Exhibit 10.4

 

STOCK OPTION GRANT UNDER THE
BANK OF HAWAII CORPORATION
2004 STOCK AND INCENTIVE COMPENSATION PLAN

 

2012 NONQUALIFIED STOCK OPTION AGREEMENT

 

This Agreement dated January 20, 2012, between Bank of Hawaii Corporation,
a Delaware corporation (“Company”), with its registered office at 130 Merchant
Street, Honolulu, Hawaii 96813, and the executive of the Company or subsidiary
of the Company (“Optionee”) who is specified in the “Notice of 2012 Nonqualified
Stock Option Grant” (“Notice”) attached hereto.

 

1.         Grant of Option.  The Company hereby grants to Optionee, effective as
of January 20, 2012 (“Grant Date”), the right and option (“Option”, in the
aggregate or singularly as the context implies) to purchase from the Company,
for a price equal to the exercise price as specified in the Notice (“Exercise
Price”), up to the number of shares of Company common stock (“Company Stock” or
“Shares”) as specified in the Notice.  This grant of Option shall be subject to
the applicable terms and conditions set forth below and is being granted
pursuant to the Bank of Hawaii Corporation 2004 Stock and Incentive Compensation
Plan (“Plan”) in accordance with the authority and direction of the Human
Resources and Compensation Committee (“Committee”) of the Company’s Board of
Directors.  The Option shall constitute a nonqualified stock option which is not
a qualified stock option as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (“Code”).

 

2.         Primary Terms and Conditions of Option

 

a.         Exercise Price.  The Exercise Price shall be the price per Share as
specified in the Notice, which is the fair market value per Share on the Grant
Date as determined in accordance with the Plan.

 

b.         Term of Option.  The term of the Option over which the Option is in
effect shall commence on the Grant Date and shall terminate on the tenth
anniversary of the Grant Date.  The Option shall not be exercisable after the
term of the Option.

 

c.         Vesting Based on Service and Performance.

 

The Option for the purchase of Shares is conditioned upon the achievement of
service and financial performance objectives applicable to the Option.  Except
as otherwise provided hereunder, the Option shall be forfeited by the Optionee
and treated as null and void under the Plan to the extent that any vesting
condition applicable to the Option is not satisfied. The Option shall not be
exercisable prior to the vesting of the Option.

 

(1)        Component Conditioned on Service

 

One-third of the total Option granted hereunder shall be subject to vesting
under this Section 2.c(1) conditioned on service and the achievement of positive
net income (which one-third block is referred to hereunder as the “Service
Options”).  Specifically, the Service Options shall become vested on

 

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February 28, 2013, provided that (I) Grantee remains an Employee through
December 31, 2012, and (II) the Committee shall have certified with respect to
the fiscal year ending December 31, 2012, that the Company has achieved positive
net income as publicly announced by the Company in its earnings release for that
period (“Net Income Performance Objective”).

 

(2)        Component Conditioned on First-Tier Performance

 

One-third of the total Option granted hereunder shall be subject to vesting
under this Section 2.c(2) conditioned on service and the achievement of
financial performance criteria at no less than the first-tier peer group level
(which one-third block is referred to hereunder as the “First-Tier Options”). 
Specifically, the First-Tier Options shall become vested on February 28, 2013,
provided that (I) Grantee remains an Employee through December 31, 2012, and
(II) the Committee shall have certified with respect to the fiscal year ending
December 31, 2012, that the Company’s “Return on Assets”, or “Return on Equity”,
or “Stock Price to Book Ratio v. Peers” falls within the top two quartiles of
the 2012 Regional Bank Index or the 2012 U.S. Bank Index that has been
designated by the Committee on or before the Grant Date and as the same may be
revised from time to time to delete organizations that cease to be publicly-held
(“First-Tier Performance Objective”).

 

For purposes of this Agreement the terms “Return on Assets”, “Return on Equity”,
and “Stock Price to Book Ratio vs. Peers” shall mean such terms as determined
and reported with respect to the Company for purposes of placement under
designated 2012 Regional Bank Index and the 2012 U.S. Bank Index.

 

(3)        Component Conditioned on Second-Tier Performance

 

One-third of the total Options granted hereunder shall be subject to vesting
under this Section 2.c(3) conditioned on service and the achievement of
financial performance criteria at the second-tier peer group level (which
one-third block is referred to hereunder as the “Second-Tier Options”). 
Specifically, the Second-Tier Options shall become vested on February 28, 2013,
provided that (I) Grantee remains an Employee through December 31, 2012, and
(II) the Committee shall have certified with respect to the fiscal year ending
December 31, 2012, that the Company’s “Return on Assets”, or “Return on Equity”,
or “Stock Price to Book Ratio vs. Peers” falls within the top quartile of the
2012 Regional Bank Index or the 2012 U.S. Bank Index that has been designated by
the Committee on or before the Grant Date and as the same may be revised from
time to time to delete organizations that cease to be publicly-held
(“Second-Tier Performance Objective”).

 

d.         Exercisability of Option.  Except as otherwise provided hereunder,
the Option shall be exercisable on or after February 28, 2013, to the extent
that the Option becomes vested. The Committee shall endeavor to certify whether
the service and financial performance objectives described in Section 2.c of
this Agreement have been satisfied on or prior to the scheduled time of vesting
on February 28, 2013.  However,

 

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in the event that the Committee has not done so, it shall make such
determination as soon thereafter as possible and, if the satisfaction of the
service and financial performance objectives have been certified, the Option
shall become vested and exercisable at the time of the making of such
certification.  In addition, the Option shall be exercisable upon the occurrence
of a “Change in Control” of the Company (as described in Section 2.8 of
the Plan).

 

3.         Exercisability Following Termination of Employment

 

a.         Generally.  This Section 3 applies to an Option that is otherwise
vested and exercisable in accordance with Section 2 above. Except as other
provided hereunder, such Option shall terminate and shall not be exercisable
following Optionee’s termination of employment.

 

If Optionee’s employment with the Company or any subsidiary terminates for a
reason other than described in the below Sections 3.b, 3.c, and 3.d, the Option
shall continue to be exercisable for a period of 120 days following such
termination, but the Option shall not be exercisable after the original term of
the Option.

 

For purposes of this Section 3, Optionee’s employment shall not be treated as
terminated in the case of continued employment with the Company or any of its
subsidiaries, or a transfer of employment within or between the Company and its
subsidiaries, or in the case of sick leave or other approved leaves of absences.

 

To the extent provided under the Notice to Optionee, in lieu of the 120-day
period applicable to a termination of employment under this Section 3.a,
the Option shall continue to be exercisable for the entire duration of the
original term of the Option following such termination of employment.

 

b.         Death or Disability. If Optionee’s employment with the Company or any
subsidiary terminates because of Optionee’s death or “disability” within the
meaning of Code Section 409A, the Option shall continue to be exercisable for a
period of 12 months following such termination, but the Option shall not be
exercisable after the original term of the Option.

 

c.         Retirement. If Optionee’s employment with the Company or any
subsidiary terminates on or after the attainment of Early Retirement Age or
Normal Retirement Age as defined by the Employees’ Retirement Plan of Bank of
Hawaii (“ERP”) (whether or not Optionee is actually eligible under the ERP, and
disregarding eligibility for an immediate payment of a mandatory cashout under
the ERP), the Option shall continue to be exercisable for the entire duration of
the original term of the Option.

 

d.         Cause.  If Optionee’s employment with the Company or any subsidiary
terminates for “Cause” (as described in Section 2.7 of the Plan), the Option
shall immediately terminate at such time.

 

4.         Exercise of Option.  An Option may be exercised from time to time
with respect to all or any portion of the number of Shares with respect to which
the Option has become exercisable by written notice to the Corporate Secretary
of the Company or other authorized personnel of the Company.

 

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When Optionee gives notice of exercise of the Option, Optionee must pay the full
Exercise Price for the Option Shares being purchased.  Optionee may make
payment: (i) by certified check or bank check payable to the order of the
Company; or (ii) by delivering (either by actual delivery or attestation)
previously acquired shares of Company common stock held by Optionee for at least
six months or acquired by Optionee on the open market and having an aggregate
fair market value at the time of exercise equal to the full Exercise Price; or
(iii) by a combination thereof.  In addition, with the approval of the
Committee, the Company may cooperate with Optionee in arranging a “cashless
exercise” of the Option through a broker approved by the Company, under which
the broker will sell shares acquired by Optionee upon exercise of the Option and
remit to the Company a sufficient portion of the sales proceeds to pay the full
Exercise Price and any tax withholding required upon such exercise.

 

The Option shall not be exercised for any fractional Shares and no fractional
Shares shall be issued or delivered.  If Optionee fails to pay for any Option
Shares specified in the notice of exercise or fails to accept delivery of the
Option Shares, the Company may terminate Optionee’s rights to purchase the
Option Shares.

 

5.         Issuance of Shares; Registration; Withholding Taxes.  As soon as
practicable after the exercise date of the Option, the Company shall cause to be
issued and delivered to Optionee, or for Optionee’s account the Option Shares
purchased.

 

The Company may postpone the issuance or delivery of the Shares until
(a) the completion of registration or other qualification of such Shares or
transaction under any state or federal law, rule or regulation, or any listing
on any securities exchange, as the Company shall determine to be necessary or
desirable; (b) the receipt by the Company of such written representations or
other documentation as the Company deems necessary to establish compliance with
all applicable laws, rules and regulations, including applicable federal and
state securities laws and listing requirements, if any; and (c) the payment to
the Company, upon its demand, of any amount requested by the Company to satisfy
any federal, state or other governmental withholding tax requirements related to
the exercise of the Option. The Company shall have the right to withhold with
respect to the payment of any Option Shares any taxes required to be withheld
because of such payment, including the withholding of Shares otherwise payable
due to exercise of the Option.  Optionee shall comply with any and all legal
requirements relating to Optionee’s resale or other disposition of any Shares
acquired under this Agreement.  Any certificate representing the Shares acquired
pursuant to the Option may bear such legend as described in Section 9 or other
legend as counsel to the Company otherwise deems appropriate to assure
compliance with applicable law.

 

6.         Nontransferability of Options.  The Option and this Agreement shall
not be assignable or transferable by Optionee other than by will or by the laws
of descent and distribution.  During Optionee’s lifetime, the Option and all
rights of Optionee under this Agreement may be exercised only by Optionee (or by
his or her legal guardian or legal representative).  If the Option is exercised
after Optionee’s death, the Committee may require evidence reasonably
satisfactory to it of the appointment and qualification of Optionee’s personal
representatives and their authority and of the right of any heir or distributee
to exercise the Option.  Any purported transfer or assignment of the Option
shall be void and of no effect, and shall give the Company the right to
terminate the Option as of the date of such purported transfer or assignment. 
Notwithstanding the foregoing, with the approval of the Committee, Optionee

 

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may transfer the Option to a revocable trust under which Optionee is both the
trustee and beneficiary.

 

7.         Share Adjustments.  The number of Shares subject to the Option and
the Exercise Price shall be adjusted proportionately for any increase or
decrease in the number of issued shares of common stock by reason of a merger,
reorganization, recapitalization, reclassification, stock split, stock dividend,
or other capital adjustments under Section 4.2 of the Plan.  The adjustment
required shall be made by the Committee, whose determination shall be
conclusive.  In no event shall the adjusted Exercise Price be less than the fair
market value of the adjusted shares on the Grant Date in accordance with the
requirements of Code Section 409A.

 

8.         No Rights as Shareholder.  Optionee shall acquire none of the rights
of a shareholder of the Company with respect to the Shares until the Shares are
issued to Optionee upon the exercise of the Option.  Except as otherwise
provided in Section 7 above, no adjustments shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such Shares are issued.

 

9.         Registration of Shares.  If a registration statement under the
Securities Act of 1933 with respect to the shares issuable upon exercise of any
option granted under the Plan is not in effect at the time of exercise, or if a
registration statement with respect to said shares to Optionee is in effect but
not with respect to Optionee’s resale thereof and Optionee is an “affiliate” of
the Company, then, in either such case, (a) as a condition of the issuance of
the shares the person exercising such Option shall give the Company a written
statement, satisfactory in form and substance to the Company, acknowledging that
said shares may be reoffered or resold by Optionee only pursuant to Rule 144
under the Securities Act of 1933 or pursuant to a separate registration
statement under said Act and (b) the Company may place upon any stock
certificate for shares issuable upon exercise of such Option the following
legend or such other legend as the Company may prescribe to prevent disposition
of the shares in violation of the Securities Act of 1933:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR THE AVAILABILITY OF
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS.  FURTHERMORE, NO OFFER, SALE,
TRANSFER, PLEDGE, OR HYPOTHECATION MAY BE MADE WITHOUT APPROVAL OF COUNSEL FOR
BANK OF HAWAII CORPORATION, AFFIXED TO THIS CERTIFICATE.  THE STOCK TRANSFER
AGENT HAS BEEN ORDERED TO EFFECTUATE TRANSFERS OF THIS CERTIFICATE ONLY IN
ACCORDANCE WITH THE ABOVE INSTRUCTIONS.

 

10.       Optionee Bound by Plan.  Optionee hereby acknowledges receipt of a
copy of the Plan and acknowledges that Optionee shall be bound by its terms,
regardless of whether such terms have been set forth in the Agreement. 
Notwithstanding the foregoing, if there is an inconsistency between the terms of
the Plan and the terms of this Agreement,

 

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Optionee shall be bound by the terms of the Plan, which terms are incorporated
herein by reference.

 

11.       Employment Rights.  Neither the Plan nor the granting of the Option
shall be a contract of employment with the Company or any of its subsidiaries.
Optionee may be discharged from employment at any time by the employing Company
or subsidiary.

 

12.       Amendment.  Generally, this Agreement may be amended, at any time and
from time to time, at the sole and complete discretion of the Committee.  Thus,
this Agreement may be amended by the Committee at any time based on its
determination that the amendment is necessary or advisable in light of any
addition to, or change in, the Code or in regulations issued thereunder, or any
federal or state securities law or other law or regulation, or based on any
discretionary authority of the Committee under the Plan. However, unless
necessary or advisable due to a change in law, any amendment to this Agreement
which has a material adverse effect on the interest of Optionee under this
Agreement shall be adopted only with the consent of Optionee.

 

13.       Notices.  Any notice or other communication made in connection with
this Agreement shall be deemed duly given when delivered in person or mailed by
certified or registered mail, return receipt requested, to Optionee at
Optionee’s address shown on Company records or such other address designated by
Optionee by similar notice, or to the Company at its then principal office, to
the attention of the Corporate Secretary of the Company.  Further, such notice
or other communication shall be deemed duly given when transmitted
electronically to Optionee at Optionee’s electronic mail address shown on
Company records or, to the extent that Optionee is an active employee, through
the Company’s intranet.

 

14.       No Advice, Warranties, or Representations.  The Company is not
providing Optionee with advice, warranties, or representations regarding any of
the legal or tax effects to Optionee with respect to the Option.  Optionee is
responsible to seek legal and tax advice from Optionee’s own legal and tax
advisors as may be appropriate or desirable.

 

15.       Code Section 162(m).  This grant of Option has been structured and is
intended to meet the requirements of a nonqualified stock option that
constitutes “performance-based compensation” that is excepted from the
applicable deduction limitation under Code Section 162(m) pursuant to Treasury
Regulation Section 162-27(e)(2)(vi).

 

16.       Code Section 409A.  This grant of Option has been structured and is
intended to meet the requirements for a nonqualified stock option that does not
provide for a “deferral of compensation” in accordance with Code Section 409A
and Treasury Regulation Section 1.409A-1(b)(5)(i)(A).

 

17.       Miscellaneous. This Agreement and the Plan set forth the final and
entire agreement between the parties with respect to the subject matter hereof,
which shall be governed by and shall be construed in accordance with the laws of
the State of Delaware. This Agreement shall bind and benefit Optionee, the
heirs, distributees and personal representative of Optionee, and the Company and
its successors and assigns.

 

BY ACCEPTING THIS OPTION GRANTED UNDER THIS 2012 NONQUALIFIED STOCK OPTION
AGREEMENT, GRANTEE AGREES TO ALL THE TERMS AND CONDITIONS DESCRIBED IN THIS
AGREEMENT AND IN THE PLAN.

 

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