For more information regarding the background of each of the nominees for director, see the sections titled “ELECTION OF DIRECTORS” and “DIRECTORS’ AND EXECUTIVE OFFICERS’
INFORMATION.” The persons named as “proxy” in the voting instructions or form of proxy provided with these materials will vote the shares represented by all validly returned proxies in accordance with the specifications of the shareholders
returning such proxies. If at the time of the Meeting any of the nominees named above should be unable to serve, the discretionary authority provided in the proxy will be exercised to vote for such substitute nominee or nominees, if any, as shall
be designated by the Board.
The election of directors requires a plurality of the votes cast “FOR” the election of the directors by the shares entitled to vote in the election at a meeting at which a quorum is
present. Accordingly, the 12 directorships to be filled at the meeting will be filled by the 12 nominees receiving the highest number of “FOR” votes.
APPROVAL OF THE 2023 STOCK COMPENSATION PLAN
The Board of Directors is asking our shareholders to approve the Central Pacific Financial Corp. 2023 Stock Compensation Plan (the “2023 Plan”). The 2023 Plan
is designed to replace our 2013 Stock Compensation Plan (the “2013 Plan”), which is expiring on April 26, 2023, and under which no stock options eligible for “incentive stock option” tax treatment may be granted after January 30, 2023.
The Board believes that the 2023 Plan is important for attracting and retaining well-qualified employees and directors in the competitive Hawaii labor market and that the 2023 Plan
will provide a significant incentive for our employees, directors and consultants to increase the value of Central Pacific Financial Corp. for all shareholders, which is essential to our long-term growth and success. The Board believes that the
number of shares authorized under the 2023 Plan reflects an appropriate balance between providing us with the flexibility to offer an equity award program over a multi-year period and shareholder dilution considerations.
If approved, the 2023 Plan will become effective as of the date shareholder approval is received, which we expect to be the date of the Meeting. The 2023 Plan authorizes the grant of
awards relating to up to 1,140,000 shares of our Common Stock. No equity grants have been made or will be made under the 2023 Plan unless and until shareholder approval is received. No further awards will be made under the 2013 Plan on or after
February 23, 2023, unless this proposal is not approved by our shareholders; however, awards
previously granted and outstanding under the 2013 Plan will continue to be governed by the terms of the 2013 Plan, and shares subject to such awards will be issued under the 2013 Plan.
Summary of the 2023 Plan
The principal features of the 2023 Plan are described below. However, this summary of the 2023 Plan does not purport to be exhaustive and is expressly qualified in its
entirety by reference to the full text of the 2023 Plan document, which is attached to this Proxy Statement as Exhibit A.
Administration. The 2023 Plan will be administered and interpreted by the Compensation Committee of our Board, which currently is comprised of four of our non-employee
directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3 under the U.S. Securities Exchange Act of 1934, as amended. However, the Compensation Committee may from time to time delegate some or all of its administrative
duties under the 2023 Plan to one or more of its members, to Company officers or to third party agents or advisors. Subject to the provisions of the 2023 Plan, the Compensation Committee has full and exclusive discretionary power and authority (a)
to interpret the terms and intent of the 2023 Plan and adopt rules for the administration of the 2023 Plan, (b) to determine eligibility for awards and select the participants to whom awards will be granted, (c) to set the terms and conditions of
the awards at initial grant and for any subsequent modifications or amendments to award agreements, and (d) to adopt modifications and amendments, and subplans to the 2023 Plan. All actions, interpretations and determinations made by the
Compensation Committee are final, conclusive and binding.
Maximum Shares Reserved. The maximum number of shares of our Common Stock available for issuance under the 2023 Plan will be 1,140,000 shares. This includes the maximum number
of shares that may be issued pursuant to incentive stock options granted under the 2023 Plan, which also will be 1,140,000 shares.
The 2023 Plan applies the following conservative rules for counting shares against the maximum share limit under the 2023 Plan:
• |
Shares underlying any awards that expire without being exercised or are forfeited, canceled or otherwise terminated without issuance of shares or payment in lieu of shares and shares
that are forfeited or repurchased by the Company for an amount not greater than the participant’s exercise or purchase price will be added back to the shares available for issuance under the 2023 Plan. |
• |
Shares tendered or held back upon exercise of an option or settlement of a stock appreciation right to cover the exercise price or tax withholding will count against the limit and
will not be available for future issuance under the 2023 Plan. |
• |
Upon exercise of stock appreciation rights, the gross number of shares for which the rights are exercised and any shares tendered or held back to cover tax withholding will count
against the limit and will not be available for future issuance under the 2023 Plan. |
• |
Shares tendered or held back upon the vesting or settlement of any restricted stock, RSUs, PSUs and other full value stock-based awards to cover tax withholding will count against the
limit and will not be available for future issuance under the 2023 Plan. |
• |
Any shares issued or issuable with respect to dividends or dividend equivalents that are reinvested into additional shares or are credited as additional restricted stock, RSUs, PSUs or other stock-based awards
are not counted against the maximum share limit |
The number of shares available for awards under the 2023 Plan is subject to equitable adjustment in connection with any transaction or event that affects our
Common Stock (including, but not limited to, a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, split up, spin-off, combination of shares, exchange of shares or other like change in capital
structure) which may be required in order to prevent dilution or enlargement of rights.
Eligibility. All of our employees, officers, directors and consultants will be eligible to participate in the 2023 Plan. All participants may receive all types of awards under
the 2023 Plan, except that incentive stock options may be granted only to employees (including officers and directors who are also employees). The Compensation Committee determines which persons eligible to participate will
PROPOSAL 4
receive awards and the terms of their individual awards. However, the Compensation Committee may authorize one or more officers of the Company to select persons other than executive
officers, directors and significant shareholders of the Company to receive awards and to determine (within Compensation Committee prescribed limits) the numbers of shares subject to such awards.
On February 23, 2023, we had approximately 797 employees (including officers and directors who are also employees), 10 non-employee directors, and approximately 15 consultants, all of
whom would have been eligible to participate in the 2023 Plan. The actual number of persons who will receive awards from time to time cannot be determined in advance because the Compensation Committee has the discretion to select the award
recipients. Consistent with recent practices under the 2013 Plan, the Company expects to make annual grants of RSUs and PSUs from the 2023 Plan to employees that are members of Managing Committee at the level of group senior vice president and
above and in limited circumstances to non-executive employees at high levels or in key positions, and to issue shares of our common stock from the 2023 Plan to non-employee Board members for 50% of their Board compensation.
Types of Awards. The 2023 Plan authorizes the grant of a variety of types of equity awards, which include incentive stock options (ISOs), nonqualified stock options
(NQSOs), stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), performance shares, performance units (PSUs) and other stock-based awards, briefly summarized as follows:
• |
Incentive Stock Options and Nonqualified Stock Options. Options entitle the participant to purchase shares of our Common Stock over time for an exercise price fixed on the date
of the grant. The exercise price may not be less than 100% of the fair market value of our Common Stock on the date of the grant. The exercise price may be paid (a) in cash, (b) by tendering previously acquired shares of our Common Stock
meeting certain criteria, (c) by applying the value of a portion of the shares acquired upon exercise and issuing only the net balance of the shares, (d) by the sale through a broker of a portion of the shares acquired upon exercise, or (e)
by a combination of these methods. The participant has no rights as a shareholder with respect to any shares covered by an option until the option vests and is exercised by the participant and shares are issued by us. |
• |
Stock Appreciation Rights. SARs entitle the participant to receive the appreciation in the fair market value of our Common Stock between the date of grant and the exercise date
either in cash or in the form of shares of our Common Stock. For cash-settled SARs, the participant will have no rights as a shareholder. For stock-settled SARs, the participant will have no rights as a shareholder with respect to any
shares covered by the SAR until the award vests and is exercised by the participant and we issue the shares. SARs may be granted as standalone awards or in tandem with the grant of options. |
• |
Restricted Stock and Restricted Stock Units. Restricted stock awards are shares of our Common Stock that vest in accordance with terms and conditions established by the
Compensation Committee. Restricted stock units provide for the issuance of shares of our Common Stock at a later date or event following vesting in accordance with terms and conditions established by the Compensation Committee at time of
grant. Shares of restricted stock and RSUs that do not satisfy vesting conditions are subject to forfeiture. In either case, the vesting conditions may be based on continued employment (or other service) with us and our affiliates and/or
achievement of performance goals. A participant granted restricted stock will have the rights of a shareholder for the Common Stock from the date of grant, including voting and dividend rights (subject to restrictions on such rights
provided in the applicable award agreements), but not the right to sell or transfer the shares. A participant granted RSUs does not have shareholder rights until shares are issued, if at all, but may be granted dividend equivalent rights
prior to issuance of shares. |
• |
Performance Shares and Performance Units. Performance shares and performance units are similar to RSUs in that they provide for the issuance of shares of our Common Stock or
other payment at a later date or event, but under which vesting and/or number of shares earned are based upon the satisfaction of performance criteria and/or achievement of performance goals in addition to continued service requirements.
PSUs provide for the issuance of shares of our Common Stock or other forms of payout based upon the value of our Common Stock following the determination of performance results during a specified performance period in accordance with terms
and conditions established by the Compensation Committee prior to or at the outset of the performance period. A participant granted PSUs does not have shareholder rights until shares are issued, if at all, but may be granted dividend
equivalent rights prior to issuance of shares. |
• |
Other Stock-Based Awards. Other stock-based awards permitted under our 2023 Plan include awards that may be settled in cash or in shares of our Common Stock and are valued in whole or in part by reference
to shares of our Common Stock. |
Minimum Vesting Requirement. Options and SARs that vest and become exercisable, and restricted stock, RSUs and stock-based awards that vest, based on the participant’s
continued employment or other continued service may not vest or become exercisable prior to the expiration of one year of continued employment or other continued service following the date of grant. However, the Compensation Committee has the
discretion to provide for earlier exercisability in the event a participant’s employment or other service terminates due to death or disability or following a change in control, and in other circumstances for a number of shares of our Common Stock
that in the aggregate does not exceed 5% of the maximum number of shares reserved under the 2023 Plan.
Terms of Awards. The Compensation Committee will determine the types of awards to be granted from among those provided under the 2023 Plan and the terms of such awards,
including the number of shares of our Common Stock or other securities underlying the
PROPOSAL 4
awards; restrictions and vesting requirements, which may be time-based vesting or vesting upon satisfaction of performance goals and/or other conditions; the exercise price for options
and SARs, which may not be less than 100% of the fair market value of a share on the grant date; and, where applicable, the expiration date of awards, which for options and SARs may not be more than 10 years after the grant date. Awards may be
granted under the 2023 Plan as part of or in conjunction with our annual and long-term incentive compensation programs and our non-employee director compensation policy.
Performance Measures. Vesting and/or exercise of awards under the 2023 Plan may be made subject to the satisfaction of financial criteria or other objective or subjective
performance measures, which are intended to align with the economic interests of our shareholders. The Compensation Committee determines the specific performance criteria that are to be used in granting performance-based awards and the performance
period over which such criteria are to be measured. These performance criteria may be measured either in absolute terms or compared to results of a peer group and may be measured at the individual level, a business unit level or other
Company-specific basis as determined by the Compensation Committee.
No Repricing. Without the prior approval of our shareholders occurring no more than 12 months prior to the event, options and SARs granted under the 2023
Plan may not be repriced, replaced, regranted or amended to reduce the exercise price, and any options and SARs with exercise prices greater than current fair market value may not be canceled in exchange for cash or any other award under the Plan.
Transferability of Awards. Awards under the 2023 Plan generally are not transferable by the participant other than by will or the laws of descent and distribution and are
generally exercisable, during the participant’s lifetime, only by the participant. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the participant or the participant’s estate or legal representative or
guardian. The Compensation Committee has discretion, however, to permit the transfer of awards other than incentive stock options.
Adjustments and Substitute Awards. The number and kind of shares available under the 2023 Plan, the shares subject to any outstanding awards, and the exercise or purchase
prices of such awards, are subject to adjustment in the event of certain reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spin-off, combination or other similar change in our capital stock or the
number or kind of shares outstanding.
Change in Control. If the Company undergoes a change in control, which includes certain corporate transactions such as a merger, reorganization or consolidation resulting in a
change in majority ownership, a sale of substantially all of our assets, a sale of more than 50% of our stock, or a change in the majority of directors on our Board during a 12-month period, then the Board or the Compensation Committee may exercise
discretion over the treatment of then outstanding awards under the 2023 Plan in order to effect or facilitate the change in control transaction. Such discretion includes the ability (i) to accelerate the vesting and/or exercisability of awards,
(ii) to cause an acquiror to assume the awards, substitute comparable awards for them, or otherwise continue the awards, or (iii) to cause the awards to be cancelled in exchange for payment of their fair market value in cash or stock. In general,
any awards outstanding under the 2023 Plan that are not exercised, assumed, substituted or otherwise continued will terminate upon the change in control.
Clawback of Awards. Awards granted under the 2023 Plan will be subject to recovery or clawback by any governmental agency or by the Company if payment or vesting is based on
materially inaccurate statements of earnings, revenues or gains, or any performance criteria/metric or other criteria or metric that is found by any governmental agency or by the Company to be materially inaccurate or to have encouraged unnecessary
and/or excessive risk taking or if it otherwise is subject to recovery or clawback under any policy adopted by the Company and in effect from time to time, including any such policy adopted pursuant to any Law or stock exchange listing requirement.
Amendment and Termination. The Board may amend or terminate the 2023 Plan at any time, provided that any such amendment or termination may not adversely affect any awards then
outstanding without the participant’s consent. Amendments to increase the number of shares of Common Stock available for awards under the 2023 Plan, amendments to alter or delete the shareholder approval requirement for repricing options and SARs,
and any other material amendments of the 2023 Plan will be subject to shareholder approval, including amendments for which shareholder approval is required by applicable laws, regulations or stock exchange rules. The 2023 Plan has a ten-year term
such that no awards may be granted under the 2023 Plan after April 26, 2033. Additionally, no incentive stock options may be granted under the 2023 Plan after January 23, 2033.
PROPOSAL 4
Federal Tax Aspects
The following is a general discussion of certain U.S. federal income tax consequences relating to certain of the awards that may be issued under the 2023 Plan, based
on U.S. federal income tax laws in effect on the date of this Proxy Statement. This discussion is general in nature only, and is not intended to be specific income tax advice on which we or any participant will rely. This summary does not describe
all of the possible federal income tax consequences that could result from the acquisition, holding, exercise or disposition of any award or of any shares of Common Stock received pursuant to any award granted under the 2023 Plan. This summary does
not describe any state, local or foreign tax consequences or any gift, estate or excise tax consequences.
Tax Consequences to Participants
Incentive Stock Options. A participant will not recognize income upon the grant of an option intended to be an incentive stock option. Furthermore, a
participant will not recognize ordinary income upon the exercise of an incentive stock option if he or she satisfies certain employment requirements, although any increase in value of the underlying stock at the time of exercise may be subject to
alternative minimum tax. To satisfy the employment requirement, a participant must exercise the option not later than three months after he or she ceases to be our employee (one year if he or she is disabled). Additionally, upon the sale of stock
received on exercise of an incentive stock option, a participant will be taxed on the difference between his or her basis in the shares (which is typically the option exercise price) and the net proceeds of the sale at long-term capital gain tax
rates if he or she satisfies certain holding period requirements. To satisfy the holding period requirements, a participant must hold the shares acquired on exercise of the incentive stock option for more than two years from the grant date of the
option and more than one year after the shares are issued to him or her.
If the employment requirement is not met, the option will be taxed as a nonqualified stock option at time of exercise. If a participant disposes of shares of our Common Stock acquired
upon the exercise of an incentive stock option without satisfying the holding period requirement, that participant generally will recognize ordinary income as of the date of disposition equal to the lesser of (i) the difference between the fair
market value of the shares on the date of exercise and the exercise price, or (ii) the difference between the selling price and the exercise price. If the selling price is greater than the fair market value of the shares on the date of exercise,
such excess will be treated as capital gain (short-term or long-term depending upon holding period).
Nonqualified Stock Options. In general, a participant will not recognize income at the time a nonqualified stock option is granted. At the time of exercise of the option, the
participant will recognize ordinary income if the shares are not then subject to a substantial risk of forfeiture. The amount of such income will be equal to the difference between the option exercise price and the fair market value of the shares
of our Common Stock on the date of exercise. At the time of the sale of the shares of our Common Stock acquired pursuant to the exercise of an option, appreciation in value of the shares after the date of exercise will be treated as either
short-term or long-term capital gain, and depreciation in value will be treated as short-term or long-term capital loss, depending on how long the shares have been held. Long-term capital gains may be eligible for reduced tax rates if the
participant has satisfied applicable holding period requirements.
Stock Appreciation Rights. In general, a participant will not recognize income at the time a stock appreciation right is granted. Upon exercise of the right, the
participant will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares on the exercise date over the exercise price, whether such amount is payable in cash or in shares of Common Stock. If the
participant receives such excess value in Common Stock, any additional gain or any loss recognized upon later disposition of any shares received on exercise will be capital gain or loss.
Restricted Stock. In general, a participant will not have taxable income upon the grant of restricted stock. Instead, at the time the participant holds stock free of any
substantial risk of forfeiture, the participant will recognize ordinary income equal to the fair market value (on that date) of the shares or other property less any amount paid. Alternatively, the participant may elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of grant of restricted stock, an amount equal to the fair market value (on the grant date) of the restricted stock less any amount paid. Any disposition of shares after restrictions
lapse will be subject to the regular rules governing long-term and short-term capital gains and losses with the basis for this purpose equal to the fair market value of the shares at the end of the restriction period (or on the date of receipt of
the restricted stock, if the participant elects to be taxed upon grant). To the extent dividends are payable during the restricted period under the applicable award agreement, any such dividends will be taxable to the participant at ordinary income
tax rates and will be deductible by the Company unless the participant has elected to be taxed on the fair market value of the restricted stock upon transfer, in which case they will be taxable to the participant as dividends and will not be
deductible by the Company.
Restricted Stock Units, Performance Shares and Performance Units. A participant will normally not recognize taxable income upon an award of RSUs or PSUs. Upon vesting or other
lapse of restrictions and the issuance of the earned shares, the participant will recognize ordinary taxable income in an amount equal to the fair market value of the Common Stock when issued or the amount of any other payment received.
PROPOSAL 4
Other Stock-Based Awards. Normally, a participant will not recognize taxable income upon the grant of performance awards or other stock-based awards. Subsequently, when the
conditions and requirements for the grants have been satisfied and the payment determined, any cash received and the fair market value of any Common Stock received will be taxed as ordinary income to the participant.
Tax Withholding. Ordinary income recognized on exercise of nonqualified stock options and stock appreciation rights and on vesting of restricted stock, restricted stock units,
performance shares, performance units and other similar awards is subject to income and employment tax wage withholding, unless the participant is a non-employee director or consultant. The Compensation Committee may allow a participant to satisfy
his or her tax withholding requirements under federal and state tax laws in connection with the exercise or receipt of an award by payment in cash, withholding from the participant’s other compensation, or electing to have shares withheld from
those to be delivered under the award.
Section 409A. A participant receiving an award that is subject to, but fails to comply with, the deferred compensation requirements of Section 409A of the Internal Revenue Code
(“Section 409A”) may be subject to a penalty tax of 20% of the income from such award plus interest charges, in addition to ordinary income tax. Failure to comply with Section 409A also may result in an acceleration of the timing of income taxation
of such awards. Awards granted under the 2023 Plan are intended to be exempt from or to comply with the requirements of Section 409A.
Tax Consequences to the Company. To the extent that a participant recognizes ordinary income as described above, we generally will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code and is not
disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m) of the Internal Revenue Code.
Section 162(m) Limitation. Section 162(m) of the Internal Revenue Code and the regulations thereunder contain special rules regarding the federal income tax deductibility of
compensation paid to our chief executive officer, our chief financial officer and to certain of our other executive officers. The general rule is that compensation paid to any of these specified executives, or to any person who was such an
executive at any time on or after January 1, 2017, is deductible only to the extent that it does not exceed $1 million in any tax year.
Shareholder Dilution Considerations
The following table reflects the number of shares of our Common Stock that will be available for awards under the 2023 Plan in
combination with awards outstanding under the 2013 Plan on February 23, 2023(1):
Shares authorized for future grant under 2023 Plan after shareholder approval |
1,140,000 |
Shares relating to outstanding 2013 Plan time-based RSUs (RSUs) |
177,152 |
Shares relating to outstanding 2013 Plan performance-based RSUs (PRSUs)(2) |
226,884 |
Total number of shares available for issuance under 2023 Plan and 2013 Plan |
1,544,036 |
(1) |
Only RSUs and PRSUs are outstanding under the 2013 Plan. No stock options, SARs or other types of awards are outstanding. |
(2) |
Number of shares listed for outstanding PRSUs is at maximum payout. Number of PRSU shares at target payout is 113,442. |
To protect shareholder interests from the potential dilutive impact of equity awards, we actively manage our equity plan resources as effectively as possible, as indicated by the table
below. The “unadjusted burn rate” for any particular fiscal year is the total number of shares of our Common Stock issuable under the equity-based awards granted in that fiscal year divided by our weighted average total number of shares of Common
Stock issued and outstanding during that fiscal year.
Our unadjusted burn rates for the past three fiscal years are set forth in the following table(1):
Year |
|
Board Shares
Issued |
|
RSUs
Granted |
|
PRSUs
Granted(2) |
|
Total Granted |
|
Weighted Average Common
Shares Outstanding |
|
Burn Rate |
2022 |
|
14,993 |
|
53,986 |
|
45,901 |
|
114,880 |
|
27,398,445 |
|
0.42% |
2021 |
|
10,681 |
|
145,587 |
|
76,187 |
|
232,455 |
|
28,003,744 |
|
0.83% |
2020 |
|
13,165 |
|
276,831 |
|
45,349 |
|
335,345 |
|
28,074,543 |
|
1.19% |
3-Year Average |
|
12,946 |
|
158,801 |
|
55,812 |
|
227,560 |
|
27,825,577 |
|
0.82% |
(1) |
For awards under the 2013 Plan during the past three years, only RSUs and PRSUs were granted to employees and shares were issued to nonemployee Board members as
compensation. No stock options, SARs or other types of awards were granted. |
(2) |
Number of PRSU shares listed is at target payout. Number of such shares at maximum payout is 91,802 in 2022, 152,374 in 2021, and 68,024 in 2020. |
PROPOSAL 4
We anticipate that the 1,140,000 shares under the 2023 Plan will give us flexibility to grant equity awards for the 10-year life of the 2023 Plan, accommodating anticipated grants
relating to the hiring, retention and promotion of employees and for the compensation of non-employee directors and consultants. However, the total number of shares available under the 2023 Plan could be exhausted sooner based on any number of
variables, including, without limitation, the value of our Common Stock, changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of
directors and officers, the extent to which vesting conditions applicable to equity-based awards are satisfied, the need to attract, retain and incentivize key talent, the type of awards we grant, and how we choose to balance total compensation
between cash and equity-based awards.
The inclusion of this information in this Proxy Statement should not be regarded as an indication that the assumptions used to determine the number of shares will be predictive of
actual future equity grants. These assumptions are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve
risks and uncertainties that could cause actual outcomes to differ materially from those in the forward-looking statements, including our ability to attract and retain talent, achievement of performance metrics with respect to certain equity-based
awards, the extent of option exercise activity, and others described in our Form 10-K for the year ended December 31, 2022.
Plan Benefits
The future benefits or amounts that would be received under the 2023 Plan are discretionary and are therefore not determinable at this time. Similarly, the benefits or
amounts which would have been received by or allocated to executive officers and our other employees for the last completed fiscal year if the 2023 Plan had been in effect cannot be determined. However, we expect that future awards under the 2023
Plan will be granted in a manner substantially consistent with the historical grant of awards under the 2013 Plan. All grants made in 2022 under the 2013 Plan to named executive officers are disclosed in the Summary Compensation Table. For
information regarding the size and structure of awards made in the past and information regarding the 2013 Plan as of December 31, 2022, please see the disclosures in this Proxy Statement under “Grants of Plan-Based Awards,” “Outstanding
Equity Awards,” and “Equity Compensation Plan Information.”
Market Value of Underlying Securities
Our Common Stock underlies all of the options and other awards to be made under the 2023 Plan. The market value of our Common Stock at the close of trading on February
23, 2023 was $23.17 per share.
Proposal 4. APPROVAL OF THE 2023 STOCK COMPENSATION PLAN COMPENSATION |
Board Recommendation |
THE BOARD OF
DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL |
PROPOSALS OF SHAREHOLDERS |
Shareholder proposals intended to be considered for inclusion in the Company’s Proxy Statement and voted on at the Company’s regularly scheduled 2024 Annual Meeting
of Shareholders must be received at the Company’s offices at 220 South King Street, Honolulu, Hawaii 96813, Attention: Corporate Secretary, by no later than 120 calendar days before the first anniversary date of the release of this Proxy Statement,
(i.e. by no later than November 7, 2023) pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended. Applicable SEC rules and regulations govern the submission of shareholder proposals and the Company’s consideration of them for
inclusion in next year’s proxy statement and form of proxy. For any proposal that is not submitted for inclusion in next year’s proxy statement (as described above), but is instead sought to be presented directly at next year’s annual meeting, SEC
rules permit management to vote proxies in its discretion if (a) the Company receives notice of the proposal before the close of business 45 days before the first anniversary date of the mailing date of this Proxy Statement (i.e., by no later than
January 21, 2024) and advises shareholders in next year’s proxy statement about the nature of the matter and how management intends to vote on the matter, or (b) the Company does not receive notice of the proposal prior to the close of business 45
days before the first anniversary of the mailing date of this Proxy Statement (i.e., by January 21, 2024). For information about nominating directors, see “Director Nomination Process—Shareholder Nominees” above.
The Company’s Bylaws contain procedures that shareholders must follow to present business at a meeting of shareholders if such business is not specified in the Proxy Statement. A
shareholder may obtain a copy of these procedures from the Company’s Corporate Secretary. In addition to other applicable requirements, for business to be properly brought before the 2024 Annual Meeting of Shareholders, a shareholder must give
notice of the matter to be presented at the Meeting in a proper written form to the Company’s Corporate Secretary or at www.sec.gov. The Corporate Secretary must receive this written notice at the principal offices of the Company not less
than 90 calendar days nor more than 120 calendar days prior to the anniversary date of the preceding year’s annual meeting (such anniversary date, April 27, 2024). Shareholder proposals not made in accordance with these requirements may be
disregarded by the chairperson of the meeting. In addition to satisfying the foregoing requirements under the Company’s bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees
other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than February 28, 2024.
The Board knows of no other business that will be presented for consideration at the Meeting other than as stated in the Notice of Meeting. If, however, other matters
are properly brought before the Meeting, it is the intention of the persons named in the form of proxy to vote the shares represented thereby on such matters in accordance with the recommendation of the Board or, if no recommendation is given, in
their own discretion.
Dated: March 6, 2023 |
CENTRAL PACIFIC FINANCIAL CORP. |
|
|
|
Glenn K.C. Ching |
|
Executive Vice President and Corporate Secretary |
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
Central Pacific Financial Corp.
2023 Stock Compensation Plan
(Adopted January 24, 2023)
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
CENTRAL PACIFIC FINANCIAL CORP. 2023 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. 2023 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,
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. |
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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. |
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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. |
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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 of the Exchange Act. |
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2.5 |
“Board” or “Board of Directors” means the Board of Directors of the Company. |
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(a) |
Gross negligence or gross neglect of duties; |
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(b) |
Commission of a felony or of a gross misdemeanor involving moral turpitude; or |
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(c) |
Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the person’s Service and resulting in an adverse effect on the Company. |
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
|
2.7 |
“Change in Control” shall mean any of the following: |
|
(a) |
Any “person” (as such term is used in Sections 13(d) and 14(d) of the 1934 Securities Exchange Act) or group becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 Securities Exchange Act) or has
the right to acquire beneficial ownership, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; |
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(b) |
The consummation of the sale, lease or other disposition by the Company of all or substantially all of the Company’s assets (including any equity interests in subsidiaries); or |
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(c) |
The consummation of a merger, consolidation, business combination, scheme of arrangement, share exchange or similar transaction involving the Company and any other corporation (“Business Combination”), other than
a Business Combination that results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or
its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such Business Combination; or |
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(d) |
During any period of not more than twelve (12) consecutive months during which the Company continues in existence, not including any period prior to the Effective Date of this Plan, individuals who, at the
beginning of such period, constitute the Board of Directors of the Company, and any new Director (other than a Director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (b)
or (c) of this Section 2.7) whose appointment to the Board or nomination for election to the Board was approved by a vote of a majority of the Directors then still in office, either were Directors at the beginning of such period or whose
appointment or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors of the Company; or |
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(e) |
Any combination of (a), (b) and (c). |
Notwithstanding the foregoing, if any “payment” (as defined for purposes of Section 409A of the Code) to be made hereunder
as a result of the occurrence one or more of the foregoing events would be considered “nonqualified deferred compensation” for purposes of Section 409A of the Code, then, as to such payment, such event shall constitute a Change in Control only if
the event additionally constitutes a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” (as such terms are defined for purposes of Section 409A of the Code) of the Company.
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2.8 |
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. |
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2.9 |
“Committee” means the Compensation Committee of the Board. However, if any member of the Compensation Committee 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 solely of members that qualify as such “non-employee directors.” The term “Committee” includes any such
committee or subcommittee, to the extent of the Compensation Committee’s delegation. |
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2.10 |
“Company” means Central Pacific Financial Corp., a Hawaii corporation, and any successor thereto as provided in Article 18 herein. |
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2.11 |
“Consultant” 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 Consultant 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
Consultant who is allowed to participate in the Plan: (a) with respect to any reference in this Plan to the working relationship between such Consultant 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 Consultant shall be eligible for a grant of an ISO; and (c) the exercise period and vesting of an Award following such Consultant’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 Consultant’s Award Agreement related to such Award, subject to the limitations set forth in the Plan. |
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2.12 |
“Director” means any individual who is a member of the Board of Directors of the Company and/or its Subsidiaries. |
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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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. |
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2.14 |
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. |
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2.15 |
“Fair Market Value” or “FMV” of a Share means, as of any date, the closing selling price of a Share on such date as quoted on the New York Stock Exchange (“NYSE”) or on another established stock
exchange (or exchanges) that has reported the greatest volume of trading in Shares on such date. If no sales are reported on an applicable date, the FMV of a Share shall be the closing selling price of a Share as quoted on the NYSE, or on
another exchange with the greatest volume of trading in Shares, on the last market trading day with reported sales prior to such applicable date. If Shares are not traded on an established stock exchange, FMV shall be determined by the
Committee in good faith based on objective criteria in accordance with Code Section 409A and applicable Treasury regulations. |
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2.16 |
“Fiscal Year” means the year commencing on January 1 and ending December 31 or other time period as approved by the Board. |
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2.17 |
“Freestanding SAR” means an SAR that is granted independently of any Options, as described in Article 7 herein. |
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2.18 |
“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. |
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2.19 |
“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. |
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2.20 |
“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 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. |
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2.21 |
“Non-Employee Director” means an individual who is serving as a Director and is not also concurrently serving as an Employee. |
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2.22 |
“Nonqualified Stock Option” or “NQSO” means an Option to purchase Shares, granted under Article 6 herein, which is not designated as an Incentive Stock Option or that otherwise does not meet such
requirements. |
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2.23 |
“Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6 herein. |
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2.24 |
“Option Price” means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option, as determined by the Committee. |
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2.25 |
“Participant” means an Employee, Director or Consultant who has been selected to receive an Award or who has an outstanding Award granted under the Plan. |
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2.26 |
“Performance Measures” means measures on which the performance goals are based as described in Article 11. |
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2.27 |
“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. |
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2.28 |
“Performance Share” means an Award so designated granted to a Participant, as described in Article 9 herein. |
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2.29 |
“Performance Unit” means an Award so designated granted to a Participant, as described in Article 9 herein. |
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2.30 |
“Period of Restriction” means the period during which an Award is 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. |
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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2.31 |
“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. |
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2.32 |
“Restricted Stock” means an Award of Shares granted to a Participant pursuant to Article 8 herein. |
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2.33 |
“Restricted Stock Unit’’ means an Award of a future right to Shares granted to a Participant pursuant to Article 8 herein. |
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2.34 |
“Retirement” means termination of Service as an Employee, at or after age 55 with 10 or more years of Service as an Employee, or such other definition as may be included in an Award Agreement. |
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2.35 |
“Service” means a Participant’s employment or other service with the Company or any Subsidiary, whether as an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a
Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the entity for which the Participant renders such Service, provided that
there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have been interrupted or terminated if the Participant takes any military leave, sick leave, or other bona fide
leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the
Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Committee or required by
law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of
Service or upon the business entity for which the Participant performs Service ceasing to be an affiliate of the Company. Subject to the foregoing, the Committee, in its discretion, shall determine whether the Participant’s Service has
terminated and the effective date of and reason for such termination. |
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2.36 |
“Shares” or “Stock” means the Shares of common stock of the Company. |
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2.37 |
“Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to the terms of Article 7 herein. |
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2.38 |
“Stock-Based Award” means an Award granted pursuant to the terms of Section 10.2 herein. |
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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. |
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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
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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) designate officers, Employees, or Consultants 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 Shares that may be subject to Awards such officer or officers may grant.
Article 4. Shares Subject to the Plan
4.1 Number of Shares Available for Awards. Subject to adjustment as provided
in this Article 4, the maximum number of Shares that may be delivered pursuant to all Awards granted under the Plan (the “Share Authorization”) shall be one million one hundred forty thousand (1,140,000) Shares, which Share Authorization also is
the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options granted under the Plan and is inclusive of any Shares so issued. No further Awards will be granted under the Central Pacific Financial Corp. 2013
Stock Compensation Plan on or after February 23, 2023, unless the Plan is not approved by the Company’s shareholders at the 2023 annual shareholder meeting, but the Central Pacific Financial Corp. 2013 Stock Compensation Plan shall remain in effect
for purposes of Awards previously granted under such plan. Any Shares related to Awards that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares or payment in cash in lieu of such Shares shall be
available again for grant under the Plan. 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), the Share Authorization shall be reduced by the full number of Shares for which the Option is exercised or to be delivered under the Award, including any Shares applied to the Option Price and any Shares applied
to tax withholding. If an SAR is exercised, whether payment is to be made in Shares or in cash, the Share Authorization shall be reduced by the full number of Shares for which the SAR is exercised, not just by any Shares or any net number of Shares
to be delivered upon such exercise. The Share Authorization 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 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.
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.
Notwithstanding anything to the contrary, any adjustments, modifications, amendments or changes of any kind
made pursuant to this Section 4.2 shall be made in a manner compliant with Section 409A of the Code.
Article 5. Eligibility and Participation
5.1 Eligibility. Individuals eligible to participate in the Plan include all
Employees, Directors, and Consultants.
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 Consultants, those to whom Awards shall be granted and shall determine the nature and amount of each Award.
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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 Consultants.
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, and is so designated as, 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.
However, an Option that becomes exercisable based on the Participant’s continued Service as an Employee,
Director or Consultant may not become exercisable in whole or in part prior to the expiration of a one (1) year period of such continued Service following the date of grant of such Option. Notwithstanding the foregoing sentence, the Committee shall
have the power and the discretion to provide for earlier exercisability in the event a Participant’s Service as an Employee, Director or Consultant terminates due to death or disability or following a Change in Control, and to provide for earlier
exercisability and vesting of Awards for a number of Shares that in the aggregate (including Shares under any Restricted Stock, Restricted Stock Units and Stock-Based Awards that vest less than one (1) year from their dates of grant and any SARs
exercisable less than one (1) year from their dates of grant) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1.
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 (subject to any requirement necessary to maintain favorable
accounting treatment for the Options granted); (c) by “net exercise” reducing the number of Shares otherwise issuable to a Participant upon exercise by the largest whole number of Shares having FMV that does not exceed the Option Price and paying
any remaining balance in cash; (d) cashless exercise by delivery of a properly executed exercise notice together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to
some or all of the Shares being acquired upon the exercise of the Option in compliance with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System; (e) a combination of (a), (b), (c)
and/or (d); or (f) by any other method approved by the Committee in its sole discretion and specified in the Award Agreement.
The Company reserves, at all times, the right, in the Committee’s sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures (including cashless exercise) for payment of the Option Price upon exercise of Options by any means other than payment in cash or its equivalent, including with respect to one or more
Participants specified by the Committee notwithstanding that such program or procedures may be available to other Participants.
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.
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
6.8 Termination of Service. 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 Service 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. Subject to earlier termination
of the Option as otherwise provided by this Plan and unless a different exercise period is provided by the Committee in an Award Agreement or amendment thereto, an Option shall terminate immediately upon the Participant’s termination of Service to
the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall
terminate:
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(a) |
Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested Shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service
terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the “Option Expiration Date”). |
|
(b) |
Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested Shares on the date on which the Participant’s
Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after
the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3)
months after the Participant’s termination of Service other than for Cause. |
|
(c) |
Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause, the Option shall terminate in its entirety and cease to be
exercisable immediately upon such termination of Service. |
|
(d) |
Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested Shares on the date
on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option
Expiration Date. |
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.
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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.
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.
However, an SAR that becomes exercisable based on the Participant’s continued Service as an Employee, Director
or Consultant may not become exercisable in whole or in part prior to the expiration of a one (1) year period of such continued Service following the date of grant of such SAR. Notwithstanding the foregoing sentence, the Committee shall have the
power and the discretion to provide for earlier exercisability in the event a Participant’s continued Service as an Employee, Director or Consultant terminates due to death or disability or following a Change in Control, and to provide for earlier
exercisability and vesting of Shares under Awards that in the aggregate (including Shares under any Restricted Stock, Restricted Stock Units and Stock-Based Awards that vest less than one (1) year from their dates of grant and any Options
exercisable less than one (1) year from their dates of grant) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1.
7.5 Exercise of Tandem SARs. Tandem SARs may he 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 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. Subject to earlier termination of the SAR as
otherwise provided by this Plan and unless a different exercise period is provided by the Committee in an Award Agreement or amendment thereto, an SAR shall terminate immediately upon the Participant’s termination
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EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the
extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate:
|
(a) |
Disability. If the Participant’s Service terminates because of the Disability of the Participant, the SAR, to the extent unexercised and exercisable for vested Shares on the date on which the Participant’s
Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any
event no later than the date of expiration of the SAR’s term as set forth in the Award Agreement evidencing such SAR (the “SAR Expiration Date”). |
|
(b) |
Death. If the Participant’s Service terminates because of the death of the Participant, the SAR, to the extent unexercised and exercisable for vested Shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on
which the Participant’s Service terminated, but in any event no later than the SAR Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the
Participant’s termination of Service other than for Cause. |
|
(c) |
Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause, the SAR shall terminate in its entirety and cease to be
exercisable immediately upon such termination of Service. |
|
(d) |
Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the SAR, to the extent unexercised and exercisable with respect to vested Shares on
the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than
the SAR Expira- tion Date. |
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 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.
However, any Restricted Stock or Restricted Stock Unit that vests based on the Participant’s continued Service
as an Employee, Director or Consultant may not become exercisable in whole or in part prior to the expiration of a one (1) year period of such continued Service following its date of grant. Notwithstanding the foregoing sentence, the Committee
shall have the power and the discretion to provide for the vesting of Restricted Stock and Restricted Stock Units in less than one (1) year following the date of grant in the event a Participant’s continued Service as an Employee, Director or
Consultant terminates due to death or disability or following a Change in Control, and to provide for vesting in less than one (1) year for a number of Shares that in the aggregate (including Shares under any Stock-Based Awards that vest less than
one (1) year from their dates of grant and any Options and SARs exercisable less than one (1) year from their dates of grant) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in
Section 4.1.
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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 paid in cash, Shares, or a combination of cash and Shares as
the Committee, in its sole discretion shall determine. The Committee’s determination regarding the form of payout of Restricted Stock Units shall be set forth in the Award Agreement pertaining to the grant of the Restricted Stock Units.
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 2023 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 shall have 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, provided that such dividends or dividend equivalents shall be paid or provided in a manner compliant with Section 409A of the Code.
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.
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2023 Proxy Statement |
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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, but in no event later than 2 ½ months
following the end of the calendar year in which such Performance Period ends; provided, however, that any Shares may be granted subject to restrictions deemed appropriate by the Committee, but only if the terms of such restrictions are compliant
with Section 409A of the Code. The determination of the Committee with respect to the form of payout of each such Award 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, for- feiture, or payout restrictions as determined by the Committee in its sole
discretion, provided that such dividends or dividend equivalents shall be paid or provided in a manner compliant with Section 409A of the Code.
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 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 with respect to any Performance Shares/Performance Units 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.
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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 Shares subject to 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 each such Award shall be set forth in the Award Agreement pertaining to the grant of the Award.
However, any Stock-Based Award that vests based on the Participant’s Service as an Employee, Director or
Consultant may not become exercisable in whole or in part prior to the expiration of a one (1) year period of such continued Service following its date of grant. Notwithstanding the foregoing sentence, the Committee shall have the power and the
discretion to provide for the vesting of Stock-Based Awards in less than one (1) year following the date of grant in the event a Participant’s continued Service as an Employee, Director or Consultant terminates due to death or disability or
following a Change in Control, and to provide for vesting in less than one (1) year for a number of Shares that in the aggregate (including any Shares under Restricted Stock and Restricted Stock Units that vest less than one (1) year from their
dates of grant and any Options and SARs exercisable less than one (1) year from their dates of grant) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1. For avoidance of
doubt, Shares issued under the Plan to Directors in payment of annual Board and committee chair retainers are not subject to the provisions of this paragraph and are not to be taken into account in applying the corresponding restrictions applicable
to Options, SARs, Restricted Stock and Restricted Stock Units.
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 with respect to any Stock-Based Awards shall be exercisable during the Participant’s lifetime only by the Participant.
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, provided that such dividends or dividend equivalents shall be paid or provided in a manner compliant with Section 409A of the Code.
Article 11. Performance Measures
At the time of grant of any Performance Shares, Performance Units or other
performance-based Awards, the Committee shall establish the business criteria, financial metrics, personal objectives and/or other performance-related benchmarks (“Performance Measures”) that are to be used to assess the level of achievement of
performance goals and determine the resulting level of payment or vesting of such Performance Shares, Performance Units or other performance-based Awards. The Performance Measures, the Performance Period over which the Performance Measures are to
be assessed, and the manner in which such Performance Measures are to be applied in determining payment or vesting of Awards shall be set forth in the Award Agreements for such Awards. Each Performance Measure may be designated to apply on a “core”
basis, where at the discretion of the Committee certain non-recurring items may be excluded for purposes of determining the attainment of the Performance Measure(s). In addition, any Performance Measure(s) may be used to measure the performance of
the Company as a whole, or of any Subsidiary, Affiliate or business unit of the Company, in comparison with peer group performance or to a published or special index, or any combination of the foregoing, as the Committee, in its sole discretion,
deems appropriate. Without limiting the generality of the preceding sentences, 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; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses. Notwithstanding the foregoing, the Committee also has the authority to provide for accelerated vesting of any Award that otherwise
would be based on the achievement of performance goals pursuant to the Performance Measures.
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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. If authorized by the Committee, a Participant may designate a beneficiary or change a previous beneficiary designation at any time by using
any forms and following any 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 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, provided that such rules and procedures for any deferrals or deferral elections pursuant to this Article 13 shall comply in all
respects with Section 409A of the Code.
Article 14. Rights of Employees and Consultants
14.1 Employment or Other Service. 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, Director or Consultant 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
Subject to the requirements and limitations of Section 409A of the Code, if applicable,
the Board or the Committee may provide for any one or more of the following consequences of a Change in Control on Awards:
15.1 Accelerated Vesting. In its discretion, the Board or the Committee may provide in the grant of
any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability and/or vesting in connection with a Change in Control of each or any outstanding Award or portion thereof and Shares
acquired pursuant thereto upon such conditions, including termination of the Participant’s employment or other Service prior to, upon, or following such Change in Control, and to such extent as the Board or the Committee shall determine.
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
15.2 Assumption, Continuation or Substitution of Awards. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, assume or continue the Company’s rights and
obligations under each or any Award or portion thereof out- standing immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s
stock. For purposes of this Section 15.2, if so determined by the Board or the Committee, in its discretion, an Award or any portion thereof shall be deemed assumed if, following the Change in Control, the Award confers the right to receive,
subject to the terms and conditions of the Plan and the applicable Award Agreement, for each Share subject to such portion of the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property
or a combination thereof) to which a holder of a Share on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the
outstanding Shares); provided, however, that if such consideration is not solely common stock of the Acquiror, the Board or the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise of the
Award for each Share to consist solely of common stock of the Acquiror equal in FMV to the per Share consideration received by holders of Shares pursuant to the Change in Control. If any portion of such consideration may be received by holders of
Shares pursuant to the Change in Control on a contingent or delayed basis, the Board or the Committee may, in its discretion, determine such FMV per Share as of the time of the Change in Control on the basis of the Board’s or the Committee’s good
faith estimate of the present value of the probable future payment of such consideration. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of the time of
consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control. Notwithstanding the foregoing, Shares acquired upon exercise of an Award prior to the Change in
Control and any consideration received pursuant to the Change in Control with respect to such Shares shall continue to be subject to all applicable provisions of the Award Agreement evidencing such Award except as otherwise provided in such Award
Agreement.
15.3 Cash-Out of Outstanding Awards. The Board or the Committee may, in its discretion and without
the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in
exchange for a payment with respect to each vested Share (including any Share for which vesting is accelerated, if so determined by the Board or the Committee, but without payment for any unvested Share) subject to such canceled Award in (i) cash,
(ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be have a value equal to the FMV of the consideration to be paid per Share in the Change
in Control, reduced (but not below zero) by the exercise price or purchase price per Share, if any, under such Award. If any portion of such consideration may be received by holders of Shares pursuant to the Change in Control on a contingent or
delayed basis, the Board or the Committee may, in its sole discretion, determine such FMV per Share as of the time of the Change in Control on the basis of the Board’s or the Committee’s good faith estimate of the present value of the probable
amount of future payment of such consideration. In the event such determination is made by the Board or the Committee, an Award having an exercise or purchase price per Share equal to or greater than the FMV of the consideration to be paid per
Share in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section 15.3 (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested
portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
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, provided that any such alteration, amendment, modification, suspension or termination of the Plan pursuant to this Article 16
shall be effected in a manner compliant with Section 409A of the Code. 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 shall 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 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. Notwithstanding anything to
the contrary, any adjustments pursuant to this Section 16.2 shall be effected in a manner compliant with Section 409A of the Code.
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16.3 Amendment and Termination of Previously Granted Awards. Notwithstanding Section 16.1 or any
other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan or any Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written
consent of the Participant holding such Award. Amendments, suspensions or modifications of the Plan or any Award Agreement that may result in changes to the tax characterization of any Award, including loss of Incentive Stock Option treatment for
any Options, shall not be considered to adversely affect any such Award in any material way.
16.4 No Repricing Without Shareholder Approval. Notwithstanding anything herein to the contrary,
except as set forth in Section 4.2 and Article 15 hereof, without the prior approval of the Company’s shareholders pursuant to shareholder action occurring no more than twelve (12) months prior to such an event, (i) the Option Price of outstanding
Options and the Grant Price of outstanding SARs may not be reduced, (ii) no outstanding Option or SAR that has an Option Price or Grant Price greater than the then current FMV may be canceled in exchange for cash or any other Award under the Plan,
and (iii) no Option or SAR may otherwise be repriced with a lower Option Price or Grant Price or otherwise replaced or regranted with an Award having an Option Price, Grant Price or other Share purchase price that is lower than its original Option
Price or Grant Price.
16.5 Regulatory Requirements. In addition, and without in any way limiting the foregoing statements
in this paragraph and notwithstanding anything else stated in this Plan or any Award Agreement, this Plan and each Award Agreement shall be subject to the following conditions:
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i. |
Any term or provision in this plan that is interpreted, deemed or found by any governmental agency or by the Company to be in violation or potential violation of any law, guidance, rule, regulation, regulatory
action, order or decree (hereinafter individually and collectively referred to as “Law”) will be modified to conform to the Law. |
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ii. |
Golden parachute payments are prohibited under this plan or agreement. |
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iii. |
Payments that require regulatory or other approval are prohibited unless and until such approval is obtained, and the Company shall have no obligation to seek such approval. |
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iv. |
The Company will not grant Awards that may constitute excessive compensation under Law or by the Company. |
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v. |
The Company will not grant Awards that threaten the Company’s safety and soundness. |
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vi. |
The Company will not grant Awards that encourage excessive risk taking. |
Except and unless specifically stated otherwise elsewhere in the Plan or in an Award Agreement or other
document to which this section is made a part of, this section and everything stated in this section shall prevail and control in the event of any ambiguity or inconsistency between what’s stated in this section and what may be stated elsewhere in
the Plan, an Award Agreement or other document.
16.6 Clawback and Other Provisions for Recovery or Termination of Awards. Any bonus, retention
award, incentive compensation or any other payment paid under this plan or agreement is subject to recovery (clawback) by any governmental agency or by the Company if it is based on materially inaccurate statements of earnings, revenues or gains,
or any performance criteria/metric or other criteria or metric that is found by any governmental agency or the Company to be materially inaccurate or to have encouraged unnecessary and/or excessive risk taking or if it otherwise is subject to
recovery or clawback under any policy adopted by the Company and in effect from time to time, including any such policy adopted pursuant to any Law or stock exchange listing requirement.
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 the Shares applied to such tax withholding with respect to an Award shall have a FMV that is no greater than the maximum statutory federal, state or local tax rates that could apply to
the Award in the jurisdictions applicable to the Participant on the date that the amount of tax to be withheld is to be determined, or such other limitation as may be required by the accounting rules and regulations to maintain favorable equity
accounting treatment for the Award. 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.
EXHIBIT A: 2023 STOCK COMPENSATION PLAN |
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, 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:
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(a) |
Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and |
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(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 Consultants, the Committee, in its sole discretion, shall have the power and authority to:
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(a) |
Determine which Affiliates and Subsidiaries shall be covered by the Plan; |
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(b) |
Determine which Employees and Consultants outside the United States are eligible to participate in the Plan; |
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(c) |
Modify the terms and conditions of any Award granted to Employees or Consultants outside the United States to comply with applicable foreign laws: |
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(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 |
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(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. |
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
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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
an employee benefit plan 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.
19.10 No Right to Continued Employment or Service. Participation in this Plan or the receipt of any
Award shall not be construed as a promise or guarantee of future or continued employment, or as stating provisions or terms of employment. The Company and its employees recognize their mutual right to end their employment relationship at any time,
and acknowledge that such relationship is one of employment-at-will. Regardless of the provisions of this Plan or of any Award Agreement, subject to the express terms and conditions of any applicable employment agreement or other services
agreement, the Company may terminate the employment of any Employee or the services of any Consultant in its sole and absolute discretion and at any time and for any reason.
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.
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.
20.6 Section 409A of the Code. It is the Company’s intent that payments under the Plan are exempt
from, and do not constitute “deferred compensation” subject to, Section 409A of the Code and that the Plan be administered accordingly. If and to the extent that any payment is determined by the Company to constitute “non-qualified deferred
compensation” subject to Section 409A of the Code and is payable hereunder to a Participant by reason of his termination of employment, then (a) such payment or benefit shall be made or provided to the Participant only upon a “separation from
service” as defined for purposes of Section 409A of the Code under applicable regulations and (b) if the Participant is a “specified employee” (within the meaning of Section 409A of the Code and as determined by the Company), such payment shall not
be made or provided before the date that is six months after the date of the Participant’s separation from service (or his earlier death). Neither the Company nor its affiliates shall have any liability to any Participant, Participant’s spouse or
other beneficiary of any Participant’s spouse or other beneficiary of any Participant or otherwise if the Plan or any amounts paid or payable hereunder are subject to the additional tax and penalties under Section 409A of the Code.