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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-7949
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BANCWEST CORPORATION
(Exact name of registrant as specified in its charter)
-----------------------
DELAWARE 99-0156159
(State of incorporation) (I.R.S. Employer
Identification No.)
999 BISHOP STREET, HONOLULU, HAWAII 96813
(Address of principal executive offices) (Zip Code)
(808) 525-7000
(Registrant's telephone number, including area code)
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common stock
as of April 30, 2001 was:
Class Outstanding
----------------------------- -----------------
Common Stock, $1.00 Par Value 68,635,656 Shares
Class A Common Stock, $1.00 Par Value 56,074,874 Shares
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2
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at March 31, 2001, December 31, 2000 and
March 31, 2000 2 - 3
Consolidated Statements of Income for the three months ended
March 31, 2001 and 2000 4
Consolidated Statements of Changes in Stockholders' Equity for the three months
ended March 31, 2001 and 2000 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 2001 and 2000 6
Notes to Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10 - 26
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURES 29
EXHIBIT INDEX
1
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BancWest Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Unaudited)
MARCH 31, December 31, March 31,
2001 2000 2000
----------- ----------- -----------
(in thousands)
ASSETS
Cash and due from banks $ 834,003 $ 873,599 $ 750,349
Interest-bearing deposits in other banks 365,261 5,972 245,510
Federal funds sold and securities purchased
under agreements to resell 373,000 307,100 217,359
Investment securities:
Held-to-maturity 86,764 92,940 125,890
Available-for-sale 2,103,515 1,960,780 2,086,309
Loans and leases:
Loans and leases 14,202,523 13,971,831 12,856,475
Less allowance for credit losses 186,246 172,443 162,666
----------- ----------- -----------
Net loans and leases 14,016,277 13,799,388 12,693,809
----------- ----------- -----------
Premises and equipment, net 288,989 276,012 279,757
Customers' acceptance liability 2,369 1,080 1,133
Core deposit intangible, net 77,365 56,640 62,878
Goodwill, net 679,107 599,139 619,281
Other real estate owned and repossessed
personal property 20,549 27,479 26,505
Other assets 572,253 456,937 419,507
----------- ----------- -----------
TOTAL ASSETS $19,419,452 $18,457,066 $17,528,287
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Domestic:
Interest-bearing $11,280,102 $10,899,009 $10,318,285
Noninterest-bearing 3,167,903 2,955,880 2,770,353
Foreign 262,168 273,250 237,780
----------- ----------- -----------
Total deposits 14,710,173 14,128,139 13,326,418
----------- ----------- -----------
Federal funds purchased and securities sold
under agreements to repurchase 648,008 577,620 603,965
Other short-term borrowings 114,526 91,448 363,817
Acceptances outstanding 2,369 1,080 1,133
Other liabilities 868,346 786,863 659,275
Long-term debt 781,039 632,423 603,560
Guaranteed preferred beneficial interests
in Company's junior subordinated debentures 250,000 250,000 100,000
----------- ----------- -----------
TOTAL LIABILITIES $17,374,461 $16,467,573 $15,658,168
----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
2
4
BancWest Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS, CONTINUED (Unaudited)
MARCH 31, December 31, March 31,
2001 2000 2000
------------ ------------ ------------
(in thousands)
Stockholders' equity:
Preferred stock, par value $1 per share
Authorized and unissued - 50,000,000 shares $ -- $ -- $ --
Class A common stock, par value $1 per share
Authorized - 75,000,000 shares
Issued - 56,074,874 shares at March 31, 2001 and
December 31, 2000 and 54,539,936 shares at
March 31, 2000 56,075 56,075 54,540
Common stock, par value $1 per share
Authorized - 200,000,000 shares
Issued - 71,053,762, 71,041,450 and 72,530,010 shares at
March 31, 2001, December 31, 2000 and
March 31, 2000, respectively 71,054 71,041 72,530
Surplus 1,126,103 1,125,652 1,124,682
Retained earnings 808,410 770,350 666,931
Accumulated other comprehensive income, net 22,308 7,601 (10,977)
Treasury stock, at cost - 2,423,466, 2,565,581 and 2,433,765 shares
at March 31, 2001, December 31, 2000 and
March 31, 2000, respectively (38,959) (41,226) (37,587)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,044,991 1,989,493 1,870,119
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,419,452 $ 18,457,066 $ 17,528,287
============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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5
BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED MARCH 31,
--------------------------------
2001 2000
------------ ------------
(in thousands, except number of
shares and per share data)
INTEREST INCOME
Interest and fees on loans $ 262,442 $ 234,145
Lease financing income 35,595 30,654
Interest on investment securities:
Taxable interest income 33,193 33,262
Exempt from Federal income taxes 118 275
Other interest income 7,503 3,051
------------ ------------
Total interest income 338,851 301,387
------------ ------------
INTEREST EXPENSE
Deposits 120,421 99,498
Short-term borrowings 10,218 11,353
Long-term debt 18,839 11,264
------------ ------------
Total interest expense 149,478 122,115
------------ ------------
Net interest income 189,373 179,272
Provision for credit losses 35,200 12,930
------------ ------------
Net interest income after provision for
credit losses 154,173 166,342
------------ ------------
NONINTEREST INCOME
Service charges on deposit accounts 20,436 16,992
Trust and investment services income 9,127 9,060
Other service charges and fees 18,374 17,988
Securities gains, net 41,300 --
Other 9,262 5,997
------------ ------------
Total noninterest income 98,499 50,037
------------ ------------
NONINTEREST EXPENSE
Salaries and wages 49,377 45,338
Employee benefits 17,973 13,847
Occupancy expense 16,235 15,357
Outside services 11,503 12,039
Intangible amortization 10,284 9,140
Equipment expense 7,532 7,186
Restructuring, integration and other
nonrecurring costs 3,935 --
Other 33,249 28,670
------------ ------------
Total noninterest expense 150,088 131,577
------------ ------------
Income before income taxes 102,584 84,802
Provision for income taxes 40,837 35,371
------------ ------------
NET INCOME $ 61,747 $ 49,431
============ ============
PER SHARE DATA(1) :
BASIC EARNINGS $ .50 $ .40
============ ============
DILUTED EARNINGS $ .49 $ .40
============ ============
CASH DIVIDENDS $ .19 $ .17
============ ============
AVERAGE SHARES OUTSTANDING(1) 124,657,896 124,629,350
============ ============
(1) Per share data and average shares outstanding were computed on a
combined basis using average Class A common stock and common stock.
The accompanying notes are an integral part of these consolidated financial
statements.
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6
BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
Accumulated
Class A Other
Common Common Retained Comprehensive Treasury
Stock Stock Surplus Earnings Income, net Stock Total
-------- -------- ----------- --------- ------------- --------- -----------
(in thousands, except per share data)
Balance, December 31, 2000 $56,075 $ 71,041 $ 1,125,652 $ 770,350 $ 7,601 $(41,226) $ 1,989,493
Comprehensive income:
Net income -- -- -- 61,747 -- -- 61,747
Unrealized valuation adjustment,
net of tax and reclassification
adjustment -- -- -- -- 14,707 -- 14,707
------- -------- ----------- --------- -------- -------- -----------
Comprehensive income -- -- -- 61,747 14,707 -- 76,454
------- -------- ----------- --------- -------- -------- -----------
Issuance of common stock -- 13 5 -- -- -- 18
Incentive Plan for Key Executives -- -- 30 -- -- -- 30
Issuance of treasury stock under
Stock Incentive Plan -- -- 416 -- -- 2,267 2,683
Cash dividends ($.19 per share) -- -- -- (23,687) -- -- (23,687)
------- -------- ----------- --------- -------- -------- -----------
Balance, March 31, 2001 $56,075 $ 71,054 $ 1,126,103 $ 808,410 $ 22,308 $(38,959) $ 2,044,991
======= ======== =========== ========= ======== ======== ===========
Balance, December 31, 1999 $51,630 $ 75,419 $ 1,124,512 $ 638,687 $ (9,873) $(37,645) $ 1,842,730
Comprehensive income:
Net income -- -- -- 49,431 -- -- 49,431
Unrealized valuation adjustment,
net of tax and reclassification
adjustment -- -- -- -- (1,104) -- (1,104)
------- -------- ----------- --------- -------- -------- -----------
Comprehensive income -- -- -- 49,431 (1,104) -- 48,327
------- -------- ----------- --------- -------- -------- -----------
Conversion of common stock to
Class A common stock 2,910 (2,910) -- -- -- -- --
Issuance of common stock -- 21 172 -- -- -- 193
Incentive Plan for Key Executives -- -- (2) -- -- 58 56
Cash dividends ($.17 per share) -- -- -- (21,187) -- -- (21,187)
------- -------- ----------- --------- -------- -------- -----------
Balance, March 31, 2000 $54,540 $ 72,530 $ 1,124,682 $ 666,931 $(10,977) $(37,587) $ 1,870,119
======= ======== =========== ========= ======== ======== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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7
BancWest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31,
---------------------------
2001 2000
--------- ---------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 61,747 $ 49,431
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 35,200 12,930
Depreciation and amortization 18,621 17,767
Income Taxes 61,624 35,122
Decrease (increase) in interest receivable 6,851 (7,653)
Decrease in interest payable (21,399) (12,630)
Increase in prepaid expenses (2,035) (4,384)
Securities gain, net (41,300) --
Accrued donation 5,000 --
Restructuring, integration and other nonrecurring costs 3,935 --
Other 23,442 (5,476)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 151,686 85,107
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing deposits
in other banks (359,289) (236,375)
Net decrease (increase) in Federal funds sold and
securities purchased under agreements to resell 159,100 (146,259)
Proceeds from maturity of held-to-maturity
investment securities 6,176 16,978
Proceeds from maturity of available-for-sale
investment securities 577,267 226,515
Purchase of available-for-sale investment securities (654,284) (446,654)
Purchase of bank owned life insurance (101,082) --
Net increase in loans and leases to customers (22,686) (347,553)
Net cash provided by acquisitions 632,965 --
Purchase of premises and equipment (5,121) (4,305)
Other (949) (167)
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 232,097 (937,820)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (644,505) 448,466
Net increase in Federal funds purchased and securities
sold under agreements to repurchase 69,723 118,877
Net increase in other short-term borrowings 23,743 249,928
Proceeds from (payments on) long-term debt, net 148,616 (3,232)
Cash dividends paid (23,687) (21,187)
Proceeds from issuance of common stock 18 193
Proceeds from issuance of treasury stock 2,713 56
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (423,379) 793,101
--------- ---------
NET DECREASE IN CASH AND DUE FROM BANKS (39,596) (59,612)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 873,599 809,961
--------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 834,003 $ 750,349
========= =========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 164,341 $ 134,745
========= =========
Income taxes paid (refund received) $ (20,788) $ 249
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of Concord securities received $ 41,300 $ --
========= =========
Loans converted into other real estate owned and
repossessed personal property $ 2,098 $ 5,383
========= =========
Loans made to facilitate the sale of other real estate owned $ 3,563 $ 1,948
========= =========
IN CONNECTION WITH BRANCH ACQUISITIONS, THE FOLLOWING
LIABILITIES WERE ASSUMED:
Fair value of assets acquired $ 14,682 $ --
Cash received 632,965 --
--------- ---------
LIABILITIES ASSUMED $ 647,647 $ --
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
6
8
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of BancWest Corporation and
Subsidiaries (the "Company" or "we/our") conform with generally accepted
accounting principles and practices within the banking industry. The following
is a summary of significant accounting policies:
CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of BancWest Corporation ("BWE") and its wholly-owned subsidiaries:
First Hawaiian Bank and its wholly-owned subsidiaries ("First Hawaiian"); Bank
of the West and its wholly-owned subsidiaries ("Bank of the West"); FHL Lease
Holding Company, Inc. and its wholly-owned subsidiary; First Hawaiian Capital I;
BancWest Capital I; and FHI International, Inc. All significant intercompany
balances and transactions have been eliminated in consolidation. In the opinion
of management, all adjustments (which included only normal recurring
adjustments) necessary for a fair presentation are reflected in the consolidated
financial statements.
RECLASSIFICATIONS
The 2000 Consolidated Financial Statements were reclassified in certain
respects to conform to the 2001 presentation. Such reclassifications did not
have a material effect on the Consolidated Financial Statements.
2. NEW PRONOUNCEMENTS
In September 2000, the Financial Accounting Standards Board ("FASB")
issued Statement of Accounting Standards ("SFAS") No. 140, "Accounting for
Transfer and Servicing of Financial Assets and Extinguishments of Liabilities"
(a replacement of SFAS No. 125). This statement revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS
No. 125's provisions without reconsideration. This statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001. This statement is effective for the recognition
and reclassification of collateral and for disclosure relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
adoption of the recognition, reclassification and disclosure provisions of SFAS
No. 140 did not have a material effect on the Company's Consolidated Financial
Statements. The adoption of the transfers and servicing of financial assets and
extinguishments of liabilities provisions of SFAS No. 140 is not expected to
have a material effect on the Company's Consolidated Financial Statements.
In January 2001, the Company adopted SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133" and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities -- An Amendment of
FASB Statement No. 133." SFAS No. 133, as amended by SFAS Nos. 137 and 138,
requires the recognition of all derivative instruments in the statement of
financial position as either assets or liabilities and the measurement of
derivative instruments at fair value. The accounting for gains or losses
resulting from changes in the value of those derivatives depends on the intended
use of the derivative and whether it qualifies for hedge accounting. The
transition adjustment resulting from the adoption and implementation of SFAS No.
133, as amended by SFAS Nos. 137 and 138, did not have a material effect on the
Company's Consolidated Financial Statements. The adoption of these new standards
were not material because the Company does not engage in significant
transactions that are covered within the scope of SFAS No. 133, as amended by
SFAS Nos. 137 and 138, specifically as it relates to the use of derivative
financial instruments.
7
9
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
3. COMMON STOCK INFORMATION
The following is a reconciliation of the numerators and denominators
used to calculate the Company's basic and diluted earnings per share for the
periods indicated:
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------------------------------
2001 2000
------------------------------------------ ------------------------------------------
INCOME AVERAGE SHARES PER SHARE INCOME AVERAGE SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- -------------- --------- ----------- -------------- ---------
(in thousands, except number of shares and per share data)
Basic:
Net income $61,747 124,657,896 $.50 $49,431 124,629,350 $.40
Effect of dilutive securities -
Stock Incentive
Plan options -- 1,473,325 -- -- 48,144 --
------- ----------- ---- ------- ----------- ----
Diluted:
Net income and
assumed conversions $61,747 126,131,221 $.49 $49,431 124,677,494 $.40
======= =========== ==== ======= =========== ====
4. IMPAIRED LOANS
The following table summarizes impaired loan information as of and for
the three months ended March 31, 2001 and 2000 and as of and for the year ended
December 31, 2000:
MARCH 31, 2001 DECEMBER 31, 2000 MARCH 31, 2000
-------------- ----------------- --------------
(in thousands)
Impaired loans with related allowance for credit
losses calculated under SFAS No. 114 $ 110,933 $ 77,518 $ 76,150
Impaired loans with no related allowance for credit
losses calculated under SFAS No. 114 35,601 35,358 14,440
-------------- -------------- --------------
Impaired loans $ 146,534 $ 112,876 $ 90,590
============== ============== ==============
Total allowance for credit losses on impaired loans $ 17,881 $ 14,702 $ 15,319
Average impaired loans 129,706 93,572 93,005
Interest income recognized on impaired loans 634 5,099 562
We consider loans to be impaired when it is probable that the Company
will be unable to collect all amounts due according to the contractual terms of
the loan agreement, including scheduled interest payments. For a loan that has
been restructured, the contractual terms of the loan agreement refer to the
terms of the original loan agreement. Not all impaired loans are necessarily
placed on nonaccrual status; for example, restructured loans performing under
restructured terms beyond a specific period may be classified as accruing, but
may still be deemed impaired. Impaired loans without a related allowance for
credit losses are generally collateralized by assets with fair values in excess
of the recorded investment in the loans. Interest payments on impaired loans are
generally applied to reduce the outstanding principal amounts of such loans.
5. MERGER WITH BANCWEST CORPORATION AND RELATED MATTERS
On November 1, 1998, we consummated the merger (the "BancWest Merger")
of the former BancWest Corporation, parent company of Bank of the West, with and
into First Hawaiian, Inc. ("FHI"). FHI, the surviving corporation of the
BancWest Merger, changed its name to BancWest Corporation on November 1, 1998.
We recorded pre-tax restructuring, BancWest Merger-related and other
nonrecurring costs totaling $25.5 million in 1998. In connection with recording
these costs, a liability of $11.3 million was recorded in 1998, of which $2.5
million remained accrued as of December 31, 2000. During the first three months
of 2001, this liability was reduced by $484,000 related to excess leased
commercial properties. As of March 31, 2001, $2 million related to excess leased
commercial properties remained accrued. The majority of the amount related to
excess leased commercial property will be fully amortized by December 2002.
6. NEVADA AND NEW MEXICO BRANCH ACQUISITIONS
In the first quarter of 2001, we consummated the acquisitions of 30
branches in Nevada and New Mexico. These branches were divested by First
Security Corporation in connection with its merger with Wells Fargo & Company.
The acquisitions added $199.5 million in loans and $1.074 billion in deposits at
March 31, 2001. We incurred a total $5.2 million in integration costs related to
these branch acquisitions since the fourth quarter of 2000, with $3.9 million
being recorded in the first quarter of 2001.
8
10
BancWest Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
7. OPERATING SEGMENTS
As of March 31, 2001, we had two reportable operating segments: Bank of
the West and First Hawaiian. The Bank of the West segment operates primarily on
the mainland United States. The First Hawaiian segment operates primarily in the
State of Hawaii.
The financial results of our operating segments are presented on an accrual
basis. There are no significant differences between the accounting policies of
the segments as compared to the Company's consolidated financial statements. We
evaluate the performance of these segments and allocate resources to them based
on net interest income and net income. There are no material intersegment
revenues.
The tables below present information about the Company's operating
segments as of or for the three months ended March 31, 2001 and 2000,
respectively.
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------------------
BANK
OF THE FIRST RECONCILING CONSOLIDATED
WEST HAWAIIAN OTHER ITEMS TOTALS
------------ ------------ ------------ ------------ ------------
(in millions)
2001
NET INTEREST INCOME $ 112 $ 81 $ (4) $ -- $ 189
Net income 34 31 (3) -- 62
Segment assets 11,982 7,517 3,339 (3,419) 19,419
2000
Net interest income $ 102 $ 79 $ (2) $ -- $ 179
Net income 25 26 (2) -- 49
Segment assets 10,171 7,334 2,806 (2,783) 17,528
The reconciling items in the tables above are primarily intercompany
eliminations.
9
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain matters contained in this filing are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. BancWest's
forward-looking statements (such as those concerning its plans, expectations,
estimates, strategies, projections and goals) involve risks and uncertainties
that could cause actual results to differ materially from those discussed in the
statements. Readers should carefully consider those risks and uncertainties in
reading this report. Factors that could cause or contribute to such differences
include, but are not limited to: (1) global, national and local economic and
market conditions; (2) the level and volatility of interest rates and currency
values; (3) government fiscal and monetary policies; (4) credit risks inherent
in the lending process; (5) loan and deposit demand in the geographic regions
where we conduct business; (6) the impact of intense competition in the rapidly
evolving banking and financial services business; (7) extensive federal and
state regulation of our business, including the effect of current and pending
legislation and regulations; (8) whether expected revenue enhancements and cost
savings are realized within expected time frames; (9) whether Bank of the West
is successful in retaining and further developing loan, deposit, customer and
employee relationships relating to its recently acquired Nevada and New Mexico
branches; (10) matters relating to the integration of our business with that of
past and future merger partners, including the impact of combining these
businesses on revenues, expenses, deposit attrition, customer retention and
financial performance; (11) our reliance on third parties to provide certain
critical services, including data processing; (12) the proposal or adoption of
changes in accounting standards by the Financial Accounting Standards Board, the
Securities and Exchange Commission or other standard setting bodies; (13)
technological changes; (14) other risks and uncertainties discussed in this
document or detailed from time to time in other Securities and Exchange
Commission filings that we make, including our 2000 Annual Report on Form 10-K;
and (15) management's ability to manage risks that result from these and other
factors.
BancWest's forward-looking statements are based on management's current views
about future events. Those statements speak only as of the date on which they
are made. We do not intend to update forward-looking statements, and we disclaim
any obligation or undertaking to update or revise any such statements to reflect
any change in our expectations or any change in events, conditions,
circumstances or assumptions on which forward-looking statements are based.
We analyze our performance on a net income basis determined in accordance with
generally accepted accounting principles, as well as on an operating basis
before merger-related, integration and other nonrecurring costs and/or the
effects of the amortization of intangible assets referred to in this analysis as
"operating" and "cash" earnings, respectively. Operating earnings, cash earnings
and operating cash earnings (the combination of the effect of adjustments for
both cash and operating results), as well as information calculated from them,
and related discussions are presented as supplementary information in this
analysis to enhance the readers' understanding of, and highlight trends in, our
core financial results excluding the effects of discreet business acquisitions
and other transactions. We include these additional disclosures because this
information is both relevant and useful in understanding the performance of the
company as management views it. Operating earnings and cash earnings should not
be viewed as a substitute for net income and earnings per share, among other
gauges of performance, as determined in accordance with generally accepted
accounting principles. Merger-related, integration and other nonrecurring costs,
the amortization of intangible assets and other items excluded from net income
to derive operating and cash earnings may be significant and may not be
comparable to those of other companies.
BNP PARIBAS ACQUISITION AGREEMENT
BancWest Corporation, BNP Paribas ("BNP Paribas"), and Chauchat L.L.C., a
Delaware limited liability company and wholly-owned subsidiary of BNP Paribas
("Chauchat L.L.C."), entered into a definitive Agreement and Plan of Merger,
dated as of May 8, 2001 (the "Merger Agreement"). Pursuant to the Merger
Agreement, Chauchat L.L.C. will merge with and into BancWest, with BancWest as
the surviving corporation (the "Merger"), and BancWest will become a
wholly-owned subsidiary of BNP Paribas. As a result of the Merger, (i) each
issued and outstanding share of BancWest common stock (other than shares owned
by BancWest or any wholly-owned subsidiary of BancWest and shares held by a
holder who properly demands appraisal rights under Delaware law) will be
converted into the right to receive $35.00 in cash and (ii) each issued and
outstanding share of BancWest Class A common stock will be converted into a
share of common stock of the surviving corporation. Consummation of the Merger
is subject to various conditions, including receipt of the approval of the
Merger Agreement by BancWest's stockholders and receipt of requisite regulatory
approvals. The Merger Agreement and a press release related to the execution of
the Merger Agreement were filed with a Report on a Form 8-K on May 11, 2001.
10
12
BANCWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
- ------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
---------------------------
(dollars in thousands, except per share data) 2001 2000
- ------------------------------------------------------------------------------------------------------------
EARNINGS AND DIVIDENDS:
Net income $ 61,747 $ 49,431
Operating earnings (1) 64,089 49,431
Cash earnings (2) 70,303 57,612
Operating cash earnings (1),(2) 72,645 57,612
Cash dividends 23,687 21,187
PER SHARE DATA:
Diluted:
Earnings $ .49 $ .40
Operating earnings (1) .51 .40
Cash earnings (2) .56 .46
Operating cash earnings (1),(2) .58 .46
Cash dividends .19 .17
Book value (at March 31) 16.40 15.00
Market price (NYSE close at March 31) 24.00 19.75
SELECTED FINANCIAL RATIOS:
Return on average total assets (ROA) 1.33% 1.18%
Operating return on average total assets (ROA)(1) 1.38 1.18
Return on average tangible assets(3) 1.62 1.44
Return on average stockholders' equity (ROE) 12.26 10.74
Operating return on average stockholders' equity (ROE)(1) 12.73 10.74
Return on average tangible stockholders' equity (3) 22.26 19.92
Net interest margin (taxable-equivalent basis) 4.58 4.82
Allowance for credit losses to total loans and leases (at March 31) 1.31 1.27
Nonperforming assets to total assets (at March 31) .66 .70
Allowance for credit losses to nonperforming loans and leases (at March 31) 1.72X 1.68x
(1) Excluding after-tax restructuring, integration and other nonrecurring costs
of $2,342,000 in the first quarter of 2001.
(2) Excluding amortization of goodwill and core deposit intangible.
(3) Defined as operating cash earnings as a percentage of average total assets
or average stockholders' equity minus average goodwill and core deposit
intangible.
11
13
NET INCOME
The following table compares net income, operating earnings, cash earnings and
operating cash earnings for the three months ended March 31, 2001 to the same
period in 2000:
THREE MONTHS ENDED MARCH 31, 2001(1) 2000 % Change
------------ ------------ ------------
(in thousands)
Net income $ 61,747 $ 49,431 24.9%
Operating earnings (2) 64,089 49,431 29.7
Cash earnings(3) 70,303 57,612 22.0
Operating cash earnings (2),(3) 72,645 57,612 26.1
(1) Includes $7.6 million after-tax net effect of the Concord security
gain, additional provision for credit losses and other nonrecurring
items. Excluding the after-tax net effect of the gain, additional
provision and other nonrecurring items, first quarter 2001 earnings
and cash earnings were $54.2 million and $62.7 million,
respectively. Operating earnings and operating cash earnings,
excluding the net after-tax effect of the aforementioned items, were
$56.5 million and $65.1 million, respectively.
(2) Excluding after-tax integration costs of $2.3 million related to the
Nevada and New Mexico branch acquisitions in the first quarter of
2001.
(3) Excluding after-tax amortization of goodwill and core deposit
intangibles.
The increases in net income, operating earnings, cash earnings and operating
cash earnings for the first three months of 2001 compared to the same period in
2000 were primarily due to a $24.6 million after-tax gain stemming from the sale
of the Company's approximate 5% interest in Star Systems, Inc. ("Concord
security gain"), which was acquired by Concord EFS, Inc. In addition, revenues
increased because of the growth in loan volumes in the mainland United States,
contribution from 30 newly acquired branches in Nevada and New Mexico in 2001
and increased noninterest income. These increases were partially offset by a $23
million (pre-tax) additional provision for credit losses, a committed donation
to a private charitable foundation of $5 million (pre-tax) and other
nonrecurring items totaling $398,000 (pre-tax). Considered together, the
after-tax net effect of the Concord security gain, the additional provision for
credit losses, the charitable contribution and the other nonrecurring items
added $7.6 million to our net income.
The following table shows diluted earnings, operating earnings, cash earnings
and operating cash earnings per share for the three months ended March 31, 2001
compared to the same period in 2000. All per-share data have been calculated to
include both common and Class A common shares.
2001(1) 2000 % Change
------------ ------------ ------------
THREE MONTHS ENDED MARCH 31,
Diluted earnings $ .49 $ .40 22.5%
Diluted operating earnings(2) .51 .40 27.5
Diluted cash earnings (3) .56 .46 21.7
Diluted operating cash earnings(2),(3) .58 .46 26.1
(1) Includes $7.6 million after-tax net effect of the Concord security
gain, additional provision for credit losses and other nonrecurring
items. Excluding the after-tax net effect of the gain, additional
provision and other nonrecurring items, first quarter 2001 earnings
and cash earnings per share were $.43 and $.50, respectively.
Operating earnings and operating cash earnings per share, excluding
the net after-tax effect of the aforementioned items, were $.45 and
$.52, respectively.
(2) Excluding after-tax integration costs of $2.3 million related to the
Nevada and New Mexico branch acquisitions in the first quarter of
2001.
(3) Excluding after-tax amortization of goodwill and core deposit
intangibles.
12
14
NET INCOME, CONTINUED
The table below shows the return on average total assets, the return on average
tangible assets, the return on average stockholders' equity and the return on
average tangible stockholders' equity for the first three months of 2001
compared to the same period in 2000. The return on average tangible assets is
defined as operating cash earnings as a percentage of average total tangible
assets. The return on average tangible stockholders' equity is defined as
operating cash earnings as a percentage of average stockholders' equity minus
average goodwill and core deposit tangibles.
2001 2000 % Change
---------- ---------- ----------
Return on average total assets 1.33% 1.18% 12.7%
Operating return on average total assets(1) 1.38 1.18 16.9
Return on average tangible assets(1) 1.62 1.44 12.5
Return on average stockholders' equity 12.26 10.74 14.2
Operating return on average stockholders' equity(1) 12.73 10.74 18.5
Return on average tangible stockholders' equity(1) 22.26 19.92 11.7
(1) Ratios are computed excluding after-tax integration costs related to the
Nevada and New Mexico branch acquisitions in the first quarter of 2001.
The increases in the above returns were a result of the higher profitability of
our assets and stockholders' equity, with revenues increasing at a faster pace
than expenses for the first three months of 2001 compared to the same period in
2000.
NET INTEREST INCOME
The following table compares net interest income on a taxable-equivalent basis
for the three months ended March 31, 2001 to the same period in 2000:
THREE MONTHS ENDED MARCH 31, 2001 2000 % Change
------------ ------------ ------------
(in thousands)
Net interest income $ 189,448 $ 179,437 5.6%
The increase in net interest income for the three months ended March 31, 2001
over the same period in 2000 was primarily due to a 10-basis-point rise (1%
equals 100 basis points) in the yield on average earning assets and an increase
in average earning assets of 11.9%, or $1.8 billion, for the three months ended
March 31, 2001, partially offset by a 34-basis-point increase in the rate paid
on funding sources. In addition, the higher net interest income is also a result
of higher average noninterest-bearing deposits, which increased by $392.2
million, or 15.2%, in the first quarter of 2001 over the same period in 2000.
13
15
NET INTEREST INCOME, CONTINUED
The following table compares net interest margin for the three months ended
March 31, 2001 to the same period in 2000:
THREE MONTHS ENDED MARCH 31, Change
2001 2000 (basis points)
-------------- -------------- --------------
Yield on average earning assets 8.19% 8.09% 10
Rate paid on funding sources 3.61 3.27 34
Net interest margin 4.58 4.82 (24)
The decrease in the net interest margin in the first three months of 2001 as
compared to the same period in 2000 is primarily due to the 34-basis-point
increase in the rate paid on funding sources, reflecting a rapidly changing
interest rate environment over the last 12 months. The Federal Reserve's
benchmark Federal Funds rate has changed six times in the period between January
2000 and March 2001. Although there have been three 50-basis-point decreases in
the first quarter of 2001, the effects of these decreases will take some time to
be fully reflected in the repricing of our assets and liabilities. For further
discussions on the impact that the changing interest environment has had on the
rate paid on deposits see page 18.
This increase in the rate paid on funding sources was partially offset by the
10-basis-point increase on the yield on average earning assets. The interest
rate spread, the difference between the yield on average earning assets and the
rate paid on interest-bearing deposits and liabilities, has decreased by 37
basis points to 3.54% in the first three months of 2001, as compared to the same
period in 2000.
THREE MONTHS ENDED MARCH 31, 2001 2000 % Change
----------- ----------- -----------
(in thousands)
Average earning assets $16,774,604 $14,988,195 11.9%
Average loans and leases 14,145,518 12,655,332 11.8
Average interest-bearing
deposits and liabilities 13,031,723 11,747,561 10.9
The increase in average earning assets was primarily due to increases in average
loans and leases. The increase in average loans and leases was primarily due to
the growth of our Bank of the West operating segment's loan and lease portfolio,
with significant increases in consumer loan and lease financing volumes. Also
contributing to the increase in average loans and leases was the addition of the
30 branches in Nevada and New Mexico in the first quarter of 2001. The acquired
branches added $134 million in average loans and leases.
The increase in average interest-bearing deposits and liabilities was primarily
due to an increase in interest-bearing deposits and long-term debt and capital
securities. Expansion of our customer deposit base, primarily from our Bank of
the West operating segment, contributed to the increase. The branches acquired
in Nevada and New Mexico added $671 million in average deposits in the first
quarter of 2001.
14
16
The following table sets forth consolidated average balance sheets, an analysis
of interest income/expense and average yield/rate for each major category of
interest-earning assets and interest-bearing liabilities for the periods
indicated on a taxable-equivalent basis. The tax equivalent adjustment is made
for items exempt from Federal income taxes (assuming a 35% tax rate for 2001 and
2000) to make them comparable with taxable items before any income taxes are
applied.
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------------------------
2001 2000
------------------------------------------- -------------------------------------------
INTEREST Interest
AVERAGE INCOME/ YIELD/ Average Income/ Yield/
ASSETS BALANCE EXPENSE RATE (1) Balance Expense Rate (1)
----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands)
Earning assets:
Interest-bearing deposits
in other banks $ 250,727 $ 3,610 5.84% $ 121,108 $ 1,634 5.43%
Federal funds sold and
securities purchased
under agreements to
resell 278,488 3,893 5.67 97,694 1,417 5.83
Investment securities(2) 2,099,871 33,385 6.45 2,114,061 33,701 6.41
Loans and leases (3),(4) 14,145,518 298,038 8.54 12,655,332 264,800 8.42
----------- ----------- ----------- -----------
Total average earning assets 16,774,604 338,926 8.19 14,988,195 301,552 8.09
----------- -----------
Nonearning assets 2,098,985 1,832,245
----------- -----------
Total assets $18,873,589 $16,820,440
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits
and liabilities:
Deposits:
Domestic:
Interest-bearing demand $ 313,906 $ 644 0.83% $ 291,174 $ 1,067 1.47%
Savings 4,328,651 25,230 2.36 4,010,723 22,769 2.28
Time 6,428,909 92,469 5.83 5,734,517 73,806 5.18
Foreign 203,398 2,078 4.14 191,834 1,856 3.89
----------- ----------- ----------- -----------
Total interest-bearing
deposits 11,274,864 120,421 4.33 10,228,248 99,498 3.91
Short-term borrowings 743,738 10,218 5.57 814,791 11,353 5.60
Long-term debt and
capital securities 1,013,121 18,839 7.54 704,522 11,264 6.43
----------- ----------- ----------- -----------
Total interest-bearing
deposits and
liabilities 13,031,723 149,478 4.65 11,747,561 122,115 4.18
----------- ----------- ----------- ----------- ----------- -----------
Interest rate spread 3.54% 3.91%
=========== ===========
Noninterest-bearing demand
deposits 2,978,114 2,585,877
Other liabilities 821,333 636,630
----------- -----------
Total liabilities 16,831,170 14,970,068
Stockholders' equity 2,042,419 1,850,372
----------- -----------
Total liabilities and
stockholders' equity $18,873,589 $16,820,440
=========== ===========
Net interest income
and margin on average
earning assets 189,448 4.58% 179,437 4.82%
=========== ===========
Tax equivalent adjustment 75 165
----------- -----------
Net interest income $ 189,373 $ 179,272
=========== ===========
(1) Annualized.
(2) Average debt investment securities were computed based on historical
amortized cost, excluding the effects of SFAS No. 115 adjustments.
(3) Nonaccruing loans and leases have been included in computations of average
loan balances.
(4) Interest income for loans included loan fees of $8,729 and $7,357 for 2001
and 2000, respectively.
15
17
INVESTMENT SECURITIES
HELD-TO-MATURITY
The following table presents the amortized cost, unrealized gains and losses,
and fair values of held-to-maturity investment securities as of the dates
indicated:
MARCH 31, December 31, March 31,
2001 2000 2000
------------ ------------ ------------
(in thousands)
Amortized cost $ 86,764 $ 92,940 $ 125,890
Unrealized gains 76 15 --
Unrealized losses (430) (1,330) (4,357)
------------ ------------ ------------
Fair value $ 86,410 $ 91,625 $ 121,533
============ ============ ============
Held-to-maturity investment securities decreased by $6.2 million, or 6.6%,
compared to December 31, 2000 and by $39.1 million, or 31.1%, compared to March
31, 2000, principally due to maturities of the investment securities.
AVAILABLE-FOR-SALE
The following table presents the amortized cost, unrealized gains and losses,
and fair values of available-for-sale investment securities as of the dates
indicated:
MARCH 31, December 31, March 31,
2001 2000 2000
------------- ------------- -------------
(in thousands)
Amortized cost $ 2,066,255 $ 1,948,029 $ 2,102,916
Unrealized gains 38,310 15,934 8,968
Unrealized losses (1,050) (3,183) (25,575)
------------- ------------- -------------
Fair value $ 2,103,515 $ 1,960,780 $ 2,086,309
============= ============= =============
There were no gross realized gains and losses on available-for-sale investment
securities for the three months ended March 31, 2001 and 2000, respectively.
CONCORD SECURITY GAIN
The $41.3 million pre-tax securities gain that was realized in the first quarter
of 2001 relates to the merger between Star System, Inc. ("Star") and Concord
EFS, Inc. ("Concord") on February 1, 2001. All of the outstanding shares of Star
were exchanged for Concord shares in the merger. BancWest owned approximately 5%
of the shares of Star Systems, Inc., which were reported on our Consolidated
Balance Sheet in other assets due to certain provisions of SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities." The Concord
shares that we received in the merger are reported as available-for-sale
securities as of February 1, 2001. The gain reflects the value of the Concord
shares as of February 1, 2001, adjusted for a 25% marketability discount because
these shares remain restricted and unregistered. Once these shares become
unrestricted and registered, BancWest may record an additional gain based on
their value at disposition.
16
18
LOANS AND LEASES
The following table sets forth the loan and lease portfolio by major categories
and loan and lease mix at March 31, 2001, December 31, 2000 and March 31, 2000:
MARCH 31, 2001 December 31, 2000 March 31, 2000
-------------------------- -------------------------- --------------------------
AMOUNT % Amount % Amount %
----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands)
Commercial, financial and agricultural $ 2,562,244 18.0% $ 2,604,590 18.6% $ 2,386,466 18.6%
Real estate:
Commercial 2,758,034 19.4 2,618,312 18.7 2,459,271 19.1
Construction 406,059 2.9 405,542 2.9 402,837 3.1
Residential:
Insured, guaranteed or
conventional 1,802,486 12.7 1,919,017 13.7 1,900,634 14.8
Home equity credit lines 453,886 3.2 441,150 3.2 442,883 3.4
----------- ----------- ----------- ----------- ----------- -----------
Total real estate loans 5,420,465 38.2 5,384,021 38.5 5,205,625 40.4
----------- ----------- ----------- ----------- ----------- -----------
Consumer 3,775,198 26.6 3,599,954 25.8 3,093,137 24.1
Lease financing 2,106,486 14.8 2,038,516 14.6 1,825,224 14.2
Foreign 338,130 2.4 344,750 2.5 346,023 2.7
----------- ----------- ----------- ----------- ----------- -----------
Total loans and leases 14,202,523 100.0% 13,971,831 100.0% 12,856,475 100.0%
=========== =========== ===========
Less allowance for credit losses 186,246 172,443 162,666
----------- ----------- -----------
Total net loans and leases $14,016,277 $13,799,388 $12,693,809
=========== =========== ===========
Total loans and leases to:
Total assets 73.1% 75.7% 73.3%
Total earning assets 83.8% 86.4% 83.7%
Total deposits 96.5% 98.9% 96.5%
The loan and lease portfolio is the largest component of total earning assets
and accounts for the greatest portion of total interest income. At March 31,
2001, total net loans and leases were $14.0 billion, representing increases of
1.6% and 10.4% over December 31, 2000 and March 31, 2000, respectively. The
increase in loans as of March 31, 2001, as compared to March 31, 2000, was
primarily due to increases in consumer loans and lease financing, primarily in
our Bank of the West operating segment. Also contributing to the increase in the
loans in the Bank of the West operating segment was the $199.5 million in loans
acquired with the branches in Nevada and New Mexico. The increase was partially
offset by decreases in commercial and real estate loan categories and certain
consumer loans in our First Hawaiian operating segment.
Commercial, financial and agricultural loans as of March 31, 2001 decreased
$42.3 million, or 1.6%, over December 31, 2000, and increased $175.8 million, or
7.4%, over March 31, 2000. The Company continues its efforts to diversify its
loan and lease portfolio, both geographically and by industry, with credit
extensions on the mainland United States accounting for the majority of the
increase in loan and lease balances and the geographic and industry
diversification during the three months ended March 31, 2001.
Commercial real estate loans increased $139.7 million, or 5.3%, from December
31, 2000, and increased $298.8 million, or 12.1%, from March 31, 2000. The
increase over the past twelve months was primarily due to the growth in our Bank
of the West operating segment.
17
19
LOANS AND LEASES, CONTINUED
Consumer loans as of March 31, 2001 increased $175.2 million, or 4.9%, over
December 31, 2000, and $682.1 million, or 22.1%, over March 31, 2000. Consumer
loans consist primarily of direct and indirect automobile, recreational vehicle,
marine, credit card and unsecured financing. The increase in consumer loans at
March 31, 2001 as compared to December 31, 2000 and March 31, 2000 was primarily
a result of growth in our Bank of the West operating segment on the mainland
United States.
Lease financing as of March 31, 2001 increased $68.0 million, or 3.3%, over
December 31, 2000, and $281.3 million, or 15.4%, over March 31, 2000. The
increase in lease financing from March 31, 2000 was primarily due to an increase
in the automobile lease portfolio in our Bank of the West operating segment. The
increase in lease financing at March 31, 2001, as compared to December 31, 2000,
was primarily due to increases on the mainland United States.
The Company's foreign loans are principally in Guam and Saipan. Foreign loans as
of March 31, 2001 decreased $6.6 million, or 1.9%, compared to December 31,
2000, with approximately 93% domiciled in Guam and Saipan.
Loan concentrations are considered to exist when there are amounts loaned to
multiple borrowers engaged in similar activities, which would cause them to be
similarly impacted by economic or other conditions. At March 31, 2001, we did
not have a concentration of loans greater than 10% of total loans which is not
otherwise disclosed as a category of loans as shown in the above table.
DEPOSITS
Deposits are the largest component of our total liabilities and account for the
greatest portion of total interest expense. At March 31, 2001, total deposits
were $14.7 billion, an increase of 10.4% over March 31, 2000. The increase was
primarily due to the growth in our customer deposit base, primarily in the Bank
of the West operating segment, including the newly acquired branches in Nevada
and New Mexico, and various deposit product programs that we initiated.
The increase in nearly all of the rates paid on deposits reflects the rising
interest rate environment for most of 2000, caused primarily by rate increases
by the Federal Reserve's Open Market Committee. The 75-basis-point total
increase in the benchmark Federal Funds rate in 2000 was followed by three sharp
and rapid 50-basis-point decreases in the first quarter of 2001. The rates paid
on deposits reflect this rapidly changing interest rate environment at different
speeds, due to the repricing characteristics of each type of deposit. Time
deposits, which generally reprice more slowly than other deposits, do not yet
fully reflect the sharp decreases in interest rates implemented in 2001, while
interest-bearing and savings deposits, which can be repriced more rapidly, are
more reflective of the current decrease in the interest rate environment. The
deposits in the foreign category are a mixture of time, savings and other
interest-bearing deposits; therefore, its rate reflects both types of repricing
characteristics. Additional information on our average deposit balances and
rates paid is provided in the table on page 15.
18
20
NONPERFORMING ASSETS
Nonperforming assets at March 31, 2001, December 31, 2000 and March 31, 2000 are
as follows:
MARCH 31, December 31, March 31,
2001 2000 2000
------------- ------------- -------------
(dollars in thousands)
Nonperforming Assets:
Nonaccrual:
Commercial, financial and agricultural $ 56,165 $ 42,089 $ 15,852
Real estate:
Commercial 15,086 15,331 29,217
Construction 119 403 2,151
Residential:
Insured, guaranteed, or conventional 10,642 11,521 17,789
Home equity credit lines -- -- 728
------------- ------------- -------------
Total real estate loans 25,847 27,255 49,885
------------- ------------- -------------
Consumer 4,671 3,257 1,634
Lease financing 8,769 6,532 5,210
Foreign 5,474 5,496 4,879
------------- ------------- -------------
Total nonaccrual loans and leases 100,926 84,629 77,460
------------- ------------- -------------
Restructured:
Commercial, financial and agricultural 957 927 950
Real estate:
Commercial 5,312 7,055 7,170
Construction -- -- 9,899
Residential:
Insured, guaranteed, or conventional 938 937 1,114
Home equity credit lines -- -- --
------------- ------------- -------------
Total real estate loans 6,250 7,992 18,183
------------- ------------- -------------
Total restructured loans and leases 7,207 8,919 19,133
------------- ------------- -------------
Total nonperforming loans and leases 108,133 93,548 96,593
Other real estate owned and repossessed personal property 20,549 27,479 26,505
------------- ------------- -------------
Total nonperforming assets $ 128,682 $ 121,027 $ 123,098
============= ============= =============
Past due loans and leases(1):
Commercial, financial and agricultural $ 10,803 $ 6,183 $ 2,906
Real estate:
Commercial 411 1,987 4,181
Construction -- -- --
Residential:
Insured, guaranteed, or conventional 3,274 3,387 6,576
Home equity credit lines 332 499 606
------------- ------------- -------------
Total real estate loans 4,017 5,873 11,363
------------- ------------- -------------
Consumer 2,376 3,719 2,433
Lease financing 177 113 116
Foreign 1,237 1,321 1,392
------------- ------------- -------------
Total past due loans and leases $ 18,610 $ 17,209 $ 18,210
============= ============= =============
Nonperforming assets to total loans and leases
and other real estate owned and
repossessed personal property (end of period):
Excluding past due loans and leases .90% .86% .96%
Including past due loans and leases 1.04% .99% 1.10%
Nonperforming assets to total assets (end of period):
Excluding past due loans and leases .66% .66% .70%
Including past due loans and leases .76% .75% .81%
(1) Represents loans and leases which are past due 90 days or more as to
principal and/or interest, are still accruing interest and are adequately
collateralized and in the process of collection.
19
21
NONPERFORMING ASSETS, CONTINUED
Nonperforming assets at March 31, 2001 were $128.7 million, or .90% of total
loans and leases and other real estate owned and repossessed personal property
("OREO"), compared to .96% at March 31, 2000. Nonperforming assets at March 31,
2001 were .66% of total assets, compared to .70% at March 31, 2000.
Nonperforming assets at March 31, 2001 increased by $7.7 million, or 6.3%, from
December 31, 2000. The increase in the nonaccrual commercial, financial and
agricultural loans was primarily due to a $12.7 million commercial credit to a
West Coast franchise operator added by Bank of the West. The decreases in real
estate -- commercial and residential loans were attributable to the transfer of
nonaccrual loans and leases to OREO, payoffs and partial paydowns of nonaccrual
loans and leases. These decreases were partially offset by increases in the
consumer and lease financing components of nonaccrual loans and leases,
primarily due to our growing loan and lease volumes in these two categories. The
increase in nonperforming loans and leases was partially offset by a decrease in
OREO, primarily due to reductions in other real estate owned in the First
Hawaiian operating segment. Included in nonperforming assets are loans to small
businesses that were partially guaranteed by the Small Business Administration
("SBA"). The outstanding loan and SBA guarantee amounts were: $13.5 million and
$5.2 million at March 31, 2001; $9.8 million and $7.3 million at December 31,
2000; and $10.5 million and $7.9 million at March 31, 2000, respectively.
Nonperforming assets at March 31, 2001 increased by $5.6 million, or 4.5%, from
March 31, 2000. The increase was primarily attributable to increases in
nonaccrual commercial, financial and agricultural loans, consumer and lease
financing loans, which were partially offset by decreases in all components of
nonaccrual real estate loans and restructured real estate -- commercial loans.
We generally place a loan or lease on nonaccrual status when we believe that
collection of principal or income has become doubtful or when loans and leases
are 90 days past due as to principal or income, unless they are well secured and
in the process of collection. We may make an exception to the general
90-day-past-due rule when the fair value of the collateral exceeds our recorded
investment in the loan or when other factors indicate that the borrower will
shortly bring the loan current. While the majority of consumer loans and leases
are subject to our general policies regarding nonaccrual loans, certain past-due
consumer loans and leases are not placed on nonaccrual status, because they are
charged off upon reaching a predetermined delinquency status varying from 120 to
180 days, depending on product type.
When we place a loan or lease on nonaccrual status, previously accrued and
uncollected interest is reversed against interest income of the current period.
When we receive a cash interest payment on a nonaccrual loan, we apply it as a
reduction of the principal balance when we have doubts about the ultimate
collection of the principal. Otherwise, we record such payments as income.
Nonaccrual loans and leases are generally returned to accrual status when they:
(1) become current as to principal and interest or (2) become both well secured
and in the process of collection.
Other than the loans listed, we were not aware of any significant potential
problem loans where possible credit problems of the borrower caused us to
seriously question the borrower's ability to repay the loan under existing
terms.
Loans past due 90 days or more and still accruing interest totaled $18.6 million
at March 31, 2001, an increase of $400,000 or 2.2%, from March 31, 2000. Loans
past due 90 days or more and still accruing interest increased by $1.4 million,
or 8.1%, from December 31, 2000 to March 31, 2001. The increase is primarily due
to higher commercial, financial and agricultural loan delinquencies, which were
partially offset by decreases in real estate, consumer and foreign loans. All of
the loans that are past due 90 days or more and still accruing interest are, in
our judgment, adequately collateralized and in the process of collection.
Hawaii has finally begun to recover from the economic stagnation that plagued it
through much of the 1990's. This improvement in Hawaii's economic condition is
one of the factors that led to the decrease in nonperforming assets in the First
Hawaiian operating segment.
20
22
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The following table sets forth the activity in the allowance for credit losses
for the periods indicated:
THREE MONTHS ENDED MARCH 31,
---------------------------------------
2001 2000
-------------- --------------
(dollars in thousands)
Loans and leases outstanding (end of period) $ 14,202,523 $ 12,856,475
============== ==============
Average loans and leases outstanding $ 14,145,518 $ 12,655,332
============== ==============
Allowance for credit losses:
Balance at beginning of period $ 172,443 $ 161,418
-------------- --------------
Loans and leases charged off:
Commercial, financial and agricultural 10,656 1,983
Real estate:
Commercial 399 291
Construction -- 1,185
Residential 1,067 1,671
Consumer 8,664 6,806
Lease financing 2,998 2,209
Foreign 602 312
-------------- --------------
Total loans and leases charged off 24,386 14,457
-------------- --------------
Recoveries on loans and leases previously charged off:
Commercial, financial and agricultural 147 109
Real estate:
Commercial 50 17
Construction 131 8
Residential 200 309
Consumer 1,699 1,616
Lease financing 502 594
Foreign 260 122
-------------- --------------
Total recoveries on loans and leases
previously charged off 2,989 2,775
-------------- --------------
Net charge-offs (21,397) (11,682)
-------------- --------------
Provision for credit losses 35,200 12,930
-------------- --------------
Balance at end of period $ 186,246 $ 162,666
============== ==============
Net loans and leases charged off to average loans
and leases .61%(1) .37%(1)
Net loans and leases charged off to allowance for
credit losses 46.59%(1) 28.88%(1)
Allowance for credit losses to total
loans and leases (end of period) 1.31% 1.27%
Allowance for credit losses to nonperforming
loans and leases (end of period):
Excluding 90 days past due
accruing loans and leases 1.72X 1.68x
Including 90 days past due
accruing loans and leases 1.47X 1.42x
(1) Annualized.
21
23
PROVISION AND ALLOWANCE FOR CREDIT LOSSES, CONTINUED
The provision for credit losses for the first three months of 2001 was $35.2
million, an increase of $22.3 million, or 172.2%, over the same period in 2000.
The increase in the provision for credit losses for the first three months of
2001 over the same period in 2000 primarily reflects the larger loan portfolio
resulting from our continued loan volume growth and certain macroeconomic and
other factors discussed below.
The provision for credit losses is based upon our judgment as to the adequacy of
the allowance for credit losses (the "Allowance") to absorb probable losses
inherent in the portfolio as of the balance sheet date. The Company uses a
systematic methodology to determine the adequacy of the Allowance and related
provision for credit losses to be reported for financial statement purposes. The
determination of the adequacy of the Allowance is ultimately one of judgment,
which includes consideration of many factors, including, among other things, the
amount of problem and potential problem loans and leases, net charge-off
experience, changes in the composition of the loan and lease portfolio by type
and location of loans and leases and in overall loan and lease risk profile and
quality, general economic factors and the fair value of collateral.
Our approach to managing exposure to credit risk involves an integrated program
of setting appropriate standards for credit underwriting and diversification,
monitoring trends that may affect the risk profile of the credit portfolio and
making appropriate adjustments to reflect changes in economic and financial
conditions that could affect the quality of the portfolio and loss probability.
The components of this integrated program include:
- Setting Underwriting and Grading Standards. In 1996, we refined our
loan grading system to ten different principal risk categories where
"1" is "no risk" and "10" is "loss" and began an effort to decrease
our exposure to customers in the weaker credit categories. We also
established risk parameters so that the cost of credit risk is an
integral part of the pricing and evaluation of credit decisions and
the setting of portfolio targets.
- Diversification. We actively manage our credit portfolio to avoid
excessive concentration by obligor, risk grade, industry, product
and geographic location. As part of this process, we also monitor
changes in risk correlation among concentration categories. In
addition, we seek to reduce our exposure to concentrations by
actively participating portions of our commercial and commercial
real estate loans to other banks.
- Risk Mitigation. Over the past few years, we have reduced our
exposure to higher-risk areas such as real estate construction
(which accounted for only 2.9% of total loans and leases at March
31, 2001), Hawaii commercial real estate, health care, hotel and
agricultural loans. We have also reduced our exposure in the
Asia-Pacific region from $101.0 million at December 31, 1997 to
$45.4 million at March 31, 2001. These outstanding loans are
collateralized by Hawaii real estate and letters of credit.
- Restricted Participation in Syndicated National Credits. In addition
to the back-up commercial paper facilities to primarily investment-
grade companies, we participate in media finance credits in the
national market, one of our traditional niches where we have
developed a special expertise over a long period of time and with
experienced personnel. At March 31, 2001, the ratio of nonperforming
shared national credits and media finance loans to total shared
national credits and media finance loans outstanding was 3%.
- Emphasis on Consumer Lending. Consumer loans represent our single
largest category of loans and leases. We focus our consumer lending
activities on loan grades with what we believe are predictable loss
rates. As a result, we are able to use formula-based approaches to
calculate appropriate reserve levels that reflect historical
experience. We generally do not participate in subprime lending
activities. We also seek to reduce our credit exposures where
feasible by obtaining third-party insurance or similar protections.
For example, in our vehicle lease portfolio (which represents
approximately 66% of our lease financing portfolio and 24% of our
combined lease financing and consumer loans at March 31, 2001), we
obtain third-party insurance for the estimated residual value of the
leased vehicle. To the extent that these policies include deductible
values we set aside reserves to fully cover the uninsured portion.
22
24
PROVISION AND ALLOWANCE FOR CREDIT LOSSES, CONTINUED
Although we have taken substantial effort to attempt to mitigate risk within our
loan portfolio, a confluence of events in the first quarter of 2001 has made it
prudent to increase our provision for credit losses. While we have not
specifically identified credits that are currently losses or potential problem
loans (other than those identified in our discussion of nonperforming assets on
pages 19 and 20), certain events make it probable that there are losses inherent
in our portfolio. These events include:
- The rapid and sharp economic slowdown in certain key sectors of
the United States economy, in particular manufacturing and
technology. This slowdown is aggravated in one of our principal
markets, California, by a recurring energy supply problem.
- The steep decline in the equity markets in the United States
experienced in the first quarter of 2001 has erased a substantial
portion of household net worth that was accumulated throughout
most of the 1990s. The decline could affect our portfolio in the
form of increased charge-offs and nonaccrual loans in the coming
months.
- Although not a large part of our portfolio, certain agricultural
loans in the Pacific Northwest have become a concern.
- The purchase of 30 branches in Nevada and New Mexico, with $199.5
million in loans at March 31, 2001, necessitated additional
provision for credit losses.
Charge-offs were $24.4 million for the first three months of 2001, an increase
of $9.9 million, or 68.7%, over the same period in 2000. The increase was
primarily due to charge-offs in the commercial, financial and agricultural and
consumer loans and lease financing in the first three months of 2001. In
particular, the charge-offs in the first quarter of 2001 were higher than in the
same period of 2000 due to the write-off of $4.4 million in agricultural credits
in the Pacific Northwest and $2.5 million for commercial fraud-related losses.
For the first three months of 2001, recoveries increased by $214,000, or 7.7%,
over the same period in 2000. The increase in recoveries was primarily in real
estate -- construction and foreign loans.
The Allowance increased to 1.72 times nonperforming loans and leases (excluding
90 days or more past due accruing loans and leases) at March 31, 2001 from 1.68
times at March 31, 2000. The increase in the ratio is principally due to an
increase in the Allowance as a result of the growth in our loan portfolio and
the additional factors mentioned above. In part, the additional provision for
credit losses results from the higher charge-offs we have experienced in the
first quarter of 2001. The additional provision for credit losses is necessary
to adequately maintain our allowance for the inherent losses within our
portfolio that result from the macroeconomic factors described above.
In our judgment, the Allowance was adequate to absorb losses inherent in the
loan and lease portfolio at March 31, 2001. However, changes in prevailing
economic conditions in the Company's markets could result in changes in the
level of nonperforming assets and charge-offs in the future and, accordingly,
changes in the Allowance. We will continue to closely monitor economic
developments and those specific items mentioned above in particular and make
necessary adjustments to the Allowance accordingly.
23
25
NONINTEREST INCOME
The following table reflects the key components of the change in noninterest
income for the three months ended March 31, 2001, as compared to the same
periods in 2000:
THREE MONTHS ENDED MARCH 31, 2001 2000 % Change
------------ ------------ ------------
(in thousands)
Service charges on deposit accounts $ 20,436 $ 16,992 20.3%
Trust and investment services income 9,127 9,060 0.7
Other service charges and fees 18,374 17,988 2.1
Securities gains, net 41,300 -- N/M
Other 9,262 5,997 54.4
------------ ------------
Total noninterest income $ 98,499 $ 50,037 96.9%
============ ============
N/M - Not Meaningful.
As the table above shows in more detail, noninterest income increased by 96.9%
for the three months ended March 31, 2001 compared to the same period in 2000.
Factors causing the increases include:
- - Concord security gain
- - Increase in service charges on deposit accounts for the three months ended
March 31, 2001, compared to the same periods in 2000, primarily due to
higher levels of deposits resulting from the expansion of our customer
deposit base predominately in our Bank of the West operating segment,
including the deposits from the 30 branches acquired in Nevada and New
Mexico in the first quarter of 2001.
- - Increase in other service charges and fees for the three months ended March
31, 2001, compared to the same periods in 2000, primarily due to: (1) higher
merchant services fees, due to higher fee charges, increased volume and more
merchant outlets; (2) higher bank card and ATM convenience fee income; and
(3) higher miscellaneous service fees.
- - Increase in other noninterest income primarily due to increased income from
bank-owned life insurance.
24
26
NONINTEREST EXPENSE
The following table reflects the key components of the change in noninterest
expense for the three months ended March 31, 2001 as compared to the same
periods in 2000:
THREE MONTHS ENDED MARCH 31,
2001 2000 % Change
------------ ------------ ------------
(in thousands)
Salaries and wages $ 49,377 $ 45,338 8.9%
Employee benefits 17,973 13,847 29.8
Occupancy expense 16,235 15,357 5.7
Outside services 11,503 12,039 (4.5)
Intangible amortization 10,284 9,140 12.5
Equipment expense 7,532 7,186 4.8
Stationery and supplies 4,400 4,705 (6.5)
Advertising and promotion 4,333 4,079 6.2
Restructuring, integration and
other nonrecurring costs 3,935 -- N/M
Other 24,516 19,886 23.3
------------ ------------
Total noninterest expense $ 150,088 $ 131,577 14.1%
============ ============
N/M - Not Meaningful.
As the table above shows in more detail, noninterest expense increased by 14.1%
for the three months ended March 31, 2001 compared to the same periods in 2000.
Factors causing the increase include:
- - Increase in salaries and wages primarily due to increased staffing as a
result of the Nevada and New Mexico branch acquisitions in the first quarter
of 2001.
- - Increase in employee benefits due to: (1) higher employee benefits due to
increased staffing as a result of the Nevada and New Mexico branch
acquisitions and (2) higher incentive benefits. Also, change from prior year
is greater due to lower net periodic pension benefit credits in the first
quarter of 2001.
- - Increase in intangible amortization due to the Nevada and New Mexico branch
acquisitions. We recorded an additional $111 million in goodwill and core
deposit intangibles at acquisition.
- - The restructuring, integration and other nonrecurring costs relate to 30
branches acquired in Nevada and New Mexico in the first quarter of 2001.
- - Increase in other noninterest expense primarily due to a $5 million
committed charitable contribution made to the First Hawaiian Foundation, a
charitable arm of First Hawaiian that supports nonprofit and community
organizations in the markets where it operates.
ACCOUNTING DEVELOPMENTS
We have a substantial amount of intangible assets, mainly goodwill and core
deposit intangibles, that stem primarily from the BancWest Merger and the Nevada
and New Mexico branch acquisitions. The amortization of these intangible assets
has a significant effect on our net income and earnings per share, among other
items, as measured under current generally accepted accounting principles. The
FASB's Business Combination Project has recently announced a preliminary
proposal that may have a material effect on our financial information.
In summary, the FASB's proposal would end the amortization of goodwill and
instead call for review of the goodwill's carrying value for impairment. If
adopted, this proposal would also apply retroactively to goodwill arising from
acquisitions prior to the implementation date. This change in accounting
practice would have a significant effect on our earnings and related
profitability ratios. For the first quarter of 2001, our net income would
increase by approximately $7 million due to the after-tax effect of the
cessation of the amortization of goodwill.
25
27
INCOME TAXES
The Company's effective income tax rates (exclusive of the tax equivalent
adjustment) for the three months ended March 31, 2001 were 39.8%, as compared to
41.7% for the same period in 2000. The decrease in the effective tax rate was
primarily due to certain benefits of restricted stock and settlement of state
tax audits.
LIQUIDITY AND CAPITAL
Stockholders' equity was $2.045 billion at March 31, 2001, an increase of 2.8%
over $1.989 billion at December 31, 2000. Compared to March 31, 2000,
stockholders' equity at March 31, 2001 increased by $174.872 million, or 9.4%.
The increase was primarily due to net income for the respective periods, less
dividends paid.
Under regulation established to ensure capital adequacy, the Company is required
to maintain minimum amounts of Tier 1 and Total Capital and minimum ratios of
Tier 1 Capital and Total Capital to risk-weighted assets, respectively, and of
Tier 1 Capital to average assets (leverage). These amounts and ratios as of
March 31, 2001 are set forth below:
For Capital
Actual Adequacy Purposes
---------------------------------- ----------------------------------
Amount Ratio Amount Ratio
-------------- -------------- -------------- --------------
(in thousands) (in thousands)
Tier 1 Capital to
Risk-Weighted
Assets $ 1,538,004 9.10% $ 677,438 4.00%
Total Capital to
Risk-Weighted
Assets $ 1,878,738 11.11% $ 1,354,876 8.00%
Tier 1 Capital to
Average Assets $ 1,538,004 8.48% $ 725,556 4.00%
As of March 31, 2001, the Company's depository institution subsidiaries were
categorized as well-capitalized under the applicable federal regulations
regarding the regulatory framework for prompt corrective action. To be
categorized as well-capitalized, a bank must have a Tier 1 risk-based capital
ratio of 6.00% or greater, a total risk-based capital ratio of 10.00% or
greater, a leverage ratio of 5.00% or greater and not be subject to any
agreement, order or directive to meet a specific capital level for any capital
measure.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK MEASUREMENT AND MANAGEMENT
The net interest income of the Company is subject to interest rate risk to the
extent the Company's interest-bearing liabilities (primarily deposits and
borrowings) mature or reprice on a different basis than its interest-earning
assets (primarily loans and leases and investment securities). When
interest-bearing liabilities mature or reprice more quickly than
interest-earning assets during a given period, an increase in interest rates
could reduce net interest income. Similarly, when interest-earning assets mature
or reprice more quickly than interest-bearing liabilities, a decrease in
interest rates could have a negative impact on net interest income. In addition,
the impact of interest rate swings may be exacerbated by factors such as our
customers' propensity to manage their demand deposit balances more or less
aggressively or to refinance mortgage and other consumer loans depending on the
interest rate environment.
The Asset/Liability Committees of the Company and its major subsidiary companies
are responsible for managing interest rate risk. The frequency of meetings of
the Asset/Liability Committees generally range from monthly to quarterly.
Recommendations for changes to a particular subsidiary's interest rate profile,
should they be deemed necessary and exceed established policies, are made to
their respective Board of Directors. Other than loans and leases that are
originated and held for sale and commitments to purchase and sell foreign
currencies and mortgage-backed securities, the Company's interest rate
derivatives and other financial instruments are not entered for trading
purposes.
26
28
INTEREST RATE RISK MEASUREMENT AND MANAGEMENT, CONTINUED
The Company models its net interest income in order to quantify its exposure to
changes in interest rates. Generally, the size of the balance sheet is held
relatively constant and then subjected to interest rate shocks up and down of
100 and 200 basis points each. Each account-level item is repriced according to
its respective contractual characteristics, including any imbedded options which
might exist (e.g. periodic interest rate caps or floors or loans and leases
which permit the borrower to prepay the principal balance of the loan or lease
prior to maturity without penalty). Off-balance-sheet instruments such as
interest rate swaps, swaptions, caps or floors are included as part of the
modeling process. For each interest rate shock scenario, net interest income
over a 12-month horizon is compared against the results of a scenario in which
no interest rate change occurs ("flat rate scenario") to determine the level of
interest rate risk at the time.
The projected impact of 100 and 200 basis-point increases and decreases in
interest rate on the Company's consolidated net interest income over the next 12
months beginning April 1 and January 1, 2001 is shown below:
(dollars in millions) +2% +1% Flat -1% -2%
- --------------------- --- --- ---- --- ---
April 1, 2001
Net Interest Income $831.9 $840.4 $834.4 $819.1 $797.7
Difference from flat $ (2.5) $ 6.0 $ -- $(15.3) $(36.7)
% variance (0.3)% 0.7% --% (1.8)% (4.4)%
- -----------------------------------------------------------------------------------
January 1, 2001
Net Interest Income $816.9 $829.2 $825.2 $811.0 $793.6
Difference from flat $ (8.3) $ 4.0 $ -- $(14.2) $(31.6)
% variance (1.0)% 0.5% --% (1.7)% (3.8)%
The changes in the models are due to differences in interest rate environments
which include the absolute level of interest rates, the shape of the yield curve
and spreads between benchmarks rates.
SIGNIFICANT ASSUMPTIONS UTILIZED AND INHERENT LIMITATIONS
The significant net interest income changes for each interest rate scenario
presented above include assumptions based on accelerating or decelerating
mortgage prepayments in declining or rising scenarios, respectively, and
adjusting deposit levels and mix in the different interest rate scenarios. The
magnitude of changes to both areas in turn are based upon analyses of customers'
behavior in differing rate environments. However, these analyses may differ from
actual future customer behavior. For example, actual prepayments may differ from
current assumptions as prepayments are affected by many variables which cannot
be predicted with certainty (e.g. prepayments of mortgages may differ on fixed
and adjustable loans depending upon current interest rates, expectations of
future interest rates, availability of refinancing, economic benefit to
borrower, financial viability of borrower, etc.).
As with any model for analyzing interest rate risk, certain limitations are
inherent in the method of analysis presented above. For example, the actual
impact on net interest income due to certain interest rare shocks may differ
from those projections presented should market conditions vary from assumptions
used in the analysis. Furthermore, the analysis does not consider the effect of
a changed level of overall economic activity that could exit in certain interest
rate environments. Moreover, the method of analysis used does not take into
account the actions that management might take to respond to changes in interest
rates because of inherent difficulties in determining the likelihood or impact
of any such response.
27
29
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1.1 Certificate of Amendment of Certificate of Incorporation of BancWest Corporation.
Exhibit 10.13 BancWest Corporation 1998 Stock Incentive Plan (Amended and Restated as of
April 19, 2001).*
Exhibit 10.22 Employment Agreement between Walter A. Dods, Jr. and BancWest Corporation, executed
May 7, 2001.*
Exhibit 10.23 Termination Protection Agreement between John K. Tsui and BancWest Corporation,
executed May 7, 2001.*
Exhibit 10.24 Termination Protection Agreement between Howard H. Karr and BancWest Corporation,
executed May 7, 2001.*
Exhibit 10.25 Termination Protection Agreement between Donald G. Horner and BancWest Corporation,
executed May 7, 2001.*
Exhibit 12 Statement regarding computation of ratios.
(b) Reports on Form 8-K None.
*Management contract or compensatory plan or arrangement.
28
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BANCWEST CORPORATION
(REGISTRANT)
Date May 14, 2001 By /s/ HOWARD H. KARR
---------------- -----------------------------------------------------
HOWARD H. KARR
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
29
31
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1.1 Certificate of Amendment of Certificate of Incorporation of
BancWest Corporation.
10.13 BancWest Corporation 1998 Stock Incentive Plan
(Amended and Restated as of April 19, 2001).*
10.22 Employment Agreement between Walter A. Dods, Jr. and BancWest
Corporation, executed May 7, 2001.*
10.23 Termination Protection Agreement between John K. Tsui and
BancWest Corporation, executed May 7, 2001.*
10.24 Termination Protection Agreement between Howard H. Karr and
BancWest Corporation, executed May 7, 2001.*
10.25 Termination Protection Agreement between Donald G. Horner
and BancWest Corporation, executed May 7, 2001.*
12 Statement regarding computation of ratios.
*Management contract or compensatory plan or arrangement.
1
EXHIBIT 3.1.1
STATE OF OF DELAWARE
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
BANCWEST CORPORATION
BANCWEST CORPORATION, a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
- - FIRST: That at a meeting of the Board of Directors of BancWest Corporation
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment
to be advisable and directing that the proposed amendment be considered at
the next annual meeting of the stockholders of said corporation. The
resolution setting forth the proposed amendment is as follows:
FURTHER RESOLVED, that to implement such increase the Board
proposes that the first sentence of Article Fourth of the
Certificate of Incorporation be amended to read as follows:
Fourth. The total number of shares of stock which the
corporation shall have authority to issue is Six Hundred
Million (600,000,000) shares having a par value of One
Dollar ($1.00) per share, divided into three classes: Four
Hundred Million (400,000,000) shares designated as Common
Stock (the "Common Stock"); One Hundred Fifty Million
(150,000,000) shares designated as Class A Common Stock
(the "Class A Common Stock"); and Fifty Million
(50,000,000) shares designated as Preferred Stock (the
"Preferred Stock").
- - SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of said corporation was duly called
and held upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor of the
amendment.
- - THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
- - FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
2
IN WITNESS WHEREOF, BancWest Corporation has caused this certificate to be
signed by Howard H. Karr, an authorized officer, this 19th day of April, 2001.
By: /s/ Howard H. Karr
---------------------------------------
Howard H. Karr
Executive Vice President and
Chief Financial Officer
2
1
EXHIBIT 10.13
BANCWEST CORPORATION
1998 STOCK INCENTIVE PLAN
(Amended and Restated as of April 19, 2001)
2
BANCWEST CORPORATION
1998 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Article Section Page
- ------- ------- ----
PROLOGUE 1
ARTICLE I DEFINITIONS 2-4
ARTICLE II ADMINISTRATION
Section 2.1 The Committee 5
Section 2.2 Authority of the Committee 5
Section 2.3 Indemnification, Insurance 5
ARTICLE III SHARES SUBJECT TO PLAN
Section 3.1 Number of Shares 6
Section 3.2 Lapsed Awards 6
Section 3.3 Adjustments in Authorized Shares 6
ARTICLE IV ELIGIBILITY AND PARTICIPATION
Section 4.1 Eligibility 7
Section 4.2 Participation 7
ARTICLE V OPTIONS
Section 5.1 Type of Options 8
Section 5.2 ISO's 8
Section 5.3 Reload Options 8
Section 5.4 Award Agreement 8
Section 5.5 Exercise Price 8-9
Section 5.6 Duration of Options 9
Section 5.7 Exercise of Options 9
Section 5.8 Payment 9
Section 5.9 Restrictions on Share Transferability 10
Section 5.10 Termination of Employment due to Death,
Disability, or Retirement 10
Section 5.11 Termination of Employment for Other
Reasons 10-11
i
3
ARTICLE VI RESTRICTED STOCK
Section 6.1 Grant of Restricted Stock 12
Section 6.2 Award Agreement 12
Section 6.3 Transferability 12
Section 6.4 Other Restrictions 12
Section 6.5 Removal of Restrictions 12
Section 6.6 Voting Rights 13
Section 6.7 Dividends and Other Distributions 13
Section 6.8 Escrow 13
Section 6.9 Termination of Employment 13
ARTICLE VII OTHER AWARDS
Section 7.1 Types of Awards 14
Section 7.2 Terms and Conditions 14
ARTICLE VIII TRANSFERABILITY OF AWARDS;
BENEFICIARY RIGHTS
Section 8.1 Transferability of Awards 15
Section 8.2 Beneficiary Rights 15
ARTICLE IX CHANGE IN CONTROL 16
ARTICLE X WITHHOLDING
Section 10.1 Tax Withholding 17
Section 10.2 Share Withholding 17
ARTICLE XI AMENDMENT AND TERMINATION
Section 11.1 Amendment 18
Section 11.2 Awards Previously Granted 18
Section 11.3 Rule 16b-3 18
ARTICLE XII MISCELLANEOUS
Section 12.1 Rights of Participants 19
Section 12.2 Miscellaneous Rules 19
Section 12.3 Performance Criteria under
Section 162(m) of the Code 19-20
ii
4
BANCWEST CORPORATION
1998 STOCK INCENTIVE PLAN
(Amended and Restated as of April 19, 2001)
PROLOGUE
The purpose of the BancWest Corporation 1998 Stock Incentive Plan (the
"Plan") is to promote the success and enhance the value of BancWest Corporation
(the "Company") by linking the personal interests of eligible employees to those
of Company stockholders and by providing eligible employees 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
employees upon whose judgment, interest, and special effort the successful
conduct of its operation is largely dependent.
The Board of Directors of the Company adopted the Plan on February 19,
1998 and the Company's stockholders approved the Plan on April 16, 1998. In
accordance with Section 11.1 of the Plan, the Board of Directors amended and
restated the Plan in its entirety as set forth herein effective as of April 19,
2001.
5
ARTICLE I
DEFINITIONS
As used herein the following terms shall have the following meanings
unless the context clearly requires otherwise.
"Beneficiary" means the person, persons, or legal entity designated by
the Participant to receive his benefits under this Plan in the event of his
death. If a Participant fails to make any designation, the person designated
shall not survive the Participant, or the legal entity designated shall no
longer be in existence or shall be legally incapable of receiving benefits
hereunder, Beneficiary shall mean the estate of the Participant.
"Board" means the Board of Directors of the Company.
"Cause" means one or more of the following reasons for the termination
of employment:
(a) The willful and continued failure by the Participant to
substantially perform his duties with the Company or a Subsidiary (other than
any such failure resulting from the Participant's Disability or incapacity due
to mental illness) after a written demand for substantial performance is
delivered to the Participant that specifically identifies the manner in which
the Company or Subsidiary believes that the Participant has not substantially
performed his duties, and the Participant has failed to remedy or take
substantial steps to remedy the situation within ten business days of receiving
such notice;
(b) The Participant's conviction for committing a felony (all
rights of appeal having been exhausted); or
(c) The Participant's willfully engaging in gross misconduct that
is materially and demonstrably injurious to the Company or a Subsidiary.
However, no act or failure to act on the Participant's part shall be considered
"willful" unless such act or omission was not in good faith and without
reasonable belief that such action or omission was in the best interest of the
Company or its Subsidiaries.
The Company or the Subsidiary shall notify the Committee if it believes
a Participant's employment has been terminated for Cause. The Committee shall
determine whether a Participant's employment has been terminated for Cause for
purposes of the Plan. The Committee shall notify the Participant in writing if
it has made a preliminary determination that the Participant's employment was
terminated for Cause. The Participant (and, if he chooses, his legal
representative) shall have an opportunity to be heard by the Committee
concerning the Committee's preliminary determination. After taking into
consideration the points raised by the Participant, the Committee shall make a
final determination as to whether the Participant's employment was terminated
for Cause and shall notify the Participant in writing of its final
determination. If the Company or the Subsidiary notifies the Committee that it
believes that a Participant has been terminated for Cause, the Participant shall
not be able to exercise any option, make any other election, or take any action
that would not be permitted under the terms of the Plan following termination of
employment for Cause unless and until the Committee makes its final decision
that the Participant was not terminated for Cause.
2
6
"Change in Control" means any of the following:
(a) Any "person" (within the meaning of Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d) thereof) other than those listed in items
(i), (ii), or (iii) of this Section becomes the "beneficial owner" (within the
meaning of Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's securities then outstanding.
(i) The Trustees under the Will and of the Estate of
Samuel M. Damon, deceased, and any other persons acting together with them.
(ii) A trustee or other fiduciary holding Shares under an
employee benefit plan of the Company or a Subsidiary.
(iii) A corporation owned directly or indirectly by the
stockholders of the Company (in substantially the same proportions as their
ownership of Shares) becomes the beneficial owner (within the meaning of said
Rule 13d-3), directly or indirectly, of securities of the Company representing
35% or more of the combined voting power of the Company's securities then
outstanding.
(b) During any period of two consecutive calendar years,
individuals who at the beginning of such period constitute the Board (and any
new Director whose election by the Company's stockholders was approved by a vote
of at least two-thirds of the Directors then in office who either were Directors
at the beginning of the period or whose election or nomination for election was
so approved) cease for any reason to constitute a majority thereof.
(c) The stockholders of the Company approve:
(i) A plan of complete liquidation of the Company;
(ii) An agreement for the sale or disposition of all or
substantially all the Company's assets; or
(iii) A merger, consolidation, or reorganization of the
Company with or involving any other corporation, other than a merger,
consolidation, or reorganization that would result in the voting stock of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting stock of the surviving
entity) at least 80% of the combined voting power of the stock that is
outstanding immediately after such merger, consolidation, or reorganization,
unless the Board determines by a majority vote prior to such merger,
consolidation, or reorganization that no Change in Control will occur as a
result of such transaction.
(d) The Board agrees by a majority vote that an event has or is
about to occur that, in fairness to the Participant, is tantamount to a Change
in Control.
A Change in Control shall occur on the first day on which any of the
preceding conditions has been satisfied.
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However, notwithstanding the above, in no event shall a Change in
Control be deemed to have occurred, with respect to a Participant, if the
Participant is part of a purchasing group that consummates the Change in Control
transaction. A Participant shall be deemed "part of a purchasing group" for
purposes of the preceding sentence if he is an equity participant in the
purchasing company or group, except for (i) passive ownership of less than 3% of
the common stock of the purchasing company or (ii) ownership of equity
participation in the purchasing company or group that is otherwise not
significant, as determined prior to the Change in Control by a majority of the
continuing Directors who are not employees of the Company or a Subsidiary.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or such other provision of law of similar purport as may at any time be
substituted therefor.
"Committee" means the Plan's administrative committee appointed pursuant
to Article II.
"Company" means BancWest Corporation.
"Director" means any individual who is a member of the Board.
"Disability" means a disability, as determined by the Social Security
Administration, that is not the result of self-inflicted injury or criminal
conduct on the part of the Participant, and in the case of a determination with
respect to an ISO, meets any additional requirements that may be necessary to
qualify as a permanent and total disability under Section 22(e)(3) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or such other provision of law of similar purport as may at
any time be substituted therefor.
"Fair Market Value" means the average of the high and low sales prices
of a Share on the New York Stock Exchange on the relevant date. If there are no
sales on such date, the Fair Market Value shall be determined as of the
immediately preceding date on which there were Share transactions.
"ISO" means an option to purchase Shares that is designated by the
Committee as an incentive stock option intended to meet the requirements of
Section 422 of the Code.
"Participant" means an employee of the Company or a Subsidiary who has
received an award under the Plan.
"Retirement" means the termination of service as an employee of the
Company and the Subsidiaries on or after (i) attainment of age 65, (ii)
attainment of age 55 and completion of five years of Vesting Service (as defined
in the BancWest Corporation Defined Contribution Plan), or (iii) attainment of
age 62 with the approval of the Committee.
"Shares" means shares of common stock of the Company.
"Subsidiary" means any corporation, partnership, joint venture, or
business trust of which 50% or more of the control thereof is owned, directly or
indirectly, by the Company, provided that for ISO purposes, "Subsidiary" shall
be defined as provided in Section 424(f) of the Code.
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ARTICLE II
ADMINISTRATION
Section 2.1 The Committee.
The Committee shall be composed of at least two members of the Board as
designated from time to time by the Board.
Section 2.2 Authority of the Committee.
(a) The Committee shall select the employees to whom awards shall be
granted under the Plan; determine the size, types, terms, and conditions of
awards; cancel and reissue awards; construe and interpret the Plan and any
agreement or instrument entered into under the Plan; establish, amend, or waive
rules and regulations for the Plan's administration; amend, subject to Article
XI, the terms and conditions of any outstanding award to the extent such terms
and conditions are within its discretion; and make any determination that may be
necessary or advisable for administration of the Plan.
(b) The Committee may from time to time delegate to any subcommittee
composed of Committee members any or all of its powers hereunder. The Committee
may from time to time delegate to any other person or persons any or all of its
ministerial functions hereunder.
(c) All determinations and decisions of the Committee shall be final,
conclusive, and binding on all persons.
Section 2.3 Indemnification, Insurance.
The Company and the Subsidiaries shall indemnify and save harmless
and/or insure each member of the Committee or any subcommittee thereof against
any and all claims, losses, damages, expenses, and liabilities arising from his
responsibilities in connection with this Plan, if the member acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and the Subsidiaries.
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ARTICLE III
SHARES SUBJECT TO PLAN
Section 3.1 Number of Shares.
(a) Subject to adjustment as provided in Section 3.3, the total number
of Shares available for grant under the Plan shall not exceed 8,000,000, which
Shares shall be reacquired or treasury shares.
(b) Notwithstanding any other provision of this Plan, no employee shall
be granted awards in excess of 400,000 Shares during any calendar year. This
limitation is intended to satisfy the requirements of Section 162(m) of the Code
so that compensation attributable to awards hereunder qualify as
performance-based compensation under Section 162(m) of the Code. The limitation
under this Section 3.1(b) shall be subject to adjustment under Section 3.3
hereof, but only to the extent permitted under Section 162(m) of the Code.
Section 3.2 Lapsed Awards.
Subject to any applicable rules under Section 16 of the Exchange Act, if
any award granted under this Plan is canceled, is forfeited, terminates,
expires, or lapses for any reason, any Shares subject to such award shall be
available for the grant of an award under the Plan.
Section 3.3 Adjustments in Authorized Shares.
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, stock split,
split-up, share combination, or other change in the corporate structure of the
Company affecting the number or value of Shares, then the number, class, and
price of Shares subject to outstanding awards under the Plan shall be adjusted
as the Committee may determine in its sole discretion to be appropriate or
equitable to prevent dilution or enlargement of rights. The number of Shares
subject to any award shall always be a whole number. Any adjustment of an ISO
under this Section 3.3 shall be made in such manner so as not to constitute a
"modification" within the meaning of Section 425(h)(3) of the Code.
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ARTICLE IV
ELIGIBILITY AND PARTICIPATION
Section 4.1 Eligibility.
To be eligible to participate in the Plan, an individual must be an
officer or employee of the Company or a Subsidiary who by the nature and scope
of his position influences the results or success of the Company. The Committee
in its sole discretion shall determine if an officer or employee is eligible. A
Director who is not an employee of the Company or a Subsidiary shall not be
eligible to participate in the Plan.
Section 4.2 Participation.
The Committee shall determine from time to time eligible employees to
whom awards shall be granted and the nature and amount of each award. No
eligible employee shall have any right to be granted an award under this Plan.
In addition, nothing in this Plan shall interfere with or limit in any way the
right of the Company or a Subsidiary to terminate any Participant's employment
at any time, nor confer upon any Participant any right to continue in the employ
of the Company or a Subsidiary.
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ARTICLE V
OPTIONS
Section 5.1 Type of Options.
The Committee shall designate at the time of the grant of an option
whether it is a nonqualified stock option or ISO and whether such option shall
be in whole or in part a reload option.
Section 5.2 ISOs.
(a) No ISO may be granted under this Plan after January 21, 2008.
(b) No employee may receive an award of ISOs that are first exercisable
during any calendar year to the extent that the aggregate Fair Market Value of
the Shares (determined at the time the ISOs are granted) exceeds $100,000.
(c) Nothing in this Section 5.2 shall be deemed to prevent the grant of
nonqualified stock options in excess of the maximum amount that may be granted
to a Participant as ISOs under Section 422 of the Code.
Section 5.3 Reload Options.
The Committee may grant reload options subject to such conditions and
provisions as the Committee shall determine. Reload options shall not exceed the
number of Shares used to pay the exercise price of the underlying options and
shall not include any Shares used to satisfy any tax withholding requirements on
account of the exercise of the underlying options. The reload option may not be
exercised during a period longer than the exercise period of the underlying
option that it replaces. The grant of a reload option shall become effective
upon the exercise of the underlying option through the use of Shares. The option
price for a reload option shall not be less than the Fair Market Value of the
Shares on the date the grant of the reload option becomes effective.
Section 5.4 Award Agreement.
Each option grant shall be evidenced by an award agreement that shall
specify the exercise price, the duration of the option, the number of Shares to
which the option pertains, and such other provisions as the Committee shall
determine. The award agreement also shall specify whether the option is intended
to be an ISO.
Section 5.5 Exercise Price.
(a) The exercise price of options shall be determined by the Committee,
provided, however, that the exercise price per Share (including options granted
under Article VII) shall not be less than the Fair Market Value of a Share on
the date the option is granted.
(b) An ISO granted to a Participant who at the time of grant owns
(taking into account Section 424(d) of the Code) Shares representing more than
10% of the total combined voting
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power of all classes of stock of the Company (herein a "Ten Percent
Stockholder") shall have an exercise price that is at least 110% of the Fair
Market Value of the Shares subject to the option.
Section 5.6 Duration of Options.
Each option shall expire at such time as the Committee shall determine
at the time of grant, provided that no ISO shall be exercisable later than the
tenth anniversary date of its grant. Notwithstanding the prior sentence, an ISO
granted to a Ten Percent Stockholder shall not be exercisable later than the
fifth anniversary date of its grant.
Section 5.7 Exercise of Options.
Options granted under the Plan shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance approve, which times, restrictions, and conditions need not be the same
for each grant or for each Participant.
Section 5.8 Payment.
(a) Options shall be exercised by the delivery of a written notice of
exercise to the Secretary of the Company that sets forth the number of Shares
with respect to which the option is to be exercised and is accompanied by full
payment for the exercise price of the Shares. The exercise price shall be
payable to the Company in full either:
(i) in cash or cash equivalent, or
(ii) if approved by the Committee (which approval may be granted
in the award agreement or may be pursuant, and subject, to rules and policies
adopted from time to time by the Committee) by tendering previously acquired
Shares having a Fair Market Value at the time of exercise equal to the total
exercise price pursuant to the options being exercised.
(b) The Committee also may allow cashless exercise of options as
permitted under any law or regulation applicable to the Company or by any other
means that the Committee determines to be consistent with the Plan's purpose.
(c) As soon as practicable after receipt of a written notification of
exercise in proper form and payment in a form approved by the Committee, the
Company shall deliver to the Participant or permitted assignee, Share
certificates in an appropriate amount based upon the number of options
exercised.
(d) The proceeds from such a payment shall be added to the general funds
of the Company and shall be used for general corporate purposes.
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Section 5.9 Restrictions on Share Transferability.
The Committee shall impose such restrictions on any Shares acquired
pursuant to the exercise of an option under the Plan as it may deem advisable,
including without limitation restrictions under applicable Federal securities
laws, the requirements of any stock exchange or market upon which the Shares are
then listed and/or traded, and any blue sky or state securities laws applicable
to the Shares. The Committee shall legend the certificates representing the
Shares to give appropriate notice of such restrictions.
Section 5.10 Termination of Employment Due to Death, Disability, or Retirement.
If the employment of a Participant is terminated by reason of death,
Disability, or Retirement, options granted to the Participant under this Plan
may be exercised only as follows:
(a) Death. If the Participant's employment is terminated by reason of
death, all outstanding options granted to such Participant shall become fully
vested as of the date of his death and shall, subject to Section 5.6, be
exercisable at any time prior to their expiration date or for one year after the
date of his death, whichever period is shorter. The options may be exercised by
the Participant's Beneficiary or by such persons who have acquired the
Participant's rights under the options by will or by the laws of descent and
distribution or permitted transfer.
(b) Disability. If the Participant's employment is terminated by reason
of Disability, all outstanding options granted to such Participant shall become
fully vested as of the date his employment terminates and shall be exercisable
at any time prior to their expiration date or for one year after the date that
his Disability is determined by the Social Security Administration, whichever
period is shorter.
(c) Retirement. If the Participant's employment is terminated by reason
of Retirement, all outstanding options granted to such Participant shall become
fully vested as of the effective date of his Retirement and shall be exercisable
at any time prior to their expiration date or for three years after his date of
Retirement, whichever period is shorter.
(d) Exercise Limitations on ISOs. Notwithstanding Sections 5.10(a), (b),
and (c), the right of a Participant to exercise an ISO shall be subject to the
limitations of Section 422 of the Code.
Section 5.11 Termination of Employment for Other Reasons.
(a) If the employment of a Participant shall terminate for any reason
other than the reasons set forth in Section 5.10 (other than for Cause), all
nonvested options held by the Participant shall vest only if the Committee
determines in its sole discretion to vest all or any portion of such options.
Thereafter, all vested options shall remain exercisable at any time prior to
their expiration date or for three months after the date that the Participant's
employment was terminated, whichever period is shorter. If the Committee does
not vest such options, the options shall be deemed for all purposes to have
remained unvested upon the termination of the Participant's employment.
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(b) If a Participant's employment is terminated for Cause, all of his
outstanding options shall immediately be surrendered to the Company and no
additional exercise periods shall be allowed, regardless of the otherwise vested
status of the options.
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ARTICLE VI
RESTRICTED STOCK
Section 6.1 Grant of Restricted Stock.
The Committee may grant Shares of restricted stock to eligible employees
in such amounts as the Committee shall determine in its sole discretion. Such
Shares of restricted stock may be issued for no consideration other than
services rendered.
Section 6.2 Award Agreement.
Each restricted stock grant shall be evidenced by an award agreement
that specifies the period (or periods) of restriction, the number of Shares of
restricted stock granted, and such other provisions as the Committee shall
determine.
Section 6.3 Transferability.
Except as provided in this Article VI or in the award agreement, Shares
of restricted stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable period of
restriction or upon earlier satisfaction of any other conditions as specified by
the Committee in its sole discretion and set forth in the award agreement.
Subject to Committee approval (which approval may be granted in the award
agreement or may be pursuant, and subject, to rules and policies adopted from
time to time by the Committee), Shares of restricted stock may be surrendered to
satisfy the exercise price of options, or satisfy withholding requirements
resulting from exercise of options, before the period of restriction lapses for
other dispositions of the restricted stock.
Section 6.4 Other Restrictions.
The Committee (i) may impose such other restrictions on any Shares of
restricted stock as it deems advisable, including without limitation
restrictions based upon the achievement of specific performance goals
(Company-wide, subsidiary, or business unit of the Company, and/or individual),
(ii) shall impose restrictions upon transfer of Shares after the period of
restriction as may be required under applicable Federal or state securities
laws, and (iii) may legend the certificates representing restricted stock to
give appropriate notice of such restrictions.
Section 6.5 Removal of Restrictions.
Except as otherwise provided in this Article VI, Shares of restricted
stock shall become freely transferable by the Participant after the last day of
the period of restriction. Once the restrictions on such Shares lapse, the
Participant shall be entitled to have any legend that was added pursuant to
Section 6.4 removed from his Share certificate.
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Section 6.6 Voting Rights.
During the period of restriction, the Participant may exercise full
voting rights with respect to his Shares of restricted stock.
Section 6.7 Dividends and Other Distributions.
Participants holding Shares of restricted stock shall be entitled to
receive all dividends and other distributions paid with respect to such Shares
while they are held during the period of restriction. The Committee shall
establish in its discretion the time at which the Participant shall receive such
dividends and distributions, which time may be any time from the date on which
they are paid generally to stockholders to the end of the period of restriction.
If any such dividends and distributions are paid in Shares, such Shares shall be
subject to the same restrictions on transferability and vesting as the Shares of
restricted stock with respect to which they were paid.
Section 6.8 Escrow.
Even though the certificates evidencing Shares of restricted stock shall
be issued in the name of the Participant, such certificates shall be held by the
Company in escrow subject to delivery to the Participant or to the Company at
such times and in such amounts as shall be directed by the Committee.
Certificates evidencing whole Shares issued as a stock dividend on or split-up
of Shares held in escrow shall be held in escrow on the terms set forth above.
Any fractional Shares so issued and any Shares acquired by a Participant's
exercise of subscription rights in respect of Shares held in escrow shall not be
subject to the escrow provisions and shall be the property of the Participant.
Section 6.9 Termination of Employment.
(a) The number of Shares of restricted stock that are vested as of the
date a Participant's employment terminates shall be determined in accordance
with the terms of the award agreement described in Section 6.2. The
Participant's nonvested Shares of restricted stock shall vest only if the
Committee determines in its sole discretion that they shall vest.
(b) With the exception of termination of employment for Cause, the
Committee in its sole discretion may provide that the restrictions shall lapse
on restricted stock after termination of employment, upon such terms and
provisions as it deems proper. If the Committee does not do so, the restrictions
upon restricted shares shall be deemed for all purposes not to have lapsed.
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ARTICLE VII
OTHER AWARDS
Section 7.1 Types of Awards.
(a) In addition to awards granted under Articles V and VI, the Committee
may grant under this Plan any other type of arrangement with an employee that by
its terms involves or might involve the issuance of (i) Shares or (ii) a
derivative security (as such term is defined in Rule 16a-1 of the Exchange Act,
as such Rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Shares or with a value derived from the
value of the Shares.
(b) Such awards are not restricted to any specified form or structure
and may include, without limitation, sales or bonuses of stock, restricted
stock, ISOs, nonqualified stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, limited stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, and an award may consist of one such security or benefit, or two or more
of them in tandem or in the alternative.
(c) Shares may be issued pursuant to an award for any lawful
consideration as determined by the Committee, including, without limitation,
services rendered by the recipient of such award.
Section 7.2 Terms and Conditions.
Subject to the provisions of this Plan, the Committee, in its sole and
absolute discretion, shall determine all of the terms and conditions of each
award granted under this Article VII, which terms and conditions may include,
among other things, a provision permitting the recipient of such award,
including any recipient who is a director or officer of the Company, to pay the
purchase price of the Shares or other property issuable pursuant to such award,
or such recipient's tax withholding obligation with respect to such issuance, in
whole or in part, by any one or more of the following:
(i) the delivery of previously owned Shares (including
"pyramiding") or other property, provided that the Company is not then
prohibited from purchasing or acquiring Shares or such other property,
(ii) a reduction in the amount of Shares or other property
otherwise issuable pursuant to such Award, or
(iii) the delivery of a promissory note, the terms and
conditions of which shall be determined by the Committee.
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ARTICLE VIII
TRANSFERABILITY OF AWARDS;
BENEFICIARY RIGHTS
Section 8.1 Transferability of Awards.
Each ISO granted under the Plan shall not be transferable other than by
will or the laws of descent or distribution. Except as otherwise set forth in
the Plan, any other award under the Plan may be transferable subject to the
terms and conditions as may be established by the Committee and set forth in the
award agreement.
Section 8.2 Beneficiary Rights.
To the extent permitted under the Plan and the award agreement, after a
Participant's death his Beneficiary may elect within the applicable period to
(i) exercise the Participant's vested awards, (ii) have restrictions removed on
restricted stock, and (iii) make such other elections and take such other
actions as permitted under the Plan and the award agreement.
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ARTICLE IX
CHANGE IN CONTROL
If a Change in Control occurs, then (i) any and all awards held by a
Participant shall become immediately vested and exercisable, (ii) any period of
restrictions and other restrictions on restricted stock shall lapse, (iii)
within ten business days after the occurrence of a Change in Control, the stock
certificates representing Shares of restricted stock shall be delivered to the
Participant without any restrictions or legends thereon (except such
restrictions or legends that are required by Federal or state securities laws),
and (iv) the Committee may modify an award as it deems appropriate prior to the
effective date of the Change in Control.
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ARTICLE X
WITHHOLDING
Section 10.1 Tax Withholding.
The Company may deduct or withhold, or require the Participant to remit
to the Company, such withholding taxes as may be required by law in connection
with the Plan.
Section 10.2 Share Withholding.
(a) A Participant may elect, subject to the Committee's approval (which
approval may be granted in the award agreement or may be pursuant, and subject,
to rules and policies adopted from time to time by the Committee), to satisfy
any withholding taxes incurred in connection with a transaction or event under
the Plan by having the Company withhold from the Shares to be issued Shares, or
by tendering to the Company Shares, having a Fair Market Value on the date in an
amount sufficient to satisfy federal and state withholding taxes as required by
law on the applicable transaction or event. If the Participant is subject to
Rule 16b-3 of the Exchange Act, any such election must comply with the
requirements, if any, of said Rule and be approved by the Committee.
(b) Except with the express consent of the Committee, such withholding
shall not exceed the minimum statutory withholding, based on minimum statutory
withholding rates for federal and state purposes, including payroll taxes that
are applicable to such supplemental taxable income.
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ARTICLE XI
AMENDMENT AND TERMINATION
Section 11.1 Amendment, Termination.
(a) The Board may amend the Plan at any time in its absolute discretion.
Any amendment, termination, or modification that (i) increases the total number
of Shares that may be issued under the Plan, (ii) materially increases the cost
of the Plan or the benefits to Participants, or (iii) changes the Plan
provisions regarding the exercise price shall be subject to approval of the
stockholders of the Company if such approval is required by the Code; Section 16
of the Exchange Act; any national securities exchange or system on which Shares
are then listed, traded, or reported; or any regulatory body having jurisdiction
with respect thereto.
(b) The Plan shall continue in existence until terminated by the Board.
The Board may terminate the Plan at any time in its absolute discretion.
Section 11.2 Awards Previously Granted.
No amendment or termination of the Plan shall in any manner adversely
affect any award previously granted under the Plan without the written consent
of the affected Participant.
Section 11.3 Rule 16b-3.
The Plan is intended to comply with Rule 16b-3 of the Exchange Act. If
the requirements of Rule 16b-3 change, the Board may amend the Plan to comply
with such changes.
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ARTICLE XII
MISCELLANEOUS
Section 12.1 Rights of Participants.
(a) No Participant shall, by reason of his participation in this Plan,
have any interest in any specific asset or assets of the Company or a
Subsidiary.
(b) Neither the adoption of this Plan, the granting of any awards under
this Plan, nor any action of the Board or the Committee in connection with the
Plan shall be held or construed to confer upon any person any legal right to be
continued as an officer or employee of the Company or a Subsidiary.
(c) No Participant shall have the right to assign, pledge, encumber, or
otherwise dispose of (except to a Beneficiary upon his death) any of his
interest in this Plan; nor shall his interest be subject to garnishment,
attachment, transfer by operation of law, or any legal process.
Section 12.2 Miscellaneous Rules.
(a) Wherever used herein the masculine gender shall include the feminine
and the singular number shall include the plural, unless the context clearly
indicates otherwise.
(b) The headings of articles and sections are included herein solely for
convenience of reference, and if there is any conflict between such headings and
the text of the Plan, the text shall be controlling.
(c) To the extent not preempted by Federal law, the Plan shall be
governed, construed, administered, and regulated according to the laws of the
State of Hawaii.
(d) The provisions of this Plan are, in the case of grants, awards, or
other acquisitions of Shares by persons who are subject to Section 16(b) of the
Exchange Act, intended to satisfy exemption requirements under Rule 16b-3, and
the Plan shall be construed accordingly. Any Committee, Board, or shareholder
approval of a transaction that is subject to Section 16(b) of the Exchange Act
may be given in a manner permitted by Rule 16b-3 (e.g., by including an exercise
or tax withholding right in an award agreement, as contemplated by Note (3) to
Rule 16b-3).
(e) The Company's obligations with respect to awards granted under the
Plan shall be binding on any successor to the Company.
(f) The Committee may condition any award under the Plan upon the
Participant's agreement that all disputes under the Plan be settled by
arbitration or another procedure prescribed by the Committee.
Section 12.3 Performance Criteria under Section 162(m) of the Code.
(a) The performance criteria for any award made to any "covered
employee" (as defined in Section 162(m) of the Code) that (i) does not satisfy
the requirements of Treasury Regulation Section 1.162-27(e)(2)(vi) and (ii) is
intended to satisfy the requirements of Section 162(m) of the
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Code shall consist of objective tests based on one or more of the following:
earnings, revenue, operating or net cash flows, financial return ratios, total
stockholder return, or market share.
(b) Performance criteria may relate to the total Company or to any
business unit. Performance targets may be set at a specific level or may be
expressed as relative to the comparable measures at comparison companies or a
defined index. The Committee shall establish specific targets for recipients.
(c) Nothing herein shall preclude the Committee from making any payments
or granting any awards whether or not such payments or awards qualify for tax
deductibility under Section 162(m) of the Code.
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EXHIBIT 12
EXHIBIT 12. STATEMENT RE: COMPUTATION OF RATIOS
BancWest Corporation and Subsidiaries
Computation of Consolidated Ratios of Earnings to Fixed Charges
THREE MONTHS ENDED MARCH 31,
------------------------------
2001 2000
------------ ------------
(dollars in thousands)
Income before income taxes $ 102,584 $ 84,802
------------ ------------
Fixed charges(1):
Interest expense 149,478 122,115
Rental expense 3,715 3,729
------------ ------------
153,193 125,844
Less interest on deposits 120,421 99,498
------------ ------------
Net fixed charges 32,772 26,346
------------ ------------
Earnings, excluding
interest on deposits $ 135,356 $ 111,148
============ ============
Earnings, including
interest on deposits $ 255,777 $ 210,646
============ ============
Ratio of earnings to fixed charges:
Excluding interest on deposits 4.13X 4.22x
Including interest on deposits 1.67X 1.67x
(1) For purposes of computing the consolidated ratios of earnings to fixed
charges, earnings represent income before income taxes plus fixed charges.
Fixed charges, excluding interest on deposits, include interest (other than
on deposits), whether expensed or capitalized, and that portion of rental
expense (generally one third) deemed representative of the interest factor.
Fixed charges, including interest on deposits, consists of the foregoing
items plus interest on deposits.
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EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the date specified in Section 14(i)
below as the Effective Date, by and between Walter A. Dods, Jr. (the "Employee")
and BancWest Corporation, a Delaware corporation (the "Company").
1. Term of Employment.
(a) Basic Rule. The Company shall, and shall cause its subsidiary,
First Hawaiian Bank (the "Bank") to, employ the Employee, and the Employee
agrees to remain in employment with the Company and the Bank, from the Effective
Date (as hereinafter defined) until the third anniversary of the Effective Date
or, if earlier, the date when the Employee's employment terminates pursuant to
subsection (b), (c) or (d) below (the "Term").
(b) Early Termination. Subject to Sections 6 and 7, the Company may
terminate the Employee's employment by giving the Employee 90 days' advance
notice in writing. The Employee may terminate his employment by giving the
Company 90 days' advance notice in writing. Any waiver of notice shall be valid
only if it is made in writing and expressly refers to the applicable notice
requirement of this Section 1. Subject to Section 8, the Employee's employment
shall terminate automatically in the event of his death.
(c) Cause. Subject to the provisions of this subsection (c), upon
written notice to the Employee, the Company may at any time during the Term
terminate the Employee's employment for Cause. For all purposes under this
Agreement, "Cause" shall mean:
(i) A material failure by the Employee to perform substantially
all of his duties, other than a failure resulting from the Employee's
complete or partial incapacity due to physical or mental illness or
impairment, hereunder;
(ii) Gross misconduct, material fraud or material dishonesty to
the Company or its employees in the performance of the Employee's duties
to the Company;
(iii) Conviction of, or plea of "guilty" or "no contest" to, a
felony under the laws of the United States or any state thereof; or
(iv) A material violation by the Employee in the course of his
duties hereunder of any law or regulation to which the Company is
subject provided that the Employee knew or should have known that the
conduct in question was in violation of such law or regulation;
provided, that a violation of such law or regulation shall be deemed to
be "material" only if it results in material financial loss to the
Company or if it materially impairs the Employee's ability to perform
his duties hereunder or his value to the Company as its officer; and
provided, further, that the Employee shall be fully protected by, and
entitled to rely upon, advice of counsel to the Company for purposes of
determining whether the Employee knew or should have known that the
conduct in question was in violation of such law or regulation.
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For purposes of this Agreement, no act or failure to act on the Employee's part
shall constitute "Cause" if done, or omitted, by him in good faith and in the
reasonable belief that his action or omission was in, or not opposed to, the
best interest of the Company. Termination of the Employee for Cause shall be
made by delivery to the Employee of a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the non-employee directors of
the Company's Board of Directors (the "Board") at a meeting of such directors
called and held for such purpose, after 30 days' prior written notice to the
Employee specifying the basis for such termination and the particulars thereof
and, with respect to clauses (i), (ii) and (iv), a reasonable opportunity for
the Employee to cure or otherwise resolve the behavior in question prior to such
meeting, finding that in the reasonable judgment of such directors, the conduct
or event set forth in clause (i), (ii), (iii) or (iv), above, has occurred and
that such occurrence warrants the Employee's termination for Cause.
(d) Disability. Subject to Section 7, the Company may terminate the
Employee's active employment during the Term due to Disability by giving the
Employee 30 days' advance notice in writing. For all purposes under this
Agreement, "Disability" shall mean a physical or mental incapacity that
qualifies the Employee for payments under the Company's or the Bank's group
long-term disability insurance policy or plan (the "LTD Plan"). In the event
that the Employee resumes the performance of substantially all of his duties
hereunder before the termination of his active employment under this subsection
(d) becomes effective, the notice of termination shall automatically be deemed
to have been revoked.
(e) Rights upon Termination. Except as expressly provided in Sections
6, 7 and 8, upon the termination of the Employee's employment, the Employee
shall only be entitled to the compensation, benefits and reimbursements under
the plans, programs or policies described in Sections 3, 4 and 5 and which
accrued or vested during the period preceding the effective date of the
termination or as a consequence of such termination (whether payable on such
termination or thereafter). The payments under this Agreement shall fully
discharge all responsibilities of the Company and the Bank to the Employee,
other than the Employee's entitlement to such accrued or vested compensation,
benefits and reimbursements as referred to in the preceding sentence.
2. Duties and Scope of Employment.
(a) Position. The Company agrees to employ the Employee as Chairman
of the Board ("Chairman") and Chief Executive Officer of the Company during the
Term. In addition, the Company agrees to cause the Bank to employ the Employee
as the Bank's Chairman and Chief Executive Officer during the Term. The
Employee, as Chairman and Chief Executive Officer of the Company and of the
Bank, shall report to the Board. As of the Effective Date, the Employee shall
continue to serve as a member of the Boards of Directors of the Company, the
Bank and Bank of the West, an affiliate of the Company ("Bank of the West").
Thereafter the Company agrees to cause the Employee to be re-elected to the
Boards of Directors of the Company, the Bank and Bank of the West. The
Employee's principal offices for the performance of his duties hereunder shall
be located in Honolulu, Hawaii. However, the Company shall also maintain
suitable offices and secretarial support for the Employee at its offices in the
San Francisco Bay Area for the Employee's use while he is performing services at
that location.
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(b) Obligations. During the Term, the Employee shall devote his
reasonable efforts and full business time to the Company and its affiliates.
During the Term, the Employee shall not render services for compensation to any
other person which would conflict with his services to the Company without the
express prior approval of the Board (including, without limitation, services as
a member of the board of directors of another corporation). Membership on the
board of directors of another corporation shall be approved unless:
(i) Such other corporation is engaged in activities that are
competitive with the Company;
(ii) Such other corporation is below the quality and stature, in
the reasonable judgment of the Board, of the Employee's position under
this Agreement and with the Company's objectives; and
(iii) The Employee's aggregate time commitments to such board
memberships are materially inconsistent with his responsibilities under
this Agreement.
The foregoing shall not preclude the Employee from engaging in appropriate
civic, charitable or religious activities or from devoting a reasonable amount
of time to private investments that do not materially interfere or conflict with
his responsibilities to the Company; provided, however, that in no event shall
the foregoing preclude the Employee from continuing to serve on such boards of
directors or trustees of any business corporations and/or charitable
organizations, or otherwise to serve as a trustee or engage in any other similar
activities, as the Employee serves or engages as of the date of this Agreement.
3. Cash Compensation.
(a) Base Salary. During the Term, the Company agrees to pay the
Employee as compensation for his services to the Company and the Bank a base
salary at the annual rate of $1,030,403 or at such higher rate as the Company
may determine from time to time ("Base Salary"). Such Base Salary shall be
payable in regular installments in accordance with the Company's standard
payroll procedures (but no less frequently than once per month). Once the
Company has increased such Base Salary, it thereafter shall not be reduced for
any reason. The Company covenants that such Base Salary is and shall be, during
the term hereof, the highest base salary of any employee of the Company or any
of its subsidiaries.
(b) Annual Bonus. With respect to each full or partial fiscal year
during the Term, the Employee shall be eligible to earn an annual bonus award in
respect of each fiscal year of the Term (prorated in the event of a partial
fiscal year) (an "Annual Bonus"), with a target of 100% of the Employee's Base
Salary (the "Target Bonus"), based upon the achievement of annual performance
targets established by the Company's Executive Compensation Committee after
consultation with the Employee; provided that Executive shall be entitled to an
Annual Bonus at least equal to 65% of the Employee's Base Salary in respect of
each of the first three full fiscal years of the Term.
(c) LTIP. The Employee shall be entitled to participate in a
long-term incentive plan (the "New LTIP"), under which the Employee shall have
the opportunity to earn maximum awards that are no less favorable than the
maximum awards that the Employee has the
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opportunity to earn pursuant to the Company's long-term incentive plan as in
effect as of the date hereof (the "Company LTIP"); provided, further, that,
under the New LTIP, the Employee's target award shall be at least equal to 50%
of Employee's Base Salary and Employee's maximum award opportunity shall be at
least 200% of such target award.
4. Vacations, Employee Benefits, Equity Arrangements and Perquisites.
(a) Vacation and Employee Benefits.
During the Term, the Employee shall be entitled to not less than four
weeks of paid vacation time per annum. During such Term, the Employee shall also
be eligible to participate in all of the employee benefit plans, executive
compensation programs and fringe benefits (including, but not limited to, all
bonus, incentive, stock, stock option, deferred compensation and retirement
plans and executive loan programs) maintained by the Company or the Bank, on
terms and conditions no less favorable than those provided to the most senior
executives of the Company or the Bank. The determination as to the amounts of
any awards available to the Employee under these programs shall be reviewed at
least annually by the Company's Executive Compensation Committee to ensure that
such amounts are competitive with awards granted to similarly situated senior
executives of publicly held bank holding companies comparable to the Company.
(b) Equity Incentive Compensation.
During the Term, the Employee shall be entitled to participate in,
and receive stock and other equity or equity-based awards, under the stock
option programs and stock purchase programs of BNP Paribas, a societe anonyme or
limited liability banking corporation organized under the laws of the Republic
of France ("BNP"), at levels and on terms consistent with those provided to
similarly situated executives of BNP and/or its subsidiaries.
(c) Perquisites. In addition to the perquisites afforded to other
senior executives of the Company, the Employee shall be entitled to the
following perquisites: (i) security driver and car, (ii) first class air travel
or air travel on corporate aircraft for business purposes for the Employee and
family (security purposes); (iii) tax preparation and financial planning
services, (iv) all other perquisites provided to Employee as of the Effective
Date (subject to reasonable future modifications, so long as such modifications
do not materially reduce, in the aggregate, the benefit of such perquisites to
the Employee), and (iv) payment of an amount in respect of all federal, state
and local income and other employment-related taxes paid by the Employee in
respect of any and all of the perquisites provided to the Employee herein, such
that the perquisites set forth herein are provided at no cost to the Employee.
5. Business Expenses.
During the Term, the Employee shall be authorized to incur necessary
and reasonable travel, entertainment and other business expenses in connection
with his duties
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hereunder. The Company, or the Bank, shall reimburse the Employee for such
expenses upon presentation of an itemized account and appropriate supporting
documentation, all in accordance with the Company's generally applicable
policies.
6. Termination Without Cause or for Good Reason.
(a) Good Reason. For all purposes under this Agreement, "Good Reason"
shall mean that the Employee, without his consent:
(i) Has incurred a reduction in his position, title, authority
or responsibility at the Company, the Bank and/or the Bank of the West
or an adverse change to his reporting relationships, or has not been
re-elected to any or all of the Boards of Directors of the Company, the
Bank, and/or Bank of the West;
(ii) Has incurred a reduction in his Base Salary or Target Bonus
or a reduction in employee benefits (including perquisites, target
long-term incentive compensation, retirement plan and deferred
compensation plan benefits);
(iii) Has been notified that his principal place of work will be
relocated to a location outside the City of Honolulu, Hawaii; or
(iv) Is required to work more than 80 days per year outside of
the Employee's principal offices in the City of Honolulu, Hawaii.
The Employee may also terminate his employment for "Good Reason" (x) if the
Company breaches any material provision of this Agreement, (y) the Company fails
to satisfy the requirements of Section 9 of this Agreement relating to the
assumption of the Agreement by any successor entity, or (z) for any reason or no
reason during the 30-day period following the first anniversary of any Change in
Control (as defined below) that occurs after the Effective Date. For purposes of
this Agreement, any good faith determination of "Good Reason" made by the
Employee shall be conclusive; provided, however, that termination by the
Employee for Good Reason shall be made by delivery to the Board of written
notice, at least 30 days' prior to the effective date of such termination,
specifying the basis for such termination and the particulars thereof and
provided that the Company shall have a reasonable opportunity to cure or
otherwise resolve the problem in question prior to the effective date of such
termination, in which case Good Reason shall not exist. For purposes of this
Agreement, "Change in Control" shall mean (i) any time at which BNP (and its
wholly owned subsidiaries) do not have, by themselves, the ability, to elect a
majority of the Board, (ii) any Person (other than BNP, the Company, any trustee
or other fiduciary holding securities under an employee benefit plan of BNP, the
Company, or any company owned, directly or indirectly, by the shareholders of
BNP or the Company in substantially the same proportions as their ownership of
stock of BNP or the Company), becomes the beneficial owner, directly or
indirectly, of securities of BNP or the Company representing 25% or more of the
combined voting power of BNP's or the Company's then-outstanding securities, or
(iii) the consummation of any merger, consolidation, plan of arrangement,
reorganization or similar transaction or series of transactions in which BNP or
the Company is involved, other than such a transaction or series of transactions
which would result in the shareholders of BNP or the Company immediately prior
thereto continuing to own (either
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by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the securities
of BNP or the Company (or such surviving entity (or the parent, if any))
outstanding immediately after such transaction(s) in substantially the same
proportions as their ownership immediately prior to such transaction(s). For
purposes of the Agreement, a Change in Control shall not be deemed to have
occurred upon the Effective Date by reason of the transactions contemplated by
the Agreement and Plan of Merger dated as of May __, 2001 by and among the
Company, BNP and Newco 1 (the "Merger Agreement") or by reason of any changes to
the Board approved by BNP or its affiliates.
(b) Severance Payment. The Employee shall receive a severance payment
from the Company (the "Severance Payment") if, during the Term of this
Agreement:
(i) The Employee voluntarily resigns his employment with the
Company for Good Reason; or
(ii) The Company terminates the Employee's employment with the
Company for any reason other than Cause, Disability or death.
The Severance Payment shall be made in a lump sum not more than five business
days following the date of the employment termination and shall be in an amount
determined under subsection (c) below. Subject to Section 1(e), the Severance
Payment shall be in lieu of any further payments to the Employee under Section 3
and any further accrual of benefits under Section 4 with respect to periods
subsequent to the date of the employment termination. Notwithstanding the
preceding sentence, however, the Employee shall be entitled to any payments or
acceleration of the vesting of awards, which occur under the terms of any plan
described in Section 4. With respect to any options or other stock-based awards
granted to the Employee pursuant to a stock option plan or other equity-based
plan, the Employee shall be 100% vested in any option or award outstanding upon
a termination of employment pursuant to this Section 6(b). If the Employee's
employment is terminated pursuant to this Section 6(b), then notwithstanding
anything to the contrary in the applicable stock option plans and the Employee's
stock option agreements, the Employee shall have the full term of such option
(but no less than eighteen (18) months) to exercise such options (irrespective
of termination of employment).
(c) Amount. The amount of the Severance Payment shall be equal to the
sum of:
(i) 300% of the sum of (A) the Employee's annual rate of Base
Salary, as in effect on the date of the employment termination, plus (B)
the arithmetic mean of the Annual Bonuses awarded to the Employee by the
Company for the three most recent consecutive fiscal years ending prior
to the date of the employment termination (regardless of when paid),
plus (C) an amount equal to the arithmetic mean of the awards paid or
payable to the Employee under the Company LTIP and/or New LTIP, as
applicable, in respect of the three most recently completed performance
cycles under such plan, provided that such amount shall in no event be
less than the Employee's award payable in year 2000 under the Company
LTIP; plus
(ii) A lump sum payment equal to the sum of (A) the Employee's
Target Bonus for the fiscal year of termination multiplied by a fraction
(the "Fraction"),
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the numerator of which shall equal the number of days the Employee was
employed by the Company in the fiscal year in which the termination
occurs, and the denominator of which shall equal 365, plus (B) the
target award(s) in respect of all performance periods in existence under
the Company LTIP and/or New LTIP, as applicable, as of the date of
termination, to which the Employee may become entitled under the
applicable plan, multiplied by the Fraction.
(d) Insurance Coverage. During the 36-month period commencing upon a
termination of employment described in subsection (b) above (such period, the
"Severance Period"), the Employee (and, where applicable, his dependents) shall
be entitled to continue participation in the group insurance plans maintained by
the Company, including life, disability and health insurance programs, as if he
were still an employee of the Company. Where applicable, the Employee's salary
for purposes of such plans shall be deemed to be equal to his Base Salary as of
the date of termination of the Employee's employment. To the extent that the
Company finds it impossible to cover the Employee under its group insurance
policies during the Severance Period, the Company shall provide the Employee
with individual policies which offer at least the same level of coverage and
which impose not more than the same costs on him. The foregoing notwithstanding,
in the event that the Employee becomes eligible for comparable group insurance
coverage in connection with new employment, the coverage provided by the Company
under this subsection (d) shall become secondary. Any group health continuation
coverage that the Company is required to offer under the Consolidated Omnibus
Budget Reconciliation Act of 1986 ("COBRA") shall commence when coverage under
this subsection (d) terminates.
(e) Additional Benefits
(i) Retirement Benefit Plan Credit. For purposes of eligibility
for retirement, for early commencement or actuarial subsidies under any
Company or Bank (or any affiliate thereof) pension, medical
reimbursement and/or life insurance plan, (x) the Employee will be
credited with years of service in respect of, and age achieved during,
the Severance Period and (y) for purposes of calculating any final pay
averages, the Employee shall be deemed to have earned the Base Salary
and Target Bonus in effect for the plan year in which the Employee's
termination occurs in respect of each plan year of the Severance Period,
subject, in respect of each such plan year, to annual increases
consistent with the Company's past practice (as of the date of this
Agreement), of increasing the rate of Base Salary and Target Bonus
amounts in the ordinary course; provided, that if any benefits afforded
by this Agreement, including the benefits arising from the grant of
additional service and age credit and the inclusion of additional years
of annual compensation, cannot be provided under the qualified pension
plans of the Company due to the qualification provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the benefit, or its
equivalent in value, shall be provided under a nonqualified pension plan
or arrangement of the Company.
(ii) Office and Secretarial Support. During the Severance
Period, the Company shall provide the Employee with appropriate and
suitable office space, and part-time secretarial staff, located in the
Honolulu, Hawaii financial district (or such other location as
designated by the Employee).
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(iii) Equity Incentive Compensation. Upon termination, all
unvested stock options, stock appreciation (phantom stock) rights
("SARs") (if any) and any restricted stock awards shall become fully
vested, and all options and SARs shall remain outstanding and
exercisable for the balance of the term of such awards.
(f) No Mitigation. The Employee shall not be required to mitigate the
amount of any payment contemplated by this Section 6 (whether by seeking new
employment or in any other manner). Except as expressly provided in subsection
(d) above, no such payment shall be reduced by earnings or benefits that the
Employee may receive from any other source.
7. Termination for Disability.
(a) Disability Continuation Period. In the event that, during the
Term, the Company terminates the Employee's employment for Disability, the
Employee shall receive all of the payments and benefit coverage described in
this Section 7. Such payments and benefit coverage shall continue for the period
(the "Disability Continuation Period") commencing on the date when the
employment termination is effective and ending on the earliest of:
(i) The third anniversary of such date of termination;
(ii) The date when the Employee's benefits under the LTD Plan
terminate; or
(iii) The date of the Employee's death.
(b) Compensation. During the Disability Continuation Period, the
Company shall pay the Employee compensation at an annual rate equal to the
difference between:
(i) The sum of the following:
(A) The Employee's annual rate of Base Salary, as in
effect on the date of the employment termination; plus
(B) The arithmetic mean of the annual bonuses awarded to
the Employee by the Company or the Bank for the three most recent
consecutive fiscal years ending prior to the date of the employment
termination (regardless of when paid); plus
(C) The arithmetic mean of the awards awarded to the
Employee by the Company under the Company LTIP for the three most
recently completed performance cycles under such plan, ending prior
to the date of the employment termination (regardless of when paid),
provided that such amount shall in no event be less than the
Employee's award payable in year 2000 under the Company LTIP; minus
(ii) The benefits received by the Employee during the applicable
period under the LTD Plan.
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Compensation under this subsection (b) shall be paid at periodic intervals in
accordance with the Company's standard payroll procedures (but no less
frequently than once per month). In addition to the foregoing, within 10 days of
the termination of the Employee's employment for Disability, the Company shall
pay to the Employee a lump sum payment equal to the sum of (x) the Employee's
Target Bonus for the fiscal year of termination multiplied by the Fraction and
(y) the Employee's target award(s) in respect of all performance periods in
existence under the long-term incentive plan in which the Employee participates
as of the date of termination, multiplied by the Fraction.
(c) Insurance Coverage. During the Disability Continuation Period,
the Employee (and, where applicable, his dependents) shall be entitled to
continue participation in the group insurance plans maintained by the Company,
including life, disability and health insurance programs, as if he were still an
employee of the Company. Where applicable, the Employee's salary for purposes of
such plans shall be deemed to be equal to his Base Salary as of termination of
employment. To the extent that the Company finds it impossible to cover the
Employee under its group insurance policies during the Disability Continuation
Period, the Company shall provide the Employee with individual policies which
offer at least the same level of coverage and which impose not more than the
same costs on him. Any group health continuation coverage that the Company is
required to offer under COBRA shall commence when coverage under this subsection
(c) terminates.
(d) Equity Incentive Compensation. Upon termination, all unvested
stock options, SARs (if any) and any restricted stock awards shall become fully
vested, and all options and SARs shall remain outstanding and exercisable for
the balance of the term of such awards.
(e) Retirement Benefit Plan Credit. For purposes of eligibility for
retirement, for early commencement or actuarial subsidies under any Company (or
subsidiary) pension, medical reimbursement and/or life insurance plan, the
Employee will be credited with years of service and age credit through the
Employee's achievement of age 65; provided, that if any benefits afforded by
this Agreement, including the benefits arising from the grant of additional
service and age credit, cannot be provided under the qualified pension plans of
the Company due to the qualification provisions of the Code, the benefit, or its
equivalent in value, shall be provided under a nonqualified pension plan or
arrangement of the Company.
8. Termination by Reason of Death.
(a) Compensation. In the event that the Employee dies, the Term shall
be automatically terminated and the Company shall pay to the Employee's estate,
in one lump sum within 10 days of such death, an amount equal to the sum of:
(i) The difference between (A) 300% of the sum of (x) the
Employee's annual rate of Base Salary, as in effect on the date of the
employment termination, plus (y) the arithmetic mean of the annual
bonuses awarded to the Employee by the Company or the Bank for the three
most recent consecutive fiscal years ending prior to the date of the
employment termination (regardless of when paid), plus (z) an amount
equal to the arithmetic mean of the awards paid or payable to the
Employee under the Company LTIP and/or New LTIP, as applicable, in
respect of the three most
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recently completed performance cycles under such plan, provided that
such amount shall in no event be less than the Employee's award payable
in year 2000 under the Company LTIP; minus (B) the benefits, if any,
received by the Employee's estate under the Company's death benefit
plan; plus
(ii) A lump sum payment equal to the sum of (A) the Employee's
Target Bonus for the fiscal year of termination multiplied by the
Fraction plus (B) the target award(s) in respect of all performance
periods in existence under the Company LTIP and/or New LTIP, as
applicable, as of the date of termination, to which the Employee may
become entitled under the applicable plan, multiplied by the Fraction.
(b) Insurance Coverage. During the 36-month period commencing upon
the Employee's death, the Employee's applicable dependents shall be entitled to
continue participation in the group insurance plans maintained by the Company,
including health insurance programs, as if the Employee were still an employee
of the Company. Where applicable, the Employee's salary for purposes of such
plans shall be deemed to be equal to his Base Salary as of death. To the extent
that the Company finds it impossible to cover the Employee's dependents under
its group insurance policies during the 36 months following the Employee's
death, the Company shall provide the Employee's dependents with individual
policies which offer at least the same level of coverage and which impose not
more than the same costs on the dependents as were payable by the Employee
and/or his dependents immediately prior to the Employee's death.
(c) Equity Incentive Compensation. Upon termination, all unvested
stock options, SARs (if any) and any restricted stock awards shall become fully
vested, and all options and SARs shall remain outstanding and exercisable for
the balance of the term of such awards.
9. Successors.
(a) Company's Successors. The Company shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets, by an agreement in substance and form
reasonably satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Company would be required to perform it in the absence of a succession. The
Company's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Company had involuntarily terminated his employment without
Cause immediately after such succession becomes effective. For all purposes
under this Agreement, the term "Company" shall include any successor to the
Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by this
Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
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10. Non-Disclosure of Confidential Information.
During the term of this Agreement and thereafter, the Employee shall
not, without the prior written consent of the Board, disclose or use for any
purpose (except in the course of his employment and in furtherance of the
business of the Company and its subsidiaries) confidential information or
proprietary data of the Company and its subsidiaries, except as required by
applicable law or legal process; provided, however, that confidential
information shall not include any information known generally to the public or
ascertainable from public or published information (other than as a result of
unauthorized disclosure by the Employee) or any information of a type not
otherwise considered confidential by persons engaged in the same business or a
business similar to that conducted by the Company and its subsidiaries;
provided, further, that the Employee may disclose the existence and contents of
this Agreement to his family, legal advisors, accountant and other financial
advisors. The Employee agrees to deliver to the Company at the termination of
his employment to the extent reasonably requested by the Company, or at any
other time the Company may reasonably request, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) relating to the
business of the Company and its subsidiaries which he may then possess or have
under his control except for personal notes of the Employee.
11. Non-Competition.
(a) Covenant Not To Compete. This Section 11 shall apply:
(i) During the Term; and
(ii) During the two-year period following the termination of the
Employee's employment by the Company without Cause (other than for
Disability) or by the Employee's resignation for Good Reason.
While this Section 11 applies, the Employee shall not, directly or indirectly,
engage in any banking business or activity in the States of California, Hawaii,
Nevada, New Mexico, Oregon, Washington, or Idaho ("Competitive Business") nor be
employed by, render services of any kind to, advise or receive compensation in
any form from, nor invest or participate in any manner or capacity in, any
entity or person which directly or indirectly engages in a Competitive Business.
(b) Exception. Subsection (a) above shall not preclude investments
in a corporation whose stock is traded on a public market and of which the
Employee owns less than five percent of the outstanding shares.
(c) Purpose of Covenant. It is agreed by both parties hereto that
the covenants contained in subsection (a) above are reasonable and necessary to
protect the confidentiality of the customer lists, trade secrets, and other
confidential information concerning the Company, acquired by the Employee.
(d) Specific Performance. The Employee and the Company recognize and
agree that (i) because of the nature of the businesses in which the Company and
its subsidiaries are engaged and because of the nature of the confidential
information that the Employee has acquired or will acquire with respect to the
businesses of the Company and its subsidiaries, it would be impracticable and
excessively difficult to determine the actual damages of the
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Company or its subsidiaries in the event that the Employee breaches any of the
covenants contained in subsection (a) above, and (ii) damages in an action at
law would not constitute reasonable or adequate compensation to the Company or
its subsidiaries in the event that the Employee breaches any of such covenants.
Accordingly, if the Employee commits any breach of such covenants or threatens
to commit any such breach, then the Company shall have the right to have the
covenants contained in subsection (a) above specifically enforced by any court
having equity jurisdiction, without posting bond or other security, it being
acknowledged and agreed by both parties hereto that any such breach or
threatened breach would cause irreparable injury to the Company and its
subsidiaries and that an injunction may be issued against the Employee. The
rights described in this subsection (d) shall be in addition to, and not in lieu
of, any other rights or remedies available to the Company under law or in
equity.
(e) Modification by Court. If any of the covenants contained in
subsection (a) above is determined to be unenforceable because of the duration
of such covenants or the area covered thereby, then the court making the
determination shall have the power to reduce the duration of such covenants
and/or the area covered thereby, and such covenants, in their reduced form,
shall be enforceable.
(f) Different Jurisdictions. If any of the covenants contained in
subsection (a) above is determined to be wholly unenforceable by the courts of
any domestic or foreign jurisdiction, then the determination shall not bar or in
any way affect the Company's right to relief in the courts of any other
jurisdiction with respect to any breach of such covenants in such other
jurisdiction. Such covenants, as they relate to each jurisdiction, shall be
severable into independent covenants and shall be governed by the laws of the
jurisdiction where a breach occurs.]
12. No Solicitation.
This Section 12 shall apply (a) during the Term and (b) during the
one-year period following the termination of the Employee's employment by the
Company for Cause or by the Employee's voluntary resignation without Good
Reason. While this Section 12 applies, the Employee shall not, directly or
indirectly, contact any employee of the Company or any of its subsidiaries to
solicit such employee to become an employee, partner or independent contractor
of the Employee or any other person.
13. Tax Effect of Payments.
(a) Excise Tax Restoration Payment. In the event that it is
determined that any payment, benefit provided or distribution of any type
(including, without limitation, the value of the acceleration of vesting of, or
payment in respect of, any options or other equity or equity-based awards, and
the payment of any amounts under the Company LTIP (or any other similar plan,
program or arrangement), by the Company, by any of its affiliates, by any one or
more trusts established by the Company (or any of its affiliates) for the
benefit of its employees, by any person who acquires ownership or effective
control of the Company or ownership of a substantial portion of the Company's
assets (within the meaning of Section 280G of the Internal Revenue Code of 1986,
as amended, and the regulations thereunder (the "Code")) or by any affiliate of
such person, to or for the benefit of the Employee, whether paid or payable or
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distributed or distributable pursuant to the terms of this Agreement, an
employment agreement or otherwise (the "Total Payments"), would be subject to
the excise tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest or penalties, are collectively referred to as
the "Excise Tax"), then the Employee shall be entitled to receive an additional
payment (an "Excise Tax Restoration Payment") in an amount that shall fund the
payment by the Employee of any Excise Tax on the Total Payments as well as all
income taxes imposed on the Excise Tax Restoration Payment, any Excise Tax
imposed on the Excise Tax Restoration Payment and any interest or penalties
imposed with respect to taxes on the Excise Tax Restoration Payment or any
Excise Tax.
(b) Determination by Auditors. All mathematical determinations and
all determinations of whether any of the Total Payments are "parachute payments"
(within the meaning of Section 280G of the Code) that are required to be made
under this Agreement, including all determinations of whether an Excise Tax
Restoration Payment is required, of the amount of such Excise Tax Restoration
Payment and of amounts relevant to the last sentence of subsection (c), shall be
made by the independent auditors retained by the Company most recently prior to
the relevant change in control and subject to the Employee's reasonable approval
(the "Auditors"), who shall provide their determination (the "Determination"),
together with detailed supporting calculations regarding the amount of any
Excise Tax Restoration Payment and any other relevant matters, both to the
Company and to the Employee within seven business days of the Employee's
termination date, if applicable, or such earlier time as is requested by the
Company or by the Employee (if the Employee reasonably believes that any of the
Total Payments may be subject to the Excise Tax). If the Auditors determine that
no Excise Tax is payable by the Employee, it shall furnish the Employee with a
written statement that such Auditors have concluded that no Excise Tax is
payable (including the reasons therefor) and that the Employee has substantial
authority not to report any Excise Tax on the Employee's federal income tax
return. If an Excise Tax Restoration Payment is determined to be payable, it
shall be paid to the Employee within five business days after the Determination
is delivered to the Company or the Employee. Any determination by the Auditors
shall be binding upon the Company and the Employee, absent manifest error.
(c) Underpayments and Overpayments. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Auditors hereunder, it is possible that Excise Tax Restoration Payments
may not be made by the Company that should be made ("Underpayments") or that
Excise Tax Restoration Payments will have been made by the Company which should
not have been made ("Overpayments"). In either event, the Auditors shall
determine the amount of the Underpayment or Overpayment that has occurred as
soon as possible. In the case of an Underpayment, the amount of such
Underpayment shall promptly be paid by the Company to or for the benefit of the
Employee. In the case of an Overpayment, the Employee shall, at the direction
and expense of the Company, take such steps as are reasonably necessary
(including the filing of returns and claims for refund), follow reasonable
instructions from, and procedures established by, the Company and otherwise
reasonably cooperate with the Company to correct such Overpayment; provided,
however, that (i) the Employee shall in no event be obligated to return to the
Company an amount greater than the net after-tax portion of the Overpayment that
the Employee has retained or has recovered as a refund from the applicable
taxing authorities and (ii) this provision shall be interpreted in a
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manner consistent with the intent of this agreement, which is to make the
Employee whole, on an after-tax basis, for the application of the Excise Tax, it
being understood that the correction of an Overpayment may result in the
Employee's repaying to the Company an amount which is less than the Overpayment.
14. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement; Modifications. No agreements, representations
or understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof. A modification of this Agreement shall be valid only if it is made in
writing and executed by both parties hereto. This Agreement shall be subject to
the requirements of any applicable banking law, regulation or order.
(d) Withholding Taxes. All payments and imputed payments made under
this Agreement shall be subject to reduction to reflect taxes required to be
withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware (other than their choice-of-law provisions).
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) Arbitration. Except as otherwise provided in Section 11, any
controversy or claim arising out of or relating to this Agreement or the breach
thereof, shall be settled by arbitration in Honolulu, Hawaii, in accordance with
the rules of the American Arbitration Association then in effect. Discovery
shall be permitted to the same extent as in a proceeding under the Federal Rules
of Civil Procedure. Judgment may be entered on the arbitrator's award
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in any court having jurisdiction. All fees and expenses of the arbitrator and of
the Employee's legal counsel shall be paid (or promptly reimbursed to the
Employee) by the Company.
(h) No Assignment. The rights of any person to payments or benefits
under this Agreement shall not be made subject to option or assignment, either
by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection (h) shall be void.
(i) Effective Date. This Agreement shall become effective on the
date of the consummation of the transaction(s) contemplated by the Merger
Agreement. Such date is herein referred to as the "Effective Date."
(j) D&O Indemnification. The Company shall indemnify the Employee to
the fullest extent permitted by applicable law against damages in connection
with his status or performance of duties as an officer or director of the
Company or any of its affiliates and shall maintain and cover the Employee under
customary and appropriate directors and officers liability insurance during the
Term and throughout the period of any applicable statute of limitations with
respect to any acts, omissions or other matters that may have occurred or arisen
during the Term.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall be
deemed to constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the 7th day of May
2001, to be effective as of the Effective Date.
BANCWEST CORPORATION
By: /S/ JOHN K. TSUI
---------------------------------------
Title: Vice Chairman & Chief Credit Officer
/s/ WALTER A. DODS, JR.
---------------------------------------
WALTER A. DODS, JR.
1
EXHIBIT 10.23
TERMINATION PROTECTION AGREEMENT
THIS AGREEMENT is entered into as of the date specified in Section 2
below as the Effective Date, by and between BancWest Corporation, a Delaware
corporation, and John K. Tsui (the "Executive").
Executive is a skilled and dedicated employee who has important
management responsibilities and talents, which benefit the Company. The Company
believes that its best interests will be served if Executive is encouraged to
remain with the Company. The Company has determined that Executive's ability to
perform Executive's responsibilities and utilize Executive's talents for the
benefit of the Company, and the Company's ability to retain Executive as an
employee, will be significantly enhanced if Executive is provided with fair and
reasonable protection from the risks of a change in ownership or control of the
Company. Accordingly, the Company and Executive agree as follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this Agreement
which are defined in Schedule A shall have the meanings set forth in Schedule A.
2. Effective Date; Term.
This Agreement shall be effective as of the date of the consummation of
the transaction(s) contemplated by the Agreement and Plan of Merger dated as of
May 7, 2001 by and among the Company, BNP Paribas, a societe anonyme or limited
liability banking corporation organized under the laws of the Republic of France
("BNP"), and Newco 1 (the "Effective Date") and shall remain in effect until the
third anniversary thereof (the "Term"). Notwithstanding the foregoing, this
Agreement shall, if in effect on the date of a Change of Control, remain in
effect for two years following the Change of Control.
3. Change of Control Benefits.
If, during the Term of this Agreement, Executive's employment with the
Company is terminated at any time by the Company without Cause, or by Executive
for Good Reason (the effective date of either such termination hereafter
referred to as the "Termination Date"), Executive shall be entitled to the
payments and benefits provided hereafter in this Section 3 and as set forth in
this Agreement. Notice of termination without Cause or for Good Reason shall be
given in accordance with Section 14, and shall indicate the specific termination
provision hereunder relied upon, the relevant facts and circumstances and the
Termination Date.
(a) Severance Payments. Within fifteen business days after the
Termination Date, the Company shall pay Executive a cash lump
sum equal to:
(1) 200% of the sum of (A) the Executive's annual rate of
Base Salary, as in effect on the date of the employment
termination, plus (B) the arithmetic mean of the Annual
Bonuses awarded to
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the Executive by the Company for the three most recent
consecutive fiscal years ending prior to the date of the
employment termination (regardless of when paid), plus
(C) an amount equal to the arithmetic mean of the awards
paid or payable to the Executive under the Company LTIP
and/or New LTIP, as applicable, in respect of the three
most recently completed performance cycles under such
plan, provided that such amount shall in no event be
less than the Executive's award payable in year 2000
under the Company LTIP; and
(2) The sum of (A) the Executive's Target Bonus for the
fiscal year of termination multiplied by a fraction (the
"Fraction"), the numerator of which shall equal the
number of days the Executive was employed by the Company
in the fiscal year in which the termination occurs, and
the denominator of which shall equal 365, plus (B) the
target award(s) in respect of all performance periods in
existence under the Company LTIP and/or New LTIP, as
applicable, as of the date of termination, to which the
Executive may become entitled under the applicable plan,
multiplied by the Fraction.
(b) Equity Incentive Compensation. Upon termination, all unvested
stock options, stock appreciation (phantom stock) rights
("SARs") (if any) and any restricted stock awards shall become
fully vested, and all options and SARs shall remain outstanding
and exercisable for the balance of the term of such awards.
(c) Insurance Coverage. During the 24-month period commencing upon a
termination of employment described in this Section 3 above
(such period, the "Severance Period"), the Executive (and, where
applicable, his dependents) shall be entitled to continue
participation in the group insurance plans maintained by the
Company, including life, disability and health insurance
programs, as if he were still an employee of the Company. Where
applicable, the Executive's salary for purposes of such plans
shall be deemed to be equal to his Base Salary as of the date of
termination of the Executive's employment. To the extent that
the Company finds it impossible to cover the Executive under its
group insurance policies during the Severance Period, the
Company shall provide the Executive with individual policies
which offer at least the same level of coverage and which impose
not more than the same costs on him. The foregoing
notwithstanding, in the event that the Executive becomes
eligible for comparable group insurance coverage in connection
with new employment, the coverage provided by the Company under
this subsection (c) shall become secondary. Any group health
continuation coverage that the Company is required to offer
under the Consolidated Omnibus Budget Reconciliation Act of 1986
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("COBRA") shall commence when coverage under this subsection (c)
terminates.
(d) Payment of Earned But Unpaid Amounts. Within fifteen business
days after the Termination Date, the Company shall pay Executive
the Base Salary through the Termination Date, any Bonus earned
but unpaid as of the Termination Date for any previously
completed fiscal year of the Company, all compensation
previously deferred by Executive but not yet paid and
reimbursement for any unreimbursed expenses properly incurred by
Executive in accordance with Company policies prior to the
Termination Date. Executive shall also receive such employee
benefits, if any, to which Executive may be entitled from time
to time under the Executive benefit or fringe benefit plans,
policies or programs of the Company, other than any Company
severance policy (payments and benefits in this subsection (d),
the "Accrued Benefits").
(e) Additional Benefit Plan Service and Age. For purposes of
eligibility for retirement, for early commencement or actuarial
subsidies under any Company (or and subsidiary thereof) pension,
medical reimbursement or life insurance plan (or any such
alternative contractual arrangement that the Executive may have
with the Company (or and subsidiary thereof), Executive will be
credited with an additional two years of service and age beyond
that accrued as of the Termination Date; provided that if any
benefits afforded by this Agreement, including the benefits
arising from the grant of additional service and age, cannot be
provided under the qualified pension plan of the Company due to
the qualification provisions of the Code, the benefit, or its
equivalent in value, shall be provided under a nonqualified
pension plan of the Company.
4. Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and, subject to Section 3(c), compensation earned from such
employment or otherwise shall not reduce the amounts otherwise payable under
this Agreement. No amounts payable under this Agreement shall be subject to
reduction or offset in respect of any claims, which the Company (or any other
person or entity) may have against Executive.
5. Tax Effect of Payments.
(a) Excise Tax Restoration Payment. In the event that it is
determined that any payment, benefit provided or
distribution of any type (including, without limitation,
the value of the acceleration of vesting of, or payment
in respect of, any options or other equity or
equity-based awards, and the payment of any amounts
under the Company LTIP (or any other similar plan,
program or arrangement), by the Company, by
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any of its affiliates, by any one or more trusts
established by the Company (or any of its affiliates)
for the benefit of its employees, by any person who
acquires ownership or effective control of the Company
or ownership of a substantial portion of the Company's
assets (within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code")) or by any affiliate
of such person, to or for the benefit of the Executive,
whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement, an employment
agreement or otherwise (the "Total Payments"), would be
subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise
tax, together with any such interest or penalties, are
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (an "Excise Tax Restoration Payment") in an
amount that shall fund the payment by the Executive of
any Excise Tax on the Total Payments as well as all
income taxes imposed on the Excise Tax Restoration
Payment, any Excise Tax imposed on the Excise Tax
Restoration Payment and any interest or penalties
imposed with respect to taxes on the Excise Tax
Restoration Payment or any Excise Tax.
(b) Determination by Auditors. All mathematical
determinations and all determinations of whether any of
the Total Payments are "parachute payments" (within the
meaning of Section 280G of the Code) that are required
to be made under this Agreement, including all
determinations of whether an Excise Tax Restoration
Payment is required, of the amount of such Excise Tax
Restoration Payment and of amounts relevant to the last
sentence of subsection (c), shall be made by the
independent auditors retained by the Company most
recently prior to the relevant change in control and
subject to the Executive's reasonable approval (the
"Auditors"), who shall provide their determination (the
"Determination"), together with detailed supporting
calculations regarding the amount of any Excise Tax
Restoration Payment and any other relevant matters, both
to the Company and to the Executive within seven
business days of the Executive's termination date, if
applicable, or such earlier time as is requested by the
Company or by the Executive (if the Executive reasonably
believes that any of the Total Payments may be subject
to the Excise Tax). If the Auditors determine that no
Excise Tax is payable by the Executive, it shall furnish
the Executive with a written statement that such
Auditors have concluded that no Excise Tax is payable
(including the reasons therefor) and that the Executive
has substantial authority not to report any Excise Tax
on the Executive's federal income tax return. If an
Excise Tax Restoration Payment is determined to be
payable, it shall be paid to the Executive within five
business days after the Determination is delivered to
the Company or the Executive. Any determination by the
Auditors shall be binding upon the Company and the
Executive, absent manifest error.
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(c) Underpayments and Overpayments. As a result of
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Auditors hereunder, it is possible that Excise Tax
Restoration Payments may not be made by the Company that
should be made ("Underpayments") or that Excise Tax
Restoration Payments will have been made by the Company
which should not have been made ("Overpayments"). In
either event, the Auditors shall determine the amount of
the Underpayment or Overpayment that has occurred as
soon as possible. In the case of an Underpayment, the
amount of such Underpayment shall promptly be paid by
the Company to or for the benefit of the Executive. In
the case of an Overpayment, the Executive shall, at the
direction and expense of the Company, take such steps as
are reasonably necessary (including the filing of
returns and claims for refund), follow reasonable
instructions from, and procedures established by, the
Company and otherwise reasonably cooperate with the
Company to correct such Overpayment; provided, however,
that (i) the Executive shall in no event be obligated to
return to the Company an amount greater than the net
after-tax portion of the Overpayment that the Executive
has retained or has recovered as a refund from the
applicable taxing authorities and (ii) this provision
shall be interpreted in a manner consistent with the
intent of this agreement, which is to make the Executive
whole, on an after-tax basis, for the application of the
Excise Tax, it being understood that the correction of
an Overpayment may result in the Executive's repaying to
the Company an amount which is less than the
Overpayment.
6. Termination for Cause.
Nothing in this Agreement shall be construed to prevent the Company from
terminating Executive's employment for Cause. If Executive is terminated for
Cause, the Company shall have no obligation to make any payments under this
Agreement, except for the Accrued Benefits.
7. Non-Competition
(a) Covenant Not To Compete. This Section 7 shall apply:
(i) During the Term; and
(ii) During the two-year period following the
termination of the Executive's employment by the
Company without Cause (other than for
Disability) or by the Executive's resignation
for Good Reason.
While this Section 7 applies, the Executive shall not,
directly or indirectly, engage in any banking business
or activity in the States of
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California, Hawaii, Nevada, New Mexico, Oregon,
Washington, or Idaho ("Competitive Business") nor be
employed by, render services of any kind to, advise or
receive compensation in any form from, nor invest or
participate in any manner or capacity in, any entity or
person which directly or indirectly engages in a
Competitive Business.
(b) Exception. Subsection (a) above shall not preclude
investments in a corporation whose stock is traded on a
public market and of which the Executive owns less than
five percent of the outstanding shares.
(c) Purpose of Covenant. It is agreed by both parties hereto
that the covenants contained in subsection (a) above are
reasonable and necessary to protect the confidentiality
of the customer lists, trade secrets, and other
confidential information concerning the Company,
acquired by the Executive.
(d) Specific Performance. The Executive and the Company
recognize and agree that (i) because of the nature of
the businesses in which the Company and its subsidiaries
are engaged and because of the nature of the
confidential information that the Executive has acquired
or will acquire with respect to the businesses of the
Company and its subsidiaries, it would be impracticable
and excessively difficult to determine the actual
damages of the Company or its subsidiaries in the event
that the Executive breaches any of the covenants
contained in subsection (a) above, and (ii) damages in
an action at law would not constitute reasonable or
adequate compensation to the Company or its subsidiaries
in the event that the Executive breaches any of such
covenants. Accordingly, if the Executive commits any
breach of such covenants or threatens to commit any such
breach, then the Company shall have the right to have
the covenants contained in subsection (a) above
specifically enforced by any court having equity
jurisdiction, without posting bond or other security, it
being acknowledged and agreed by both parties hereto
that any such breach or threatened breach would cause
irreparable injury to the Company and its subsidiaries
and that an injunction may be issued against the
Executive. The rights described in this subsection (d)
shall be in addition to, and not in lieu of, any other
rights or remedies available to the Company under law or
in equity.
(e) Modification by Court. If any of the covenants contained
in subsection (a) above is determined to be
unenforceable because of the duration of such covenants
or the area covered thereby, then the court making the
determination shall have the power to reduce the
duration of such covenants and/or the area covered
thereby, and such covenants, in their reduced form,
shall be enforceable.
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(f) Different Jurisdictions. If any of the covenants
contained in subsection (a) above is determined to be
wholly unenforceable by the courts of any domestic or
foreign jurisdiction, then the determination shall not
bar or in any way affect the Company's right to relief
in the courts of any other jurisdiction with respect to
any breach of such covenants in such other jurisdiction.
Such covenants, as they relate to each jurisdiction,
shall be severable into independent covenants and shall
be governed by the laws of the jurisdiction where a
breach occurs.
8. No Solicitation; Non-Disclosure of Confidential Information.
(a) This Section 8 shall apply (i) during the Term and (ii)
during the one-year period following the termination of
the Executive's employment by the Company for Cause or
by the Executive's voluntary resignation without Good
Reason. While this Section 8 applies, the Executive
shall not, directly or indirectly, contact any employee
of the Company or any of its subsidiaries to solicit
such employee to become an employee, partner or
independent contractor of the Executive or any other
person.
(b) During the Term of this Agreement and thereafter, the
Executive shall not, without the prior written consent
of the Board, disclose or use for any purpose (except in
the course of his employment and in furtherance of the
business of the Company and its subsidiaries)
confidential information or proprietary data of the
Company and its subsidiaries, except as required by
applicable law or legal process; provided, however, that
confidential information shall not include any
information known generally to the public or
ascertainable from public or published information
(other than as a result of unauthorized disclosure by
the Executive) or any information of a type not
otherwise considered confidential by persons engaged in
the same business or a business similar to that
conducted by the Company and its subsidiaries; provided,
further, that the Executive may disclose the existence
and contents of this Agreement to his family, legal
advisors, accountant and other financial advisors. The
Executive agrees to deliver to the Company at the
termination of his employment to the extent reasonably
requested by the Company, or at any other time the
Company may reasonably request, all memoranda, notes,
plans, records, reports and other documents (and copies
thereof) relating to the business of the Company and its
subsidiaries which he may then possess or have under his
control except for personal notes of the Executive
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9. Indemnification; Director's and Officer's Liability Insurance.
The Company shall indemnify the Executive to the fullest extent
permitted by applicable law against damages in connection with his status or
performance of duties as an officer or director of the Company or any of its
affiliates and shall maintain and cover the Executive under customary and
appropriate directors and officers liability insurance during the Term and
throughout the period of any applicable statute of limitations with respect to
any acts, omissions or other matters that may have occurred or arisen during the
Term.
10. Arbitration.
Except as otherwise provided in Section 7, any controversy or claim
arising out of or relating to this Agreement or the breach thereof, shall be
settled by arbitration in Honolulu, Hawaii, in accordance with the rules of the
American Arbitration Association then in effect. Discovery shall be permitted to
the same extent as in a proceeding under the Federal Rules of Civil Procedure.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. All fees and expenses of the arbitrator and of the Executive's
legal counsel shall be paid (or promptly reimbursed to the Executive) by the
Company.
11. No Assignment.
The rights of any person to payments or benefits under this Agreement
shall not be made subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any action
in violation of this Section 11 shall be void.
12. Withholding.
Notwithstanding any other provision of this Agreement, the Company may,
to the extent required by law, withhold applicable federal, state and local
income and other taxes from any payments due to Executive hereunder.
13. Applicable Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflicts of laws principles
thereof.
14. Notice.
Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of the Executive, mailed notices
shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary
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15. Entire Agreement; Modification.
No agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter hereof. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof. A modification of this
Agreement shall be valid only if it is made in writing and executed by both
parties hereto. This Agreement shall be subject to the requirements of any
applicable banking law, regulation or order.
16. Counterparts.
This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
[Signatures on next page.]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the 7th day of May
2001, to be effective as of the Effective Date.
BANCWEST CORPORATION
By: /s/ Walter A. Dods, Jr.
--------------------------------------
Title: Chairman & Chief Executive Officer
EXECUTIVE:
/s/ John K. Tsui
- --------------------------------------
John K.Tsui
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SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a
different meaning, the following terms, when capitalized, have the meaning
indicated:
I. "Act" means the Securities Exchange Act of 1934, as amended.
II. "Annual Bonus" means the amount payable to Executive under the
Company's applicable annual bonus plan with respect to a fiscal year of the
Company.
III. "Bank" means First Hawaiian Bank.
IV. "Base Salary" means Executive's annual rate of base salary in
effect on the date in question.
V. "Cause" means either of the following:
(1) A material failure by the Executive to perform substantially all
of his duties, other than a failure resulting from the
Executive's complete or partial incapacity due to physical or
mental illness or impairment, hereunder;
(2) Gross misconduct, material fraud or material dishonesty to the
Company or its employees in the performance of the Executive's
duties to the Company;
(3) Conviction of, or plea of "guilty" or "no contest" to, a felony
under the laws of the United States or any state thereof; or
(4) A material violation by the Executive in the course of his
duties hereunder of any law or regulation to which the Company
is subject provided that the Executive knew or should have known
that the conduct in question was in violation of such law or
regulation; provided, that a violation of such law or regulation
shall be deemed to be "material" only if it results in material
financial loss to the Company or if it materially impairs the
Executive's ability to perform his duties hereunder or his value
to the Company as its officer; and provided, further, that the
Executive shall be fully protected by, and entitled to rely
upon, advice of counsel to the Company for purposes of
determining whether the Executive knew or should have known that
the conduct in question was in violation of such law or
regulation.
For purposes of this Agreement, no act or failure to act on the
Executive's part shall constitute "Cause" if done, or omitted,
by him in good faith and in the reasonable belief that his
action or omission was in, or not opposed to, the best interest
of the Company. Termination of the Executive for Cause shall be
made by delivery from the chief executive officer of the Company
(the "CEO") to the Executive of written notice, at least 30
days' prior to the effective date of such
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termination, specifying the basis, in the reasonable judgment of
the CEO, for such termination and the particulars thereof;
provided that with respect to clauses (1), (2) and (4) the
Executive shall have a reasonable opportunity to cure or
otherwise resolve the behavior in question prior to the
effective date of such termination, in which case Cause shall
not exist.
VI. "Change of Control" means the first to occur of any of the
following:
(1) BNP (and any of its wholly owned subsidiaries) do not
have, by themselves, the ability to elect a majority of
the Board,
(2) any Person (other than BNP, the Company, any trustee or
other fiduciary holding securities under an employee
benefit plan of BNP, the Company, or any company owned,
directly or indirectly, by the shareholders of BNP or
the Company in substantially the same proportions as
their ownership of stock of BNP or the Company), becomes
the beneficial owner, directly or indirectly, of
securities of BNP or the Company, representing 25% or
more of the combined voting power of BNP's or the
Company's then-outstanding securities, or
(3) the consummation of any merger, consolidation, plan of
arrangement, reorganization or similar transaction or
series of transactions in which BNP or the Company is
involved, other than such a transaction or series of
transactions which would result in the shareholders of
BNP or the Company immediately prior thereto continuing
to own (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) more than 50% of the combined voting power of
the securities of BNP or the Company (or such surviving
entity (or the parent, if any)) outstanding immediately
after such transaction(s) in substantially the same
proportions as their ownership immediately prior to such
transaction(s).
For purposes of the Agreement, a Change in Control shall
not be deemed to have occurred upon the Effective Date
by reason of the transactions contemplated by the
Agreement and Plan of Merger among BNP, the Company and
Newco 1 dated as of May 7, 2001 or by reason of any
changes to the Board approved by BNP or its affiliates.
VII. "Code" means the Internal Revenue Code of 1986, as amended.
VIII. "Company" means BancWest Corporation and, after a Change of
Control, any successor or successors thereto.
IX. "Company LTIP" means the Company's long-term incentive plan as
in effect as of the date hereof.
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X. "Good Reason" means that, on or after a Change of Control,
without Executive's express prior written approval, other than due to
Executive's Permanent Disability or death, the Executive:
(1) Has incurred a reduction in his position, title, authority or
responsibility at the Company, the Bank and/or the Bank of the
West or an adverse change to his reporting relationships, or has
not been re-elected to any or all of the Boards of Directors of
the Company or the Bank, and/or Bank of the West;
(2) Has incurred a reduction in his Base Salary or Target Bonus or a
reduction in employee benefits (including perquisites, target
long-term incentive compensation, retirement plan and deferred
compensation plan benefits);
(3) Has been notified that his principal place of work will be
relocated to a location outside the City of Honolulu, Hawaii; or
(4) Is required to work more than 80 days per year outside of the
Company's principal offices in the City of Honolulu, Hawaii.
The Executive may also terminate his employment for "Good Reason" (x) if the
Company breaches any material provision of this Agreement or (y) for any reason
or no reason during the 30-day period following the first anniversary of any
Change in Control that occurs after the Effective Date. Except as provided in
(5) above, Executive shall have six months from the time Executive first becomes
aware of the existence of Good Reason to resign for Good Reason. For purposes of
this Agreement, any good faith determination of "Good Reason" made by the
Executive shall be conclusive; provided, however, that termination by the
Executive for Good Reason shall be made by delivery to the Board of written
notice, at least 30 days' prior to the effective date of such termination,
specifying the basis for such termination and the particulars thereof and
provided that the Company shall have a reasonable opportunity to cure or
otherwise resolve the problem in question prior to the effective date of such
termination, in which case Good Reason shall not exist.
XI. "New LTIP" means any long-term incentive plan established by the
Company (or any parent or affiliate thereof) after the Effective Date, in which
the Executive participates as of the date in question.
XII. "Permanent Disability" means a physical or mental incapacity
that qualifies the Executive for payments under the Company's or the Bank of the
West's group long-term disability insurance policy or plan.
XIII. "Target Bonus" means the target Bonus established for Executive
under the Company's annual incentive compensation plan, whether expressed as a
percentage of Base Salary or a dollar amount.
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EXHIBIT 10.24
TERMINATION PROTECTION AGREEMENT
THIS AGREEMENT is entered into as of the date specified in Section 2
below as the Effective Date, by and between BancWest Corporation, a Delaware
corporation, and Howard H. Karr (the "Executive").
Executive is a skilled and dedicated employee who has important
management responsibilities and talents, which benefit the Company. The Company
believes that its best interests will be served if Executive is encouraged to
remain with the Company. The Company has determined that Executive's ability to
perform Executive's responsibilities and utilize Executive's talents for the
benefit of the Company, and the Company's ability to retain Executive as an
employee, will be significantly enhanced if Executive is provided with fair and
reasonable protection from the risks of a change in ownership or control of the
Company. Accordingly, the Company and Executive agree as follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this Agreement
which are defined in Schedule A shall have the meanings set forth in Schedule A.
2. Effective Date; Term.
This Agreement shall be effective as of the date of the consummation of
the transaction(s) contemplated by the Agreement and Plan of Merger dated as of
May 7, 2001 by and among the Company, BNP Paribas, a societe anonyme or limited
liability banking corporation organized under the laws of the Republic of France
("BNP"), and Newco 1 (the "Effective Date") and shall remain in effect until the
third anniversary thereof (the "Term"). Notwithstanding the foregoing, this
Agreement shall, if in effect on the date of a Change of Control, remain in
effect for two years following the Change of Control.
3. Change of Control Benefits.
If, during the Term of this Agreement, Executive's employment with the
Company is terminated at any time by the Company without Cause, or by Executive
for Good Reason (the effective date of either such termination hereafter
referred to as the "Termination Date"), Executive shall be entitled to the
payments and benefits provided hereafter in this Section 3 and as set forth in
this Agreement. Notice of termination without Cause or for Good Reason shall be
given in accordance with Section 14, and shall indicate the specific termination
provision hereunder relied upon, the relevant facts and circumstances and the
Termination Date.
(a) Severance Payments. Within fifteen business days after the
Termination Date, the Company shall pay Executive a cash lump
sum equal to:
(1) 200% of the sum of (A) the Executive's annual rate of
Base Salary, as in effect on the date of the employment
termination, plus (B) the arithmetic mean of the Annual
Bonuses awarded to the
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Executive by the Company for the three most recent
consecutive fiscal years ending prior to the date of the
employment termination (regardless of when paid), plus
(C) an amount equal to the arithmetic mean of the awards
paid or payable to the Executive under the Company LTIP
and/or New LTIP, as applicable, in respect of the three
most recently completed performance cycles under such
plan, provided that such amount shall in no event be
less than the Executive's award payable in year 2000
under the Company LTIP; and
(2) The sum of (A) the Executive's Target Bonus for the
fiscal year of termination multiplied by a fraction (the
"Fraction"), the numerator of which shall equal the
number of days the Executive was employed by the Company
in the fiscal year in which the termination occurs, and
the denominator of which shall equal 365, plus (B) the
target award(s) in respect of all performance periods in
existence under the Company LTIP and/or New LTIP, as
applicable, as of the date of termination, to which the
Executive may become entitled under the applicable plan,
multiplied by the Fraction.
(b) Equity Incentive Compensation. Upon termination, all unvested
stock options, stock appreciation (phantom stock) rights
("SARs") (if any) and any restricted stock awards shall become
fully vested, and all options and SARs shall remain outstanding
and exercisable for the balance of the term of such awards.
(c) Insurance Coverage. During the 24-month period commencing upon a
termination of employment described in this Section 3 above
(such period, the "Severance Period"), the Executive (and, where
applicable, his dependents) shall be entitled to continue
participation in the group insurance plans maintained by the
Company, including life, disability and health insurance
programs, as if he were still an employee of the Company. Where
applicable, the Executive's salary for purposes of such plans
shall be deemed to be equal to his Base Salary as of the date of
termination of the Executive's employment. To the extent that
the Company finds it impossible to cover the Executive under its
group insurance policies during the Severance Period, the
Company shall provide the Executive with individual policies
which offer at least the same level of coverage and which impose
not more than the same costs on him. The foregoing
notwithstanding, in the event that the Executive becomes
eligible for comparable group insurance coverage in connection
with new employment, the coverage provided by the Company under
this subsection (c) shall become secondary. Any group health
continuation coverage that the Company is required to offer
under the Consolidated Omnibus Budget Reconciliation Act of 1986
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("COBRA") shall commence when coverage under this subsection (c)
terminates.
(d) Payment of Earned But Unpaid Amounts. Within fifteen business
days after the Termination Date, the Company shall pay Executive
the Base Salary through the Termination Date, any Bonus earned
but unpaid as of the Termination Date for any previously
completed fiscal year of the Company, all compensation
previously deferred by Executive but not yet paid and
reimbursement for any unreimbursed expenses properly incurred by
Executive in accordance with Company policies prior to the
Termination Date. Executive shall also receive such employee
benefits, if any, to which Executive may be entitled from time
to time under the Executive benefit or fringe benefit plans,
policies or programs of the Company, other than any Company
severance policy (payments and benefits in this subsection (d),
the "Accrued Benefits").
(e) Additional Benefit Plan Service and Age. For purposes of
eligibility for retirement, for early commencement or actuarial
subsidies under any Company (or and subsidiary thereof) pension,
medical reimbursement or life insurance plan (or any such
alternative contractual arrangement that the Executive may have
with the Company (or and subsidiary thereof), Executive will be
credited with an additional two years of service and age beyond
that accrued as of the Termination Date; provided that if any
benefits afforded by this Agreement, including the benefits
arising from the grant of additional service and age, cannot be
provided under the qualified pension plan of the Company due to
the qualification provisions of the Code, the benefit, or its
equivalent in value, shall be provided under a nonqualified
pension plan of the Company.
4. Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and, subject to Section 3(c), compensation earned from such
employment or otherwise shall not reduce the amounts otherwise payable under
this Agreement. No amounts payable under this Agreement shall be subject to
reduction or offset in respect of any claims, which the Company (or any other
person or entity) may have against Executive.
5. Tax Effect of Payments.
(a) Excise Tax Restoration Payment. In the event that it is
determined that any payment, benefit provided or distribution of
any type (including, without limitation, the value of the
acceleration of vesting of, or payment in respect of, any
options or other equity or equity-based awards, and the payment
of any amounts under the Company LTIP (or any other similar
plan, program or arrangement), by the Company, by
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any of its affiliates, by any one or more trusts established by
the Company (or any of its affiliates) for the benefit of its
employees, by any person who acquires ownership or effective
control of the Company or ownership of a substantial portion of
the Company's assets (within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and the regulations
thereunder (the "Code")) or by any affiliate of such person, to
or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement, an employment agreement or otherwise (the "Total
Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest or penalties, are
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (an
"Excise Tax Restoration Payment") in an amount that shall fund
the payment by the Executive of any Excise Tax on the Total
Payments as well as all income taxes imposed on the Excise Tax
Restoration Payment, any Excise Tax imposed on the Excise Tax
Restoration Payment and any interest or penalties imposed with
respect to taxes on the Excise Tax Restoration Payment or any
Excise Tax.
(b) Determination by Auditors. All mathematical determinations and
all determinations of whether any of the Total Payments are
"parachute payments" (within the meaning of Section 280G of the
Code) that are required to be made under this Agreement,
including all determinations of whether an Excise Tax
Restoration Payment is required, of the amount of such Excise
Tax Restoration Payment and of amounts relevant to the last
sentence of subsection (c), shall be made by the independent
auditors retained by the Company most recently prior to the
relevant change in control and subject to the Executive's
reasonable approval (the "Auditors"), who shall provide their
determination (the "Determination"), together with detailed
supporting calculations regarding the amount of any Excise Tax
Restoration Payment and any other relevant matters, both to the
Company and to the Executive within seven business days of the
Executive's termination date, if applicable, or such earlier
time as is requested by the Company or by the Executive (if the
Executive reasonably believes that any of the Total Payments may
be subject to the Excise Tax). If the Auditors determine that no
Excise Tax is payable by the Executive, it shall furnish the
Executive with a written statement that such Auditors have
concluded that no Excise Tax is payable (including the reasons
therefor) and that the Executive has substantial authority not
to report any Excise Tax on the Executive's federal income tax
return. If an Excise Tax Restoration Payment is determined to be
payable, it shall be paid to the Executive within five business
days after the Determination is delivered to the Company or the
Executive. Any determination by the Auditors shall be binding
upon the Company and the Executive, absent manifest error.
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(c) Underpayments and Overpayments. As a result of uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Auditors hereunder, it is possible
that Excise Tax Restoration Payments may not be made by the
Company that should be made ("Underpayments") or that Excise Tax
Restoration Payments will have been made by the Company which
should not have been made ("Overpayments"). In either event, the
Auditors shall determine the amount of the Underpayment or
Overpayment that has occurred as soon as possible. In the case
of an Underpayment, the amount of such Underpayment shall
promptly be paid by the Company to or for the benefit of the
Executive. In the case of an Overpayment, the Executive shall,
at the direction and expense of the Company, take such steps as
are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and
procedures established by, the Company and otherwise reasonably
cooperate with the Company to correct such Overpayment;
provided, however, that (i) the Executive shall in no event be
obligated to return to the Company an amount greater than the
net after-tax portion of the Overpayment that the Executive has
retained or has recovered as a refund from the applicable taxing
authorities and (ii) this provision shall be interpreted in a
manner consistent with the intent of this agreement, which is to
make the Executive whole, on an after-tax basis, for the
application of the Excise Tax, it being understood that the
correction of an Overpayment may result in the Executive's
repaying to the Company an amount which is less than the
Overpayment.
6. Termination for Cause.
Nothing in this Agreement shall be construed to prevent the Company from
terminating Executive's employment for Cause. If Executive is terminated for
Cause, the Company shall have no obligation to make any payments under this
Agreement, except for the Accrued Benefits.
7. Non-Competition
(a) Covenant Not To Compete. This Section 7 shall apply:
(i) During the Term; and
(ii) During the two-year period following the termination of
the Executive's employment by the Company without Cause
(other than for Disability) or by the Executive's
resignation for Good Reason.
While this Section 7 applies, the Executive shall not, directly
or indirectly, engage in any banking business or activity in the
States of
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California, Hawaii, Nevada, New Mexico, Oregon, Washington, or
Idaho ("Competitive Business") nor be employed by, render
services of any kind to, advise or receive compensation in any
form from, nor invest or participate in any manner or capacity
in, any entity or person which directly or indirectly engages in
a Competitive Business.
(b) Exception. Subsection (a) above shall not preclude investments
in a corporation whose stock is traded on a public market and of
which the Executive owns less than five percent of the
outstanding shares.
(c) Purpose of Covenant. It is agreed by both parties hereto that
the covenants contained in subsection (a) above are reasonable
and necessary to protect the confidentiality of the customer
lists, trade secrets, and other confidential information
concerning the Company, acquired by the Executive.
(d) Specific Performance. The Executive and the Company recognize
and agree that (i) because of the nature of the businesses in
which the Company and its subsidiaries are engaged and because
of the nature of the confidential information that the Executive
has acquired or will acquire with respect to the businesses of
the Company and its subsidiaries, it would be impracticable and
excessively difficult to determine the actual damages of the
Company or its subsidiaries in the event that the Executive
breaches any of the covenants contained in subsection (a) above,
and (ii) damages in an action at law would not constitute
reasonable or adequate compensation to the Company or its
subsidiaries in the event that the Executive breaches any of
such covenants. Accordingly, if the Executive commits any breach
of such covenants or threatens to commit any such breach, then
the Company shall have the right to have the covenants contained
in subsection (a) above specifically enforced by any court
having equity jurisdiction, without posting bond or other
security, it being acknowledged and agreed by both parties
hereto that any such breach or threatened breach would cause
irreparable injury to the Company and its subsidiaries and that
an injunction may be issued against the Executive. The rights
described in this subsection (d) shall be in addition to, and
not in lieu of, any other rights or remedies available to the
Company under law or in equity.
(e) Modification by Court. If any of the covenants contained in
subsection (a) above is determined to be unenforceable because
of the duration of such covenants or the area covered thereby,
then the court making the determination shall have the power to
reduce the duration of such covenants and/or the area covered
thereby, and such covenants, in their reduced form, shall be
enforceable.
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(f) Different Jurisdictions. If any of the covenants contained in
subsection (a) above is determined to be wholly unenforceable by
the courts of any domestic or foreign jurisdiction, then the
determination shall not bar or in any way affect the Company's
right to relief in the courts of any other jurisdiction with
respect to any breach of such covenants in such other
jurisdiction. Such covenants, as they relate to each
jurisdiction, shall be severable into independent covenants and
shall be governed by the laws of the jurisdiction where a breach
occurs.
8. No Solicitation; Non-Disclosure of Confidential Information.
(a) This Section 8 shall apply (i) during the Term and (ii)
during the one-year period following the termination of
the Executive's employment by the Company for Cause or
by the Executive's voluntary resignation without Good
Reason. While this Section 8 applies, the Executive
shall not, directly or indirectly, contact any employee
of the Company or any of its subsidiaries to solicit
such employee to become an employee, partner or
independent contractor of the Executive or any other
person.
(b) During the Term of this Agreement and thereafter, the
Executive shall not, without the prior written consent
of the Board, disclose or use for any purpose (except in
the course of his employment and in furtherance of the
business of the Company and its subsidiaries)
confidential information or proprietary data of the
Company and its subsidiaries, except as required by
applicable law or legal process; provided, however, that
confidential information shall not include any
information known generally to the public or
ascertainable from public or published information
(other than as a result of unauthorized disclosure by
the Executive) or any information of a type not
otherwise considered confidential by persons engaged in
the same business or a business similar to that
conducted by the Company and its subsidiaries; provided,
further, that the Executive may disclose the existence
and contents of this Agreement to his family, legal
advisors, accountant and other financial advisors. The
Executive agrees to deliver to the Company at the
termination of his employment to the extent reasonably
requested by the Company, or at any other time the
Company may reasonably request, all memoranda, notes,
plans, records, reports and other documents (and copies
thereof) relating to the business of the Company and its
subsidiaries which he may then possess or have under his
control except for personal notes of the Executive
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9. Indemnification; Director's and Officer's Liability Insurance.
The Company shall indemnify the Executive to the fullest extent
permitted by applicable law against damages in connection with his status or
performance of duties as an officer or director of the Company or any of its
affiliates and shall maintain and cover the Executive under customary and
appropriate directors and officers liability insurance during the Term and
throughout the period of any applicable statute of limitations with respect to
any acts, omissions or other matters that may have occurred or arisen during the
Term.
10. Arbitration.
Except as otherwise provided in Section 7, any controversy or claim
arising out of or relating to this Agreement or the breach thereof, shall be
settled by arbitration in Honolulu, Hawaii, in accordance with the rules of the
American Arbitration Association then in effect. Discovery shall be permitted to
the same extent as in a proceeding under the Federal Rules of Civil Procedure.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. All fees and expenses of the arbitrator and of the Executive's
legal counsel shall be paid (or promptly reimbursed to the Executive) by the
Company.
11. No Assignment.
The rights of any person to payments or benefits under this Agreement
shall not be made subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any action
in violation of this Section 11 shall be void.
12. Withholding.
Notwithstanding any other provision of this Agreement, the Company may,
to the extent required by law, withhold applicable federal, state and local
income and other taxes from any payments due to Executive hereunder.
13. Applicable Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflicts of laws principles
thereof.
14. Notice.
Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of the Executive, mailed notices
shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary
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15. Entire Agreement; Modification.
No agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter hereof. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof. A modification of this
Agreement shall be valid only if it is made in writing and executed by both
parties hereto. This Agreement shall be subject to the requirements of any
applicable banking law, regulation or order.
16. Counterparts.
This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
[Signatures on next page.]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the 7th day of May
2001, to be effective as of the Effective Date.
BANCWEST CORPORATION
By: /s/ Walter A. Dods, Jr.
---------------------------------------
Title: Chairman & Chief Executive Officer
------------------------------------
EXECUTIVE:
/s/ Howard H. Karr
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Howard H. Karr
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SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms, when capitalized, have the meaning indicated:
I. "Act" means the Securities Exchange Act of 1934, as amended.
II. "Annual Bonus" means the amount payable to Executive under the
Company's applicable annual bonus plan with respect to a fiscal year of the
Company.
III. "Bank" means First Hawaiian Bank.
IV. "Base Salary" means Executive's annual rate of base salary in
effect on the date in question.
V. "Cause" means either of the following:
(1) A material failure by the Executive to perform substantially all
of his duties, other than a failure resulting from the
Executive's complete or partial incapacity due to physical or
mental illness or impairment, hereunder;
(2) Gross misconduct, material fraud or material dishonesty to the
Company or its employees in the performance of the Executive's
duties to the Company;
(3) Conviction of, or plea of "guilty" or "no contest" to, a felony
under the laws of the United States or any state thereof; or
(4) A material violation by the Executive in the course of his
duties hereunder of any law or regulation to which the Company
is subject provided that the Executive knew or should have known
that the conduct in question was in violation of such law or
regulation; provided, that a violation of such law or regulation
shall be deemed to be "material" only if it results in material
financial loss to the Company or if it materially impairs the
Executive's ability to perform his duties hereunder or his value
to the Company as its officer; and provided, further, that the
Executive shall be fully protected by, and entitled to rely
upon, advice of counsel to the Company for purposes of
determining whether the Executive knew or should have known that
the conduct in question was in violation of such law or
regulation.
For purposes of this Agreement, no act or failure to act on the
Executive's part shall constitute "Cause" if done, or omitted,
by him in good faith and in the reasonable belief that his
action or omission was in, or not opposed to, the best interest
of the Company. Termination of the Executive for Cause shall be
made by delivery from the chief executive officer of the Company
(the "CEO") to the Executive of written notice, at least 30
days' prior to the effective date of such
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termination, specifying the basis, in the reasonable judgment of
the CEO, for such termination and the particulars thereof;
provided that with respect to clauses (1), (2) and (4) the
Executive shall have a reasonable opportunity to cure or
otherwise resolve the behavior in question prior to the
effective date of such termination, in which case Cause shall
not exist.
VI. "Change of Control" means the first to occur of any of the
following:
(1) BNP (and any of its wholly owned subsidiaries) do not
have, by themselves, the ability to elect a majority of
the Board,
(2) any Person (other than BNP, the Company, any trustee or
other fiduciary holding securities under an employee
benefit plan of BNP, the Company, or any company owned,
directly or indirectly, by the shareholders of BNP or
the Company in substantially the same proportions as
their ownership of stock of BNP or the Company), becomes
the beneficial owner, directly or indirectly, of
securities of BNP or the Company, representing 25% or
more of the combined voting power of BNP's or the
Company's then-outstanding securities, or
(3) the consummation of any merger, consolidation, plan of
arrangement, reorganization or similar transaction or
series of transactions in which BNP or the Company is
involved, other than such a transaction or series of
transactions which would result in the shareholders of
BNP or the Company immediately prior thereto continuing
to own (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) more than 50% of the combined voting power of
the securities of BNP or the Company (or such surviving
entity (or the parent, if any)) outstanding immediately
after such transaction(s) in substantially the same
proportions as their ownership immediately prior to such
transaction(s).
For purposes of the Agreement, a Change in Control shall
not be deemed to have occurred upon the Effective Date
by reason of the transactions contemplated by the
Agreement and Plan of Merger among BNP, the Company and
Newco 1 dated as of May 7, 2001 or by reason of any
changes to the Board approved by BNP or its affiliates.
VII. "Code" means the Internal Revenue Code of 1986, as amended.
VIII. "Company" means BancWest Corporation and, after a Change of
Control, any successor or successors thereto.
IX. "Company LTIP" means the Company's long-term incentive plan as
in effect as of the date hereof.
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X. "Good Reason" means that, on or after a Change of Control,
without Executive's express prior written approval, other than due to
Executive's Permanent Disability or death, the Executive:
(1) Has incurred a reduction in his position, title,
authority or responsibility at the Company, the Bank
and/or the Bank of the West or an adverse change to his
reporting relationships;
(2) Has incurred a reduction in his Base Salary or Target
Bonus or a reduction in employee benefits (including
perquisites, target long-term incentive compensation,
retirement plan and deferred compensation plan
benefits);
(3) Has been notified that his principal place of work will
be relocated to a location outside the City of Honolulu,
Hawaii; or
(4) Is required to work more than 80 days per year outside
of the Company's principal offices in the City of
Honolulu, Hawaii.
The Executive may also terminate his employment for "Good Reason" (x) if the
Company breaches any material provision of this Agreement or (y) for any reason
or no reason during the 30-day period following the first anniversary of any
Change in Control that occurs after the Effective Date. Except as provided in
(5) above, Executive shall have six months from the time Executive first becomes
aware of the existence of Good Reason to resign for Good Reason. For purposes of
this Agreement, any good faith determination of "Good Reason" made by the
Executive shall be conclusive; provided, however, that termination by the
Executive for Good Reason shall be made by delivery to the Board of written
notice, at least 30 days' prior to the effective date of such termination,
specifying the basis for such termination and the particulars thereof and
provided that the Company shall have a reasonable opportunity to cure or
otherwise resolve the problem in question prior to the effective date of such
termination, in which case Good Reason shall not exist.
XI. "New LTIP" means any long-term incentive plan established by the
Company (or any parent or affiliate thereof) after the Effective Date, in which
the Executive participates as of the date in question.
XII. "Permanent Disability" means a physical or mental incapacity
that qualifies the Executive for payments under the Company's or the Bank of the
West's group long-term disability insurance policy or plan.
XIII. "Target Bonus" means the target Bonus established for Executive
under the Company's annual incentive compensation plan, whether expressed as a
percentage of Base Salary or a dollar amount.
1
EXHIBIT 10.25
TERMINATION PROTECTION AGREEMENT
THIS AGREEMENT is entered into as of the date specified in Section 2
below as the Effective Date, by and between BancWest Corporation, a Delaware
corporation, and Donald G. Horner (the "Executive").
Executive is a skilled and dedicated employee who has important
management responsibilities and talents, which benefit the Company. The Company
believes that its best interests will be served if Executive is encouraged to
remain with the Company. The Company has determined that Executive's ability to
perform Executive's responsibilities and utilize Executive's talents for the
benefit of the Company, and the Company's ability to retain Executive as an
employee, will be significantly enhanced if Executive is provided with fair and
reasonable protection from the risks of a change in ownership or control of the
Company. Accordingly, the Company and Executive agree as follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this Agreement
which are defined in Schedule A shall have the meanings set forth in Schedule A.
2. Effective Date; Term.
This Agreement shall be effective as of the date of the consummation of
the transaction(s) contemplated by the Agreement and Plan of Merger dated as of
May 7, 2001 by and among the Company, BNP Paribas, a societe anonyme or limited
liability banking corporation organized under the laws of the Republic of France
("BNP"), and Newco 1 (the "Effective Date") and shall remain in effect until the
third anniversary thereof (the "Term"). Notwithstanding the foregoing, this
Agreement shall, if in effect on the date of a Change of Control, remain in
effect for two years following the Change of Control.
3. Change of Control Benefits.
If, during the Term of this Agreement, Executive's employment with the
Company is terminated at any time by the Company without Cause, or by Executive
for Good Reason (the effective date of either such termination hereafter
referred to as the "Termination Date"), Executive shall be entitled to the
payments and benefits provided hereafter in this Section 3 and as set forth in
this Agreement. Notice of termination without Cause or for Good Reason shall be
given in accordance with Section 14, and shall indicate the specific termination
provision hereunder relied upon, the relevant facts and circumstances and the
Termination Date.
(a) Severance Payments. Within fifteen business days after the
Termination Date, the Company shall pay Executive a cash lump
sum equal to:
(1) 200% of the sum of (A) the Executive's annual rate of
Base Salary, as in effect on the date of the employment
termination,
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plus (B) the arithmetic mean of the Annual Bonuses
awarded to the Executive by the Company for the three
most recent consecutive fiscal years ending prior to the
date of the employment termination (regardless of when
paid), plus (C) an amount equal to the arithmetic mean
of the awards paid or payable to the Executive under the
Company LTIP and/or New LTIP, as applicable, in respect
of the three most recently completed performance cycles
under such plan, provided that such amount shall in no
event be less than the Executive's award payable in year
2000 under the Company LTIP; and
(2) The sum of (A) the Executive's Target Bonus for the
fiscal year of termination multiplied by a fraction (the
"Fraction"), the numerator of which shall equal the
number of days the Executive was employed by the Company
in the fiscal year in which the termination occurs, and
the denominator of which shall equal 365, plus (B) the
target award(s) in respect of all performance periods in
existence under the Company LTIP and/or New LTIP, as
applicable, as of the date of termination, to which the
Executive may become entitled under the applicable plan,
multiplied by the Fraction.
(b) Equity Incentive Compensation. Upon termination, all unvested
stock options, stock appreciation (phantom stock) rights
("SARs") (if any) and any restricted stock awards shall become
fully vested, and all options and SARs shall remain outstanding
and exercisable for the balance of the term of such awards.
(c) Insurance Coverage. During the 24-month period commencing upon a
termination of employment described in this Section 3 above
(such period, the "Severance Period"), the Executive (and, where
applicable, his dependents) shall be entitled to continue
participation in the group insurance plans maintained by the
Company, including life, disability and health insurance
programs, as if he were still an employee of the Company. Where
applicable, the Executive's salary for purposes of such plans
shall be deemed to be equal to his Base Salary as of the date of
termination of the Executive's employment. To the extent that
the Company finds it impossible to cover the Executive under its
group insurance policies during the Severance Period, the
Company shall provide the Executive with individual policies
which offer at least the same level of coverage and which impose
not more than the same costs on him. The foregoing
notwithstanding, in the event that the Executive becomes
eligible for comparable group insurance coverage in connection
with new employment, the coverage provided by the Company under
this subsection (c) shall become secondary. Any group health
continuation coverage that the Company is required to offer
under the Consolidated Omnibus Budget Reconciliation Act of 1986
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("COBRA") shall commence when coverage under this subsection (c)
terminates.
(d) Payment of Earned But Unpaid Amounts. Within fifteen business
days after the Termination Date, the Company shall pay Executive
the Base Salary through the Termination Date, any Bonus earned
but unpaid as of the Termination Date for any previously
completed fiscal year of the Company, all compensation
previously deferred by Executive but not yet paid and
reimbursement for any unreimbursed expenses properly incurred by
Executive in accordance with Company policies prior to the
Termination Date. Executive shall also receive such employee
benefits, if any, to which Executive may be entitled from time
to time under the Executive benefit or fringe benefit plans,
policies or programs of the Company, other than any Company
severance policy (payments and benefits in this subsection (d),
the "Accrued Benefits").
(e) Additional Benefit Plan Service and Age. For purposes of
eligibility for retirement, for early commencement or actuarial
subsidies under any Company (or and subsidiary thereof) pension,
medical reimbursement or life insurance plan (or any such
alternative contractual arrangement that the Executive may have
with the Company (or and subsidiary thereof), Executive will be
credited with an additional two years of service and age beyond
that accrued as of the Termination Date; provided that if any
benefits afforded by this Agreement, including the benefits
arising from the grant of additional service and age, cannot be
provided under the qualified pension plan of the Company due to
the qualification provisions of the Code, the benefit, or its
equivalent in value, shall be provided under a nonqualified
pension plan of the Company.
4. Mitigation.
Executive shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, and, subject to Section 3(c), compensation earned from such
employment or otherwise shall not reduce the amounts otherwise payable under
this Agreement. No amounts payable under this Agreement shall be subject to
reduction or offset in respect of any claims, which the Company (or any other
person or entity) may have against Executive.
5. Tax Effect of Payments.
(a) Excise Tax Restoration Payment. In the event that it is
determined that any payment, benefit provided or distribution of
any type (including, without limitation, the value of the
acceleration of vesting of, or payment in respect of, any
options or other equity or equity-based awards, and the payment
of any amounts under the Company LTIP (or any other similar
plan, program or arrangement), by the Company, by
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any of its affiliates, by any one or more trusts established by
the Company (or any of its affiliates) for the benefit of its
employees, by any person who acquires ownership or effective
control of the Company or ownership of a substantial portion of
the Company's assets (within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and the regulations
thereunder (the "Code")) or by any affiliate of such person, to
or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement, an employment agreement or otherwise (the "Total
Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest or penalties, are
collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (an
"Excise Tax Restoration Payment") in an amount that shall fund
the payment by the Executive of any Excise Tax on the Total
Payments as well as all income taxes imposed on the Excise Tax
Restoration Payment, any Excise Tax imposed on the Excise Tax
Restoration Payment and any interest or penalties imposed with
respect to taxes on the Excise Tax Restoration Payment or any
Excise Tax.
(b) Determination by Auditors. All mathematical determinations and
all determinations of whether any of the Total Payments are
"parachute payments" (within the meaning of Section 280G of the
Code) that are required to be made under this Agreement,
including all determinations of whether an Excise Tax
Restoration Payment is required, of the amount of such Excise
Tax Restoration Payment and of amounts relevant to the last
sentence of subsection (c), shall be made by the independent
auditors retained by the Company most recently prior to the
relevant change in control and subject to the Executive's
reasonable approval (the "Auditors"), who shall provide their
determination (the "Determination"), together with detailed
supporting calculations regarding the amount of any Excise Tax
Restoration Payment and any other relevant matters, both to the
Company and to the Executive within seven business days of the
Executive's termination date, if applicable, or such earlier
time as is requested by the Company or by the Executive (if the
Executive reasonably believes that any of the Total Payments may
be subject to the Excise Tax). If the Auditors determine that no
Excise Tax is payable by the Executive, it shall furnish the
Executive with a written statement that such Auditors have
concluded that no Excise Tax is payable (including the reasons
therefor) and that the Executive has substantial authority not
to report any Excise Tax on the Executive's federal income tax
return. If an Excise Tax Restoration Payment is determined to be
payable, it shall be paid to the Executive within five business
days after the Determination is delivered to the Company or the
Executive. Any determination by the Auditors shall be binding
upon the Company and the Executive, absent manifest error.
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(c) Underpayments and Overpayments. As a result of uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Auditors hereunder, it is possible
that Excise Tax Restoration Payments may not be made by the
Company that should be made ("Underpayments") or that Excise Tax
Restoration Payments will have been made by the Company which
should not have been made ("Overpayments"). In either event, the
Auditors shall determine the amount of the Underpayment or
Overpayment that has occurred as soon as possible. In the case
of an Underpayment, the amount of such Underpayment shall
promptly be paid by the Company to or for the benefit of the
Executive. In the case of an Overpayment, the Executive shall,
at the direction and expense of the Company, take such steps as
are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and
procedures established by, the Company and otherwise reasonably
cooperate with the Company to correct such Overpayment;
provided, however, that (i) the Executive shall in no event be
obligated to return to the Company an amount greater than the
net after-tax portion of the Overpayment that the Executive has
retained or has recovered as a refund from the applicable taxing
authorities and (ii) this provision shall be interpreted in a
manner consistent with the intent of this agreement, which is to
make the Executive whole, on an after-tax basis, for the
application of the Excise Tax, it being understood that the
correction of an Overpayment may result in the Executive's
repaying to the Company an amount which is less than the
Overpayment.
6. Termination for Cause.
Nothing in this Agreement shall be construed to prevent the Company from
terminating Executive's employment for Cause. If Executive is terminated for
Cause, the Company shall have no obligation to make any payments under this
Agreement, except for the Accrued Benefits.
7. Non-Competition
(a) Covenant Not To Compete. This Section 7 shall apply:
(i) During the Term; and
(ii) During the two-year period following the termination of
the Executive's employment by the Company without Cause
(other than for Disability) or by the Executive's
resignation for Good Reason.
While this Section 7 applies, the Executive shall not, directly
or indirectly, engage in any banking business or activity in the
States of
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California, Hawaii, Nevada, New Mexico, Oregon, Washington, or
Idaho ("Competitive Business") nor be employed by, render
services of any kind to, advise or receive compensation in any
form from, nor invest or participate in any manner or capacity
in, any entity or person which directly or indirectly engages in
a Competitive Business.
(b) Exception. Subsection (a) above shall not preclude investments
in a corporation whose stock is traded on a public market and of
which the Executive owns less than five percent of the
outstanding shares.
(c) Purpose of Covenant. It is agreed by both parties hereto that
the covenants contained in subsection (a) above are reasonable
and necessary to protect the confidentiality of the customer
lists, trade secrets, and other confidential information
concerning the Company, acquired by the Executive.
(d) Specific Performance. The Executive and the Company recognize
and agree that (i) because of the nature of the businesses in
which the Company and its subsidiaries are engaged and because
of the nature of the confidential information that the Executive
has acquired or will acquire with respect to the businesses of
the Company and its subsidiaries, it would be impracticable and
excessively difficult to determine the actual damages of the
Company or its subsidiaries in the event that the Executive
breaches any of the covenants contained in subsection (a) above,
and (ii) damages in an action at law would not constitute
reasonable or adequate compensation to the Company or its
subsidiaries in the event that the Executive breaches any of
such covenants. Accordingly, if the Executive commits any breach
of such covenants or threatens to commit any such breach, then
the Company shall have the right to have the covenants contained
in subsection (a) above specifically enforced by any court
having equity jurisdiction, without posting bond or other
security, it being acknowledged and agreed by both parties
hereto that any such breach or threatened breach would cause
irreparable injury to the Company and its subsidiaries and that
an injunction may be issued against the Executive. The rights
described in this subsection (d) shall be in addition to, and
not in lieu of, any other rights or remedies available to the
Company under law or in equity.
(e) Modification by Court. If any of the covenants contained in
subsection (a) above is determined to be unenforceable because
of the duration of such covenants or the area covered thereby,
then the court making the determination shall have the power to
reduce the duration of such covenants and/or the area covered
thereby, and such covenants, in their reduced form, shall be
enforceable.
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(f) Different Jurisdictions. If any of the covenants contained in
subsection (a) above is determined to be wholly unenforceable by
the courts of any domestic or foreign jurisdiction, then the
determination shall not bar or in any way affect the Company's
right to relief in the courts of any other jurisdiction with
respect to any breach of such covenants in such other
jurisdiction. Such covenants, as they relate to each
jurisdiction, shall be severable into independent covenants and
shall be governed by the laws of the jurisdiction where a breach
occurs.
8. No Solicitation; Non-Disclosure of Confidential Information.
(a) This Section 8 shall apply (i) during the Term and (ii)
during the one-year period following the termination of
the Executive's employment by the Company for Cause or
by the Executive's voluntary resignation without Good
Reason. While this Section 8 applies, the Executive
shall not, directly or indirectly, contact any employee
of the Company or any of its subsidiaries to solicit
such employee to become an employee, partner or
independent contractor of the Executive or any other
person.
(b) During the Term of this Agreement and thereafter, the
Executive shall not, without the prior written consent
of the Board, disclose or use for any purpose (except in
the course of his employment and in furtherance of the
business of the Company and its subsidiaries)
confidential information or proprietary data of the
Company and its subsidiaries, except as required by
applicable law or legal process; provided, however, that
confidential information shall not include any
information known generally to the public or
ascertainable from public or published information
(other than as a result of unauthorized disclosure by
the Executive) or any information of a type not
otherwise considered confidential by persons engaged in
the same business or a business similar to that
conducted by the Company and its subsidiaries; provided,
further, that the Executive may disclose the existence
and contents of this Agreement to his family, legal
advisors, accountant and other financial advisors. The
Executive agrees to deliver to the Company at the
termination of his employment to the extent reasonably
requested by the Company, or at any other time the
Company may reasonably request, all memoranda, notes,
plans, records, reports and other documents (and copies
thereof) relating to the business of the Company and its
subsidiaries which he may then possess or have under his
control except for personal notes of the Executive
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9. Indemnification; Director's and Officer's Liability Insurance.
The Company shall indemnify the Executive to the fullest extent
permitted by applicable law against damages in connection with his status or
performance of duties as an officer or director of the Company or any of its
affiliates and shall maintain and cover the Executive under customary and
appropriate directors and officers liability insurance during the Term and
throughout the period of any applicable statute of limitations with respect to
any acts, omissions or other matters that may have occurred or arisen during the
Term.
10. Arbitration.
Except as otherwise provided in Section 7, any controversy or claim
arising out of or relating to this Agreement or the breach thereof, shall be
settled by arbitration in Honolulu, Hawaii, in accordance with the rules of the
American Arbitration Association then in effect. Discovery shall be permitted to
the same extent as in a proceeding under the Federal Rules of Civil Procedure.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. All fees and expenses of the arbitrator and of the Executive's
legal counsel shall be paid (or promptly reimbursed to the Executive) by the
Company.
11. No Assignment.
The rights of any person to payments or benefits under this Agreement
shall not be made subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any action
in violation of this Section 11 shall be void.
12. Withholding.
Notwithstanding any other provision of this Agreement, the Company may,
to the extent required by law, withhold applicable federal, state and local
income and other taxes from any payments due to Executive hereunder.
13. Applicable Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflicts of laws principles
thereof.
14. Notice.
Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of the Executive, mailed notices
shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary
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15. Entire Agreement; Modification.
No agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter hereof. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof. A modification of this
Agreement shall be valid only if it is made in writing and executed by both
parties hereto. This Agreement shall be subject to the requirements of any
applicable banking law, regulation or order.
16. Counterparts.
This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
[Signatures on next page.]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the 7th day of May
2001, to be effective as of the Effective Date.
BANCWEST CORPORATION
By: /s/ Walter A. Dods, Jr.
--------------------------------------
Title: Chairman & Chief Executive Officer
EXECUTIVE:
/s/ Donald G. Horner
- ----------------------------------
Donald G. Horner
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SCHEDULE A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms, when capitalized, have the meaning indicated:
I. "Act" means the Securities Exchange Act of 1934, as amended.
II. "Annual Bonus" means the amount payable to Executive under the
Company's applicable annual bonus plan with respect to a fiscal year of the
Company.
III. "Bank" means First Hawaiian Bank.
IV. "Base Salary" means Executive's annual rate of base salary in
effect on the date in question.
V. "Cause" means either of the following:
(1) A material failure by the Executive to perform substantially all
of his duties, other than a failure resulting from the
Executive's complete or partial incapacity due to physical or
mental illness or impairment, hereunder;
(2) Gross misconduct, material fraud or material dishonesty to the
Company or its employees in the performance of the Executive's
duties to the Company;
(3) Conviction of, or plea of "guilty" or "no contest" to, a felony
under the laws of the United States or any state thereof; or
(4) A material violation by the Executive in the course of his
duties hereunder of any law or regulation to which the Company
is subject provided that the Executive knew or should have known
that the conduct in question was in violation of such law or
regulation; provided, that a violation of such law or regulation
shall be deemed to be "material" only if it results in material
financial loss to the Company or if it materially impairs the
Executive's ability to perform his duties hereunder or his value
to the Company as its officer; and provided, further, that the
Executive shall be fully protected by, and entitled to rely
upon, advice of counsel to the Company for purposes of
determining whether the Executive knew or should have known that
the conduct in question was in violation of such law or
regulation.
For purposes of this Agreement, no act or failure to act on the
Executive's part shall constitute "Cause" if done, or omitted,
by him in good faith and in the reasonable belief that his
action or omission was in, or not opposed to, the best interest
of the Company. Termination of the Executive for Cause shall be
made by delivery from the chief executive officer of the Company
(the "CEO") to the Executive of written notice, at least 30
days' prior to the effective date of such
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termination, specifying the basis, in the reasonable judgment of
the CEO, for such termination and the particulars thereof;
provided that with respect to clauses (1), (2) and (4) the
Executive shall have a reasonable opportunity to cure or
otherwise resolve the behavior in question prior to the
effective date of such termination, in which case Cause shall
not exist.
VI. "Change of Control" means the first to occur of any of the
following:
(1) BNP (and any of its wholly owned subsidiaries) do not
have, by themselves, the ability to elect a majority of
the Board,
(2) any Person (other than BNP, the Company, any trustee or
other fiduciary holding securities under an employee
benefit plan of BNP, the Company, or any company owned,
directly or indirectly, by the shareholders of BNP or
the Company in substantially the same proportions as
their ownership of stock of BNP or the Company), becomes
the beneficial owner, directly or indirectly, of
securities of BNP or the Company, representing 25% or
more of the combined voting power of BNP's or the
Company's then-outstanding securities, or
(3) the consummation of any merger, consolidation, plan of
arrangement, reorganization or similar transaction or
series of transactions in which BNP or the Company is
involved, other than such a transaction or series of
transactions which would result in the shareholders of
BNP or the Company immediately prior thereto continuing
to own (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) more than 50% of the combined voting power of
the securities of BNP or the Company (or such surviving
entity (or the parent, if any)) outstanding immediately
after such transaction(s) in substantially the same
proportions as their ownership immediately prior to such
transaction(s).
For purposes of the Agreement, a Change in Control shall
not be deemed to have occurred upon the Effective Date
by reason of the transactions contemplated by the
Agreement and Plan of Merger among BNP, the Company and
Newco 1 dated as of May 7, 2001 or by reason of any
changes to the Board approved by BNP or its affiliates.
VII. "Code" means the Internal Revenue Code of 1986, as amended.
VIII. "Company" means BancWest Corporation and, after a Change of
Control, any successor or successors thereto.
IX. "Company LTIP" means the Company's long-term incentive plan as
in effect as of the date hereof.
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X. "Good Reason" means that, on or after a Change of Control,
without Executive's express prior written approval, other than due to
Executive's Permanent Disability or death, the Executive:
(1) Has incurred a reduction in his position, title,
authority or responsibility at the Company, the Bank
and/or the Bank of the West or an adverse change to his
reporting relationships;
(2) Has incurred a reduction in his Base Salary or Target
Bonus or a reduction in employee benefits (including
perquisites, target long-term incentive compensation,
retirement plan and deferred compensation plan
benefits);
(3) Has been notified that his principal place of work will
be relocated to a location outside the City of Honolulu,
Hawaii; or
(4) Is required to work more than 80 days per year outside
of the Company's principal offices in the City of
Honolulu, Hawaii.
The Executive may also terminate his employment for "Good Reason" (x) if the
Company breaches any material provision of this Agreement or (y) for any reason
or no reason during the 30-day period following the first anniversary of any
Change in Control that occurs after the Effective Date. Except as provided in
(5) above, Executive shall have six months from the time Executive first becomes
aware of the existence of Good Reason to resign for Good Reason. For purposes of
this Agreement, any good faith determination of "Good Reason" made by the
Executive shall be conclusive; provided, however, that termination by the
Executive for Good Reason shall be made by delivery to the Board of written
notice, at least 30 days' prior to the effective date of such termination,
specifying the basis for such termination and the particulars thereof and
provided that the Company shall have a reasonable opportunity to cure or
otherwise resolve the problem in question prior to the effective date of such
termination, in which case Good Reason shall not exist.
XI. "New LTIP" means any long-term incentive plan established by the
Company (or any parent or affiliate thereof) after the Effective Date, in which
the Executive participates as of the date in question.
XII. "Permanent Disability" means a physical or mental incapacity
that qualifies the Executive for payments under the Company's or the Bank of the
West's group long-term disability insurance policy or plan.
XIII. "Target Bonus" means the target Bonus established for Executive
under the Company's annual incentive compensation plan, whether expressed as a
percentage of Base Salary or a dollar amount.
