve the issuance of Common Stock or any other security or benefit with a
value derived from the value of Common Stock. Awards are not restricted to any
specified form or structure and may include, without limitation, incentive stock
options, nonqualified stock options, reload stock options, restricted stock,
limited stock appreciation rights, and performance shares. An award may consist
of one such security or benefit or two or more of them in connection with each
other ("in tandem") or in the alternative. The terms of each award will be
established by the Committee and set forth in the agreement evidencing the
award.
The Board believes that this flexibility to design forms of awards will
assist in keeping the Corporation's compensation programs current with
competitive programs.
Maximum Stock Award Levels. The maximum number of shares of Common Stock
available for award will be 2,000,000 shares, all of which must be treasury or
reacquired shares. No individual may receive options or awards during any
calendar year as a maximum amount, in any form allowed under the 1998 SIP, which
in the aggregate exceed 200,000 shares of Common Stock.
Stock Options. As in the 1991 SIP, stock options awarded may either be
incentive stock options ("ISOs") or nonqualified stock options ("NSOs"). Options
will expire no later than ten years after the date of grant and may not be
exercised prior to six months following the date of grant. The exercise price of
stock options may not be less than the fair market value on the date of grant.
The Committee may establish other vesting or performance requirements which must
be met prior to the exercise of the options. Options may be granted in tandem
with stock appreciation rights ("SARs") or other types of awards.
The 1998 SIP provides that ISOs are nontransferable other than by the
laws of descent and distribution. The Committee may, in its discretion, allow
for the transferability of any other form of NSOs.
The closing price of Common Stock on the Nasdaq Stock Market on February
20, 1998 was $40 1/8.
Restricted Stock. The Committee may also grant shares of restricted
stock. These grants will be subject to the continued employment of the recipient
and may also be subject to performance criteria at the discretion of the
Committee. If the recipient's employment terminates prior to the completion of
the specified employment or the attainment of the specified performance goals,
the awards will lapse and the shares will return to the Corporation. The
Committee may provide for a prorated attainment of the performance criteria or a
prorated attainment of time-based restrictions. During the restriction period,
the recipient would be entitled to vote the shares and receive dividends.
Restricted stock certificates would bear a legend giving notice of the
restrictions relating to the grant.
Reload Options. The Committee may grant concurrently with the award of
any option (the "underlying option") a reload option that permits the optionee
to purchase a number of shares of Common Stock equal to the number of shares of
Common Stock delivered by the optionee to exercise the underlying option.
Although the underlying option may be an ISO, a reload option will be an NSO.
The reload option will have the same expiration date as the underlying option
and an exercise price equal to the fair market value of the shares on the date
of the exercise of the underlying option.
A reload option permits an optionee to retain the potential appreciation
in the number of already-owned shares that are used to exercise the underlying
option. Retention of such potential appreciation is accomplished by the grant of
the reload option in the number of shares used to pay the exercise of the
underlying option.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted in tandem with the grant of an option. An SAR is exercisable only if the
underlying option is exercisable. Upon the exercise of an SAR, the recipient is
entitled to receive cash from the Corporation in an amount equal to the excess
of the fair market value of the shares covered by the option over the exercise
price of such shares. Upon exercise of an SAR, the tandem option automatically
terminates. Conversely, upon the exercise of an option, the tandem SAR
automatically terminates.
22
Performance Standards. To avoid the deductibility limits of Section
162(m) of the Code, the performance standards relating to awards under the 1998
SIP must be based upon objective performance measures. The performance criteria
applicable to awards under the 1998 SIP may include one or more of the
following: earnings, revenue, operating or net cash flows, financial return
ratios, total stockholder return, or market share.
Performance criteria may relate to the total Corporation or any business
unit. Performance targets may be set at a specific level or may be expressed as
relative to the comparable measures at comparison companies or a defined index.
The Committee will establish specific targets for recipients.
Acceleration. An award granted under the 1998 SIP may include a provision
accelerating the receipt of benefits upon the occurrence of specified events,
such as a change of control of the Corporation or a dissolution, liquidation,
merger, reclassification, sale of all or substantially all of the property and
assets of the Corporation, or other significant corporate transaction.
Payment. An award may permit the recipient to pay all or part of the
exercise price of the shares or other property issuable pursuant thereto, and/or
to pay all or part of such recipient's tax withholding obligation with respect
to such issuance, by (i) delivering previously-owned shares of Common Stock,
(ii) reducing the amount of shares or other property otherwise issuable pursuant
to the award, or (iii) delivering a promissory note, the terms and conditions of
which will be determined by the Committee. If an option award permits the
recipient to pay for the shares issuable pursuant thereto with previously-owned
shares, the recipient would be able to exercise the option in successive
transactions, starting with a relatively small number of shares and, by a series
of exercises using shares acquired from each such transaction to pay the
purchase price of the shares acquired in the following transaction, to exercise
an option for a large number of shares with no more investment than the original
share or shares delivered.
Adjustments. The number, class, and price of stock option awards,
performance awards, and restricted stock are subject to appropriate adjustment
in the event of certain changes in the Common Stock, including stock dividends,
recapitalization, mergers, consolidations, split-ups, combinations, or exchanges
of shares and the like.
Federal Income Tax Consequences
The following is a brief description of the federal income tax treatment
that will generally apply to awards issued under the 1998 SIP, based on federal
income tax laws in effect on the date hereof. The exact federal income tax
treatment of an award will depend on the specific nature of the award. Such an
award may, depending on the conditions applicable to the award, be taxable as an
option, restricted stock, a cash payment, or otherwise. Recipients of options or
other awards should not rely on this discussion for individual tax advice, as
each recipient's situation and tax consequences of any particular award will
vary depending upon the specific facts and circumstances involved. Each
recipient is advised to consult with his or her own tax advisor for particular
federal, as well as state and local, income and other tax advice.
Stock Option Awards. The granting of ISOs or NSOs does not result in
immediate taxable income to the optionee.
The exercise of an NSO will result in ordinary income to the optionee in
the amount by which the market price of the shares acquired exceeds the exercise
price. Income tax withholding may be met either through cash payment at the time
of exercise or through share withholding. The Corporation will receive a tax
deduction in an amount that corresponds to the optionee's ordinary income.
The exercise of an ISO will not result in taxable income to the optionee
if the optionee does not dispose of the stock within two years of the date the
option was granted and one year after the option is exercised. (However, the
difference between the fair market value of the shares upon exercise and the
exercise price is an item of tax preference subject to the possible application
of the alternative minimum tax.) If the exercise and disposition requirements
are met, any gain realized by the optionee when such shares are sold will be
taxed as capital gain. The Corporation will not receive a tax deduction for the
resulting gain. If these holding periods are not met, the option will be treated
generally as an NSO for tax purposes.
Restricted Stock Awards. The granting of an award of restricted stock
does not result in taxable income to the recipient unless the recipient elects
to report the award as taxable income under Section 83(b) of the Code. Absent
such election, the value of the award is considered taxable income once it is
vested and distributed. Dividends are paid concurrent with, and in an amount
equal to, ordinary dividends and are taxable as
23
paid. If a Section 83(b) election is made, the recipient recognizes ordinary
income in the amount of the total value on the date of grant and the Corporation
receives a corresponding tax deduction. Any gain or loss subsequently
experienced will be a capital gain or loss to the recipient and the Corporation
does not receive an additional tax deduction.
Reload Options. The receipt of a reload option by the holder of an ISO or
NSO should not (i) affect the tax treatment of the exercise of such ISO or NSO
or (ii) result in the recognition of income. A reload option will constitute an
NSO for federal income tax purposes and will be taxed as such in the manner
described above.
Stock Appreciation Rights. The granting of an SAR does not result in
taxable income to the recipient. When the SAR is exercised, the gain will be
considered as ordinary income to the recipient. The Corporation will receive a
corresponding tax deduction.
Performance Awards. The granting of a performance award does not result
in taxable income to the recipient. When the award is paid or distributed, the
full value paid or distributed will be considered as ordinary income to the
recipient. The Corporation will receive a corresponding tax deduction.
Other Forms of Awards. Awards may be granted under the 1998 SIP that do
not fall clearly into the categories described above. The federal income tax
treatment of such awards will depend upon the specific terms of such awards.
Generally, the Corporation will obtain an income tax deduction equal to the
ordinary income recognized by the recipient of the award and will be required to
make arrangements for withholding applicable taxes with respect to any ordinary
income recognized by a recipient.
Term and Amendment of 1998 SIP
The 1998 SIP, if approved by stockholders, will be effective as of
February 19, 1998. It will expire on February 18, 2008 unless suspended or
discontinued by action of the Board of Directors. The Board may amend the 1998
SIP as appropriate. Any amendment that (i) increases the total number of shares
of Common Stock that may be issued under the 1998 SIP, (ii) materially increases
the cost of the 1998 SIP or the benefits to participants, or (iii) changes plan
provisions regarding the exercise price will be subject to stockholder approval
if such approval is required by federal or state law or regulation or by any
national securities exchange or system on which shares are then listed, traded,
or reported.
The Board of Directors recommends a vote FOR the 1998 SIP.
ELECTION OF AUDITOR
The Board of Directors, on recommendation of the Joint Audit Committee,
recommends the election of Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as
Auditor of the Corporation to serve for the ensuing year. Coopers & Lybrand has
served the Corporation in the capacity of independent Auditors since 1973.
Proxies in the accompanying form will be voted for the election of Coopers &
Lybrand unless a contrary specification is indicated therein, in which event
they will be voted as specified. Election of the Auditor requires the
affirmative vote of a majority of the shares present or represented at the
meeting. Under the Corporation's Certificate of Incorporation and Bylaws,
abstentions and broker non-votes will not have the effect of votes in opposition
to the election of Coopers & Lybrand.
It is expected that representatives of Coopers & Lybrand will be at the
Annual Meeting and will be available to respond to questions and make a
statement if they choose.
The Board of Directors recommends a vote FOR the election of Coopers &
Lybrand as Auditor.
OTHER BUSINESS
At the date of this proxy statement, management does not know of any
business to be presented at the Annual Meeting other than the matters set forth
above. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying form of proxy to vote in
accordance with their judgment on such matters.
24
STOCKHOLDER PROPOSALS FOR 1999
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of the Corporation must be received by the Corporate Secretary of the
Corporation on or prior to December 31, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
FIRST HAWAIIAN, INC.
Herbert E. Wolff
Senior Vice President and Secretary
Dated: March 4, 1998
A COPY OF THE ANNUAL REPORT OF THE CORPORATION ON FORM 10-K TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PRIOR TO MARCH 31, 1998, WILL BE AVAILABLE
AFTER THAT DATE TO EACH STOCKHOLDER UPON WRITTEN REQUEST THEREFOR.
25
APPENDIX A
FIRST HAWAIIAN, INC.
1998 STOCK INCENTIVE PLAN
PROLOGUE
The purpose of the First Hawaiian, Inc. 1998 Stock Incentive Plan (the
"Plan") is to promote the success and enhance the value of First Hawaiian, Inc.
(the "Company") by linking the personal interests of eligible employees to those
of Company stockholders and by providing eligible employees with an incentive
for outstanding performance. The Plan is further intended to provide flexibility
to the Company in its ability to motivate, attract, and retain the services of
employees upon whose judgment, interest, and special effort the successful
conduct of its operation is largely dependent.
The Board of Directors of the Company adopted the Plan on February 19,
1998, subject to approval by the Company's stockholders. If the Plan's adoption
is not approved by the Company's stockholders prior to February 18, 1999, the
Plan shall automatically be and become cancelled and terminated on February 18,
1999. All awards granted pursuant to the Plan prior to such stockholder approval
shall not be exercisable until such approval and any such awards shall
automatically be and become cancelled and terminated if such approval is not
obtained.
ARTICLE I
DEFINITIONS
As used herein the following terms shall have the following meanings
unless the context clearly requires otherwise.
"Beneficiary" means the person, persons, or legal entity designated by
the Participant to receive his benefits under this Plan in the event of his
death. If a Participant fails to make any designation, the person designated
shall not survive the Participant, or the legal entity designated shall no
longer be in existence or shall be legally incapable of receiving benefits
hereunder, Beneficiary shall mean the estate of the Participant.
"Board" means the Board of Directors of the Company.
"Cause" means one or more of the following reasons for the termination
of employment:
(a) The willful and continued failure by the Participant to
substantially perform his duties with the Company or a Subsidiary (other than
any such failure resulting from the Participant's Disability or incapacity due
to mental illness) after a written demand for substantial performance is
delivered to the Participant that specifically identifies the manner in which
the Company or Subsidiary believes that the Participant has not substantially
performed his duties, and the Participant has failed to remedy or take
substantial steps to remedy the situation within ten business days of receiving
such notice;
(b) The Participant's conviction for committing a felony (all rights of
appeal having been exhausted); or
(c) The Participant's willfully engaging in gross misconduct that is
materially and demonstrably injurious to the Company or a Subsidiary. However,
no act or failure to act on the Participant's part shall be considered
"willful" unless such act or omission was not in good faith and without
reasonable belief that such action or omission was in the best interest of the
Company or its Subsidiaries.
The Company or the Subsidiary shall notify the Committee if it believes a
Participant's employment has been terminated for Cause. The Committee shall
determine whether a Participant's employment has been terminated for Cause for
purposes of the Plan. The Committee shall notify the Participant in writing if
it has made a preliminary determination that the Participant's employment was
terminated for Cause. The
26
Participant (and, if he chooses, his legal representative) shall have an
opportunity to be heard by the Committee concerning the Committee's preliminary
determination. After taking into consideration the points raised by the
Participant, the Committee shall make a final determination as to whether the
Participant's employment was terminated for Cause and shall notify the
Participant in writing of its final determination. If the Company or the
Subsidiary notifies the Committee that it believes that a Participant has been
terminated for Cause, the Participant shall not be able to exercise any option,
make any other election, or take any action that would not be permitted under
the terms of the Plan following termination of employment for Cause unless and
until the Committee makes its final decision that the Participant was not
terminated for Cause.
"Change in Control" means any of the following:
(a) Any "person" (within the meaning of Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d) thereof) other than those listed in items
(i), (ii), or (iii) of this Section becomes the "beneficial owner" (within the
meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's securities then outstanding.
(i) The Trustees under the Will and of the Estate of Samuel M.
Damon, deceased, and any other persons acting together with them.
(ii) A trustee or other fiduciary holding Shares under an
employee benefit plan of the Company or a Subsidiary.
(iii) A corporation owned directly or indirectly by the
stockholders of the Company (in substantially the same proportions as their
ownership of Shares) becomes the beneficial owner (within the meaning of said
Rule 13d-3), directly or indirectly, of securities of the Company representing
35% or more of the combined voting power of the Company's securities then
outstanding.
(b) During any period of two consecutive calendar years, individuals
who at the beginning of such period constitute the Board (and any new Director
whose election by the Company's stockholders was approved by a vote of at least
two-thirds of the Directors then in office who either were Directors at the
beginning of the period or whose election or nomination for election was so
approved) cease for any reason to constitute a majority thereof.
(c) The stockholders of the Company approve:
(i) A plan of complete liquidation of the Company;
(ii) An agreement for the sale or disposition of all or
substantially all the Company's assets; or
(iii) A merger, consolidation, or reorganization of the Company
with or involving any other corporation, other than a merger, consolidation, or
reorganization that would result in the voting stock of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting stock of the surviving entity) at
least 80% of the combined voting power of the stock that is outstanding
immediately after such merger, consolidation, or reorganization unless the Board
determines by a majority vote prior to such merger, consolidation, or
reorganization that no Change in Control will occur as a result of such
transaction.
(d) The Board agrees by a majority vote that an event has or is about
to occur that, in fairness to the Participant, is tantamount to a Change in
Control.
A Change in Control shall occur on the first day on which any of the
preceding conditions has been satisfied.
However, notwithstanding the above, in no event shall a Change in Control
be deemed to have occurred, with respect to a Participant, if the Participant is
part of a purchasing group that consummates the Change in Control transaction. A
Participant shall be deemed "part of a purchasing group" for purposes of the
preceding sentence if he is an equity participant in the purchasing company or
group, except for (i) passive ownership of less than 3% of the common stock of
the purchasing company or (ii) ownership of equity participation in the
purchasing company or group that is otherwise not significant, as determined
prior to the Change in Control by a majority of the continuing Directors who are
not employees of the Company or a Subsidiary.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or such other provision of law of similar purport as may at any time be
substituted therefor.
"Committee" means the Plan's administrative committee appointed pursuant
to Article II.
27
"Company" means First Hawaiian, Inc.
"Director" means any individual who is a member of the Board.
"Disability" means a disability, as determined by the Social Security
Administration, that is not the result of self-inflicted injury or criminal
conduct on the part of the Participant, and in the case of a determination with
respect to an ISO, meets any additional requirements that may be necessary to
qualify as a permanent and total disability under Section 22(e)(3) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or such other provision of law of similar purport as may at any
time be substituted therefor.
"Fair Market Value" means the average of the highest and lowest prices of
a Share as reported in publications of general circulation for the Autoquote
System of the National Association of Securities Dealers, Inc. on the relevant
date. If there are no sales on such date, the Fair Market Value shall be
determined as of the immediately preceding date on which there were Share
transactions.
"ISO" means an option to purchase Shares that is designated by the
Committee as an incentive stock option intended to meet the requirements of
Section 422 of the Code.
"Participant" means an employee of the Company or a Subsidiary who has
received an award under the Plan.
"Retirement" means the termination of service as an employee of the
Company and the Subsidiaries on or after (i) attainment of age 65, (ii)
attainment of age 55 and completion of ten years of Vesting Service (as defined
in the First Hawaiian, Inc. Profit Sharing Plan), or (iii) attainment of age 62
with the approval of the Committee.
"Shares" means shares of common stock of the Company.
"Subsidiary" means any corporation, partnership, joint venture, or
business trust of which 50% or more of the control thereof is owned, directly or
indirectly, by the Company, provided that for ISO purposes, "Subsidiary" shall
be defined as provided in Section 424(f) of the Code.
ARTICLE II
ADMINISTRATION
Section 2.1 The Committee.
The Committee shall be composed of at least two members of the Board as
designated from time to time by the Board.
Section 2.2 Authority of the Committee.
(a) The Committee shall select the employees to whom awards shall be
granted under the Plan; determine the size, types, terms, and conditions of
awards; cancel and reissue awards; construe and interpret the Plan and any
agreement or instrument entered into under the Plan; establish, amend, or waive
rules and regulations for the Plan's administration; amend, subject to Article
XI, the terms and conditions of any outstanding award to the extent such terms
and conditions are within its discretion; and make any determination that may be
necessary or advisable for administration of the Plan.
(b) The Committee may from time to time delegate to any other person or
persons any or all of its powers hereunder.
(c) All determinations and decisions of the Committee shall be final,
conclusive, and binding on all persons.
Section 2.3 Indemnification, Insurance.
The Company and the Subsidiaries shall indemnify and save harmless and/or
insure each member of the Committee against any and all claims, losses, damages,
expenses, and liabilities arising from his responsibilities in connection with
this Plan, if the member acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and the
Subsidiaries.
28
ARTICLE III
SHARES SUBJECT TO PLAN
Section 3.1 Number of Shares.
(a) Subject to adjustment as provided in Section 3.3, the total number
of Shares available for grant under the Plan shall not exceed 2,000,000, which
Shares shall be reacquired or treasury shares.
(b) Notwithstanding any other provision of this Plan, no employee shall
be granted awards in excess of 200,000 Shares during any calendar year. This
limitation is intended to satisfy the requirements of Section 162(m) of the Code
so that compensation attributable to awards hereunder qualify as
performance-based compensation under Section 162(m) of the Code. The limitation
under this Section 3.1(b) shall be subject to adjustment under Section 3.3
hereof, but only to the extent permitted under Section 162(m) of the Code.
Section 3.2 Lapsed Awards.
Subject to the rules under Section 16 of the Exchange Act, if any award
granted under this Plan is canceled, is forfeited, terminates, expires, or
lapses for any reason, any Shares subject to such award shall be available for
the grant of an award under the Plan.
Section 3.3 Adjustments in Authorized Shares.
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, split-up, share
combination, or other change in the corporate structure of the Company affecting
the number or value of Shares, then the number, class, and price of Shares
subject to outstanding awards under the Plan shall be adjusted as the Committee
may determine in its sole discretion to be appropriate or equitable to prevent
dilution or enlargement of rights. The number of Shares subject to any award
shall always be a whole number. Any adjustment of an ISO under this Section 3.3
shall be made in such manner so as not to constitute a "modification" within the
meaning of Section 425(h)(3) of the Code.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
Section 4.1 Eligibility.
To be eligible to participate in the Plan, an individual must be an
officer or employee of the Company or a Subsidiary who by the nature and scope
of his position influences the long-term results or success of the Company. The
Committee in its sole discretion shall determine if an officer or employee is
eligible. A Director who is not an employee of the Company or a Subsidiary shall
not be eligible to participate in the Plan.
Section 4.2 Participation.
The Committee shall determine from time to time eligible employees to
whom awards shall be granted and the nature and amount of each award. No
eligible employee shall have any right to be granted an award under this Plan.
In addition, nothing in this Plan shall interfere with or limit in any way the
right of the Company or a Subsidiary to terminate any Participant's employment
at any time, nor confer upon any Participant any right to continue in the employ
of the Company or a Subsidiary.
29
ARTICLE V
OPTIONS
Section 5.1 Type of Options.
The Committee shall designate at the time of the grant of an option
whether it is a nonqualified stock option or ISO and whether such option shall
be in whole or in part a reload option.
Section 5.2 ISOs.
(a) No ISO may be granted after January 21, 2008.
(b) No employee may receive an award of ISOs that are first exercisable
during any calendar year to the extent that the aggregate Fair Market Value of
the Shares (determined at the time the ISOs are granted) exceeds $100,000.
(c) Nothing in this Section 5.2 shall be deemed to prevent the grant of
nonqualified stock options in excess of the maximum amount that may be granted
to a Participant as ISOs under Section 422 of the Code.
Section 5.3 Reload Options.
The Committee may grant reload options subject to such conditions and
provisions as the Committee shall determine. Reload options shall not exceed the
number of Shares used to pay the exercise price of the underlying options and
shall not include any Shares used to satisfy any tax withholding requirements on
account of the exercise of the underlying options. The reload option may not be
exercised during a period longer than the exercise period of the underlying
option that it replaces. The grant of a reload option shall become effective
upon the exercise of the underlying option through the use of Shares. The option
price for a reload option shall not be less than the Fair Market Value of the
Shares on the date the grant of the reload option becomes effective.
Section 5.4 Award Agreement.
Each option grant shall be evidenced by an award agreement that shall
specify the exercise price, the duration of the option, the number of Shares to
which the option pertains, and such other provisions as the Committee shall
determine. The award agreement also shall specify whether the option is intended
to be an ISO.
Section 5.5 Exercise Price.
(a) The exercise price of options shall be determined by the Committee,
provided, however, that the exercise price per Share shall not be less than the
Fair Market Value of a Share on the date the option is granted.
(b) An ISO granted to a Participant who at the time of grant owns
(taking into account Section 424(d) of the Code) Shares representing more than
10% of the total combined voting power of all classes of stock of the Company
(herein a "Ten Percent Stockholder") shall have an exercise price that is at
least 110% of the Fair Market Value of the Shares subject to the option.
Section 5.6 Duration of Options.
Each option shall expire at such time as the Committee shall determine
at the time of grant, provided that no ISO shall be exercisable later than the
tenth anniversary date of its grant. Notwithstanding the prior sentence, an ISO
granted to a Ten Percent Stockholder shall not be exercisable later than the
fifth anniversary date of its grant.
Section 5.7 Exercise of Options.
Options granted under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance approve, which times, restrictions, and conditions need not
30
be the same for each grant or for each Participant. However, in no event may any
option granted under this Plan become exercisable earlier than six months after
the date of its grant.
Section 5.8 Payment.
(a) Options shall be exercised by the delivery of a written notice of
exercise to the Secretary of the Company that sets forth the number of Shares
with respect to which the option is to be exercised and is accompanied by full
payment for the exercise price of the Shares. The exercise price shall be
payable to the Company in full either:
(i) in cash or cash equivalent, or
(ii) if permitted under the award agreement, by tendering
previously acquired Shares having a Fair Market Value at the time of exercise
equal to the total exercise price pursuant to the options being exercised,
provided, however, that any Shares so tendered by a Participant must be
acceptable to the Committee in its sole discretion.
(b) The Committee also may allow cashless exercise of options as
permitted under any law or regulation applicable to the Company or by any other
means that the Committee determines to be consistent with the Plan's purpose.
The proceeds from such a payment shall be added to the general funds of the
Company and shall be used for general corporate purposes.
(c) As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant or
permitted assignee, Share certificates in an appropriate amount based upon the
number of options exercised.
Section 5.9 Restrictions on Share Transferability.
The Committee shall impose such restrictions on any Shares acquired
pursuant to the exercise of an option under the Plan as it may deem advisable,
including without limitation restrictions under applicable Federal securities
laws, the requirements of any stock exchange or market upon which the Shares are
then listed and/or traded, and any blue sky or state securities laws applicable
to the Shares. The Committee shall legend the certificates representing the
Shares to give appropriate notice of such restrictions.
Section 5.10 Termination of Employment Due to Death, Disability, or Retirement.
If the employment of a Participant is terminated by reason of death,
Disability, or Retirement, options granted to the Participant under this Plan
may be exercised only as follows:
(a) Death. If the Participant's employment is terminated by reason of
death, any outstanding options granted to such Participant that are vested as of
the date of his death shall, subject to Section 5.6, remain exercisable at any
time prior to their expiration date or for one year after the date his
employment terminated, whichever period is shorter. The options may be exercised
by the Participant's Beneficiary or by such persons who have acquired the
Participant's rights under the options by will or by the laws of descent and
distribution or permitted transfer.
(b) Disability. If the Participant's employment is terminated by reason
of Disability, any outstanding options granted to such Participant that are
vested as of the date his employment terminates shall remain exercisable at any
time prior to their expiration date or for one year after the date that his
Disability is determined by the Committee to be total and permanent, whichever
period is shorter.
(c) Retirement. If the Participant's employment is terminated by reason
of Retirement, any outstanding options granted to such Participant that are
vested as of the effective date of his Retirement shall remain exercisable at
any time prior to their expiration date or for three years after his date of
Retirement, whichever period is shorter.
(d) Exercise Limitations on ISOs. Notwithstanding Sections 5.10(a),
(b), and (c), the right of a Participant to exercise an ISO shall be subject to
the limitations of Section 422 of the Code.
(e) Vesting at Termination Date. The following options shall be
considered vested as of the date the Participant's employment terminates:
31
(1) Options that were exercisable as of the date of employment
termination shall remain exercisable;
(2) An additional portion of the options shall become exercisable
upon termination of employment. This portion shall be a percentage of the
options equal to the product of (A) and (B) where:
(A) is the percentage of the options that otherwise would have
first become exercisable at the end of the calendar year in which the employment
termination occurs; and
(B) is a fraction, the numerator of which is the number of
full weeks of employment during the calendar year in which employment
termination occurs, and the denominator of which is 52; and
(3) Except as provided in Section 5.10(f), options that are
scheduled to vest in a year that begins after the end of the calendar year in
which employment termination occurs shall be cancelled.
(f) Notwithstanding the foregoing provisions of this Section 5.10, the
Committee shall have the authority in its sole discretion to accelerate the
vesting of options that are outstanding as of the date a Participant's
employment terminates.
Section 5.11 Termination of Employment for Other Reasons.
(a) If the employment of a Participant shall terminate for any reason
other than the reasons set forth in Section 5.10 (other than for Cause), all
nonvested options held by the Participant shall vest only if the Committee
determines in its sole discretion to vest all or any portion of such options.
Thereafter, all vested options shall remain exercisable at any time prior to
their expiration date or for three months after the date that the Participant's
employment was terminated, whichever period is shorter. If the Committee does
not vest such options, the options shall be deemed for all purposes to have
remained unvested upon the termination of the Participant's employment.
(b) If a Participant's employment is terminated for Cause, all of his
outstanding options shall immediately be surrendered to the Company and no
additional exercise periods shall be allowed, regardless of the otherwise vested
status of the options.
ARTICLE VI
RESTRICTED STOCK
Section 6.1 Grant of Restricted Stock.
The Committee may grant Shares of restricted stock to eligible employees
in such amounts as the Committee shall determine in its sole discretion. Such
Shares of restricted stock may be issued for no consideration other than
services rendered.
Section 6.2 Award Agreement.
Each restricted stock grant shall be evidenced by an award agreement that
specifies the period (or periods) of restriction, the number of Shares of
restricted stock granted, and such other provisions as the Committee shall
determine.
Section 6.3 Transferability.
Except as provided in this Article VI or Section 8.1, Shares of
restricted stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable period of restriction
or upon earlier satisfaction of any other conditions as specified by the
Committee in its sole discretion and set forth in the award agreement. Subject
to approval by the Committee, Shares of restricted stock may be surrendered to
satisfy the exercise price of options granted to a Participant prior to the
lapse of the period of restriction. However, in no event may any restricted
stock vest earlier than six months following the date of its grant. Prior to the
lapse of the period of restriction, the rights with respect to a Participant's
restricted stock shall be available only to the Participant during his lifetime.
32
Section 6.4 Other Restrictions.
The Committee (i) may impose such other restrictions on any Shares of
restricted stock as it deems advisable, including without limitation
restrictions based upon the achievement of specific performance goals
(Company-wide, subsidiary, or business unit of the Company, and/or individual),
(ii) shall impose restrictions upon transfer of Shares after the period of
restriction as may be required under applicable Federal or state securities
laws, and (iii) may legend the certificates representing restricted stock to
give appropriate notice of such restrictions.
Section 6.5 Removal of Restrictions.
Except as otherwise provided in this Article VI, Shares of restricted
stock shall become freely transferable by the Participant after the last day of
the period of restriction. Once the restrictions on such Shares lapse, the
Participant shall be entitled to have any legend that was added pursuant to
Section 6.4 removed from his Share certificate.
Section 6.6 Voting Rights.
During the period of restriction, the Participant may exercise full
voting rights with respect to his Shares of restricted stock.
Section 6.7 Dividends and Other Distributions.
Participants holding Shares of restricted stock shall be entitled to
receive all dividends and other distributions paid with respect to such Shares
while they are held during the period of restriction. The Committee shall
establish in its discretion the time at which the Participant shall receive such
dividends and distributions, which time may be any time from the date on which
they are paid generally to stockholders to the end of the period of restriction.
If any such dividends and distributions are paid in Shares, such Shares shall be
subject to the same restrictions on transferability and vesting as the Shares of
restricted stock with respect to which they were paid.
Section 6.8 Escrow.
Even though the certificates evidencing Shares of restricted stock shall
be issued in the name of the Participant, such certificates shall be held by the
Company in escrow subject to delivery to the Participant or to the Company at
such times and in such amounts as shall be directed by the Committee.
Certificates evidencing whole Shares issued as a stock dividend on or split-up
of Shares held in escrow shall be held in escrow on the terms set forth above.
Any fractional Shares so issued and any Shares acquired by a Participant's
exercise of subscription rights in respect of Shares held in escrow shall not be
subject to the escrow provisions and shall be the property of the Participant.
Section 6.9 Termination of Employment.
(a) The number of Shares of restricted stock that are vested as of the
date a Participant's employment terminates shall be determined in accordance
with the terms of the award agreement described in Section 6.2. The
Participant's nonvested Shares of restricted stock shall vest only if the
Committee determines in its sole discretion that they shall vest.
(b) With the exception of termination of employment for Cause, the
Committee in its sole discretion may provide that the restrictions shall lapse
on restricted stock after termination of employment, upon such terms and
provisions as it deems proper. If the Committee does not do so, the restrictions
upon restricted shares shall be deemed for all purposes not to have lapsed.
33
ARTICLE VII
OTHER AWARDS
Section 7.1 Types of Awards.
(a) In addition to awards granted under Articles V and VI, the
Committee may grant under this Plan any other type of arrangement with an
employee that by its terms involves or might involve the issuance of (i) Shares
or (ii) a derivative security (as such term is defined in Rule 16a-1 of the
Exchange Act, as such Rule may be amended from time to time) with an exercise or
conversion privilege at a price related to the Shares or with a value derived
from the value of the Shares.
(b) Such awards are not restricted to any specified form or structure
and may include, without limitation, sales or bonuses of stock, restricted
stock, ISOs, nonqualified stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, limited stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, and an award may consist of one such security or benefit, or two or more
of them in tandem or in the alternative.
(c) Shares may be issued pursuant to an award for any lawful
consideration as determined by the Committee, including, without limitation,
services rendered by the recipient of such award.
Section 7.2 Terms and Conditions.
Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
award granted under this Article VII, which terms and conditions may include,
among other things, a provision permitting the recipient of such award,
including any recipient who is a director or officer of the Company, to pay the
purchase price of the Shares or other property issuable pursuant to such award,
or such recipient's tax withholding obligation with respect to such issuance, in
whole or in part, by any one or more of the following:
(i) the delivery of previously owned Shares (including
"pyramiding") or other property, provided that the Company is not then
prohibited from purchasing or acquiring Shares or such other property,
(ii) a reduction in the amount of Shares or other property
otherwise issuable pursuant to such Award, or
(iii) the delivery of a promissory note, the terms and
conditions of which shall be determined by the Committee.
ARTICLE VIII
TRANSFERABILITY OF AWARDS;
BENEFICIARY RIGHTS
Section 8.1 Transferability of Awards.
Each ISO granted under the Plan shall not be transferable other than by
will or the laws of descent or distribution. Except as otherwise set forth in
the Plan, any other award under the Plan may be transferable subject to the
terms and conditions as may be established by the Committee and set forth in the
award agreement.
Section 8.2 Beneficiary Rights.
To the extent permitted under the Plan and the award agreement, after a
Participant's death his Beneficiary may elect within the applicable period to
(i) exercise the Participant's vested awards, (ii) have restrictions removed on
restricted stock, and (iii) make such other elections and take such other
actions as permitted under the Plan and the award agreement.
34
ARTICLE IX
CHANGE IN CONTROL
If a Change in Control occurs, then unless otherwise specifically
prohibited by the Plan (i) any and all awards held by a Participant for at least
six months shall become immediately vested and exercisable, (ii) any period of
restrictions and other restrictions on restricted stock shall lapse, (iii)
within ten business days after the occurrence of a Change in Control, the stock
certificates representing Shares of restricted stock shall be delivered to the
Participant without any restrictions or legends thereon (except such
restrictions or legends that are required by Federal or state securities laws),
and (iv) the Committee may modify an award as it deems appropriate prior to the
effective date of the Change in Control.
ARTICLE X
WITHHOLDING
Section 10.1 Tax Withholding.
The Company may deduct or withhold, or require the Participant to remit
to the Company, such withholding taxes as may be required by law in connection
with the Plan.
Section 10.2 Share Withholding.
A Participant may elect, subject to the Committee's approval, to satisfy
any withholding taxes incurred in connection with a transaction or event under
the Plan by having the Company withhold from the Shares to be issued Shares, or
by tendering to the Company Shares, having a Fair Market Value on the date in an
amount sufficient to satisfy federal and state withholding taxes as required by
law on the applicable transaction or event. If the Participant is subject to
Rule 16b-3 of the Exchange Act, any such election must comply with the
requirements, if any, of said Rule and be approved by the Committee.
ARTICLE XI
AMENDMENT AND TERMINATION
Section 11.1 Amendment.
The Board may amend or terminate the Plan. Any amendment, termination,
or modification that (i) increases the total number of Shares that may be issued
under the Plan, (ii) materially increases the cost of the Plan or the benefits
to Participants, or (iii) changes the Plan provisions regarding the exercise
price shall be subject to approval of the stockholders of the Company if such
approval is required by the Code; Section 16 of the Exchange Act; any national
securities exchange or system on which Shares are then listed, traded, or
reported; or any regulatory body having jurisdiction with respect thereto.
Section 11.2 Awards Previously Granted.
No amendment or termination of the Plan shall in any manner adversely
affect any award previously granted under the Plan without the written consent
of the affected Participant.
Section 11.3 Rule 16b-3.
The Plan is intended to comply with Rule 16b-3 of the Exchange Act. If
the requirements of Rule 16b-3 change, the Board may amend the Plan to comply
with such changes.
35
ARTICLE XII
MISCELLANEOUS
Section 12.1 Rights of Participants.
(a) No Participant shall, by reason of his participation in this Plan,
have any interest in any specific asset or assets of the Company or a
Subsidiary.
(b) Neither the adoption of this Plan, the granting of any awards under
this Plan, nor any action of the Board or the Committee in connection with the
Plan shall be held or construed to confer upon any person any legal right to be
continued as an officer or employee of the Company or a Subsidiary.
(c) No Participant shall have the right to assign, pledge, encumber, or
otherwise dispose of (except to a Beneficiary upon his death) any of his
interest in this Plan; nor shall his interest be subject to garnishment,
attachment, transfer by operation of law, or any legal process.
Section 12.2 Miscellaneous Rules.
(a) Wherever used herein the masculine gender shall include the
feminine and the singular number shall include the plural, unless the context
clearly indicates otherwise.
(b) The headings of articles and sections are included herein solely
for convenience of reference, and if there is any conflict between such headings
and the text of the Plan, the text shall be controlling.
(c) To the extent not preempted by Federal law, the Plan shall be
governed, construed, administered, and regulated according to the laws of the
State of Hawaii.
(d) Any transaction under the Plan involving a grant, award, or other
acquisition of Shares subject to Section 16(b) of the Exchange Act shall not be
effected unless exempt under Rule 16b-3 thereunder.
(e) The Company's obligations with respect to awards granted under the
Plan shall, if not otherwise covered by Article XI, be binding on any successor
to the Company.
(f) The Committee may condition any award under the Plan upon the
Participant's agreement that all disputes under the Plan be settled by
arbitration or another procedure prescribed by the Committee.
36
First Hawaiian, Inc. THIS IS YOUR PROXY FORM
PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF FIRST HAWAIIAN, INC.
ANNUAL MEETING -- APRIL 16, 1998
The undersigned hereby appoints F. MATSUDA, R.F. McPHEE, and F.C. WEYAND,
and each of them, each with full power of substitution, the proxies of the
undersigned to attend the Annual Meeting of Stockholders of FIRST HAWAIIAN, INC.
(the "Corporation") to be held at 9:30 o'clock A.M., Hawaiian Standard Time, on
April 16, 1998 in the 30th floor Boardroom of First Hawaiian Center, 999 Bishop
Street, Honolulu, Hawaii, and any adjournments thereof, and to vote at said
meeting and any adjournments thereof all shares of stock of the Corporation
standing in the name of the undersigned, as instructed on the reverse side, and
in their judgment on any other business which may properly come before said
meeting:
(To Be Continued And Signed On The Other Side)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
FIRST HAWAIIAN, INC.
April 16, 1998
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
FOR all
nominate listed WITHHOLD
at right AUTHORITY
1. ELECTION [ ] [ ] Nominee: Julia Ann Frohlich
OF John A. Hoag
DIRECTORS Bert T. Kobayashi, Jr.
*(INSTRUCTIONS: To withhold authority to vote Fred C. Weyand
for any individual nominee write that nominee's Robert C. Wo
name in the space provided below.)
- --------------------------------------------------
FOR AGAINST ABSTAIN
2. Fix the total number of Directors at fifteen. [ ] [ ] [ ]
3. Proposal to approve the 1998 Stock Incentive Plan. [ ] [ ] [ ]
4. Proposal to approve the election of Coopers & [ ] [ ] [ ]
Lybrand L.L.P. as Auditor.
This proxy will be voted as directed, but if no direction is specified, it will
be voted FOR Proposals 1, 2, 3 and 4.
SIGNATURE DATE SIGNATURE DATE
------------------ -------- ----------------- -----
IF HELD JOINTLY
NOTE: Stockholder(s) should sign above exactly as name(s) appears hereon. But
minor discrepancies in such signatures shall not invalidate their proxy; if more
than one Stockholder, all should sign.
