Document:

Exhibit 4.3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STATE
  OF HAWAII

  	
  Form DC - 3

  
	
  FILED 

  	
  09/13/2004 12:09 PM

  	
   

  	
  DEPARTMENT
  OF COMMERCE AND

  	
  7/2004

  
	
  Business Registration Division

  	
   

  	
  CONSUMER
  AFFAIRS

  	
   

  
	
  DEPT. OF COMMERCE AND CONSUMER AFFAIRS

  	
   

  	
  Business
  Registration Division

  	
   

  
	
   

  	
   

  	
  335
  Merchant Street

  	
   

  
	
  State of Hawaii

  	
   

  	
  Mailing
  Address: P.O. Box 40, Honolulu, Hawaii 96810

  	
   

  
					

 

ARTICLES OF AMENDMENT

(Section 414-286, Hawaii
Revised Statutes)

 

PLEASE TYPE OR PRINT
LEGIBLY IN BLACK INK 

The undersigned, duly authorized officer of the
corporation submitting these Articles of Amendment, certifies as follows: 

	
   

  	
   

  	
   

  
	
  1. 

  	
  The name of the corporation is:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CENTRAL PACIFIC FINANCIAL CORP.

  
	
   

  	
   

  	
   

  
	
  2. 

  	
  The amendment(s) adopted is attached.

  	
   

  
	
   

  	
   

  	
   

  
	
  3. 

  	
  The total number of shares outstanding is:

  	
  16,141,443 common (as of September 13, 2004); 0 Preferred;

  
	
   

  	
   

  	
  0 Junior Participating
  Preferred, Series A

  
	
   

  	
   

  	
   

  
	
  4. 

  	
  The amendment(s) was adopted (check one):

  	
   

  
	
   

  	
   

  	
   

  
	
  ý

  	
  at a meeting of the shareholders held on 

  	
  September 13, 2004

  
	
   

  	
   

  	
  (Month Day Year)

  
				

 

 

	
  Class/Series

  	
  Total Number of Votes Entitled to be Cast

  	
  Number of Votes Cast For Amendment

  	
  Number of Votes Cast Against Amendment

  
	
  Common

  	
  16,109,107

  	
  13,314,106

  	
  1,062,031

  

 

OR

 

	
  o

  	
  by written
  consent dated 

  	
   

  	
  which all of the shareholders signed.

  
	
   

  	
   

  	
  (Month Day Year)

  	
   

  

 

5. If
the amendment(s) provides for an exchange, reclassification, or cancellation of
issued shares, provisions necessary to effect the
exchange, reclassification, or cancellation, if any, have been made. 

 

The
undersigned certifies under the penalties of Section 414-20, Hawaii Revised
Statutes, that the undersigned has read the above statements and that the same
are true and correct. 

 

	
  Signed this

  	
  14th

  	
  day of 

  	
  September

  	
  ,

  	
  2004

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Glenn K.C. Ching, Vice
  President & Secretary

  	
   

  	
  /s/ Glenn K.C. Ching

  
	
  (Type/Print Name &
  Title)

  	
   

  	
  (Signature of Officer)

  

 

 

SEE INSTRUCTIONS ON
REVERSE SIDE. The articles must be signed by at least one officer of the
corporation. 

 

 

 

 

ATTACHMENT
TO THE ARTICLES OF AMENDMENT

OF CENTRAL PACIFIC FINANCIAL CORP.

 

 

Article IV. Section 1, of the Articles of
Incorporation of Central Pacific Financial Corp., as amended, is amended to
read as follows:

 

                                                                "1.           The amount of authorized capital stock of the Corporation
shall be ONE HUNDRED MILLION (100,000,000) shares of common stock, no par value
per share, and ONE MILLION (1,000,000) shares of preferred stock, no par value
per share.  The Corporation shall have
the privilege of subsequent extensions of its capital stock from time to time
in the manner provided by law."Exhibit
4.5

 

CERTIFICATE
OF AMENDMENT OF

BYLAWS OF

CENTRAL PACIFIC FINANCIAL CORP.

(A Hawaii Corporation)

 

The following amendments
to the Bylaws of Central Pacific Financial Corp. (the “Company”) were approved
by the Company’s Board of Directors (the “Board”) as of September 14,
2004.  The Effective Date (as defined
below) was September 15, 2004.

 

 

WHEREAS, the Company
entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated
April 22, 2004, with CB Bancshares, Inc. (“CBBI”), contemplating the
merger of CBBI with and into the Company (the “Merger”); and

 

WHEREAS, pursuant to
Section 7.02(d) of the Merger Agreement and as a condition to CBBI’s
obligation to consummate the Merger, the Company agreed to adopt certain
amendments to the Company’s Bylaws as set forth in Annex 2 of the Merger
Agreement no later than the time the Merger becomes effective (the “Effective
Time”).

 

NOW THEREFORE BE IT
RESOLVED, that the Board hereby amends, with such amendment to take effect at
the Effective Time, the first five sentences of Section 1 of
Article III of the Company’s Bylaws to read as follows:

 

“The business of
the Corporation shall be managed by a Board of Directors which shall be fifteen
(15) in number. The directors shall be divided into three classes, designated
Class I, Class II and Class III, with the terms of office of one class expiring
each year.  Each class shall consist of
five directors. The term of the initial Class I directors shall terminate on
the date of the 2007 Annual Meeting; the term of the initial Class II directors
shall terminate on the date of the 2005 Annual Meeting; and the term of the
initial Class III directors shall terminate on the date of the 2006 Annual
Meeting or, in each case, upon such director’s earlier death, resignation or
removal.  At each succeeding Annual
Meeting of Stockholders beginning in 2005, successors to the class of directors
whose term expires at that Annual Meeting shall be elected for a three-year
term and hold office until their successors are duly elected and qualified.”;
and be it

 

RESOLVED FURTHER, that
the Board hereby amends, with such amendment to take effect at the Effective
Time, Article III of the Bylaws of the Company to include the following
new Section 14:

 

“Section 3.14.
BOARD COMPOSITION.  Until the third
anniversary of the effective time of the merger between the Corporation

 

 

and CB Bancshares, Inc.,
(i) the ratio of Continuing Central Pacific Directors to Continuing CB
Bancshares Directors shall be maintained at 9 to 6 and all vacancies on the
Board of Directors created by the cessation of service of a Continuing CB
Bancshares Director shall be filled by a nominee selected by a majority of the
Continuing CB Bancshares Directors and all vacancies on the Board created by
the cessation of service of a Continuing Central Pacific Director shall be
filled by a nominee selected by a majority of the Continuing Central Pacific
Directors and (ii) the Continuing CB Bancshares Directors and the Continuing
Central Pacific Directors shall be apportioned among the three classes of the
Board of Directors such that the ratio of Continuing CB Bancshares Directors to
Continuing Central Pacific Directors is 2 to 3 in each class. The provisions of
this Section 3.14 and the first paragraph of Section 3.1 may be
modified, amended or repealed, and any Bylaw provision inconsistent with the
provisions of the first paragraph of Section 3.1 and this
Section 3.14 may only be adopted by an affirmative vote of at least 80
percent of the entire Board of Directors. In the event of any inconsistency
between any other provision of these By-laws and any provision of this
Section 3.14, the provisions of this Section 3.14 shall control.
Until the second anniversary of the effective time of the merger between the Corporation
and CB Bancshares, Inc., the removal of Ronald K. Migita from the position of
Chairman of the Board shall require the affirmative vote of at least 80% of the
entire Board of Directors.

 

‘Continuing
Central Pacific Directors’ shall mean the directors of Central Pacific as of
the effective time of the merger between the Corporation and CB Bancshares,
Inc. who were directors of Central Pacific immediately prior to the effective
time of the merger between the Corporation and CB Bancshares, Inc. and any
additional directors of the Corporation who take office after the effective
time of the merger between the Corporation and CB Bancshares, Inc. who are
nominated by a majority of the Continuing Central Pacific Directors.

 

‘Continuing CB
Bancshares Directors’ shall mean the directors of CB Bancshares as of the
effective time of the merger between the Corporation and CB Bancshares, Inc.
who were directors of CB Bancshares immediately prior to the effective time of
the merger between the Corporation and CB Bancshares, Inc. and any additional
directors of the Corporation who take office after the effective time of the
merger between the Corporation and CB Bancshares, Inc. who are nominated by a
majority of the Continuing CB Bancshares Directors.”Exhibit 4.8

 

Central Pacific Financial Corp.

2004 Stock Compensation Plan

 

 

Contents

 

	
  Article 1.  Establishment, Purpose, and Duration

  	
   

  
	
   

  	
   

  
	
  Article 2.  Definitions

  	
   

  
	
   

  	
   

  
	
  Article 3.  Administration

  	
   

  
	
   

  	
   

  
	
  Article 4.  Shares Subject to the Plan and Maximum
  Awards

  	
   

  
	
   

  	
   

  
	
  Article 5.  Eligibility and Participation

  	
   

  
	
   

  	
   

  
	
  Article 6.  Stock Options

  	
   

  
	
   

  	
   

  
	
  Article 7.  Stock Appreciation Rights

  	
   

  
	
   

  	
   

  
	
  Article 8.  Restricted Stock and Restricted Stock
  Units

  	
   

  
	
   

  	
   

  
	
  Article 9.  Performance Shares and Performance Units

  	
   

  
	
   

  	
   

  
	
  Article 10.  Stock-Based Awards

  	
   

  
	
   

  	
   

  
	
  Article 11.  Performance Measures

  	
   

  
	
   

  	
   

  
	
  Article 12.  Beneficiary Designation

  	
   

  
	
   

  	
   

  
	
  Article 13.  Deferrals and Share Settlements

  	
   

  
	
   

  	
   

  
	
  Article 14.  Rights of Employees and Independent
  Contractors

  	
   

  
	
   

  	
   

  
	
  Article 15.  Change in Control

  	
   

  
	
   

  	
   

  
	
  Article 16.  Amendment, Modification, Suspension, and
  Termination

  	
   

  
	
   

  	
   

  
	
  Article 17.  Withholding

  	
   

  
	
   

  	
   

  
	
  Article 18.  Successors

  	
   

  
	
   

  	
   

  
	
  Article 19.  General Provisions

  	
   

  
	
   

  	
   

  
	
  Article 20.  Legal Construction

  	
   

  

 

 

Central Pacific
Financial Corp.

2004 Stock Compensation Plan

 

Article 1. 
Establishment, Purpose, and Duration

 

1.1      Establishment
of the Plan. Central Pacific Financial Corp., a Hawaii corporation
(hereinafter referred to as the “Company”), establishes an incentive
compensation plan to be known as the Central Pacific Financial Corp. 2004 Stock
Compensation Plan (hereinafter referred to as the “Plan”), as set forth in this
document.

 

The Plan permits the
grant of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights (“SARs”), Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, and Stock-Based Awards.

 

The Plan shall become
effective upon shareholder approval of the Plan (the “Effective Date”) and
shall remain in effect as provided in Section 1.3 hereof.

 

1.2      Purpose
of the Plan. The purpose of the Plan is to promote the success and enhance
the value of the Company by linking the personal interests of the Participants
to those of the Company’s shareholders, and by providing Participants with an
incentive for outstanding performance.

 

The Plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of Participants upon whose judgment, interest,
and special effort the successful conduct of its operation largely is
dependent.

 

1.3      Duration
of the Plan. Unless sooner terminated as provided herein, the Plan shall
terminate ten (10) years from the Effective Date. After the Plan is terminated,
no future Awards may be granted, but Awards previously granted shall remain
outstanding in accordance with their applicable terms and conditions and the
Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock
Options may be granted more than ten (10) years after the earlier of (a) the
adoption of the Plan by the Board, and (b) the Effective Date.

 

1.4      Awards
under Prior Option Plans.  From and
after the Effective Date, the Company will make new Awards only under this
Plan.  For the avoidance of doubt, all
awards granted before the Effective Date under any prior plan shall remain in
full force and effect and shall continue to be governed by the terms of the
applicable plan and related award agreement.

 

Article 2. 
Definitions

 

Whenever used in the
Plan, the following terms shall have the meaning set forth below, and when the
meaning is intended, the initial letter of the word shall be capitalized.

 

2.1      “Affiliate”
shall have the meaning ascribed to such term in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act.

 

 

2.2      “Award”
means, individually or collectively, a grant under this Plan of NQSOs, ISOs,
SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance
Units, or Stock-Based Awards.

 

2.3      “Award
Agreement” means either (i) an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan; or (ii) a statement issued by the Company to a
Participant describing the terms and provisions of such Award.

 

2.4      “Beneficial
Owner or Beneficial Ownership” shall have the meaning ascribed to such term
in rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

2.5      “Board”
or “Board of Directors” means the Board of Directors of the Company.

 

2.6      “Cause”
means:

 

(a)   Gross negligence or gross
neglect of duties;

 

(b)   Commission of a felony or of a
gross misdemeanor involving moral turpitude; or

 

(c)   Fraud, disloyalty, dishonesty
or willful violation of any law or significant Company policy committed in
connection with the person’s employment in service and resulting in an adverse
effect on the Company.

 

2.7      “Change in Control”
shall mean any of the following:

 

(a)   Individuals who, on the date of
adoption of this Plan, 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 such date, 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;

 

(b)   Any “person” (as such term is
defined in Section 3(a)(9) of 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

 

2

 

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 or (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (c)); or

 

(c)   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 shareholders, 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”).

 

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.

 

2.8      “Code”
means the U.S. Internal Revenue Code of 1986, as amended from time to time,
or any successor thereto.

 

3

 

2.9      “Committee” means the
Compensation Committee of the Board. 
However, if a member of the Compensation Committee is not an “outside
director” within the meaning of Section 162(m) of the Code or is not a
“non-employee director” within the meaning of Rule 16b-3 under the Exchange
Act, the Compensation Committee may from time to time delegate some or all of
its functions under the Plan to a committee or subcommittee composed of members
that meet the relevant requirements. 
The term “Committee” includes any such committee or subcommittee, to the
extent of the Compensation Committee’s delegation.

 

2.10   “Company” means Central Pacific Financial Corp., a Hawaii
corporation, and any successor thereto as provided in Article 18 herein.

 

2.11   “Covered Employee” means a
Participant who is a “covered employee,” as defined in Section 162(m) of the
Code and the regulations promulgated under Section 162(m) of the Code, or any
successor statute.

 

2.12   “Director” means any
individual who is a member of the Board of Directors of the Company and/or its
Subsidiaries.

 

2.13   “Employee” means any
employee of the Company, its Affiliates, and/or its Subsidiaries. Directors who
are not otherwise employed by the Company, its Affiliates, and/or its
Subsidiaries shall not be considered Employees under this Plan.

 

Individuals described in
the first sentence of this definition who are foreign nationals or are employed
outside of the United States, or both, are considered to be Employees and may
be granted Awards on the terms and conditions set forth in the Plan, or on such
other terms and conditions as may, in the judgment of the Committee, be
necessary or desirable to further the purpose of the Plan

 

2.14   “Exchange Act” means the
Securities Exchange Act of 1934, as amended from time to time, or any successor
act thereto.

 

4

 

2.15   “Fair Market Value” or “FMV”
means a price that is based on the opening, closing, actual, high, low, or
average selling prices of a Share on the New York Stock Exchange (“NYSE”) or
other established stock exchange (or exchanges) on the applicable date, the
preceding trading day, the next succeeding trading day, or an average of
trading days, as determined by the Committee in its discretion. Such definition
of FMV shall be specified in the Award Agreement and may differ depending on
whether FMV is in reference to the grant, exercise, vesting, or settlement or
payout of an Award. If, however, the accounting standards used to account for
equity awards granted to Participants are substantially modified subsequent to
the Effective Date of the Plan, the Committee shall have the ability to
determine an Award’s FMV based on the relevant facts and circumstances. If
Shares are not traded on an established stock exchange, FMV shall be determined
by the Committee based on objective criteria.

 

2.16   “Fiscal Year” means the
year commencing on January 1 and ending December 31 or other time period as
approved by the Board.

 

2.17   “Freestanding SAR” means an
SAR that is granted independently of any Options, as described in Article
7 herein.

 

2.18   “Full Value Award” means an
Award other than in the form of an ISO, NQSO, or SAR and which is settled by
the issuance of Shares.

 

2.19   “Grant Price” means the
price at which a SAR may be exercised by a Participant, as determined by the
Committee and set forth in Section 7.1 herein.

 

2.20   “Incentive Stock Option” or
“ISO”
means an Option to purchase Shares granted under Article 6 herein and that is
designated as an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code, or any successor provision.

 

2.21   “Independent Contractor”
means an individual providing services to the Company, its Affiliates, and/or
its Subsidiaries, other than a Director who is not also an Employee of the
Company, its Affiliates, and/or its Subsidiaries. Such Independent Contractor
shall be eligible to participate in the Plan as selected by the Committee in
accordance with Article 5. Notwithstanding any other provision in the Plan
to the contrary, the following shall apply in the case of an Independent
Contractor who is allowed to participate in the Plan: (a) with respect to any
reference in this Plan to the working relationship between such Independent
Contractor and the Company, its Affiliates, and/or its Subsidiaries, the term
“service” shall apply as may be appropriate in lieu of the term “employment” or
“employ”; (b) no such Independent Contractor shall be eligible for a grant of
an ISO; and (c) the exercise period and vesting of an Award following such
Independent Contractor’s termination from service shall be specified and
governed under the terms and conditions of the Award as may be determined by
the Committee and set forth in the Independent Contractor’s Award Agreement
related to such Award.

 

2.22   “Insider” shall mean an
individual who is, on the relevant date, an officer, Director, or more than
ten percent (10%) Beneficial Owner of any class of the Company’s equity

 

5

 

securities that is registered pursuant to
Section 12 of the Exchange Act, as determined by the Board in accordance
with Section 16 of the Exchange Act.

 

2.23   “Nonqualified Stock Option”
or “NQSO”
means an Option to purchase Shares, granted under Article 6 herein,
which is not intended to be an Incentive Stock Option or that otherwise does
not meet such requirements.

 

2.24   “Option” means an Incentive
Stock Option or a Nonqualified Stock Option, as described in Article 6 herein.

 

2.25   “Option Price” means the
price at which a Share may be purchased by a Participant pursuant to an Option,
as determined by the Committee.

 

2.26   “Participant” means an
Employee, Director or Independent Contractor who has been selected to receive
an Award or who has an outstanding Award granted under the Plan.

 

2.27   “Performance-Based
Compensation” means compensation under an Award that satisfies the
requirements of Section 162(m) of the Code for deductibility of remuneration
paid to Covered Employees.

 

2.28   “Performance Measures”
means measures as described in Article 11 on which the performance goals are
based and which are approved by the Company’s shareholders pursuant to this
Plan in order to qualify Awards as Performance-Based Compensation.

 

2.29   “Performance Period” means the
period of time during which the performance goals must be met in order to
determine the degree of payout and/or vesting with respect to an Award.

 

2.30   “Performance
Share” means an Award granted to a Participant, as described in
Article 9 herein.

 

2.31   “Performance Unit” means an
Award granted to a Participant, as described in Article 9 herein.

 

2.32   “Period of Restriction”
means the period when Awards are subject to forfeiture based on the passage of
time, the achievement of performance goals, and/or upon the occurrence of other
events as determined by the Committee, at its discretion.

 

2.33   “Person” shall have the
meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used
in Sections 13(d) and 14(d) thereof, including a “group” as defined in
Section 13(d) thereof.

 

2.34   “Restricted
Stock” means an Award of Shares granted to a Participant pursuant to
Article 8 herein.

 

2.35   “Restricted
Stock Unit” means an Award granted to a Participant pursuant to
Article 8 herein.

 

6

 

2.36   “Shares”
or “Stock” means the Shares of common stock of the Company.

 

2.37   “Stock Appreciation Right”
or “SAR”
means an Award, designated as an SAR, pursuant to the terms of Article 7
herein.

 

2.38   “Stock-Based
Award” means an Award granted pursuant to the terms of Section
10.2 herein.

 

2.39   “Subsidiary” means any
corporation, partnership, joint venture, limited liability company, or other
entity (other than the Company) in an unbroken chain of entities beginning with
the Company if each of the entities other than the last entity in the unbroken
chain owns at least fifty percent (50%) of the total combined voting power in
one of the other entities in such chain.

 

2.40   “Tandem SAR” means an SAR
that is granted in connection with a related Option pursuant to Article 7
herein, the exercise of which shall require forfeiture of the right to purchase
a Share under the related Option (and when a Share is purchased under the
Option, the Tandem SAR shall similarly be cancelled) or an SAR that is granted
in tandem with an Option but the exercise of such Option does not cancel the
SAR, but rather results in the exercise of the related SAR.

 

Article 3. 
Administration

 

3.1      General.
The Committee shall be responsible for administering the Plan. The Committee
may employ attorneys, consultants, accountants, and other persons, and the
Committee, the Company, and its officers and Directors shall be entitled to
rely upon the advice, opinions, or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Committee shall be
final, conclusive, and binding upon the Participants, the Company, and all
other interested parties.

 

3.2      Authority
of the Committee. The Committee shall have full and exclusive discretionary
power and authority to interpret the terms and the intent of the Plan and to
determine eligibility for Awards and to adopt such rules, regulations, and
guidelines for administering the Plan as the Committee may deem necessary or
proper. Such authority shall include, but not be limited to, selecting Award
recipients, establishing all Award terms and conditions and, subject to Article
16, adopting modifications and amendments, or subplans to the Plan or any Award
Agreement, including without limitation, any that are necessary to comply with
the laws of the countries in which the Company, its Affiliates, and/or its
Subsidiaries operate.

 

3.3      Delegation.
The Committee may delegate to one or more of its members or to one or more
officers of the Company, its Affiliates and/or its Subsidiaries, or to one or
more agents or advisors such administrative duties as it may deem advisable,
and the Committee or any person to whom it has delegated duties as aforesaid
may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. Except
with respect to Awards to Insiders, the Committee may (to the extent permitted
by applicable law), by resolution, authorize one or more officers of the Company
to do one or both of the following: (a)

 

7

 

designate
officers, Employees, or Independent Contractors of the Company, its Affiliates,
and/or its Subsidiaries to be recipients of Awards; and (b) determine the size
of the Award; provided, however, that the resolution providing such
authorization sets forth the total number of Awards such officer or officers
may grant.

 

Article 4. 
Shares Subject to the Plan and Maximum Awards

 

4.1      Number
of Shares Available for Awards. Subject to adjustment as provided in this
Article 4, the number of Shares which may be delivered pursuant to Awards
granted under the Plan (the ”Share Authorization”) shall be 1,500,000
Shares.  The maximum aggregate number of
Shares that may be granted pursuant to any Award granted in any one Fiscal Year
to any one Participant shall be 200,000 Shares.  The maximum number of Shares that may be issued for Full
Value Awards shall be limited to 50% of the Share Authorization.  Any Shares related to Awards which terminate
by expiration, forfeiture, cancellation, or otherwise without the issuance of
such Shares, are settled in cash in lieu of Shares, or are exchanged with the
Committee’s permission for Awards not involving Shares, shall be available
again for grant under the Plan. Moreover, if the Option Price of any Option
granted under the Plan or the tax withholding requirements with respect to any
Award granted under the Plan are satisfied by tendering Shares to the Company
(by either actual delivery or by attestation), or if an SAR is exercised, only
the number of Shares issued, net of the Shares tendered, if any, will be deemed
delivered for purposes of determining the maximum number of Shares available
for delivery under the Plan.  The
maximum number of Shares available for issuance under the Plan shall not be
reduced to reflect any dividends or dividend equivalents that are reinvested
into additional Shares or credited as additional Restricted Stock, Restricted
Stock Units, Performance Shares, or Stock-Based Awards. The Shares available
for issuance under the Plan may be authorized and unissued Shares or
treasury Shares.

 

4.2      Adjustments
in Authorized Shares. In the event of any corporate event or transaction
(including, but not limited to, a change in the Shares of the Company or the
capitalization of the Company) such as a merger, consolidation, reorganization,
recapitalization, separation, Stock dividend, Stock split, reverse Stock split,
split up, spin-off, or other distribution of Stock or property of the Company,
combination of securities, exchange of securities, dividend in kind, or other
like change in capital structure or distribution (other than normal cash
dividends) to shareholders of the Company, or any similar corporate event or transaction,
the Committee, in its sole discretion, in order to prevent dilution or
enlargement of Participants’ rights under the Plan, shall substitute or adjust,
in an equitable manner, as applicable, the number and kind of Shares that may
be issued under the Plan, the number and kind of Shares subject to outstanding
Awards, the Option Price or Grant Price applicable to outstanding Awards, the
Award Limits, and other value determinations applicable to outstanding Awards.

 

Appropriate adjustments may also be made by the
Committee in the terms of any Awards under the Plan to reflect such changes or
distributions and to modify any other terms of outstanding Awards on an
equitable basis, including modifications of performance goals and changes in
the length of Performance Periods. The determination of the Committee as to the
foregoing adjustments, if any, shall be conclusive and binding on Participants
under the Plan.

 

8

 

Subject to the provisions of Article 15 and any
applicable law or regulatory requirement, without affecting the number of
Shares reserved or available hereunder, the Committee may authorize the
issuance, assumption, substitution, conversion or termination of Awards under
this Plan in connection with any merger, consolidation, acquisition of property
or Stock, or reorganization, upon such terms and conditions as it may deem
appropriate. Additionally, the Committee may amend the Plan, or adopt
supplements to the Plan, in such manner as it deems appropriate to provide for
such issuance, assumption, substitution, conversion or termination, all without
further action by the Company’s shareholders.

 

Article 5. 
Eligibility and Participation

 

5.1      Eligibility.
Individuals eligible to participate in the Plan include all Employees,
Directors, and Independent Contractors.

 

5.2      Actual
Participation. Subject to the provisions of the Plan, the Committee may
from time to time, select from all eligible Employees, Directors, and
Independent Contractors, those to whom Awards shall be granted and shall
determine the nature and amount of each Award.

 

Article 6. 
Stock Options

 

6.1      Grant
of Options. Subject to the terms and provisions of the Plan, Options may be
granted to Participants in such number, and upon such terms, and at any
time and from time to time as shall be determined by the Committee, provided
that ISOs shall not be granted to Non-Employee Directors and Independent
Contractors.

 

6.2      Award
Agreement. Each Option grant shall be evidenced by an Award Agreement that
shall specify the Option Price, the duration of the Option, the number of
Shares to which the Option pertains, the conditions upon which an Option shall
become vested and exercisable, and such other provisions as the Committee shall
determine which are not inconsistent with the terms of the Plan. The Award
Agreement also shall specify whether the Option is intended to be an ISO or a
NQSO.

 

6.3      Option
Price. The Option Price for each grant of an Option under this Plan shall
be determined by the Committee and shall be specified in the Award Agreement.
The Option Price shall be at least one hundred percent (100%) of the FMV of the
Shares on the date of grant.

 

6.4      Duration
of Options. Each Option granted to a Participant shall expire at such time
as the Committee shall determine at the time of grant; provided, however, no
Option shall be exercisable later than the tenth (10th) anniversary
date of its grant.

 

6.5      Exercise
of Options. Options granted under this Article 6 shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall in each instance approve, which need not be the same for each
grant or for each Participant.

 

9

 

6.6      Payment.
Options granted under this Article 6 shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised, accompanied by full
payment for the Shares.

 

The Option Price upon
exercise of any Option shall be payable to the Company in full either:
(a) in cash or its equivalent; (b) by tendering (either by actual delivery
or attestation) previously acquired Shares having an aggregate FMV at the time
of exercise equal to the total Option Price (provided, if required to maintain
favorable accounting treatment for the Options granted, the Shares that are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price or have been purchased on the
open market); (c) by a combination of (a) and (b); or (d) any other method
approved by the Committee in its sole discretion at the time of grant and as
set forth in the Award Agreement.

 

The Committee also may
allow cashless exercise as permitted under the Federal Reserve Board’s
Regulation T, subject to applicable securities law restrictions, or by any
other means which the Committee determines to be consistent with the Plan’s
purpose and applicable law.

 

Subject to Section 6.7
and any governing rules or regulations, as soon as practicable after receipt of
a written notification of exercise and full payment, the Company shall deliver
to the Participant, Share certificates or evidence of book entry Shares, in an
appropriate amount based upon the number of Shares purchased under the
Option(s).

 

Unless otherwise
determined by the Committee, all payments under all of the methods indicated
above shall be paid in United States dollars.

 

6.7      Restrictions
on Share Transferability. The Committee may impose such restrictions on any
Shares acquired pursuant to the exercise of an Option granted under this
Article 6 as it may deem advisable, including, without limitation, requiring
the Participant to hold the Shares acquired pursuant to exercise for a specified
period of time, restrictions under applicable federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are
then listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.

 

6.8      Termination
of Employment.  Each Participant’s Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the Option following termination of the Participant’s employment with the
Company, its Affiliates, and/or its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with each Participant, need not be uniform among
all Options issued pursuant to this Article 6, and may reflect distinctions
based on the reasons for termination.

 

10

 

6.9      Transferability
of Options.

 

(a)        Incentive Stock Options. No
ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.

 

(b)        Nonqualified Stock Options.
Except as otherwise provided in a Participant’s Award Agreement or otherwise at
any time by the Committee, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution; provided that
the Board or Committee may permit further transferability, on a general or a
specific basis, and may impose conditions and limitations on any permitted
transferability. Further, except as otherwise provided in a Participant’s Award
Agreement or otherwise at any time by the Committee, or unless the Board or the
Committee decides to permit further transferability, all NQSOs granted to a
Participant under this Article 6 shall be exercisable during his or her
lifetime only by such Participant.

 

6.10   Notification of Disqualifying Disposition. The Participant will notify the Company upon
the disposition of Shares issued pursuant to the exercise of an ISO. The
Company will use such information to determine whether a disqualifying
disposition as described in Section 421(b) of the Code has occurred.

 

Article 7. 
Stock Appreciation Rights

 

7.1      Grant
of SARs. Subject to the terms and conditions of the Plan, SARs may be
granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs,
Tandem SARs, or any combination of these forms of SARs.

 

Subject to the terms and
conditions of the Plan, the Committee shall have complete discretion in
determining the number of SARs granted to each Participant and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.

 

The SAR Grant Price for
each grant of a Freestanding SAR shall be determined by the Committee and shall
be specified in the Award Agreement. The SAR Grant Price must be at least one
hundred percent (100%) of the FMV of the Shares on the date of grant. The Grant
Price of Tandem SARs shall be equal to the Option Price of the related Option.

 

7.2      SAR
Agreement. Each SAR Award shall be evidenced by an Award Agreement that
shall specify the Grant Price, the term of the SAR, and such other provisions
as the Committee shall determine.

 

11

 

7.3      Term
of SAR. The term of an SAR granted under the Plan shall be determined by
the Committee, in its sole discretion, and except as determined otherwise by
the Committee and specified in the SAR Award Agreement, no SAR shall be
exercisable later than the tenth (10th) anniversary date of its
grant.

 

7.4      Exercise
of Freestanding SARs. Freestanding SARs may be exercised upon whatever
terms and conditions the Committee, in its sole discretion, imposes upon them.

 

7.5.     Exercise
of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares
subject to the related Option upon the surrender of the right to exercise the
equivalent portion of the related Option. A Tandem SAR may be exercised only
with respect to the Shares for which its related Option is then exercisable.

 

Notwithstanding any other
provision of this Plan to the contrary, with respect to a Tandem SAR granted in
connection with an ISO: (a) the Tandem SAR will expire no later than the
expiration of the underlying ISO; (b) the value of the payout with respect to
the Tandem SAR may be for no more than one hundred percent (100%) of the
difference between the Option Price of the underlying ISO and the FMV of the
Shares subject to the underlying ISO at the time the Tandem SAR is exercised;
and (c) the Tandem SAR may be exercised only when the FMV of the Shares subject
to the ISO exceeds the Option Price of the ISO.

 

7.6      Payment
of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled
to receive payment from the Company in an amount determined by multiplying:

 

(a)         The
difference between the FMV of a Share on the date of exercise over the Grant
Price; by

 

(b)         The
number of Shares with respect to which the SAR is exercised.

 

At the discretion of the
Committee, the payment upon SAR exercise may be in cash, in Shares of
equivalent value, in some combination thereof, or in any other manner approved
by the Committee at its sole discretion. The Committee’s determination
regarding the form of SAR payout shall be set forth or reserved for later
determination in the Award Agreement pertaining to the grant of the SAR.

 

7.7      Termination
of Employment. Each Award Agreement shall set forth the extent to which the
Participant shall have the right to exercise the SAR following termination of
the Participant’s employment with the Company, its Affiliates, and/or its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination.

 

7.8      Nontransferability
of SARs. Except as otherwise provided in a Participant’s Award Agreement,
no SAR granted under the Plan may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution; provided that the Board or Committee may permit
further transferability, on a general or a specific basis, and may impose
conditions and limitations on any permitted transferability. Further, except as
otherwise provided in a Participant’s Award Agreement or otherwise unless the
Board or the Committee

 

12

 

decides to permit
further transferability, all SARs granted to a Participant under this Article 7
shall be exercisable during his or her lifetime only by such Participant.

 

7.9      Other
Restrictions.  The Committee shall
impose such other conditions and/or restrictions on any Shares received upon
exercise of a SAR granted pursuant to the Plan as it may deem advisable. This
includes, but is not limited to, requiring the Participant to hold the Shares
received upon exercise of an SAR for a specified period of time.

 

Article 8. 
Restricted Stock and Restricted Stock Units

 

8.1      Grant of Restricted Stock or Restricted Stock
Units. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time to time, may
grant Shares of Restricted Stock and/or Restricted Stock Units to Participants
in such amounts, as the Committee shall determine. Restricted Stock Units shall
be similar to Restricted Stock except that no Shares are actually awarded to
the Participant on the date of grant.

 

8.2      Restricted
Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or
Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall
specify the Period(s) of Restriction, the number of Shares of Restricted Stock
or the number of Restricted Stock Units granted, and such other provisions as
the Committee shall determine.

 

8.3      Transferability.
Except as provided in this Article 8, the Shares of Restricted Stock
and/or Restricted Stock Units granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Award Agreement (and in the case of Restricted Stock Units until the date
of delivery or other payment), or upon earlier satisfaction of any other
conditions, as specified by the Committee, in its sole discretion, and set
forth in the Award Agreement. All rights with respect to the Restricted Stock
and/or Restricted Stock Units granted to a Participant under the Plan shall be
available during his or her lifetime only to such Participant.

 

8.4      Other Restrictions. The Committee shall impose such other
conditions and/or restrictions on any Shares of Restricted Stock or Restricted
Stock Units granted pursuant to the Plan as it may deem advisable including,
without limitation, a requirement that Participants pay a stipulated purchase
price for each Share of Restricted Stock or each Restricted Stock Unit,
restrictions based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions, restrictions under applicable federal or state
securities laws, or any holding requirements or sale restrictions placed on the
Shares by the Company upon vesting of such Restricted Stock or Restricted Stock
Units.

 

To the extent deemed appropriate
by the Committee, the Company may retain the certificates representing Shares
of Restricted Stock in the Company’s possession until such time as all
conditions and/or restrictions applicable to such Shares have been satisfied or
lapse.

 

Except as otherwise provided in
this Article 8, Shares of Restricted Stock covered by each Restricted Stock
Award shall become freely transferable by the Participant after all conditions
and restrictions applicable to such Shares have been satisfied or lapse, and
Restricted Stock Units shall be

 

13

 

paid
in cash, Shares, or a combination of cash and Shares as the Committee, in its
sole discretion shall determine.

 

8.5      Certificate
Legend. In addition to any legends placed on certificates pursuant to
Section 8.4 herein, each certificate representing Shares of Restricted
Stock granted pursuant to the Plan may bear a legend such as the following:

 

“The sale or other
transfer of the Shares of Stock represented by this certificate, whether
voluntary, involuntary, or by operation of law, is subject to certain
restrictions on transfer as set forth in the Central Pacific Financial Corp.’s
2004 Stock Compensation Plan, and in the associated Restricted Stock Award
Agreement. A copy of the Plan and such Restricted Stock Award Agreement may be
obtained from the Central Pacific Financial Corp.”

 

8.6      Voting Rights. To the extent permitted or required by law, as determined by the
Committee, Participants holding Shares of Restricted Stock granted hereunder
may be granted the right to exercise full voting rights with respect to those
Shares during the Period of Restriction. A Participant shall have no
voting rights with respect to any Restricted Stock Units granted hereunder.

 

8.7      Dividends and Dividend Equivalents. During the Period of Restriction, Participants
holding Shares of Restricted Stock or Restricted Stock Units granted hereunder
may, if the Committee so determines, be credited with dividends paid with
respect to Restricted Stock or dividend equivalents with respect to Restricted
Stock Units while they are so held in a manner determined by the Committee in
its sole discretion. The Committee may apply any restrictions to the dividends
or dividend equivalents that the Committee deems appropriate. The Committee, in
its sole discretion, may determine the form of payment of dividends or dividend
equivalents, including cash, Shares, Restricted Stock, or Restricted Stock
Units and such dividends or dividend equivalents may be subject to accrual,
forfeiture, or payout restrictions as determined by the Committee.

 

8.8      Termination
of Employment. Each Award Agreement shall set forth the extent to which the
Participant shall have the right to retain Restricted Stock and/or Restricted
Stock Units following termination of the Participant’s employment with the
Company, its Affiliates, and/or its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with each Participant, need not be uniform among
all Shares of Restricted Stock or Restricted Stock Units issued pursuant to the
Plan, and may reflect distinctions based on the reasons for termination.

 

8.9      Section 83(b) Election. The
Committee may provide in an Award Agreement that the Award of Restricted Stock
is conditioned upon the Participant making or refraining from making an
election with respect to the Award under Section 83(b) of the Code. If a
Participant makes an election pursuant to Section 83(b) of the Code concerning
a Restricted Stock Award, the Participant shall be required to file promptly a
copy of such election with the Company.

 

14

 

Article 9. 
Performance Shares and Performance Units

 

9.1      Grant
of Performance Shares and Performance Units. Subject to the terms of
the Plan, Performance Shares and/or Performance Units may be granted to
Participants in such amounts and upon such terms, and at any time and from time
to time, as shall be determined by the Committee.

 

9.2      Value
of Performance Shares and Performance Units. Each Performance Share shall
have an initial value equal to the FMV of a Share on the date of grant. Each
Performance Unit shall have an initial value that is established by the
Committee at the time of grant. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will determine
the value and/or number of Performance Shares/Performance Units that will be
paid out to the Participant.

 

9.3      Earning
of Performance Shares and Performance Units. Subject to the terms of
this Plan, after the applicable Performance Period has ended, the holder
of Performance Shares/Performance Units shall be entitled to receive payout on
the value and number of Performance Shares/Performance Units earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been achieved.
Notwithstanding the foregoing, the Company has the ability to require the
Participant to hold the Shares received pursuant to such Award for a specified
period of time.

 

9.4      Form
and Timing of Payment of Performance Shares and Performance Units. Payment
of earned Performance Shares/Performance Units shall be as determined by the
Committee and as evidenced in the Award Agreement. Subject
to the terms of the Plan, the Committee, in its sole discretion, may
pay earned Performance Shares/Performance Units in the form of cash or in
Shares (or in a combination thereof) equal to the value of the earned
Performance Shares/Performance Units as soon as practicable after the end of
the applicable Performance Period. Any Shares may be granted subject to any
restrictions deemed appropriate by the Committee. The determination of the
Committee with respect to the form of payout of such Awards shall be set forth
in the Award Agreement pertaining to the grant of the Award.

 

9.5      Dividend
Equivalents.  At the discretion of the Committee, Participants holding
Performance Shares may be entitled to receive dividend equivalents with respect
to dividends declared with respect to the Shares. Such dividends may be subject
to accrual, forfeiture, or payout restrictions as determined by the Committee
in its sole discretion.

 

9.6      Termination
of Employment. Each Award Agreement shall set forth the extent to which the
Participant shall have the right to retain Performance Shares and/or Performance
Units following termination of the Participant’s employment with the Company,
its Affiliates, and/or its Subsidiaries. Such provisions shall be determined in
the sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Awards of
Performance Shares or Performance Units issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination.

 

9.7      Nontransferability.
Except as otherwise provided in a Participant’s Award Agreement, Performance
Shares/Performance Units may not be sold, transferred, pledged, assigned, or
otherwise

 

15

 

alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, except as otherwise provided in a Participant’s Award Agreement, a
Participant’s rights under the Plan shall be exercisable during his or her
lifetime only by such Participant.

 

Article 10. 
Stock-Based Awards

 

10.1   Stock-Based
Awards. The Committee may grant other
types of equity-based or equity-related Awards (including the grant or offer
for sale of unrestricted Shares) in such amounts and subject to such terms and
conditions, as the Committee shall determine. Such Awards may entail the
transfer of actual Shares to Participants, or payment in cash or otherwise of
amounts based on the value of Shares and may include, without limitation,
Awards designed to comply with or take advantage of the applicable local laws
of jurisdictions other than the United States.

 

10.2   Value
of Stock-Based Awards.  Each
Stock-Based Award shall have a value based on the value of a Share, as
determined by the Committee. The Committee may establish performance goals in
its discretion. If the Committee exercises its discretion to establish
performance goals, the number and/or value of Stock-Based Awards that will be
paid out to the Participant will depend on the extent to which the performance
goals are met.

 

10.3   Earning
of Stock-Based Awards. Subject to the terms of this Plan, the holder
of Stock-Based Awards shall be entitled to receive payout on the number and
value of Stock-Based Awards earned by the Participant, to be determined as a
function of the extent to which applicable performance goals, if any, have been
achieved.

 

10.4   Form
and Timing of Payment of Stock-Based Awards. Payment of earned Stock-Based
Awards shall be as determined by the Committee and as evidenced in the Award
Agreement. Subject to the terms of the Plan, the Committee, in its sole
discretion, may pay earned Stock-Based Awards in the form of cash or in Shares
(or in a combination thereof) that have an aggregate FMV equal to the value of
the earned Stock-Based Awards. Such Shares may be granted subject to any
restrictions deemed appropriate by the Committee. The determination of the
Committee with respect to the form of payout of such Awards shall be set forth
in the Award Agreement pertaining to the grant of the Award.

 

10.5   Termination
of Employment. Each Award Agreement shall set forth the extent to which the
Participant shall have the right to receive Stock-Based Awards following
termination of the Participant’s employment with the Company, its Affiliates,
and/or its Subsidiaries. Such provisions shall be determined in the sole discretion
of the Committee, shall be included in the Award Agreement entered into with
each Participant, need not be uniform among all Awards of Stock-Based Awards
issued pursuant to the Plan, and may reflect distinctions based on the reasons
for termination.

 

10.6   Nontransferability.
Except as otherwise provided in a Participant’s Award Agreement, Stock-Based
Awards may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and distribution.
Further, except as otherwise provided in a Participant’s Award Agreement, a
Participant’s rights under the Plan shall be exercisable during the
Participant’s lifetime only by the Participant.

 

16

 

10.7   Dividend
Equivalents. At the discretion of the Committee, Participants holding
Stock-Based Awards may be entitled to receive dividend equivalents with respect
to dividends declared with respect to the Shares. Such dividends may be subject
to accrual, forfeiture, or payout restrictions as determined by the Committee
in its sole discretion.

 

Article 11. 
Performance Measures

 

 Unless and until the
Committee proposes for shareholder vote and the shareholders approve a change
in the general Performance Measures set forth in this Article 11, the
performance goals upon which the payment or vesting of an Award to a Covered
Employee that is intended to qualify as Performance-Based Compensation shall be
limited to the following Performance Measures:

 

(a)        Earnings per share (actual
or targeted growth);

(b)        Net income after capital
costs;

(c)        Net income (before or
after taxes);

(d)        Return measures
(including, but not limited to, return on assets, risk-adjusted return on
capital, or return on equity);

(e)        Efficiency ratio;

(f)         Full-time equivalency
control;

(g)        Stock price (including,
but not limited to, growth measures and total shareholder return);

(h)        Noninterest income
compared to net interest income ratio;

(i)         Expense targets;

(j)         Margins;

(k)        Operating efficiency;

(l)         EVA®;

(m)       Credit quality measures;

(n)        Customer satisfaction;

(o)        Loan growth;

(p)        Deposit growth;

(q)        Net interest margin;

(r)         Fee income;

(s)        Operating expense; and

(t)         Credit quality.

 

In addition to the
foregoing, the Committee may consider the following individual unit/production
Performance Measures: cost per dollar loan growth; cost per dollar deposit
growth; revenue per personnel; operating expense to group budget; service
levels (group); and personal performance.

 

Any Performance Measure(s) may be used to measure the performance of the
Company as a whole or any business unit of the Company or any combination
thereof, as the Committee may deem appropriate, or any of the above Performance
Measures as compared to the performance of a group of comparator companies, or
published or special index that the Committee, in its sole discretion, deems
appropriate. The Committee also has the authority to provide for accelerated
vesting of any Award based on the achievement of performance goals pursuant to
the Performance Measures specified in this Article 11.

 

17

 

The
Committee may provide in any such Award that any evaluation of performance may
include or exclude any of the following events that occurs during a Performance
Period: (a) asset write-downs; (b) litigation or claim judgments or
settlements; (c) the effect of changes in tax laws, accounting principles, or
other laws or provisions affecting reported results; (d) reorganization or restructuring
programs; (e) extraordinary or nonrecurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management’s discussion and analysis
of financial condition and results of operations appearing in the Company’s
annual report to shareholders for the applicable year; (f) acquisitions or
divestitures; and (g) foreign exchange gains and losses. To the extent such
inclusions or exclusions affect Awards to Covered Employees, they shall be
prescribed in a form that meets the requirements of Code Section 162(m) for
deductibility.

 

Awards that are designed
to qualify as Performance-Based Compensation, and that are held by Covered
Employees, may not be adjusted upward. The Committee shall retain the
discretion to adjust such Awards downward.

 

In the event that
applicable tax and/or securities laws change to permit Committee discretion to
alter the governing Performance Measures without obtaining shareholder approval
of such changes, the Committee shall have sole discretion to make such changes
without obtaining shareholder approval. In addition, in the event that the
Committee determines that it is advisable to grant Awards that shall not
qualify as Performance-Based Compensation, the Committee may make such grants
without satisfying the requirements of Code Section 162(m).

 

Article 12. 
Beneficiary Designation

 

A Participant’s
“beneficiary” is the person or persons entitled to receive payments or other
benefits or exercise rights that are available under the Plan in the event of
the Participant’s death. A Participant may designate a beneficiary or
change a previous beneficiary designation at any time by using forms and
following procedures approved by the Committee for that purpose.
If no beneficiary designated by the Participant is eligible to
receive payments or other benefits or exercise rights that are available under
the Plan at the Participant’s death the beneficiary shall be the Participant’s
estate.

 

Notwithstanding the
provisions above, the Committee may in its discretion, after notifying the
affected Participants, modify the foregoing requirements, institute additional
requirements for beneficiary designations, or suspend the existing beneficiary
designations of living Participants or the process of determining beneficiaries
under this Article 12, or both. If the Committee suspends the process of
designating beneficiaries on forms and in accordance with procedures it has
approved pursuant to this Article 12, the determination of who is a
Participant’s beneficiary shall be made under the Participant’s will and
applicable state law.

 

Article 13. 
Deferrals and Share Settlements

 

Notwithstanding any other
provision under the Plan, the Committee may permit or require a Participant to
defer such Participant’s receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant by virtue of the
exercise of an Option or SAR, or with

 

18

 

respect to the lapse or waiver of restrictions with respect to Restricted
Stock or Restricted Stock Units or the satisfaction of any requirements or
performance goals with respect to Performance Shares, Performance Units, or
Stock-Based Awards. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for
such payment deferrals.

 

Article 14. 
Rights of Employees and Independent Contractors

 

14.1   Employment.
Nothing in the Plan or an Award Agreement shall interfere with or limit in any
way the right of the Company, its Affiliates, and/or its Subsidiaries to
terminate any Participant’s employment or other service relationship at any
time, nor confer upon any Participant any right to continue in the capacity in
which he or she is employed or otherwise serves the Company, its Affiliates,
and/or its Subsidiaries.

 

Neither an Award nor any
benefits arising under this Plan shall constitute part of an employment
contract with the Company, its Affiliates, and/or its Subsidiaries and,
accordingly, subject to Articles 3 and 16, this Plan and the benefits
hereunder may be terminated at any time in the sole and exclusive discretion of
the Committee without giving rise to liability on the part of the Company, its
Affiliates, and/or its Subsidiaries for severance payments.

 

For purposes of the Plan,
transfer of employment of a Participant between the Company, its Affiliates,
and/or its Subsidiaries shall not be deemed a termination of employment.
Additionally, the Committee shall have the ability to stipulate in a Participant’s
Award Agreement that a transfer to a company that is spun-off from the Company
shall not be deemed a termination of employment with the Company for purposes
of the Plan until the Participant’s employment is terminated with the spun-off
company.

 

14.2   Participation.
No Employee or Independent Contractor shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.

 

14.3   Rights
as a Shareholder. A Participant shall have none of the rights of a
shareholder with respect to Shares covered by any Award until the Participant
becomes the record holder of such Shares.

 

Article 15. 
Change in Control

 

Upon the occurrence of a
Change in Control, unless otherwise specifically prohibited under applicable
laws, or by the rules and regulations of any governing governmental agencies or
national securities exchanges, or unless the Committee shall determine
otherwise in the Award Agreement (which may include a modification to the
definition of a Change in Control as determined by the Committee):

 

(a)        Any and all Options and
SARs granted hereunder shall become immediately exercisable; additionally, if a
Participant’s employment is terminated for any other reason except

 

19

 

Cause within
twelve (12) months of such Change in Control, the Participant shall have until
the earlier of: (i) twelve (12) months following such termination date; or (ii)
the expiration of the Option or SAR term, to exercise any such Option or SAR;

 

(b)        Any Period of Restriction
for Restricted Stock and Restricted Stock Units granted hereunder that have not
previously vested shall end, and such Restricted Stock and Restricted Stock
Units shall become fully vested;

 

(c)        The target payout
opportunities attainable under all outstanding Awards under the Plan which are
subject to achievement of any of the Performance Measures specified in Article
11, or any other performance conditions or restrictions that the Committee has
made the Award contingent upon, shall be deemed to have been fully earned as of
the effective date of the Change in Control.

 

(i)         The vesting of all Awards
denominated in Shares shall be accelerated as of the effective date of the
Change in Control, and there shall be paid out to Participants a pro rata
number of Shares based upon an assumed achievement of all relevant targeted
performance goals and upon the length of time within the Performance Period, if
any, that has elapsed prior to the Change in Control. The Committee has the
authority to pay all or any portion of the value of the Shares in cash.

 

(ii)        Awards denominated in cash
shall be paid pro rata to Participants with the proration determined as a
function of the length of time within the Performance Period, if any, that has
elapsed prior to the Change in Control, and based on an assumed achievement of
all relevant targeted performance goals.

 

(d)        Subject to Article 16,
herein, the Committee shall have the authority to make any modifications to the
Awards as determined by the Committee to be appropriate before the effective
date of the Change in Control.

 

Article 16. 
Amendment, Modification, Suspension, and Termination

 

16.1   Amendment,
Modification, Suspension, and Termination. The Committee or Board may, at
any time and from time to time, alter, amend, modify, suspend, or
terminate the Plan in whole or in part. Notwithstanding anything herein to
the contrary, without the prior approval of the Company’s shareholders, Options
issued under the Plan will not be repriced, replaced, or regranted through
cancellation, or by lowering the exercise price of a previously granted Option.
No amendment of the Plan shall be made without shareholder approval if
shareholder approval is required by law, regulation, or stock exchange rule.

 

16.2   Adjustment
of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.
The Committee may make adjustments in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4.2 hereof)
affecting the Company or the financial statements of the

 

20

 

Company or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
unintended dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.

 

16.3   Awards
Previously Granted. Notwithstanding any other provision of the Plan to the
contrary, no termination, amendment, suspension, or modification of the Plan
shall adversely affect in any material way any Award previously granted
under the Plan, without the written consent of the Participant holding such
Award.

 

Article 17. 
Withholding

 

17.1   Tax
Withholding. The Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign
(including the Participant’s FICA obligation), required by law or regulation to
be withheld with respect to any taxable event arising or as a result of this
Plan.

 

17.2   Share
Withholding. With respect to withholding required upon the exercise of
Options or SARs, upon the lapse of restrictions on Restricted Stock or
Restricted Stock Units, or upon the achievement of performance goals related to
Performance Shares, or any other taxable event arising as a result of Awards
granted hereunder, the Company may require or Participants may elect, subject
to the approval of the Committee, to satisfy the withholding requirement, in
whole or in part, by having the Company withhold Shares having a FMV of a Share
on the date the tax is to be determined equal to the tax that could be imposed
on the transaction, provided that if required by the accounting rules and
regulations to maintain favorable accounting treatment for the Awards, the tax
is to be determined equal to the minimum statutory total tax that could be
imposed on the transaction. All elections shall be irrevocable, made in
writing, and signed by the Participant, and shall be subject to any
restrictions or limitations that the Committee, in its sole discretion, deems
appropriate.

 

Article 18. 
Successors

 

All obligations of the Company under the Plan with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.

 

Article 19. 
General Provisions

 

19.1   Forfeiture
Events.  The Committee may specify
in an Award Agreement that the Participant’s rights, payments, and benefits
with respect to an Award shall be subject to reduction, cancellation,
forfeiture, or recoupment upon the occurrence of certain specified events, in
addition to any otherwise applicable vesting or performance conditions of an
Award. Such events shall include, but shall not be limited to, termination of
employment for Cause, violation of material Company,

 

21

 

Affiliate, and/or Subsidiary policies, breach of noncompetition,
confidentiality, or other restrictive covenants that may apply to the
Participant, or other conduct by the Participant that is detrimental to the
business or reputation of the Company, its Affiliates, and/or its Subsidiaries.

 

19.2   Legend.
The certificates for Shares may include any legend that the Committee deems
appropriate to reflect any restrictions on transfer of such Shares.

 

19.3   Delivery
of Title. The Company shall have no obligation to issue or deliver evidence
of title for Shares issued under the Plan prior to:

 

(a)        Obtaining any approvals
from governmental agencies that the Company determines are necessary or
advisable; and

 

(b)        Completion of any
registration or other qualification of the Shares under any applicable national
or foreign law or ruling of any governmental body that the Company determines
to be necessary or advisable.

 

19.4   Investment
Representations.  The Committee may require each Participant
receiving Shares pursuant to an Award under this Plan to represent and warrant
in writing that the Participant is acquiring the Shares for investment and
without any present intention to sell or distribute such Shares.

 

19.5   Employees
Based Outside of the United States. Notwithstanding any provision of the
Plan to the contrary, in order to comply with the laws in other countries in
which the Company, its Affiliates, and/or its Subsidiaries operate or have
Employees or Independent Contractors, the Committee, in its sole discretion,
shall have the power and authority to:

 

(a)        Determine which Affiliates
and Subsidiaries shall be covered by the Plan;

 

(b)        Determine which Employees
and Independent Contractors outside the United States are eligible to
participate in the Plan;

 

(c)        Modify the terms and
conditions of any Award granted to Employees or Independent Contractors outside
the United States to comply with applicable foreign laws;

 

(d)        Establish subplans and
modify exercise procedures and other terms and procedures, to the extent such
actions may be necessary or advisable. Any subplans and modifications to
Plan terms and procedures established under this Section 19.5 by the Committee
shall be attached to this Plan document as appendices; and

 

(e)        Take any action, before or
after an Award is made that it deems advisable to obtain approval or comply
with any necessary local government regulatory exemptions or approvals.

 

22

 

Notwithstanding the
above, the Committee may not take any actions hereunder, and no Awards shall be
granted, that would violate the Exchange Act, the Code, any securities law, or
governing statute or any other applicable law.

 

19.6   Uncertificated
Shares. To the extent that the Plan provides for issuance of certificates
to reflect the transfer of Shares, the transfer of such Shares may be effected
on a noncertificated basis, to the extent not prohibited by applicable law or
the rules of any stock exchange.

 

19.7   Unfunded
Plan. Participants shall have no right, title, or interest whatsoever in or
to any investments that the Company, its Affiliates, and/or its Subsidiaries
may make to aid it in meeting its obligations under the Plan. Nothing contained
in the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between
the Company, its Affiliates, and/or its Subsidiaries and any Participant,
beneficiary, legal representative, or any other person. To the extent that any
person acquires a right to receive payments from the Company, its Affiliates,
and/or its Subsidiaries under the Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company. All payments to be made
hereunder shall be paid from the general funds of the Company and no special or
separate fund shall be established and no segregation of assets shall be made
to assure payment of such amounts except as expressly set forth in the Plan.
The Plan is not intended to be subject to ERISA.

 

19.8   No
Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
Awards, or other property shall be issued or paid in lieu of fractional Shares
or whether such fractional Shares or any rights thereto shall be forfeited or
otherwise eliminated.

 

19.9   Retirement
and Welfare Plans. The Awards under this Plans will not be included as
“compensation” for purposes of computing benefits payable to any Participant
under the Company’s retirement plans (both qualified and nonqualified) or
welfare benefit plans unless such other plan expressly provides that such
compensation shall be taken into account in computing a
Participant’s benefit.

 

Article 20. 
Legal Construction

 

20.1   Gender
and Number. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.

 

20.2   Severability.
In the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.

 

20.3   Requirements
of Law. The granting of Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required. The Company shall receive the consideration required by law for
the issuance of Awards under the Plan.

 

23

 

The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

 

20.4   Securities
Law Compliance. The Company may use reasonable endeavors to register Shares
allotted pursuant to the exercise of an Award with the United States Securities
and Exchange Commission or to effect compliance with the registration,
qualification, and listing requirements of any national or foreign securities
laws, stock exchange, or automated quotation system. With respect to Insiders,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed advisable
by the Committee.

 

20.5   Governing
Law. The Plan and each Award Agreement shall be governed by the laws of the
State of Hawaii, excluding any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of the Plan to the
substantive law of another jurisdiction. Unless otherwise provided in the Award
Agreement, recipients of an Award under the Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of Hawaii, to
resolve any and all issues that may arise out of or relate to the Plan or any
related Award Agreement.

 

24

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