Exhibit 10.1

 

August 10, 2004

 

Mr. James M. Wells III

 

Dear Jim:

 

This letter explains the agreement between SunTrust Bank (SunTrust or the
Company) and you with regard to the insurance bonus arrangement.

 

Background

 

Prior to 2004, you were a participant in the Crestar Executive Life Insurance
Plan (ELI). Some years ago you transferred your ownership interest in the ELI
policy insuring your life (the Policy) to a trust, for which SunTrust Bank
serves as Trustee (the Trust and the Trustee, respectively). Thereafter, the
Trustee and SunTrust each paid a portion of the premiums on the Policy, and on
rollout, the cash value and death benefits of the Policy were to be split
between the Trust and the Company so that the Company would recover its premium
costs in accordance with the Policy’s collateral assignment.

 

As you are well aware, the IRS issued new guidelines in 2003 regarding the
taxation of split dollar life insurance arrangements, such as those under the
ELI Plan. It was not clear in 2003, nor is it clear now, whether existing split
dollar policies are subject to the new tax rules. In addition, it was unclear in
2003 whether split dollar premiums paid by an employer should be treated as
loans to an executive under the Sarbanes-Oxley Act.

 

In order to protect your life insurance benefits under these new restrictions,
the Company and you agreed last year to make changes to the structure of your
ELI benefit. The following paragraphs describe those changes and our mutual
commitments.

 

Policy Rollout

 

The new IRS split dollar regulations offered a “safe harbor” termination of a
split dollar arrangement prior to January 1, 2004, which allowed a participant
full access to the policy’s cash value without any current tax consequences.
Therefore, in order to protect the Policy’s equity of $138,069 on a tax-free
basis, SunTrust and the Trustee agreed to an early “roll-out” of the Policy in
December 2003. The Company received its cumulative net premium payments of
$297,975 and released its rights in the Policy, thus terminating the split
dollar arrangement. Consequently, as of the December rollout, the collateral
assignment ended, you no longer participate in the ELI Plan and the Company no
longer has an obligation to make any future premium payments under the ELI Plan
or the Policy.

 

Insurance Bonus

 

While the 2003 rollout of the Policy protected the Policy’s accumulated cash
value, it will still be necessary to pay annual premiums to maintain the
Policy’s death benefit coverage – 4 times your base pay until you reach age 65,
when it reduces by 50 percent. Currently, the Policy’s death benefits are $2.6
million. This amount is also subject to adjustment to correspond to future
changes in your base pay.

 

Because we no longer have the option of a split dollar arrangement, we agreed
that the Company will pay you an annual insurance bonus to help compensate for
the ELI benefit you have lost. The bonus will be equal to the premium amount the
Company would have paid if the Policy had continued until rollout under the ELI
Plan, taking into consideration contributions from you or the trust. Our outside
consultants (The Newport Group) have determined that the required Company
premium for 2004,

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calculated on a level premium basis to age 65, would be $47,485. See the
enclosed Exhibit A Inforce Policy Projection. To help account for the taxes you
will owe on this amount, the Company will increase your insurance bonus by a
“make whole” amount. For 2004, the make whole bonus is $17,929 (see column 2).
Therefore, your total insurance bonus for 2004 is $65,414 (sum of columns 1 and
2), which is treated as taxable compensation to you. Your net after-tax
compensation received (assuming a 40.35% combined effective federal and state
tax rate) would be $39,019. The total 2004 premium to Pacific Life is $47,485
(see column (5)) resulting in a net outlay for you of $8,466 which is what you
would have paid had your ELI participation continued (see column (11)). For 2005
and later years, the premium and bonus amounts will be adjusted to reflect
changes caused by interest crediting rates and other variables.

 

SunTrust’s payment of the annual insurance bonus is contingent on continuation
of the Policy in accordance with the terms of this Agreement. The Company will
pay the annual insurance bonus to you until the time your Policy would have
rolled out to you under the ELI Plan — the earliest of (1) the date that would
have been the Policy’s normal scheduled rollout date under the ELI Plan (i.e.,
generally the later of your attainment of age 65 or the 15th anniversary date of
the policy); (2) termination of your Policy; (3) written notice by the Company
to you if any portion of the annual premium due on your Policy is not timely
paid or any provision of this Agreement is breached and such failure or such is
not cured within thirty (30) days after such notice; or (4) your death.

 

As you and I have discussed, however, the Company will allow the Policy’s
premium payment period to be extended to age 70 (rather than age 65), provided
that the Policy’s death benefit is not decreased from the scheduled amount
(i.e., 4 times base pay until age 65, when it reduces by 50%). An extension will
have the effect of reducing the total annual premium but, of course, will
increase by five years the period over which the Trustee must continue paying
premiums. The Exhibit B Inforce Policy Projection (columns (5) through (10))
shows the projections based on a level annual premium of $27,700 to age 70. The
projected amounts will also fluctuate in future years depending on interest
crediting rates and other factors.

 

Note the following additional conditions to which you and the Trustee must
agree. Once SunTrust stops paying the insurance bonus, the Trustee will bear the
full risk of premium payments and Policy lapse. Under no circumstances will
SunTrust extend the period for paying the annual insurance bonus to you beyond
your age 65 or any earlier applicable date described in the preceding paragraph.
If the Policy’s death benefit is reduced from what it would have been under the
ELI Plan during the period in which the Company is paying the annual insurance
bonus, then you and the Trustee agree to notify the Company and to accept a pro
rata reduction in the Company’s annual payment to you. In addition, you and the
Trustee agree that the Trustee will pay annual premiums into the Policy by your
age 70 (see column 5 of Exhibit B) that are equal in the aggregate to the sum of
the premium bonus the Company has paid to you (see column 1). The attached
summary explains this arrangement in more detail.

 

Change in Control

 

In the event of a “Change in Control” of SunTrust Banks, Inc., the terms set
forth in this Agreement, (including the annual insurance bonus and gross up)
shall be binding on any successor to the Company. For purposes of this letter,
“Change in Control” has the same meaning as set forth in the Change in Control
Agreement entered into by you and SunTrust Banks, Inc. on March 22, 2001. The
annual insurance bonus described in this letter shall not be taken into account
for purposes of determining the “Current Compensation Package” under the Change
in Control Agreement and shall be paid independently of any other payment under
the Change in Control Agreement.

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Miscellaneous

 

This Agreement shall not be amended, altered or modified and no term may be
waived without the written consent of the Company and you and the Trustee. The
Company has no rights or interest in the death proceeds or in the cash surrender
value of the Policy. The Company and you agree that the value of any bonuses you
receive pursuant to this Agreement shall not be considered as compensation,
salary or any other earnings (regardless of how designated) for purposes of
determining any benefit under any of the plans, policies or arrangements of the
Company or SunTrust Banks, Inc. or any affiliate, including but not limited to,
pension, retirement, bonus, severance or any other agreement, and that this
Agreement is not and shall not be construed as an employee benefit plan subject
to ERISA. This Agreement shall be governed by the laws of the state of Georgia
(excluding its choice-of-law rules). Failure of the Company or you to enforce
any of the provisions of this Agreement shall not be considered a waiver of that
provision or any other provision. This Agreement shall be binding on the Trustee
and its successors and assigns; on the beneficiaries and distributes of the
Trust; and on your estate, executors, personal representatives, heirs, devisees
and issue.

 

Conclusion

 

We know that these insurance benefits are important to you and your family, and
we wanted to take appropriate steps to protect them. If you have any questions
about this Agreement, please don’t hesitate to call me. I can be reached at ST
Net 340-6479.

 

You and the Trustee should sign below to indicate your agreement to the terms
and conditions of this Agreement. Return one copy of this signed Agreement to
me. Upon your signature and the signature of the Trustee, this Agreement is
effective as of December 17, 2003, and it supersedes any and all other
agreements, with respect to the bonus arrangement described herein.

 

Sincerely,

 

Jo Anne Rioli Moeller

Senior Vice President

Compensation and Executive Benefits

 

Enclosures

 

Copy to: Claire Craighill

 

Consent of James M. Wells III

 

I have seen, understand and agree to the terms of this letter:

 

/s/ James M. Wells III

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    August 19, 2004

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James M. Wells III                   Date:

/s/ Thomas N. Churning

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    August 19, 2004

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Witness                   Date: