Document:

Exhibit 10.68

 

 

FORM OF

AFFYMETRIX,
INC.

XXXXXXXXX
STOCK OPTION AGREEMENT

 

	
  Name

  	
   

  	
  Option
  Number:

  	
   

  	
  XXXXXX

  
	
  Address1

  	
   

  	
  ID:

  	
   

  	
  XXXXXX

  
	
  City, State, Zip Code

  	
   

  	
  Plan:

  	
   

  	
  Amended & Restated 2000
  Equity Incentive Plan

  
						

 

This XXXXXXXXX Stock Option Agreement (the “Agreement”), is made and
entered into between AFFYMETRIX, INC., a Delaware corporation (the “Company”)
and _______________ (“Optionee”) residing at the above address.

 

THE PARTIES AGREE AS FOLLOWS:

 

                1. Grant of
Option.  The Company hereby grants to
the Optionee a XXXXXXX Stock Option (the “Option”) to purchase common stock of
the Company as specified below, subject to (i) the Terms and Conditions of
Grant attached as Exhibit A, and (ii) the Affymetrix, Inc. Amended &
Restated 2000 Equity Incentive Plan (the “Plan”) incorporated herein by
reference.

 

                2. Definitions.  As used in this Agreement, including the
Terms and Conditions of Grant, the following terms shall have the meanings set
forth in this section 2.

 

	
  2.1

  	
   

  	
  Grant Date:

  	
   

  	
  XXXXXX

  
	
  2.2

  	
   

  	
  Number of shares covered:

  	
   

  	
  XXX

  
	
  2.3

  	
   

  	
  Option Termination Date:

  	
   

  	
  XXXXXX

  
	
  2.4

  	
   

  	
  Exercise Price:

  	
   

  	
  XXXXXX

  
	
  2.5

  	
   

  	
  Vesting Schedule:

  	
   

  	
  As follows:

  

 

	
  Shares

  	
   

  	
  Vest Type

  	
   

  	
  Full Vest

  
	
  XXX

  	
   

  	
  On Vest Date

  	
   

  	
  XXXXXX

  
	
  XXX

  	
   

  	
  On Vest Date

  	
   

  	
  XXXXXX

  
	
  XXX

  	
   

  	
  On Vest Date

  	
   

  	
  XXXXXX

  
	
  XXX

  	
   

  	
  On Vest Date

  	
   

  	
  XXXXXX

  

 

 

	
  AFFYMETRIX, INC.

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
  Company Representative

  	
   

  	
  Name of Optionee

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Date

  

 

 

Exhibit A

AFFYMETRIX, INC.

AMENDED AND RESTATED 2000 EQUITY INCENTIVE PLAN AS OF JUNE 10, 2004

TERMS AND CONDITIONS OF GRANT

	
  Tax Treatment

  	
   

  	
  This
  option is intended to be an incentive stock option or
  a nonstatutory option, as provided in the Stock Option Grant Agreement. ISO’s
  will only be granted up to the allowable limit under IRS Regulations.

  
	
  Vesting

  	
   

  	
  This
  option becomes exercisable in installments, as shown in the Stock Option
  Grant Agreement.

  
	
   

  	
   

  	
  No
  additional shares become exercisable after your service in any one of the
  positions of employee, consultant or director of the Company (or a subsidiary
  of the Company) has terminated for any reason.

  
	
  Term

  	
   

  	
  This
  option expires in any event at the close of business at Company headquarters
  on the day before the 7th anniversary of the Date of Grant, as shown in the
  Stock Option Grant Agreement. (It will expire earlier if your service
  terminates, as described below.)

  
	
  Regular Termination

  	
   

  	
  If
  your service in any one of the positions of an employee, consultant or
  director of the Company or a subsidiary of the Company terminates for any
  reason except death or total and permanent disability, then this option will
  expire at the close of business at Company headquarters on the date 90 days
  after your termination date. The Company determines when your service
  terminates for this purpose.

  
	
  Death

  	
   

  	
  If
  you die as an employee, consultant or director of the Company or a subsidiary
  of the Company, then this option will expire at the close of business at
  Company headquarters on the date 12 months after the date of death.

  
	
  Disability

  	
   

  	
  If
  your service as an employee, consultant or director of the Company or a
  subsidiary of the Company terminates because of your total and permanent
  disability, then this option will expire at the close of business at Company
  headquarters on the date 12 months after your termination date.

  
	
   

  	
   

  	
  For
  all purposes under this Agreement, “total and permanent disability” means
  that you are unable to engage in any substantial gainful activity by reason
  of any medically determinable physical or mental impairment which can be
  expected to result in death or which has lasted, or can be expected to last,
  for a continuous period of not less than one year.

  
	
  Leaves
  of Absence

  	
   

  	
  For
  purposes of this option, your service does not terminate when you go on a
  military leave, a sick leave or another bona fide
  leave of absence, if the leave was approved by the Company in writing and if continued
  crediting of service is required by the terms of the leave or by applicable
  law. But your service terminates when the approved leave ends, unless you
  immediately return to active work. Vesting will be suspended during leave of
  absence unless continued vesting was approved by the Company in writing.

  
	
  Restrictions
  on Exercise

  	
   

  	
  The
  Company will not permit you to exercise this option if the issuance of shares
  at that time would violate any law or regulation.

  

 

 

	
  Notice
  of Exercise

  	
   

  	
  When
  you wish to exercise this option, you must contact the Company’s preferred
  broker. The preferred broker will notify the Company of your intent to
  exercise. With the Company’s approval, you may notify the Company by filing
  the proper “Notice of Exercise” form. Your notice must specify how many
  shares you wish to purchase. Your notice must also specify method of receipt
  of shares (physical certificate or transferred electronically to your
  broker). The notice will be effective when it is received along with the full
  payment of the exercise price and any applicable taxes by the Company.

  
	
   

  	
   

  	
  If
  someone else wants to exercise this option after your death, that person must
  prove to the Company’s satisfaction that he or she is entitled to do so.

  
	
  Form of
  Payment

  	
   

  	
  When
  you submit your notice of exercise, you must include payment of the option
  exercise price for the shares you are purchasing. Payment may be made in one
  (or a combination of two or more) of the following forms as approved by the
  committee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •       Your personal check, a cashier’s check or a money
  order.

  
	
   

  	
   

  	
  •       Certificates
  for shares of Company stock that you own, along with any forms needed to
  effect a transfer of those shares to the Company. The value of the shares,
  determined as of the effective date of the option exercise, will be applied
  to the option exercise price. Instead of surrendering shares of Company
  stock, you may attest to the ownership of those shares on a form provided by
  the Company and have the same number of shares subtracted from the option
  shares issued to you. However, you may not surrender, or attest to the
  ownership of, shares of Company stock in payment of the exercise price if
  your action would cause the Company to recognize compensation expense (or
  additional compensation expense) with respect to this option for financial
  reporting purposes.

  
	
   

  	
   

  	
  •       Irrevocable directions to a securities broker approved
  by the Company to sell all or part of your option shares and to deliver to
  the Company from the sale proceeds an amount sufficient to pay the option
  exercise price and any withholding taxes. (The balance of the sale proceeds,
  if any, will be delivered to you.) The directions must be given by signing a
  special “Notice of Exercise” form provided by the Company.

  
	
   

  	
   

  	
  •       Irrevocable directions to a securities broker or
  lender approved by the Company to pledge option shares as security for a loan
  and to deliver to the Company from the loan proceeds an amount sufficient to
  pay the option exercise price and any withholding taxes. The directions must
  be given by signing a special “Notice of Exercise” form provided by the
  Company.

  
	
  Withholding
  Taxes and Stock Withholding

  	
   

  	
  •       You will not be allowed to exercise this option unless
  you make arrangements acceptable to the Company to pay any withholding taxes
  that may be due as a result of the option exercise. These arrangements may
  include (subject to committee approval) withholding shares of Company stock
  that otherwise would be issued to you when you exercise this option. The value of these shares, determined
  as of the effective date of the option exercise, will be applied to the
  withholding taxes.

  
	
  Restrictions
  on Resale

  	
   

  	
  By
  signing this Agreement, you agree not to sell any option shares at a time
  when applicable laws, Company policies (including the Insider Trading Policy)
  or an agreement between the Company and its underwriters prohibit a sale.
  This restriction will apply as long as you are an employee, consultant or
  director of the Company or a subsidiary of the Company.

  

 

 

	
  Transfer
  of Option

  	
   

  	
  Prior
  to your death, only you may exercise this option. You cannot transfer or
  assign this option. For instance, you may not sell this option or use it as
  security for a loan. If you attempt to do any of these things, this option
  will immediately become invalid. You may, however, dispose of this option in
  your will or a beneficiary designation.

  
	
   

  	
   

  	
  Regardless
  of any marital property settlement agreement, the Company is not obligated to
  honor a notice of exercise from your former spouse, nor is the Company
  obligated to recognize your former spouse’s interest in your option in any
  other way.

  
	
  Exchange
  of Unexercised Options for SAR

  	
   

  	
  The Company shall have
  the ability at any time, to substitute stock appreciation rights (“SARs”) for all of your unexercised Options. The grant
  price of a substitute SAR shall be equal to the exercise price of the
  replaced Option. Upon exercise of an SAR, you shall receive from the Company
  an amount equal to (i) the number of Common Shares with respect to which the
  SAR is exercised multiplied by (ii) the excess of the fair market value of a
  Common Share on the exercise date over the grant price of the SAR, payable in
  Common Shares.

  
	
  Retention
  Rights

  	
   

  	
  Your
  option or this Agreement do not give you the right to be retained by the
  Company or a subsidiary of the Company in any capacity. The Company and its
  subsidiaries reserve the right to terminate your service at any time, with or
  without cause.

  
	
  Stockholder
  Rights

  	
   

  	
  You,
  or your estate or heirs, have no rights as a stockholder of the Company until
  you have exercised this option by giving the required notice to the Company
  and paying the exercise price. No adjustments are made for dividends or other
  rights if the applicable record date occurs before you exercise this option,
  except as described in the Plan.

  
	
  Adjustments

  	
   

  	
  In
  the event of a stock split, a stock dividend or a similar change in Company
  stock, the number of shares covered by this option and the exercise price per
  share may be adjusted pursuant to the Plan.

  
	
  Applicable
  Law

  	
   

  	
  This
  Agreement will be interpreted and enforced under the laws of the State of
  Delaware (without regard to their choice-of-law provisions).

  
	
  The
  Plan and Other Agreements

  	
   

  	
  The
  text of the Plan is incorporated in this Agreement by reference.

  This
  Agreement and the Plan constitute the entire understanding between you and
  the Company regarding this option. Any prior agreements, commitments or
  negotiations concerning this option are superseded. This Agreement may be
  amended only by another written agreement, signed by both parties.

  

BY SIGNING THE COVER SHEET OF
THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND 

CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.Exhibit 10.3

 

September 9, 2004

 

Clint Arnoldus

625 Hakaka Place

Honolulu, Hawaii 96816

 

Re:       Employment Agreement

 

Dear
Clint:

 

This is your EMPLOYMENT
AGREEMENT with
Central Pacific Financial Corp., a Hawaii corporation (the “Company”).

 

1.  The Merger Agreement;
Effectiveness

 

This Agreement relates to the Agreement and Plan of Merger, dated as of
April 22, 2004 (the “Merger Agreement”), between the Company
and CB Bancshares, Inc., a Hawaii corporation (“CB Bancshares”).  It
sets forth the terms of your employment with the Company and its affiliates
(together, as constituted from time to time, the “Group”) once the merger provided for in the Merger Agreement
becomes effective.  However, if the
Merger Agreement or your present employment terminates for any reason before
the merger occurs, all of this Agreement’s provisions will terminate and there
will be no liability of any kind under this Agreement.

 

2.  Terms Schedule

 

Some of the terms of your employment are in the attached schedule (your
“Schedule”), which is part of
this Agreement.

 

3.  Your Position,
Performance and Other Activities

 

(a)  Position.  You
will be employed in the position stated in your Schedule.

 

(b)  Authority,
Responsibilities and Reporting.  You will have any reporting
relationships set forth in your Schedule. 
You will have the authority and responsibilities that correspond to your
position, including any particular authority and responsibilities that are
specified in the Schedule or that the Company’s Board of Directors (the “Board”)

 

 

or any officer of the Group to whom you
report in accordance with your Schedule may assign to you from time to time
consistent with the provisions of this Agreement.

 

(c)  Performance. 
During your employment, you will devote substantially all of your
business time and attention to the Group and will use good faith efforts to
discharge your responsibilities under this Agreement to the best of your
ability.

 

(d)  Other Activities. 
During your employment, you may
serve on corporate, civic or charitable boards and manage personal investments,
so long as these activities do
not significantly interfere with your performance of your responsibilities
under this Agreement and are consistent with the Group’s Code of Conduct and
Ethics.  The Company acknowledges that
you currently serve on, and approves your continued service on, the corporate,
civic and charitable boards listed in your Schedule.

 

4.  Term of Your
Employment

 

Your employment under this Agreement will begin at the time the merger
provided for in the Merger Agreement becomes effective (your “Start Date”) and end on the earlier of (1)
the end of the Agreement Period stated in your Schedule or (2) the
effectiveness of early termination of your employment under Section 7(e).  References in this Agreement to “your employment” are to your employment
under this Agreement.

 

5.  Your Compensation

 

(a)  Salary. 
During your employment, you will receive an annual base salary (adjusted
as provided herein from time to time, your “Salary”).  The starting amount of your Salary is stated
in your Schedule.  The Company may
increase it at any time for any reason. 
The Company may not decrease your Salary (including after any increase),
and any increase in your Salary will not reduce or limit any other obligation
to you under this Agreement.  Your Salary
will be paid in accordance with the Group’s practices for similarly situated
executives.

 

(b)  Bonus.  You
will be entitled to receive an annual cash bonus (your “Bonus”) for each fiscal year of the
Company ending during your employment. 
The amount of your Bonus will be determined by the Company in accordance
with your Schedule, and it will be paid in accordance with the Group’s
practices for similarly situated executives of the Group.

 

(c)  Other Executive
Compensation Plans and Additional Compensation. 
During your employment, you will be entitled to participate in all of
the Group’s executive compensation plans, including any management incentive
plans, deferred compensation plans, supplemental retirement plans and stock and
stock option plans, on a basis that is at least as favorable as that provided
to similarly situated executives of the Group (subject to the provisions of
your Schedule).  You will also receive
any additional compensation provided in your Schedule.

 

6.  Employee Benefits.

 

(a)  Employee Benefit Plans. 
During your employment, you will be entitled to (1) participate in each
of the Group’s employee benefit and welfare plans, including plans

 

2

 

providing retirement benefits or medical,
dental, hospitalization, life or disability insurance, and (2) receive
perquisites, in each case on a
basis that is at least as favorable as that provided to similarly situated
executives of the Group (subject to the provisions of your Schedule).

 

(b)  Vacation.  You
will be entitled to paid annual vacation during your employment on a basis that
is at least as favorable as that provided to similarly situated executives of
the Group.

 

(c)  Business Expenses.  You
will be reimbursed for all business and entertainment expenses incurred by you
in performing your responsibilities under this Agreement.  However,
your reimbursement will be subject to the Group’s normal practices for
similarly situated executives.

 

(d)  Indemnification.  To
the extent permitted by law, the Company will indemnify you against any actual
or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, arising by reason of your status as a
director, officer, employee and/or agent of the Group during your employment or
your status, if any, as a trustee or other fiduciary of any employee benefit
plan sponsored by any member of the Group. 
In addition, to the extent permitted by law, the Company will pay or
reimburse any expenses, including reasonable attorney’s fees, you incur in
investigating and defending any actual or threatened action, suit or proceeding
for which you may be entitled to indemnification under this Section 6(d).  However, you agree to repay any expenses paid
or reimbursed by the Company if it is ultimately determined that you are not
legally entitled to be indemnified by the Company.  If the Company’s ability to make any payment
contemplated by this Section 6(d) depends on an investigation or determination
by the board of directors of any member of the Group, at your request the
Company will use its best efforts to cause the investigation to be made (at the
Company’s expense) and to have the relevant board reach a determination as soon
as reasonably possible.

 

(e)  Additional Benefits. 
During your employment, you will be provided any additional benefits
stated in your Schedule.

 

7.  Early Termination of
Your Employment.

 

(a)  No Reason Required.  You or the Company may terminate your employment early at any time for
any reason, or for no reason, subject to compliance with Section 7(e).

 

(b)  Termination by the Company
for Cause.

 

(1)  “Cause” means any of the following:

 

(A)  Your
willful failure to perform substantially your responsibilities under this Agreement,
after demand for substantial
performance has been given by the Board that specifically identifies how you
have not substantially performed your responsibilities,

 

(B)  Your
conviction of any felony or of a misdemeanor involving fraud, dishonesty, or
moral turpitude,

 

3

 

(C)  Your
willful or intentional material breach of this Agreement that results in
financial or reputational detriment to the Group that is not de minimis,

 

(D)  Your
willful or intentional material misconduct in the performance of your duties
under the Agreement that results in financial or reputational detriment to the
Group that is not de minimis,

 

(E)  Your
material breach of the Group’s Code of Business Conduct and Ethics if the breach
is of a nature for which other similarly situated executives of the Group would
be terminated, or

 

(F)  Your
willful attempt to obstruct or willful failure to cooperate with any
investigation authorized by the Board or any governmental or self-regulatory
entity.

 

For
this definition, (i) no act or omission by you will be “willful” unless it is
made by you in bad faith or without a reasonable belief that your act or
omission was in the best interests of the Group and (ii) any act or omission by
you based on authority given pursuant to a resolution duly adopted by the Board
or on the advice of counsel for the Group will be deemed made in good faith and
in the best interests of the Company.

 

(2)  To
terminate your employment “for Cause”, Cause must have occurred and the Company
must comply with Section 7(e) and any other steps required in your Schedule for
termination for Cause.

 

(c)  Termination by You for
Good Reason.

 

(1)  “Good Reason” means any of the following:

 

(A)  Any
material and adverse change in your position from that provided in your
Schedule (including by reason of removal or failure to be elected or
re-elected),

 

(B)  Any
failure by the Company to provide you with authority, responsibilities and
reporting relationships as provided in Section 3(b) (including assigning you
duties materially inconsistent with your position and responsibilities),

 

(C)  Any
failure by the Company to provide you with compensation or benefits as provided
in Section 5 and Section 6,

 

(D)  Any
failure by the Company to comply with Section 12(c), or

 

(E)  The
occurrence of any additional event set forth in your Schedule as being Good
Reason.

 

(2)  To
terminate your employment “for Good Reason”, Good Reason must have occurred and
you must comply with Section 7(e) and any other steps

 

4

 

required in your Schedule for termination for Good Reason.  However,
(A) Good Reason will not include any isolated, insubstantial and inadvertent
failure by the Company that is not in bad faith and is cured promptly on your
giving the Company notice, (B) if you do not give a Termination Notice to the
Company within 180 days after you have knowledge that an event constituting
Good Reason has occurred, the event will no longer constitute Good Reason, and
(C) an event will not constitute Good Reason if you have consented to it in
accordance with Section 14(f).

 

(d)  Termination on Disability
or Death.

 

(1)  “Disability” means your absence from your
responsibilities with the Company on a full-time basis for 130 business days in
any consecutive 12 months as a result of incapacity due to mental or physical
illness or injury.  If the Company
determines in good faith that your Disability has occurred, it may give you
Termination Notice.  If, within 30 days
of Termination Notice, you do not return to full-time performance of your
responsibilities, your employment will terminate (the “Disability Effective Date”).  If you do return to full-time performance in
that 30-day period, the Termination Notice will be cancelled.  Except as provided in this Section 7(d), any
incapacity due to mental or physical illness or injury will not affect the
Company’s obligations under this Agreement.

 

(2)  Your
employment will terminate automatically on your death.

 

(e)  Termination Notice.

 

(1)  To
terminate your employment early, either you or the Company must provide a
Termination Notice to the other.  A “Termination Notice” is a written notice
that states the specific provision of this Agreement on which termination is
based, including, if applicable, the specific clause of the definition of Cause
or Good Reason and a reasonably detailed description of the facts that permit
termination under that clause.  (The
failure to include any fact in a Termination Notice that contributes to a
showing of Cause or Good Reason does not preclude either party from asserting
that fact in enforcing its rights under this Agreement.)

 

(2)  If your
employment is terminated by the Company other than for Disability or death or
you terminate your employment for Good Reason, your employment will end on the
date specified in the Notice of Termination. 
If you terminate your employment without Good Reason, your employment
will end 60 days after the Company receives the Termination Notice (although
the Company may accelerate the end of your employment by providing you with
notice or, alternatively, may place you on paid leave during such period).  If your employment is terminated by reason of
your death or Disability, your employment will end on the date of death or the
Disability Effective Date, as applicable.

 

5

 

8.  The Company’s Obligations in
Connection With Your Early Termination

 

(a)  General Effect.  On
termination in accordance with Section 7, your employment will end and the
Group will have no further obligations to you except as provided in this
Section 8.

 

(b)  For Good Reason or Without
Cause.  If the Company terminates your employment
without Cause or you terminate your employment for Good Reason:

 

(1)  The
Company will pay you the following as of the end of your employment:  (A) your unpaid Salary, (B) your Salary for
any accrued but unused vacation and (C) any accrued expense reimbursements
(together, your “Accrued Compensation”).  In addition, the Company will timely pay you
any other amounts and provide you any benefits that are required, or to which
you are entitled (in each case as an active employee for any period before the
effectiveness of early termination of your employment and as a terminated
employee after effectiveness), under any plan or contract of the Company or the
Group (together, the “Other Accrued Benefits”).

 

(2)  The
Company will pay you your Accrued Bonus.  Your “Accrued Bonus” means the sum of (A) any unpaid but vested
Bonus for the fiscal year ending before Termination Notice is given and (B) any
excess of (i) your target Bonus for the fiscal year in which Termination Notice
is given multiplied by the number
of days of your employment since the fiscal year ending before Termination
Notice is given divided by 365 over (ii) any Bonus paid to you for a
fiscal year ending after Termination Notice is given.

 

(3)  The
Company will pay you (A) the sum of your Salary and your target Bonus for the
fiscal year in which Termination Notice is given multiplied by (B) the length of the Severance Period stated
in your Schedule (in years, including any fractional years).

 

(4)  All stock
options issued by the Group to you will vest and become immediately
exercisable, and, subject to your Schedule, will remain exercisable for at
least 12 months after the end of your employment (or, if earlier, until they
would have expired but for your termination). 
All restricted stock and other equity-based compensation awarded by the
Group to you will vest and become immediately payable.  The benefits in this Section 8(b)(4) are
referred to as “Accelerated Vesting”.

 

(5)  The
Company will provide any “Additional Good Reason/Without Cause Benefits”
provided in your Schedule.

 

(c)  For Cause or without Good
Reason.  If the Company terminates your employment for
Cause or you terminate your employment without Good Reason, the Company will
pay you your Accrued Compensation and will provide you your Other Accrued
Benefits.

 

(d)  Death or Disability.  If
your employment terminates as a result of your Death or Disability, the Company
will pay you your Accrued Compensation and Accrued Bonus

 

6

 

and will provide your Other Accrued
Benefits.  The Company will also provide
any “Additional Death/Disability Benefits” provided in your Schedule.

 

(e)  Additional Provisions.  Your
Schedule may provide additional provisions that relate to the Company’s
obligations in this Section 8 or the Company’s obligations on your termination
generally.  These provisions are a part
of this Agreement.

 

(f)  Condition. 
Subject to your Schedule, as a condition to making the payments and
providing the benefits stated in this Section 8, the Company may require you to
execute and deliver a general release (substantially in the form attached as
Exhibit A) in which you release all claims that you may have against any member
of the Group and any of their respective past or present officers, directors,
employees or agents other than your
rights under this Agreement, your rights under any Other Accrued Benefits, and
your rights to indemnification and continued liability insurance coverage
(under this Agreement or otherwise).

 

(g)  Timing. 
Subject to Section 8(f), the benefits provided in this Section 8 will begin
at the end of your employment, any cash payments owed to you under this Section
8 will be paid in a lump sum amount
no later than 15 business days following the termination of your employment,
and the Other Accrued Benefits will be provided in accordance with the terms of
the relevant plan or contract.

 

(h)  Resignation from
Directorships and Officerships.  Unless the Group waives this
requirement, the termination of your employment for any reason will constitute
your resignation from (1) any director, officer or employee position you then
have with any member of the Group and (2) all fiduciary positions (including as
trustee) you hold with respect to any pension plans or trusts established by
any member of the Group.  You agree that
this Agreement will serve as your written notice of resignation in this
circumstance.

 

9.  Proprietary Information.

 

(a)  Definition.  “Proprietary Information” means
confidential or proprietary information, knowledge or data concerning (1) the
Group’s businesses, strategies, operations, financial affairs, organizational
matters, personnel matters, budgets, business plans, marketing plans, studies,
policies, procedures, products, ideas, processes, software systems, trade
secrets and technical know-how, and other information regarding the business of
the Group and (2) any matter relating to clients of the Group or other third
parties having relationships with the Group. 
Proprietary Information may include information furnished to you orally
or in writing (whatever the form or storage medium) or gathered by inspection,
in each case before or after the date of this Agreement.  However, Proprietary Information does not
include information (1) that was or becomes generally available to you on a
non-confidential basis, if the source of this information was not reasonably
known to you to be bound by a duty of confidentiality, (2) that was or becomes
generally available to the public or within the relevant trade or industry,
other than as a result of a disclosure by you, directly or indirectly, or (3)
that was independently developed by you without reference to any Proprietary
Information.

 

(b)  Use and Disclosure.  You
will obtain or create Proprietary Information in the course of your involvement
in the Group’s activities and may already have Proprietary

 

7

 

Information. 
You agree that the Proprietary Information is the exclusive property of
the Group, and that, during your employment, you will use and disclose
Proprietary Information only for the Group’s benefit and in accordance with any
restrictions placed on its use or disclosure by the Group.  After your employment, you will not use or
disclose any Proprietary Information. 
Notwithstanding anything to the contrary in this Section 9(b),
Proprietary Information may be disclosed when required by law or by any court,
arbitrator, mediator or administrative or legislative body (including any
committee thereof), provided that
(1) you shall request confidential treatment with respect to such information
and/or request matters with respect to such information be sealed and (2) you
shall disclose the minimum amount required.

 

(c)  Limitations. 
Nothing in this Agreement prohibits you or the Group from providing
truthful testimony to governmental, regulatory or self-regulatory authorities.

 

10.  On-going Restrictions on Your
Activities

 

(a)  Terms used.  This
Section uses the following defined terms:

 

“Competitive
Enterprise” means (1) Bank of Hawaii, First Hawaiian Bank, American
Savings Bank, Finance Factors and Hawaii National Bank and any successors
thereto or (2) any business enterprise that holds a 25% or greater equity,
voting or profit participation interest in any of the preceding.

 

“Client”
means any client of the Company to whom you provided services, for whom you
transacted business, or whose identity became known to you in connection with
your employment by the Group.

 

“Solicit” means any communication, regardless of
who initiates it, that invites, advises, encourages or requests any person to
take or refrain from taking any action.

 

“Restriction
Period” has the meaning set forth in the Schedule.

 

(b)  Your
Importance to the Group and the Effect of this Section 10.  You acknowledge that, in the
course of your involvement in the Group’s activities, you will have access to
Proprietary Information and the Group’s client base and will yourself profit
from the goodwill associated with the Group. 
On the other hand, in view of your access to Proprietary Information and
your importance to the Group, if you compete with the Group for some time after
your employment, the Group will likely suffer significant harm but the amount
of loss would be uncertain and not readily ascertainable.  You understand that this Section 10 will
limit your ability to earn a livelihood in a Competitive Enterprise and your
relationships with Clients but you have determined that your complying with
this Section 10 will not result in severe economic hardship for you or your
family.

 

(c)  Non-Competition.  Until
the end of your Restriction Period, you will not, directly or indirectly:

 

(1)  hold a 5%
or greater equity, voting or profit participation interest in a Competitive
Enterprise; or

 

8

 

(2)  associate
(including as a director, officer, employee, partner, consultant, agent or
advisor) with a Competitive Enterprise and in connection with your association
engage in Hawaii, or directly or indirectly manage or supervise personnel
engaged in Hawaii, in any activity:

 

(A)  that is
substantially similar to any activity that you were engaged in,

 

(B)  that
calls for the application of specialized knowledge or skills substantially
similar to those used by you in your activities;

 

(C)  that is
substantially similar to any activity for which you had direct or indirect
managerial or supervisory responsibility,

 

in each case, for
the Group at any time during the year before the end of your employment (or, if
earlier, the year before the date of determination).

 

(d)  Non-Solicitation of Clients.  Until
the end of your Restriction Period, you will not, directly or indirectly,
Solicit any Client to transact business with a Competitive Enterprise or to
reduce or refrain from doing any business with the Group.

 

(e)  Non-Solicitation of Group
Employees.  Until the end of your Restriction Period, you
will not, directly or indirectly, Solicit anyone who is then an employee of the
Group (or who was an employee of the Group within the prior six months) to
resign from the Group or to apply for or accept employment with any Competitive
Enterprise.

 

(f)  Notice to New Employers. 
Before you either apply for or accept employment with any other person
or entity while any of Section 10 (c), (d), or (e) is in effect, you will
provide the prospective employer with written notice of the provisions of this
Section 10 and will deliver a copy of the notice to the Group.

 

(g)  No Disparagement.  You
shall make no public statement that would libel, slander or disparage any
member of the Group or any of their respective past or present officers,
directors, employees or agents.  The
Company agrees that it shall (and shall use good faith efforts to cause the
Chief Executive Officer of the Company, the Board, and its officers and employees
to) make no public statement that would libel, slander or disparage you.

 

(h)  Survival.  Any
termination of your employment (or breach of this Agreement by you or the
Group) shall have no effect on the continuing operation of this Section 10.

 

11.  Effect on Other Agreements.

 

(a)  Prior Employment
Agreements and Severance Rights.  Beginning on your Start Date,
this Agreement will supersede any earlier employment agreement or understanding
and any earlier severance, change-in-control or similar rights you may have
with any member of the Group (including CB Bancshares or any affiliate of it).

 

(b)  Effect on Other
Agreements; Entire Agreement.This Agreement is the entire agreement between you and the Company with
respect to the relationship contemplated by

 

9

 

this Agreement and supersedes any earlier
agreement, written or oral, with respect to the subject matter of this
Agreement.  You agree that you are not
entitled to any severance, change-in-control or similar rights under any plan
of the Group.  In entering into this
Agreement, no party has relied on or made any representation, warranty,
inducement, promise or understanding that is not in this Agreement.

 

12.  Successors.

 

(a)  Payments on Your Death.  If
you die and any amounts become payable under this Agreement, the Company will
pay those amounts to your estate.

 

(b)  Assignment by You.  You
may not assign this Agreement without the Company’s consent.  Also, except as required by law, your right
to receive payments or benefits under this Agreement may not be subject to
execution, attachment, levy or similar process. 
Any attempt to effect any of the preceding in violation of this Section
12(b), whether voluntary or involuntary, will be void.

 

(c)  Assumption by any
Surviving Company.  The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place.  As used in
this Agreement, “Company” shall
mean the Company as hereinbefore defined and any successor to all or
substantially all of its business or assets.

 

13.  Disputes.

 

(a)  Employment Matter.  This
Section 13 applies to any controversy or claim between you and the Group
arising out of or relating to or concerning any aspect of this Agreement, your
employment with the Group or the Company, the termination of that employment or
your compensation or benefits from the Group or the Company (together, an “Employment Matter”).

 

(b)  Mandatory Arbitration.  Subject to the provisions of this Section 13,
any Employment Matter will be finally settled by arbitration in Honolulu,
Hawaii administered by the American Arbitration Association under its
Commercial Arbitration Rules then in effect.  However, the rules will be
modified in the following ways: (1) each arbitrator will agree to treat as
confidential evidence and other information presented to the same extent as the
information is required to be kept confidential under Section 9, (2) the
optional Rules for Emergency Measures of Protections will apply, (3) you and
the Group agree not to request any amendment or modification to the terms of
this Agreement except as provided in Section 14(c), (4) a decision must be
rendered within 10 business days of the parties’ closing statements or
submission of post-hearing briefs and (5) the arbitration will be conducted
before a panel of three arbitrators, one selected by you within 10 days of the
commencement of arbitration, one selected by the Company in the same period and
the third selected jointly by these arbitrators (or, if they are unable to
agree on an arbitrator within 30 days of the commencement of arbitration, the
third arbitrator will be appointed by the American Arbitration Association; provided that the arbitrator shall be a
partner or former partner at a nationally recognized law firm).

 

10

 

(c)  Limitation on Damages.  You and the Group agree that there will be no
punitive damages payable as a result of any Employment Matter and agree not to
request punitive damages.

 

(d)  Injunctions and
Enforcement of Arbitration Awards.  You or the Group may bring an
action or special proceeding in a state or federal court of competent
jurisdiction sitting in Honolulu, Hawaii to
enforce any arbitration award under Section 13(b).  Also, the Group may bring such an action or
proceeding, in addition to its rights under Section 13(b) and whether or not an
arbitration proceeding has been or is ever initiated, to temporarily,
preliminarily or permanently enforce any part of Sections 9 and 10.  You agree that (1) your violating any part of
Sections 9 and 10 would cause damage to the Group that cannot be measured or
repaired, (2) the Group therefore is entitled to an injunction, restraining
order or other equitable relief restraining any actual or threatened violation
of those Sections, (3) no bond will need to be posted for the Group to receive
such an injunction, order or other relief and (4) no proof will be required
that monetary damages for violations of those Sections would be difficult to
calculate and that remedies at law would be inadequate.

 

(e)  Jurisdiction and Choice of
Forum.  You and the Group
irrevocably submit to the exclusive jurisdiction of any state or federal court
located in Honolulu, Hawaii (the “Forum”)
over any Employment Matter that is not otherwise arbitrated or resolved
according to Section 13(b).  This includes any action or proceeding to
compel arbitration or to enforce an arbitration award.  Both you and the Group (1) acknowledge that
the Forum has a reasonable relation to this Agreement and to the relationship
between you and the Group and that the submission to the Forum will apply even
if the forum chooses to apply non-Forum law, (2) waive, to the extent permitted
by law, any objection to personal jurisdiction or to the laying of venue of any
action or proceeding covered by this Section 13(e) in the Forum, (3) agree not
to commence any such action or proceeding in any forum other than the Forum and
(4) agree that, to the extent permitted by law, a final and non-appealable
judgment in any such action or proceeding in any such court will be conclusive
and binding on you and the Group. 
However, nothing in this Agreement precludes you or the Group from
bringing any action or proceeding in any court for the purpose of enforcing the
provisions of Sections 13(b) and this 13(e).

 

(f)  Waiver of Jury Trial.  To the extent permitted by law, you and the
Group waive any and all rights to a jury trial with respect to any Employment
Matter.

 

(g)  Governing Law.  This Agreement will be governed by and
construed in accordance with the laws of the State of Hawaii applicable to
contracts made and to be performed entirely within that State.

 

(h)  Costs.  The
Company will pay or reimburse any reasonable expenses, including reasonable
attorney’s fees, you incur as a result of any Employment Matter, provided that you substantially prevail in
the Employment Matter.

 

(i)  Interest.  If
the Company fails to pay when due any amount required by the Agreement, it
shall pay interest on such amount at a rate equal to its prime commercial
lending rate.

 

11

 

(j)  Survival.  For
the avoidance of doubt, any termination of your employment (or breach of this
Agreement by you or the Group) shall have no effect on the continuing operation
of this Section 13.

 

14.  General Provisions.

 

(a)  Construction.

 

(1)           References (A) to Sections are to sections of this Agreement unless otherwise
stated; (B) to any contract
(including this Agreement) are to the contract as amended, modified,
supplemented or replaced from time to time; (C) to any statute,  rule
or regulation are to the statute,
rule or regulation as amended, modified, supplemented or replaced from time to
time (and, in the case of statutes, include any rules and regulations
promulgated under the statute) and to any section
of any statute,  rule or
regulation include any successor to the section; (D) to any governmental authority include any
successor to the governmental authority; (E) to any plan include any programs, practices and policies; (F) to
any entity include any
corporation, limited liability company, partnership, association, business
trust and similar organization and include any governmental authority; and (G)
to any affiliate of any entity
are to any person or other entity directly or indirectly controlling,
controlled by or under common control with the first entity.

 

(2)           The various headings
in this Agreement are for convenience of reference only and in no way define,
limit or describe the scope or intent of any provisions or Sections of this
Agreement.

 

(3)           Unless the context requires otherwise,
(A) words describing the singular number include the plural and vice versa, (B) words denoting any
gender include all genders and (C) the words “include”, “includes”
and “including” will be deemed to
be followed by the words “without limitation”.

 

(4)           It is your and the Group’s intention that
this Agreement not be construed more strictly with regard to you or the Group.

 

(b)  Withholding.  You and the Group will treat all payments to you under this Agreement
as compensation for services. 
Accordingly, the Group may withhold from any payment any taxes that are
required to be withheld under any law, rule or regulation.  Any amounts so withheld will be timely and
properly remitted by the Company to the appropriate taxing authority.

 

(c)  Severability.  If any provision of this Agreement (or if the application of any
provision to a person or particular circumstances) is found by any court of
competent jurisdiction (or legally empowered agency) to be illegal, invalid or
unenforceable for any reason, then (1) the provision will be amended
automatically to the minimum extent necessary to cure the illegality or
invalidity and permit enforcement and (2) the remainder of this Agreement will
not be affected.  In particular, if any
provision of Section 10 is so found to violate law or be unenforceable because
it applies for longer than a maximum permitted period or to greater than a
maximum permitted area, it will be automatically amended to apply for the
maximum permitted period and maximum permitted area.

 

12

 

(d)  No Set-off or
Mitigation/Etc.  Your and the Company’s respective obligations
under this Agreement will not be affected by any set-off, counterclaim,
recoupment or other right you or any member of the Group may have against each
other or anyone else (except as provided in Section 10).  You do not need to seek other employment or
take any other action to mitigate any amounts owed to you under this Agreement,
and those amounts will not be reduced if you do obtain other employment (except
as this Agreement specifically states).

 

(e)  Bank Regulatory
Limitation.  If any payment or benefit under this
Agreement would otherwise be a golden parachute payment within the meaning of
Section 18(k) of the Federal Deposit Insurance Act (a “Golden Parachute Payment”) that is
prohibited by applicable law, then the total payments and benefit will be
reduced to the greatest amount that could be made to you without there being a
Golden Parachute Payment.  The Company
will give you the opportunity to select the order in which payments or benefits
are reduced.  To the extent reasonably
practicable, the Company will seek the approval of the Federal Deposit
Insurance Corporation and/or the State of Hawaii Division of Financial
Institutions and any other bank regulatory body, as necessary, to make any
payment to you under this Agreement that would otherwise constitute a Golden
Parachute Payment.

 

(f)  Notices.  All
notices, requests, demands, consents and other communications under this
Agreement must be in writing and will be deemed given (1) on the business day
sent, when delivered by hand or facsimile transmission (with confirmation)
during normal business hours, (2) on the business day after the business day
sent, if delivered by a nationally recognized overnight courier or (3) on the
third business day after the business day sent if delivered by registered or
certified mail, return receipt requested, in each case to the following address
or number (or to such other addresses or numbers as may be specified by notice
that conforms to this Section 14(f)):

 

If to you, to the address stated in your Schedule, and

 

If to the Company or any other member of the Group, to:

 

Central Pacific Financial Corp.

220 South King Street

Honolulu, Hawaii  96813

Attention:  Glenn K.C. Ching

Facsimile:  (808) 544-6835

 

with
a copy to:

 

Sullivan & Cromwell LLP

125 Broad Street

New York, New York   10004

Attention:  Marc Trevino

Facsimile:  212-558-3588

 

(g)  Consideration.  This
Agreement is entered in consideration of the mutual covenants contained in this
Agreement.  You and the Group acknowledge
the receipt and

 

13

 

sufficiency of the consideration to this
Agreement and intend this Agreement to be legally binding.

 

(h)  Amendments and Waivers.  Any
provision of this Agreement may be amended or waived but only if the amendment
or waiver is in writing and signed, in the case of an amendment, by you and the
Company or, in the case of a waiver, by the party that would have benefited
from the provision waived.  Except as
this Agreement otherwise provides, no failure or delay by you or the Group to
exercise any right or remedy under this Agreement will operate as a waiver, and
no partial exercise of any right or remedy will preclude any further exercise.

 

(i)  Third Party Beneficiaries. 
Subject to Section 12, this Agreement will be binding on, inure to the
benefit of and be enforceable by the parties and their respective heirs,
personal representatives, successors and assigns.  This Agreement does not confer any rights,
remedies, obligations or liabilities to any entity or person other than you and
the Company and your and the Company’s permitted successors and assigns,
although this Agreement will inure to the benefit of, and confer related rights
and remedies on, the Group (including for this purpose for periods before your
Start Date, the Company, CB Bancshares and their respective affiliates).

 

(j)  Counterparts.  This
Agreement may be executed as counterparts, each of which will constitute an
original and all of which, when taken together, will constitute one agreement.

 

*                      *                      *

 

Please confirm your acceptance of the terms and conditions of your
employment with the Company by signing where indicated below.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Clayton K. Honbo

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted
  and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/
  Clint Arnoldus

  	
   

  	
   

  
	
  Date:
  09/09/04

  	
   

  
				

 

14

 

Terms Schedule

to Employment Agreement of

Clint Arnoldus

 

	
  Name and
  address for notices

  	
   

  	
  Clint Arnoldus

  625 Hakaka Place

  Honolulu, HI 96816

  

  with a copy to

  

  Sonnenschein Nath & Rosenthal LLP

  8000 Sears Tower

  Chicago, IL 60606

  Attention:  Roger C. Siske

  Facsimile:  (312) 876-7934

  
	
   

  	
   

  	
   

  
	
  Position

  	
   

  	
  You will serve as Chief
  Executive Officer of the Company.

  

  In addition, you will be a member of the Board. You agree to serve as a member of the Board, as well as a
  member of any Board committee to which you may be elected or appointed.

  
	
   

  	
   

  	
   

  
	
  Reporting,
  Authority and Responsibilities

  	
   

  	
  You will be the most
  senior officer of the Company, although the Company may have a non-executive
  Chairman, and will report only to the Board.

  

  All officers, departments and divisions of the Company and its subsidiaries
  will report directly or indirectly to you, except
  to the extent any of the preceding are required by law, rule,
  regulation or stock exchange listing requirement to report directly or
  indirectly to the Board or a subcommittee of the Board.

  

  You will have day-to-day responsibility for the management of the Company.

  
	
   

  	
   

  	
   

  
	
  Other
  Activities

  	
   

  	
  Non profit board
  memberships currently are:

  

  Aloha United Way; Chamber of Commerce of Hawaii; Honolulu Japanese Chamber of
  Commerce; Honolulu Symphony; Japan-America Society of Hawaii; La Pietra –
  Hawaii School for Girls; March of Dimes; and University of Hawaii Foundation
  Board of Trustees.

  
	
   

  	
   

  	
   

  
	
  Agreement
  Period

  	
   

  	
  Your Agreement Period
  begins on your Start Date and is initially scheduled to end at the close of
  business on the third anniversary of your Start Date.

  

  Beginning on the first anniversary of your Start Date, your Agreement Period
  will automatically extend each day by one day (so that it remains two years
  long), until either you or the Company provides notice of non-

  

 

 

	
   

  	
   

  	
  renewal. In no event will
  your Agreement Period extend, however, beyond the end of the Company’s fiscal
  year in which your 65th birthday occurs.

  
	
   

  	
   

  	
   

  
	
  Starting
  Salary

  	
   

  	
  $600,000

  
	
   

  	
   

  	
   

  
	
  Bonus

  	
   

  	
  Your Bonus will be
  determined based on the achievement of performance goals established by the
  Board in consultation with you, with a minimum bonus target equal to 50% of
  your Salary and a maximum bonus of 150% of target. Performance goals shall be
  set within the first 90 days of the Company’s fiscal year.

  
	
   

  	
   

  	
   

  
	
  Other
  Executive Compensation Plans

  	
   

  	
  On your Start Date, you
  will receive a cash bonus of $1,080,000 (your “Transaction Bonus”). Your Transaction Bonus will not
  reduce your Bonus in any respect. In addition, you agree that it will not
  count toward or be considered in determining payments or benefits due under
  any other plan, program, policy or arrangement with the Group.

  

  On your Start Date, you will be granted options to purchase 180,000 shares of
  the Company’s common stock (your “Sign-On
  Options”), subject
  to shareholder approval of a new equity compensation plan in connection with
  the merger contemplated by the Merger Agreement. Your Sign-On Options (1)
  will vest at one-third per year on the first three anniversaries of your
  Start Date, (2) have an exercise price equal to the closing price of the
  Company’s common stock on your Start Date and (3) have a scheduled term of 10
  years. Except as provided in this Agreement, your Sign-On Options will be
  subject to the terms of the new equity compensation plan and to the terms of
  your award agreement under it (which will contain the Group’s normal
  provisions for senior executives).

  

  Your Sign-On Options are intended to encompass annual grants for the first
  three years of your employment. As a result, you will not be entitled to
  receive any additional equity awards before the third anniversary of your
  Start Date, unless the Board determines otherwise.

  
	
   

  	
   

  	
   

  
	
  Additional
  Benefits

  	
   

  	
  SERP. Under the circumstances provided in this Agreement, you will be
  entitled to a supplemental executive retirement benefit (your “SERP Benefit”) as follows:

   

  (1)   Your SERP Benefit shall be a lump sum
  payment equal to the actuarial equivalent of a joint and 100% survivor
  annuity payable to you for your life, and

  

 

2

 

	
   

  	
   

  	
  upon your death, if your
  current spouse survives, to your current spouse for life commencing when you
  attain age 65.

   

  (2)   The annuity amount on which your SERP
  Benefit will be based is equal to (A) the product of your years of service
  with the Company (not in excess of 15 years) multiplied by 3 1/3% of the
  average of your Salary and Bonus for the three fiscal years preceding your
  termination (or your salary and annual cash bonus for years before your Start
  Date), reduced by (B) the
  actuarial equivalent of your benefit under the Social Security Act and any
  other retirement benefits provided by the Group (including any retirement
  benefits under a defined benefit plan or an employee stock ownership plan
  sponsored by any member of the Group).

   

  (3)   If your employment is terminated by the
  Company without Cause or you terminate your employment for Good Reason, in
  either case before the third anniversary of your Start Date, then for purposes of calculating the
  annuity amount on which your SERP Benefit will be based:

   

  (A)  you will be deemed to have additional
  service with the Company equal to the lesser of (i) two years of service or
  (ii) the period between the effectiveness of your early termination of employment
  and the third anniversary of your Start Date;

   

  (B)   you will be deemed to have terminated
  employment at the end of the additional service period described in clause
  (A);

   

  (C)   during each fiscal year of the Company
  ending during the additional service period described in clause (A), you will
  be deemed to have earned your Salary (for parts of the fiscal year after
  effectiveness of termination of your employment) and a Bonus equal to your
  target Bonus for the fiscal year in which Termination Notice is given.

   

  (4)   If your employment is terminated by your
  death, your estate will receive a lump sum payment equal to the lump sum
  payment you would have received if you had terminated your employment (for
  reasons other than your death) the day before your death.

   

  (5)   Actuarial equivalence shall be determined
  based

  

 

3

 

	
   

  	
   

  	
  upon Pension Benefit
  Guaranty Corporation immediate annuity interest and mortality factors (as in
  effect on the effectiveness of termination of your employment).

   

  Vacation. You will be entitled to vacation totaling at least four weeks a year.

  

  Negotiation Costs. The Company
  will pay your reasonable legal and consulting fees and expenses (plus a tax
  gross-up) in connection with the negotiation, drafting and implementation of
  the Agreement, subject to a maximum of $65,000.

  
	
   

  	
   

  	
   

  
	
  Cause
  Steps

  	
   

  	
  The Company may not
  terminate your employment for Cause unless:

   

  (1)   No fewer than 15 days prior to the
  termination date, the Company provides you with notice (a “Consideration Notice”) of its intent to
  consider the termination of your employment for Cause, including a detailed
  description of the specific reasons for such consideration;

   

  (2)   On a date not less than 15 days after the
  Consideration Notice, you shall have the opportunity to appear before the
  Board, with or without counsel, at your election, to present arguments and
  evidence on your own behalf; and

   

  (3)   Following your presentation to the Board,
  or your failure to appear before the Board at the date and time specified in
  the Consideration Notice, you may be terminated for Cause only if (A) the
  Board by affirmative vote of at least 3/4 of its members (excluding you and
  any Board member involved in events leading to the Board’s consideration of
  terminating your employment for Cause), determines that the actions or
  inactions specified in the Consideration Notice occurred, that such actions
  or inactions constitute Cause and that your employment should be terminated
  for Cause; and (B) the Board provides you with a Termination Notice (which
  must be consistent with the Consideration Notice).

   

  The Company may place you
  on paid leave for period between Consideration Notice and the determination
  of the Board, but in no event more than 60 days. This type of leave will not
  constitute Good Reason.

  

 

4

 

	
   

  	
   

  	
  Notwithstanding the
  definition of “Cause” in the Agreement, if the Company does not give you a
  Consideration Notice within 180 days after any member of the Board (who was not
  a party to the event constituting Cause) has actual knowledge that an event
  constituting Cause has occurred, the event will no longer constitute Cause.

  

  If there is a dispute between you and the Company about the existence of
  Cause, the issue shall be subject to de
  novo review under Section 13.

  
	
   

  	
   

  	
   

  
	
  Good
  Reason

  	
   

  	
  The following will also
  constitute Good Reason:

   

  (1)   Requiring you to be principally based at
  any office or location more than 30 miles from your office at the time of
  this Agreement (it will not, however, be Good Reason for the Company to
  require you to travel on business to an extent consistent with your travel
  obligations at the time of this Agreement), or

   

  (2)   Any termination of employment by you for
  any reason or no reason within the 60-day period commencing 6 months after a
  Change in Control (as defined in the attached Change in Control Annex).

  
	
   

  	
   

  	
   

  
	
  Good
  Reason Steps

  	
   

  	
  You may not terminate your
  employment for Good Reason unless,
  no fewer than 15 days prior to the termination date, you provide the Company
  a Consideration Notice of your intent to consider the termination of your
  employment for Good Reason, including a detailed description of the specific
  reasons for such intention and the Company is given an opportunity to cure
  before the termination date specified in the Consideration Notice.

  
	
   

  	
   

  	
   

  
	
  Severance
  Period

  	
   

  	
  Your Severance Period will
  be 2 years, although in no event will your Severance Period be longer than
  the period beginning on the effectiveness of early termination of your
  employment and ending at the end of the Company’s fiscal year in which your
  65th birthday occurs.

  
	
   

  	
   

  	
   

  
	
  Accelerated
  Vesting

  	
   

  	
  Stock options subject to
  Accelerated Vesting under Section 8(b) will remain exercisable until they
  would have expired but for your termination. This does not apply to Stock
  options subject to Accelerated Vesting under Section 8(d).

  
	
   

  	
   

  	
   

  
	
  Additional
  Good Reason/Without Cause Benefits

  	
   

  	
  If the Company terminates
  your employment without Cause or you terminate your employment for Good

  

 

5

 

	
   

  	
   

  	
  Reason:

   

  (1)   The Company will pay you your SERP Benefit.

   

  (2)   The Company will reimburse reasonable
  expenses you incur within one year of termination in relocating to a location
  within the continental United States (up to a maximum of $250,000).

   

  (3)   For your life and the life of your current
  spouse, you, your current spouse and your dependents will continue to be
  entitled to participate in each of the Group’s employee welfare plans
  providing for medical or health insurance on a basis (including costs) that
  is at least as favorable as that provided to similarly situated executives of
  the Group (the “Medical Benefits”).
  However, if the Group’s plans do not permit you, your spouse or your
  dependents to participate on this basis, the Company will provide Medical
  Benefits (with the same after-tax effect for you) outside of the plans. If
  (A) you become employed by another employer and are eligible for coverage
  from your new employer or (B) you become eligible for Medicare, the Medical
  Benefits will be secondary to this coverage (if the Group reimburses you for
  any increased cost and provides any additional benefits that are necessary to
  provide you with the full Medical Benefits). After you become eligible for
  Medicare, your cost of the Medical Benefits will be reduced by 50%.

   

  (4)   The Company will reimburse reasonable
  expenses you incur within one year of termination for outplacement services
  to be provided you by an entity you reasonably select and for reasonably
  suitable office space and secretarial assistance, subject to a maximum of $50,000 for all such expenses
  combined.

   

  (5)   For 6 years following termination of your
  employment, the Company will maintain Directors’ and Officers’ liability
  insurance for you (covering acts as a director, officer, employee and/or
  agent of the Group during your employment) at a level equivalent to the most
  favorable and protective coverage for any active officer or director of the
  Company then maintained by the Company.

  
	
   

  	
   

  	
   

  
	
  Additional
  Death/Disability Benefits

  	
   

  	
  If your employment
  terminates as a result of your Death or Disability, the Company will pay you
  or your beneficiary your SERP Benefit and provide Accelerated

  

 

6

 

	
   

  	
   

  	
  Vesting and Medical Benefits.

  
	
   

  	
   

  	
   

  
	
  Additional
  Provisions Related to Section 8 of the Agreement.

  	
   

  	
  If your employment
  terminates for any reason (other than termination by the Company for Cause)
  after the third anniversary of your Start Date, the Company will provide you
  your Medical Benefits and your SERP Benefit (in addition to any other
  payments or benefits under this Agreement but without duplication).

  

  If there is a “Change in Control”, as defined in the attached Change in
  Control Annex, the payments and benefits provided in the Change in Control
  Annex will substitute for those stated in Section 8.

  

  You are entitled to the additional payments set forth in the attached
  Additional Payments Annex.

  
	
   

  	
   

  	
   

  
	
  Condition
  to Obligations to You on Early Termination

  	
   

  	
  If the Company requires a release
  from you in accordance with Section 8(f), it must also execute and deliver a
  general release in which it releases all claims that it may have against you other than its rights under this
  Agreement, any plan or contract of the Group and any claims it may have that
  arise out of your fraud or commission of a felony. These releases will be a
  form reasonably acceptable to you.

  
	
   

  	
   

  	
   

  
	
  Restriction
  Period

  	
   

  	
  Restriction Period means
  the period beginning on your Start Date and ending at the end of your
  Agreement Period.

  

 

7

 

Change in
Control Annex

to Employment Agreement of

Clint Arnoldus

 

1.  Change in Control

 

A “Change in Control”means any of the following:

 

(i)        Individuals
who, on the date of the Agreement, constitute the Board (the “Incumbent Directors”) cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date of the Agreement, whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially
elected or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be an Incumbent Director;

 

(ii)       Any “person”
(as such term is defined in Section 3(a)(9) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)
and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company’s then outstanding securities
eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however,
that the event described in this paragraph (ii) shall not be deemed to be
a Change in Control by virtue of any of the following
acquisitions:  (A) by the Company or any Subsidiary, (B) by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii), or (E) pursuant
to any acquisition by you or any group of persons including you (or any entity
controlled by you or any group of persons including you);

 

(iii)      The
consummation of a merger, consolidation, statutory share exchange, sale of all
or substantially all of the Company’s assets, a plan of liquidation or
dissolution of the Company or similar form of corporate transaction involving
the Company or any of its Subsidiaries that requires the approval of the
Company’s stockholders, whether for such transaction or the issuance of
securities in the transaction (a “Business
Transaction”), unless immediately following such Business Transaction:  (A) more than 50%  of the
total voting power of (x) the corporation resulting from such Business
Transaction (the “Surviving Corporation”),
or (y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of at least 95% of the voting securities
eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by
Company Voting Securities that were outstanding immediately prior to such
Business Transaction (or, if applicable, is represented by shares into which
such Company Voting Securities were converted pursuant to such Business
Transaction), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting Securities
among the holders thereof immediately prior to the Business Transaction,
(B) no person (other than any employee benefit plan (or related trust)
sponsored or maintained by the

 

 

Surviving Corporation
or the Parent Corporation),  is or becomes the beneficial owner,
directly or indirectly, of 25% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
and (C) at least a majority of the members of the board of directors of
the Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Transaction were
Incumbent Directors at the time of the Board’s approval of the execution of the
initial agreement providing for such Business Transaction  (any
Business Transaction which satisfies all of the criteria specified in (A), (B)
and (C) above shall be deemed to be a “Non-Qualifying
Transaction”); or

 

(iv)     Any other
transaction, event, or circumstance, regardless of form (collectively, “Transaction”), which results in control
over the strategic and operational decisions of the Company by a board of
directors, committee or group other than the Incumbent Directors (collectively,
the “New Board”); provided, however,
that such Transaction shall not be deemed to result in a Change of Control if
(i) you report to the Chairman of the New Board and are a member of the New
Board, and remain Chief Executive Officer of the Company and (ii) the
Transaction is not otherwise a Change of Control contemplated by any of the
other preceding paragraphs.

 

Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 25% of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding; provided, that
if after such acquisition by the Company such person becomes the beneficial
owner of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.

 

2.  Qualifying Terminations

 

The provisions of this Change in Control Schedule apply to any “Qualifying Termination.”  A qualifying termination is any of the
following from the time of a Change in Control until the two-year anniversary
of a Change in Control:

 

(a)       The
Company terminating your employment without Cause;

 

(b)      Your
terminating your employment for Good Reason;

 

Also,
a Qualifying Termination will include any termination of your employment before
a Change in Control for reasons that would have constituted a Qualifying
Termination if they had occurred following a Change in Control if (i) the
termination (or Good Reason event) was in anticipation of a Change in Control
or at the request of a third party who had indicated an intention or taken
steps reasonably calculated to effect a Change in Control; and (ii) such Change
in Control (or an alternative or competing Change in Control) actually occurs.

 

 

3.  Payments on Qualifying Termination

 

(1)  Qualifying Terminations. 
If there is a Qualifying Termination, the Company will make the payments
and provide the benefits set forth in Section 8(b) of the Agreement (as if
there were a termination for Good Reason) except
that your Severance Period will be 3 years (notwithstanding any contrary
provision in the Agreement or your Schedule).

 

(2)  Other Terminations. 
If your employment terminates other than as a result of a Qualifying
Termination, the terms of the Agreement will continue to apply.

 

4.  General Provisions.

 

(1)  Part of the Agreement.  This Annex is part of your Employment Agreement (the “Agreement”) with Central Pacific Financial
Corp., a Hawaii corporation.  However, to
the extent this Annex is inconsistent with the Agreement, this Annex will
govern.

 

(2)  Defined Terms.  Terms used but not defined in this Annex are used with the meaning
assigned in the Agreement.

 

 

Additional Payments Annex

to Employment Agreement of

Clint Arnoldus

 

1.  Gross-Up

 

Anything in the Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment, award, benefit or distribution (or any
acceleration of any payment, award, benefit or distribution) by the Company (or
any of its affiliated entities) or any entity which effectuates a Change in
Control (or any of its affiliated entities) to or for your benefit (whether
pursuant to the terms of the Agreement or otherwise, but determined without
regard to any additional payments required under this Annex) (the “Payments”) would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the “Code”), or any interest or
penalties are incurred by you with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”),
then the Company shall pay to you an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by you of all taxes (including, without limitation, any income
taxes and any interest and penalties imposed with respect thereto, and any
excise tax) imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to (i) pay federal income taxes at
the highest marginal rates of federal income taxation for the calendar year in
which the Gross-Up Payment is to be made and (ii) pay applicable state and
local income taxes at the highest marginal rate of taxation for the calendar
year in which the Gross-Up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state
and local taxes.

 

2.  Determination

 

(a)  General.  Subject to the provisions of this Annex, all determinations required to
be made under this Annex, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment, the amount of any Option
Redetermination (as defined below) and the assumptions to be utilized in
arriving at such determinations, shall be made by the public accounting firm
that is retained by the Company as of the date immediately prior to the Change
in Control (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and
you within fifteen (15) business days of the receipt of notice from the Company
or you that there has been a Payment, or such earlier time as is requested by
the Company (collectively, the “Determination”).  Notwithstanding the foregoing, in the event
(i) the Board shall determine prior to the Change in Control that the
Accounting Firm is precluded from performing such services under applicable
auditor independence rules, (ii) the Audit Committee of the Board determines
that it does not want the Accounting Firm to perform such services because of
auditor independence concerns or (iii) the Accounting Firm is serving as
accountant or auditor for the person(s) effecting the Change in Control, the
Board shall appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). 
All fees and expenses of the Accounting Firm shall be borne solely by
the Company and the Company shall enter into any agreement requested by the
Accounting Firm in connection with the performance of the services
hereunder.  The Gross-Up Payment under
this Annex with respect to any Payments shall be made no later than thirty (30)
days following such Payment.  If the
Accounting Firm determines that no Excise Tax is payable by you, it shall

 

 

furnish you with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
your applicable federal income tax return will not result in the imposition of
a negligence or similar penalty.  The
Determination by the Accounting Firm shall be binding upon the Company and you.

 

(b)  Underpayment and
Overpayment.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (“Underpayment”)
or Gross-Up Payments are made by the Company which should not have been made (“Overpayment”), consistent with the
calculations required to be made hereunder. 
In the event the amount of the Gross-Up Payment is less than the amount
necessary to reimburse you for your Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the
Company to or for your benefit.  In the
event the amount of the Gross-Up Payment exceeds the amount necessary to
reimburse you for your Excise Tax,
the Accounting Firm shall determine the amount of the Overpayment that has been
made and any such Overpayment (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by you to or for the
benefit of the Company immediately after it is refunded to you by the Internal
Revenue Service.  You shall cooperate, to
the extent your expenses are reimbursed by the Company, with any reasonable
requests by the Company in connection with any contests or disputes with the
Internal Revenue Service in connection with the Excise Tax.

 

(c)  Option Redetermination.  In the event that the Company determines that the value of any
accelerated vesting of stock options held by you shall be redetermined within
the context of Treasury Regulation §1.280G-1 Q/A 33 (the “Option Redetermination”), you shall (i)
file with the Internal Revenue Service an amended federal income tax return
that claims a refund of the overpayment of the Excise Tax attributable to such
Option Redetermination and (ii) promptly pay the refundable Excise Tax to the
Company.

 

3.  General Provisions.

 

(a)  Part of the Agreement.  This Annex is part of your Employment Agreement (the “Agreement”) with Central Pacific Financial
Corp., a Hawaii corporation.  However, to
the extent this Annex is inconsistent with the Agreement, this Annex will
govern.

 

(b)  Defined Terms.  Terms used but not defined in this Annex are used with the meaning
assigned in the Agreement.

 

 

Exhibit A to Employment Agreement

Form of Release

 

This is your RELEASE with Central Pacific Financial Corp., a Hawaii
corporation (the “Company”).

 

1.  Your Employment Agreement

 

This Release relates to your Employment Agreement (which includes your
Terms Schedule, [Change of Control Annex and Additional Payments Annex](1))
dated as of June [day], 2004 and
as amended from time to time, with the Company (your “Employment Agreement”).

 

2.  Release of Claims

 

(a)  Released Claims.  In consideration of the payments
and benefits described in your Employment Agreement, you release and discharge
the Company and its subsidiaries, affiliates, officers, directors, employees,
agents and their successors and assigns (the “Group
Released Parties”) from any and all actions, causes of action,
claims, allegations, rights, obligations, liabilities, or charges
(collectively, “Claims”) that you
may have, whether known or unknown, by reason of any matter, related to any
Employment Matter (as defined in your Employment Agreement).  Without limitation, released Claims include
(1) Claims for compensation, bonuses or benefits, (2) Claims under any
compensation plan or arrangement maintained by any member of the Group, (3)
Claims for wrongful, constructive or unlawful discharge, (4) Claims for age and
national origin discrimination, (5) Claims for sexual harassment, (6) Claims
related to whistleblowing, (7) Claims for emotional distress, intentional
infliction of emotional distress, assault, battery or pain and suffering, (8)
Claims for punitive or exemplary damages, (9) Claims for violations of any of
the following acts or laws:  the Equal
Pay Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Americans with Disabilities
Act of 1991, the Employee Retirement Income Security Act of 1974, the Worker
Adjustment Retraining and Notification Act, the Family Medical Leave Act,
Hawaii’s Whistle Blowers Protection Act, Hawaii’s Employment Practices Law,
Hawaii’s Payment of Wages Law, Hawaii’s Wage and Hour Law, Hawaii’s Temporary
Disability Insurance Law, Hawaii’s Prepaid Health Care Act, Hawaii’s Dislocated
Workers’ Act, Hawaii’s Occupational Safety and Health Law and Hawaii’s Family
Leave Law (including all amendments to any of these acts or laws), or (10)
Claims for violations of any other federal, state or municipal fair employment
statutes or laws.  In addition, in
consideration of the provisions of your Employment Agreement, you further agree
to waive any and all rights under the laws of any jurisdiction in the United
States, or any other country, that limit a general release to those claims that
are known or suspected to exist in your favor as of the date of this Agreement.

 

(b)  Exceptions.  Notwithstanding Section 2(a), this
Release shall not (1) limit in any way your ability to bring an action to
enforce your rights under your Employment Agreement, (2) release any claim for
Other Accrued Benefits (as defined in your Employment Agreement), or (3)
release any claim for indemnification and continued liability coverage (under
your Employment Agreement or otherwise). 
For purposes of this

 

(1)           Include
if applicable.

 

 

Release, the term “Claims” as
used shall not include any claims not released by you as set forth in this
Section 2(b).

 

(c)  Representations and
Warranties.  You represent and warrant that you have not,
and as of the Effective Date (as defined in Section 4) will not have, filed any
civil action, suit, arbitration, administrative charge, or legal proceeding
against any Group Released Party nor have you assigned, pledged, or
hypothecated as of the Effective Date any Claim to any person and no other
person has an interest in the claims that you are releasing herein.

 

(d)  No Relief for Released
Claims.  You agree that should any person or entity
file or cause to be filed any civil action, suit, arbitration or other legal
proceeding seeking equitable or monetary relief concerning any Claim released
by you, you will not seek or accept any personal relief from or as the result
of the action, suit, arbitration or proceeding.

 

3.  Your Understanding of this Release and
Your Rights

 

You acknowledge and agree that you have read this Release in its
entirety and that this Release releases known and unknown Claims, including,
without limitation, to rights and claims arising under ADEA.  You further acknowledge and agree that:

 

(a)     You are entering into this Release and
releasing, waiving and discharging rights or claims only in exchange for
consideration which you are not already entitled to receive.

 

(b)    You have been advised, and are being advised
by the terms of the Release, to consult with an attorney before executing this
Release.  You also acknowledge that you
chose and consulted with the counsel of your choice concerning your rights and
that your counsel negotiated this Release on your behalf.

 

(c)     You have been advised, and are being advised
by the terms of this Release, that you have had at least 21 days within which
to consider this Release.

 

4.  Your Ability to Revoke this Release;
Effective Date

 

You may revoke this Release within 7 days of signing
(for any reason or no reason) by complying with the following sentence.  To revoke this Release, you must deliver (or cause to be delivered)
written notice of your revocation to the Group at [Address and Contact Person] no later than 5:00 p.m. Hawaii
time on [date].  If you revoke this Release in accordance with
the preceding sentence, it will become null and void.  If you do not, this Release will become
effective at such time (the “Effective Date”).

 

2

 

5.  Your Employment Agreement

 

For the avoidance of doubt, your Employment Agreement will continue in
full force and effect, including, without limitation, your obligations under
Sections 9 and 10 of your Employment Agreement.

 

6.  Dispute Resolution

 

The terms of this Release shall be governed by Section 13 of your
Employment Agreement.

 

 

	
  Accepted
  and Agreed:

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Date:

  

 

3

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