EXHIBIT 10.17
Termination of Split Dollar Agreement
And Release of Interest
("Termination and Release")
WHEREAS, First Hawaiian Bank, a Hawaii corporation (hereafter, the "Employer")
has entered into a Split Dollar Agreement dated February 1, 1993 (hereafter, the
"Agreement") with the Xxxxxx X. Xxxx, Xx. Irrevocable Trust (hereafter, the
"Owner"), whereby the Employer was provided certain collateral rights in a life
insurance policy (hereafter, the "Policy") insuring Xxxxxx X. Xxxx, Xx.
("Employee") in exchange for providing premium payments on such Policy; and,
WHEREAS, the Agreement permits the modification of the Agreement only upon the
written approval of both the Employer and the Owner as provided by Section 14 of
the Agreement; and,
WHEREAS, the Employer and Owner wish to restructure the manner in which the life
insurance protection will be provided in the future to the Owner as a result of
the promulgation of regulations and other pronouncement which have altered the
income tax treatment of the program to the Employee;
THEREFORE, in consideration of the mutual promises contained in this Termination
and Release, the parties agree as follows:
1. The Agreement shall be terminated as of the date hereof. Upon termination
of the Agreement, the Policy which is the subject of the Agreement shall
be split into two separate policies; one to be owned thereafter by the
Owner and the other to be owned by the Employer. The resulting Policies
shall be referred to as OWNER'S POLICY and the EMPLOYER'S POLICY as
follows:
OWNER'S POLICY
The Owner's Policy will be owned completely by the current owner of
the policy and will be designed to provide a death benefit of not
less than three times the Employee's annual salary, less $1,000,000.
Currently, that death benefit is equal to $2,578,466. Future
increases in death benefits to reflect future increases in salary
may be subject to limits imposed by the insurance carrier, and may
require satisfactory medical underwriting. The cash value of the
Owner's Policy is projected (but not guaranteed) to be sufficient to
provide the stated death benefit above without requiring any future
premium payments, using current financial assumptions as determined
by the Employer. The Employer will have no interest in the Owner's
Policy.
EMPLOYER'S POLICY
The Employer's Policy will be owned by Employer and the Owner will
have no rights in it. The Employer's Policy will have a face amount
and cash value equal to the remaining portion of death benefits and
cash value of the Policy.
2. Employer's intent is to provide Employee with a death benefit that may
increase over time to reflect increases in Employee's annual salary.
During Employee's employment with Employer, the death benefit of the
Owner's Policy is intended to be the greater of $2,578,466 or an amount
equal to three times Employee's then-current salary, with such product
reduced by $1,000,000. If an increase in the policy death benefit is
required, Employer shall notify Owner of the amount of the proposed
increase. Owner shall apply for such increase and Employee shall promptly
thereafter complete any underwriting requirements of the carrier. After
termination of employment with Employer, the death benefit will remain
level at the amount that existed before termination.
The cash value of the Owner's Policy is intended to grow so that, without
payment of additional premiums, that policy's cash values will support the
death benefit. If, while the Employee is employed with Employer,
conditions change such that, in the
good faith judgment of the Employer (using projected salary increases and
other economic assumptions reasonably selected by the Employer),
additional premiums are necessary to provide projected cash values
sufficient to support the death benefit, then the Employer will make those
additional premium payments into the Owner's Policy. Employer's obligation
to fund increases in death benefits of the Owner's Policy shall be subject
to and limited by any rules of the carrier. In addition, to the extent
that any death benefit increase is issued on a rated or substandard basis,
the Employer's obligation to pay additional premiums will be limited to a
reasonable estimate of two hundred percent (200%) of the cost it would
incur if the Employee were able to satisfy "standard" medical underwriting
criteria.
The Employer shall have discretion to determine how frequently it will
review the Owner's Policy to determine whether death benefits should be
increased and whether cash values are sufficient to meet the foregoing
objectives; provided Employer shall conduct such reviews at least every
three years.
The Employer's obligation to make premium payments into the Owner's Policy
shall terminate when the Employee ceases to be employed by Employer,
whether through retirement, death, termination or otherwise.
3. If any additional premium is paid by the Employer, an additional bonus
payment will be made to the Employee sufficient to cover the state and
federal income tax liability on the additional premium, and on this bonus,
assuming the maximum marginal tax bracket.
4. Owner agrees that, until Employee's retirement or other termination of
employment with the Employer, neither Owner nor any other person will,
without the prior written consent of Employer (which may be given or
withheld in its sole discretion), exercise any rights of ownership under
the Owner's Policy that reduces the policy's current or prospective cash
value or that otherwise may increase the amount of premiums the Employer
would be required to pay. If prior to retirement or termination of
employment the Owner or any other person takes any such action without
prior written consent of the Employer, the Employer shall have no further
obligation to pay any additional premiums under the Owner's Policy.
5. The Employer is given the authority to take the steps deemed necessary, in
its sole discretion, to implement this Termination and Release, including
but not limited to the submission of any forms or paperwork with the
insurance carrier issuing the Policy deemed necessary to implement this
Termination and Release.
6. Upon execution of this Termination and Release, the Employer shall have no
further rights in or claim to the Owner's Policy, and the Employee and the
Owner of the Policy shall have no rights under or claims against the
Employer with respect to the Agreement, the existing Policy, the BancWest
Corporation Split-Dollar Plan for Executives or the Employer's Policy.
This Termination and Release is agreed to by the following:
Employee First Hawaiian Bank
/s/ Xxxxxx X. Xxxx, Xx. By /s/ Xxxxxx X. Xxxxxx
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Signature Its Executive Vice President
12/16/03 12/16/2003
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Date Date
Owner (if different than Employee)
FIRST HAWAIIAN BANK, TRUSTEE
/S/ XXXXXX X. XXXXXX
VICE PRESIDENT
Signature
12-16-03
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Date
