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The following is an excerpt from a DEF 14A SEC Filing, filed by CAPITAL PACIFIC HOLDINGS INC on 6/14/2000.
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CAPITAL PACIFIC HOLDINGS INC - DEF 14A - 20000614 - EXECUTIVE_COMPENSATION

EXECUTIVE COMPENSATION AND OTHER INFORMATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth the cash compensation paid during the fiscal years ended February 29, 2000, February 28, 1999 and February 28, 1998 to each of the five most highly compensated executive officers of the Company in all capacities in which they served, and such other individuals as are required to be disclosed.

SUMMARY COMPENSATION TABLE

                                                                      LONG TERM
                                                                     COMPENSATION
                                                                     ------------
                                                                      NUMBER OF
                                             ANNUAL COMPENSATION      SECURITIES
                                   FISCAL    --------------------     UNDERLYING        ALL OTHER
   NAME AND PRINCIPAL POSITION      YEAR      SALARY      BONUS        OPTIONS       COMPENSATION(c)
   ---------------------------     ------    --------    --------    ------------    ---------------
Hadi Makarechian.................   2000     $301,875    $598,000(a)        --           $  160
  Chairman and Chief                1999      284,896     312,560(b)        --              180
  Executive Officer                 1998      270,625          --           --              204
Stephen P. Couig.................   2000      212,500     105,000       24,000              910
  Senior Vice President,            1999      175,000      67,500       15,000              180
  Residential Division              1998      155,208      42,500           --              204
Steven O. Spelman, Jr............   2000      178,750     115,000       24,000            1,931
  Senior Vice President,            1999      157,500      57,500       15,000              180
  Chief Financial Officer           1998       46,875(d)    1,250(d)        --               68(d)
  and Corporate Secretary
Paul P. Makarechian..............   2000      143,333     105,000       24,000            1,077
  Senior Vice President             1999       75,000      57,500       15,000              180
                                    1998       39,551      17,500           --              204
William A. Funk(e)...............   2000      200,000      20,000        8,000            1,327
  Senior Vice President             1999           --          --           --               --
                                    1998           --          --           --               --


(a) Bonus was earned in FY 2000 but was paid in FY 2001.

(b) Bonus was earned in FY 1999 but was paid in FY 2000.

(c) Represents premiums paid by the Company for term life insurance for the benefit of the insured and employer matching contributions to the Company's
401(k) Plan which began in October, 1999.

(d) Represents amounts paid for the period November 1997 through February 1998.

(e) Mr. Funk began employment with the Company on March 1, 1999.

STOCK OPTIONS

Effective February 28, 1995, the Company, as approved by the stockholders of the Company in July 1995, adopted the 1995 Stock Incentive Plan (the "1995 Plan"). The 1995 Plan permits a committee designated by the Board of the Company to make awards to key employees and directors of the Company and its subsidiaries. Subject to various restrictions, awards could be in the form of stock options, restricted or unrestricted stock, stock appreciation rights or a combination of the above. The maximum number of shares or share equivalents that may be awarded under the 1995 Plan is 1,500,000. In February 1999, the Board of Directors approved a grant of 256,000 stock options under the Plan. The grants were effective on February 8, 1999. The stock underlying all of the option grants is the Company's Non-Voting Common Stock, par value $.10 per share. As of June 9, 2000, there is no Non-Voting Common Stock outstanding. Since there is no market for the Non-Voting Common Stock, the value of such Non-Voting Common Stock for purposes of calculating the value of the options (solely for purposes of this Proxy Statement) is assumed to be the market price of the Company's publicly traded voting common stock.

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OPTIONS GRANTS IN LAST FISCAL YEAR

                                                                                               POTENTIAL REALIZABLE
                                   INDIVIDUAL GRANTS(1)                                          VALUE AT ASSUMED
                             ---------------------------------                                   ANNUAL RATES OF
                                NUMBER OF         PERCENT OF                                       STOCK PRICE
                               SECURITIES       TOTAL OPTIONS                                    APPRECIATION FOR
                               UNDERLYING         GRANTED TO      EXERCISE OR                     OPTION TERM(3)
                             OPTIONS GRANTED      EMPLOYEES       BASE PRICE     EXPIRATION    --------------------
           NAME                    (#)          IN FISCAL YEAR      ($/SH)          DATE        5%($)       10%($)
           ----              ---------------    --------------    -----------    ----------    -------      -------
Hadi Makarechian...........          (2)              --                --             --          --           --
Stephen P. Couig...........      24,000              9.6             1.875        9/30/09      28,300       71,718
Steven O. Spelman, Jr......      24,000              9.6             1.875        9/30/09      28,300       71,718
Paul P. Makarechian........      24,000              9.6             1.875        9/30/09      28,300       71,718
William A. Funk............       8,000              3.2             1.875        9/30/09       9,433       23,906


(1) The nonqualified stock options granted by the Board are scheduled to vest at a rate of 33 1/3% per year over the first three years and to lapse after ten years unless sooner exercised or forfeited. All stock options will vest immediately in the event of either (i) a merger in which the Company does not survive or (ii) a sale of all or substantially all of the Company's assets. All stock options were granted at the closing market price of the Company's voting shares on the date of grant.

(2) Under the existing 1995 Stock Incentive Plan, Hadi Makarechian is not eligible to receive stock options.

(3) The dollar amounts under these columns are the result of calculations at the 5% and 10% rates set by the SEC, and therefore are not intended to forecast possible future appreciation of the Company's stock price. In all cases the appreciation is calculated from the award date to the end of the option term.

FISCAL YEAR END OPTION VALUES

                                                                         NUMBER OF
                                                                   SECURITIES UNDERLYING         VALUE OF UNEXERCISED
                                                                    UNEXERCISED OPTIONS          IN-THE-MONEY OPTIONS
                                                                 AT FISCAL YEAR END(#)(1)      AT FISCAL YEAR END($)(3)
                             SHARES ACQUIRED                    ---------------------------   ---------------------------
           NAME              ON EXERCISE(#)    VALUE REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
           ----              ---------------   --------------   -----------   -------------   -----------   -------------
Hadi Makarechian...........        --               --                (2)            --            --              --
Stephen P. Couig...........        --               --             5,000         34,000           625          25,250
Steven O. Spelman, Jr......        --               --             5,000         34,000           625          25,250
Paul P. Makarechian........        --               --             5,000         34,000           625          25,250
William A. Funk............        --               --                --          8,000            --           8,000


(1) The nonqualified stock options granted by the Board are scheduled to vest at a rate of 33 1/3% per year over the first three years and to lapse after ten years unless sooner exercised or forfeited. All stock options will vest immediately in the event of either (i) a merger in which the Company does not survive or (ii) a sale of all or substantially all of the Company's assets. All stock options were granted at the closing market price of the Company's voting shares on the date of grant.

(2) Under the existing 1995 Stock Incentive Plan, Hadi Makarechian is not eligible to receive stock options.

(3) Calculated per share by subtracting the exercise price from the market price of the Company's voting shares on February 29, 2000.

EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS

None of the executive officers is currently working under an employment contract.

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COMPENSATION COMMITTEE DETERMINATION ON EXECUTIVE COMPENSATION

The Compensation Committee (the "Committee") of the Company's Board of Directors establishes the Company's general compensation policies, compensation plans, and specific compensation levels for the Company's Chief Executive Officer and any other executive officer which may in the future be specifically designated by the Board of Directors. The Compensation Committee also reviews the design, administration and effectiveness of compensation programs for other key executives. The general policy and philosophy of the Compensation Committee is to provide total compensation opportunities that are competitive with the opportunities offered to executives in similar positions at competing companies and that compensation with a strong link to the financial performance of the Company enables the Company to attract and retain the key personnel necessary to fuel continued growth and profitability.

The Committee has examined the compensation of the executives of comparatively placed homebuilders to determine whether or not the compensation of the Company's Chief Executive Officer is within the range of his peers. In undertaking such examination, the Committee has sought publicly available information regarding homebuilders which are at a similar stage in their growth and development to that of the Company and therefore compete for the same executive personnel.

Performance Based Compensation

The Committee has reviewed the Company's performance in Fiscal 2000 under the direction of the Chief Executive Officer both in homebuilding and commercial and real estate development activities. Based upon the Committee's review of the compensation of chief executives of similarly placed homebuilders, and particularly in light of (i) the Company's non-homebuilding activities, (ii) the Company's increased performance, (iii) the fact that the Company's Chief Executive Officer has assumed some of the responsibility of the Company's former Chief Operating Officer, and (iv) the fact that the Company's Chief Executive Officer, unlike the chief executive officers of the majority of the peer group, receives no material non-cash compensation, it was the Committee's judgment that the existing bonus compensation structure would not be sufficient to provide total compensation commensurate with the Company's Chief Executive Officer's responsibilities. In light of contractual restrictions on increasing the basis of the Chief Executive Officer's performance based compensation required by the Company's investor, Farallon Capital Management, LLC ("Farallon"), at the time of the Fiscal 1998 equity and restructuring transaction, however, it was determined to retain his performance based compensation of four percent (4%) of the pre-tax income of the Company for fiscal year 2000.

Section 162(m) of the Internal Revenue Code of 1986 limits deductions for certain executive compensation in excess of $1 million. The Code permits deduction of compensation in excess of $1 million only if it is performance based, the criteria for award are specified in detail, and stockholder approval is obtained prior to payment. The policy of the Company is to maintain the tax deductibility of all compensation paid to its executives. The annual cash bonus has been structured to meet the requirements for deductibility. While the Compensation Committee does not anticipate any payments exceeding $1 million under the compensation structure it has approved, any such payments will be contingent upon shareholder approval.

Base Salary

The annualized base salary of the Chief Executive Officer was $301,875 for Fiscal Year 2000. For the reasons stated above with respect to Performance Based Compensation, it was the Committee's judgment that the base salary of the Chief Executive Officer should be substantially increased. Unless and until the existing contractual restrictions on the base compensation payable to the Chief Executive Officer required by Farallon are modified or eliminated, however, the Committee has determined to recommend an increase of $15,094 to $316,969 for Fiscal Year 2001, the maximum increase permitted under such contractual restrictions.

          /s/ KARLHEINZ M. KAISER                               /s/ ALLAN L. ACREE
--------------------------------------------       --------------------------------------------
            Karlheinz M. Kaiser                                   Allan L. Acree

Dated: February 29, 2000

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