Document:

<PAGE>

                                  Exhibit 10.27

                              SEPARATION AGREEMENT
                              --------------------

          THIS SEPARATION AGREEMENT (the "Agreement") is made and entered into
as of the 22nd day of September, 2000, by and between LAWRENCE M. JOHNSON
("Executive") and PACIFIC CENTURY FINANCIAL CORPORATION, a Delaware corporation
(the "Company").

                              STATEMENT OF PURPOSE

          Executive is employed as an executive officer of the Company and
Executive's employment with the Company and membership on the Company's Board of
Directors will terminate on such date as the Company shall employ a successor to
Executive (the "Date of Termination"). The Company and Executive wish to set out
in this Agreement the termination payments and other benefits that will be
provided to Executive to settle in full all matters relating to Executive's
employment and termination with the Company.

          NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:

          1. Termination of Employment; Termination Payments.
             ------------------------------------------------

               (a) The Company and Executive acknowledge that Executive shall
serve as the Chief Executive Officer of the Company and shall remain on the
Company's payroll and receive base salary at the current annual rate through the
Date of Termination. In addition, until the Date of Termination Executive shall
continue to participate in all stock option, performance grants, board
<PAGE>

compensation programs, bonus, pension, savings, retirement, profit-sharing,
subscription, or other incentive or deferred compensation plans of the Company,
as well as any welfare and benefit plans, practices, policies and programs of
the Company in accordance with their respective terms in which Executive
participates as of the date hereof.

               (b) Upon the Date of Termination, Executive shall receive a
lump-sum payment of $2,940,000.

          2. Incentive Plan Continuation. Executive will continue participation
             ---------------------------
in the Company's 2000 1-year Incentive Plan and in the Company's 1998, 1999, and
2000, 3-year Incentive Plans per plan specifications.

          3. Defined Benefit Plans. Executive currently participates in the
             ---------------------
Employees' Retirement Plan of Bank of Hawaii (the "Retirement Plan") and the
Excess Benefit Plan. In the year immediately following the Date of Termination,
Executive shall be entitled to receive a pension benefit under the Retirement
Plan and the Excess Benefit Plan. For purposes of each of these plans, Executive
shall receive age and service credit through age 62 whether through such plans
or otherwise.

          4. Money Purchase and Profit Sharing Plans. Executive shall be
             ---------------------------------------
eligible to receive the Profit Sharing Plan, Excess Profit Sharing Plan, Money
Purchase Plan, and Excess Money Purchase Plan contributions for the year in
which the Date of Termination occurs.

          5. Continuation of Medical and Dental Benefits; Retiree Medical. The
             -------------------------------------------
Company shall continue to provide Executive and his current spouse with medical
and dental benefits on the basis such benefits are currently provided until
Executive attains age 62. After Executive attains age
<PAGE>

62, Executive and his current spouse shall be provided with retiree medical
benefits in accordance with the terms and provisions of the Company's retiree
medical plan.

          6. Stock Awards. Executive has been awarded options to purchase the
             ------------
Company's common stock under the Company's Stock Option Plan of 1994 (the "1994
Plan") and the Company's Stock Option Plan of 1988 (the "1988 Plan").
Non-qualified stock options (NSO's) granted under the 1994 Plan and exercisable
on the Date of Termination shall remain exercisable for a period of five years
following the Date of Termination, but not longer than the exercise period, in
accordance with the terms of the 1994 Plan. NSO's granted under the 1988 Plan
and exercisable on the Date of Termination shall remain exercisable for a period
of one year following the Date of Termination, but not longer than the exercise
period, in accordance with the terms of the 1988 Plan. Executive's incentive
stock options (ISO's) granted under the 1994 and 1988 Plan will be disqualified
and be treated as NSO's as provided above.

          7. Life Insurance and Supplemental Life Insurance.
             -----------------------------------------------

               (a) Beginning in the year following the Date of Termination, the
Company shall provide Executive with Basic Life Insurance in the amount of
$50,000. Each succeeding year, the amount of coverage shall be reduced by 15%.
After the fourth year of coverage, the coverage shall remain constant at
$20,000, subject to no further reductions.

               (b) Following the Date of Termination, Executive shall also have
the right to continue his Supplemental Life Insurance in the amount of $100,000.
Each succeeding year,
<PAGE>

the amount of coverage shall be reduced by 15%. After the fourth year of
coverage, the Supplemental Life Insurance will terminate.

          8.  Additional Benefits. In addition to the foregoing, the Company
              -------------------
agrees that, until Executive attains age 70, the Company will provide and
maintain Executive with a furnished office in downtown Honolulu, parking space,
and part-time (20 hours per week) executive secretary and will continue to
provide the security system including security gate installed at Executive's
current residence, but not any replacement residence. The Company will provide
the services of a security officer (currently David Oyama) to respond to alarms
at Executive's residence and to provide miscellaneous services such as drop off
and pick up at airport. Security officer services are not to exceed 10 hours per
month.

          9.  Tax Withholding and Reporting. The Company shall be entitled to
              -----------------------------
withhold from the benefits and payments described herein any and all taxes
required to be withheld by applicable law.

          10. Release of the Company. Executive, on behalf of himself and his
              ----------------------
heirs, personal representatives, successors and assigns, hereby releases and
forever discharges the Company, its affiliates, and each and every one of their
respective present and former directors, officers, employees, agents, successors
and assigns from and against any and all claims, demands, damages, actions,
causes of action, costs and expenses, which Executive now has, may ever have had
or may have hereafter upon or by reason of any matter, cause or thing occurring,
done or omitted to be done prior to the date of this Agreement, including
without limitation all
<PAGE>

"Employment-Related Claims" and all rights and claims Executive has or might
have under the Worker Adjustment and Retraining Notification Act, the Age
Discrimination in Employment Act of 1967, as amended ("ADEA"), Title VII of the
Civil Rights amended, and the Americans with Disabilities Act of 1990, as
amended. For purposes of this Agreement, "Employment-Related Claims" means all
rights and claims Executive has or may have related to his employment by or
status as an employee, officer or director of the Company or any of its
affiliates or the termination of that employment or status or to any employment
practices and policies of the Company or its affiliates.

          Executive acknowledges and agrees that he has read this release in its
entirety and that this release is a general release of all known and unknown
claims, including rights and claims arising under ADEA. Executive further
acknowledges and agrees that:

          (a)  This release does not release, waive or discharge any rights or
               claims that may arise for actions or omissions after the date of
               this Agreement;

          (b)  Executive is entering into this Agreement and releasing, waiving
               and discharging rights or claims only in exchange for
               consideration which he is not already entitled to receive;

          (c)  Executive has been advised, and is being advised by this release,
               to consult with an attorney before executing this Agreement;

          (d)  Executive has been advised, and is being advised by this release,
               that he has up to twenty-one (21) days within which to consider
               this release; and

          (e)  Executive is aware that this release will not become effective or
               enforceable until seven (7) days following his execution of this
               Agreement and that he may revoke this release at any time during
               such period by delivering (or causing to be delivered) to the
               Company at the address provided in Paragraph 11 hereof written
               notice of his revocation of this release no later than 5:00 p.m.
               eastern time on the seventh (7th) full date following his
               execution of this Agreement.
<PAGE>

          11. Release of Executive. In consideration of Executive's entering
              --------------------
into this Agreement, the Company, for itself, its affiliates and their
respective predecessors, successors and assigns hereby releases and forever
discharges Executive from and against any and all claims, demands, damages,
actions, causes of action, costs and expenses, of whatever kind or nature, in
law, equity or otherwise, which the Company or any of said entities now has, may
ever have had or may have hereafter upon or by reason of any matter, cause or
thing occurring, done or omitted to be done prior to the date of this Agreement,
including without limitation all rights and claims the Company or any of said
entities or any third parties have or might have as a result of Executive's
status as an officer, director or employee of the Company or any of said
entities or the termination of that status; provided, however that this release
                                            --------  -------
shall not apply to any claims the Company may have which arise out of or relate
to (a) the conviction of Executive for the commission of a felony involving
dishonesty with respect to the Company, its affiliates or their respective
predecessors or (b) gross and willful misconduct by Executive that is
demonstrably and materially injurious to the Company, its affiliates or their
respective predecessors, whether monetarily or otherwise. For purposes of this
Paragraph 11, no act or failure to act on Executive's part shall be considered
"willful" unless done or failed to be done by Executive in bad faith and without
reasonable belief that Executive's action or omission was in the best interest
of the Company. As of the date of this Agreement, the Company has no knowledge
of any potential claims against Executive arising out of any of the events
described in (a) or (b) above.

          12. Confidentiality. Executive hereby covenants and agrees to keep in
              ---------------
full confidence all information concerning this Agreement except (i) to the
extent disclosure is or may be required by applicable law or (ii) to the extent
disclosure to Executive's legal counsel and
<PAGE>

personal financial advisors is reasonably necessary in connection with
Executive's consideration of the terms of this Agreement or Executive's personal
financial dealings. Executive acknowledges and agrees that the Company shall be
entitled to enforce specifically the covenant in this Paragraph 12 by seeking an
injunction against Executive in addition to any other remedies available to the
Company at law or in equity.

          13. Non-competition and Non-solicitation. Executive agrees that,
              ------------------------------------
during Executive's employment and for a period of one year following the Date of
Termination (the "Protected Period"), Executive will not, without the written
consent of the Company, engage in any business of, or enter the employ of, or
have any interest in, directly or indirectly, any other person, firm,
corporation or other entity engaged in any business of the Company. Nothing
herein shall restrict Executive from owning 2% or less of the outstanding
securities of any corporation or other entity whose securities are listed on any
national securities exchange or traded over-the-counter, if Executive has no
other connection or relationship with the issuer of such securities. During the
Protected Period, the Executive agrees not directly or indirectly to solicit for
employment other than employment as Executive's executive secretary any person
employed by the Company or its affiliates or solicit any client or customer of
the Company or its affiliates at the Date of Termination or six months prior
thereto.

          14. Notices. All notices, requests, demands or other communications
              -------
under this Agreement shall be in writing and shall be deemed to have been duly
given when delivered in person or deposited in the United States mail, postage
prepaid, by registered or certified mail, return receipt requested, to the party
to whom such notice is being given as follows:
<PAGE>

         As to Executive:            Lawrence M. Johnson
                                     3833 Old Pali Road
                                     Honolulu, Hawaii 96817

         As to the Company:          Pacific Century Financial Corporation
                                     P. O. Box 2900
                                     Honolulu, Hawaii 96846
                Attention:           Director of Human Resources

Either party may change his or its address or the name of the person to whose
attention the notice or other communication shall be directed from time to time
by serving notice thereof upon the other party as provided herein.

          15. Miscellaneous. This Agreement, and the rights and obligations of
              -------------
the parties hereto, shall be governed by and construed in accordance with the
laws of the State of Hawaii. If any provision hereof is unenforceable, such
provision shall be fully severable, and this Agreement shall be construed and
enforced as if such unenforceable provision had never comprised a part hereof,
the remaining provisions hereof shall remain in full force and effect, and the
court construing the Agreement shall add as a part hereof a provision as similar
in terms and effect to such unenforceable provision as may be enforceable, in
lieu of the unenforceable provision. No representations, inducements, promises
or agreements, oral or otherwise, which are not embodied herein, shall be of any
force or effect. As used in this Agreement, the term "affiliate" means a
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 1563(a) of the Code) as the Company. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.
<PAGE>

          IN WITNESS WHEREOF, Executive has hereunto set his hand and the
          Company has caused this Agreement to be executed by its duly
          authorized representative, all as of the date first above written.

Witness:

      September 21, 2000                     /S/ LAWRENCE M. JOHNSON
--------------------------------         ------------------------------
                                             Lawrence M. Johnson

                                         PACIFIC CENTURY FINANCIAL
                                               CORPORATION

                                         By:  /S/  MARY G. BITTERMAN
                                             --------------------------<PAGE>

                                  Exhibit 10.28

                              EMPLOYMENT AGREEMENT
                              --------------------

          AGREEMENT by and among Pacific Century Financial Corporation, a
Delaware corporation (the "Company") and Michael E. O'Neill (the "Executive")
dated as of the 3rd day of November, 2000.

          1.   Employment Period. The Company hereby agrees to employ the
               -----------------
Executive, and the Executive hereby agrees to enter into the employ of the
Company, subject to the terms and conditions of this Agreement until such time
as such employment is terminated hereunder.

          2.   Terms of Employment. (a) Position and Duties. (i) the Executive
               -------------------      -------------------
shall serve as Chairman of the Board of Directors of the Company and as Chief
Executive Officer of the Company and of Bank of Hawaii, with such authority,
duties and responsibilities as are commensurate and consistent with such
position and (ii) the Executive's services shall be performed primarily at the
Company's office in Honolulu, Hawaii.

          (b)  Compensation. (i) Base Salary. The Executive shall receive a base
               ------------      -----------
salary at an annual rate of $900,000, subject to annual review (the "Annual Base
Salary").

               (ii)  Annual Bonus. The Executive shall be eligible for an annual
                     ------------
bonus, as determined by the Compensation Committee of the Board, provided that
the Executive shall receive a bonus of $600,000 on the first anniversary of the
date hereof.

               (iii) Stock Incentives. On the date hereof, the Company shall
                     ----------------
grant the Executive a nonqualified stock option to acquire that number of shares
of common stock of the Company that have a fair market value of $30 million
based on the closing price (the "Closing Price") of the Company's common stock
on the New York Stock Exchange on the date hereof (the "Option"). The Option
shall have a per share exercise price equal to the Closing Price and shall vest
in three equal annual installments on the first three anniversaries on the date
of grant, subject to acceleration as provided herein. The Option shall become
immediately exercisable upon a Change of Control of the Company (as defined in
the Company's Stock Option Plan). The Option shall have a ten year term and
shall remain exercisable for the full term unless the Executive's employment is
tenninated by the Company for Cause or by the Executive without Good Reason.

               (iv)  Other Employee Benefit Plans and Expenses. The Executive
                     -----------------------------------------
shall be entitled to participate in all employee benefit, welfare and other
plans, practices, policies and programs generally applicable to similarly
situated executives of the Company as in effect from time to time. The Company
shall reimburse the Executive on an after-tax basis for all reasonable
relocation expenses incurred in moving to Honolulu and shall pay for the
Executive's accommodation on an after-tax basis until such time as the Executive
finds a permanent residence, provided that the Company shall not be required to
pay for such accommodation for more than 90 days.

          3.   Termination of Employment. (a) Death or Disability. The
               -------------------------      -------------------
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the
<PAGE>

Executive written notice in accordance with Section 9(b) of this Agreement of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive calendar days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.

          (b)  Cause. The Company may terminate the Executive's employment for
               -----
Cause or without Cause. For purposes of this Agreement, "Cause" shall mean:

               (i)   the continued failure of the Executive to perform
               substantially the Executive's duties with the Company or one of
               its affiliated companies (other than any such failure resulting
               from incapacity due to physical or mental illness), after a
               written demand for substantial performance is delivered to the
               Executive by the Board of Directors of the Company (the "Board")
               which specifically identifies the manner in which the Board
               believes that the Executive has not substantially performed the
               Executive's duties, or

               (ii)  the willful engaging by the Executive in illegal conduct or
gross misconduct, which is materially and demonstrably injurious to the Company
or any of its affiliated companies, or

               (iii) conviction of a felony or guilty or nolo contendere plea by
the Executive with respect thereto.

For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board of Directors of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the Company
and its affiliated companies. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than two-thirds of the entire membership of the Board of Directors of
the Company at a meeting of such Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.

          (c)  Good Reason. The Executive's employment may be terminated by the
               -----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean in the absence of a written consent of the Executive:
<PAGE>

               (i)   the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 2(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;

               (ii)  any failure by the Company to comply with any of the
provisions of Section 2(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

               (iii) the Company's requiring the Executive to be based at any
office or location outside of Honolulu, Hawaii;

               (iv)  any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or

               (v)   any failure by the Company to comply with and satisfy
Section 8(c) of this Agreement.

          (d)  Notice of Termination. Any termination by the Company for Cause,
               ---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 9(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.

          (e)  Date of Termination. "Date of Termination" means (i) if the
               -------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein within 30 days of such notice, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

          4.   Obligations of the Company Upon Termination. (a) Good Reason;
               -------------------------------------------      -----------
Other Than for Cause, Death or Disability. If, during the Employment Period, the
-----------------------------------------
Company shall terminate the Executive's employment other than for Cause, death
or Disability or the Executive shall terminate employment for Good Reason:
<PAGE>

               (i)   the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the Executive's Annual Base
Salary through the Date of Termination to the extent not theretofore paid
("Accrued Base Salary");

               (ii)  the Option shall vest and shall become immediately
exercisable and shall remain exercisable until the tenth anniversary of the date
of grant; and

               (iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice of, or contract or agreement with,
the Company or its affiliated companies through the Date of Termination (such
other amounts and benefits shall be hereinafter referred to as the "Other
Benefits").

          (b)  Death. If the Executive's employment is terminated by reason of
               -----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Base Salary and the
timely payment or provision of Other Benefits. Accrued Base Salary shall be paid
to the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 4(b) shall
include death benefits as in effect on the date of the Executive's death
generally with respect to similarly situated executives of the Company. In
addition, the Option shall vest and shall become immediately exercisable until
the tenth anniversary of the date of grant.

          (c)  Disability. If the Executive's employment is terminated by reason
               ----------
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Base Salary and the timely payment or provision of Other Benefits.
Accrued Base Salary shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 4(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability benefits as in effect on the Disability Effective Date
generally with respect to similarly situated executives of the Company. In
addition, the Option shall vest and shall become immediately exercisable and
shall remain exercisable until the tenth anniversary of the date of grant.

          (d)  Cause; Other than for Good Reason. If the Executive's employment
               ---------------------------------
shall be terminated for Cause or the Executive terminates his employment without
Good Reason during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date of Termination and (y)
Other Benefits, in each case to the extent theretofore unpaid.

          5.   Full Settlement. The Company's obligation to make the payments
               ---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent
<PAGE>

permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").

          6.   Certain Additional Payments by the Company. (a) Anything in this
               ------------------------------------------
Agreement to the contrary notwithstanding and except as set forth below, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
6) (a "Payment") 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 and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 6(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Payments do not exceed 110% of the greatest
amount (the "Reduced Amount") that could be paid to the Executive such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.

          (b)  Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by such
certified public accounting firm reasonably acceptable to the Executive as may
be designated by the Company (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-
Up Payment, as determined pursuant to this Section 6, shall be paid by the
Company to the Executive within five days of (i) the later of the due date for
the payment of any Excise Tax, and (ii) the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 6(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

          (c)  The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-
<PAGE>

Up Payment. Such notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:

               (i)   give the Company any information reasonably requested by
the Company relating to such claim,

               (ii)  take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

               (iv)  permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 6(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

          (d)  If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by
<PAGE>

the Company pursuant to Section 6(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.

          7.   Confidential Information. (a) The Executive shall hold in a
               ------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.

          (b)  In the event of a breach or threatened breach of this Section 7,
the Executive agrees that the Company shall be entitled to injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or threatened
breach, the Executive acknowledges that damages would be inadequate and
insufficient.

          (c)  Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this Section 7.

          8.   Successors. (a) This Agreement is personal to the Executive and
               ----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

          (b)  This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

          (c)  The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company and/or the Parent would be required to perform it if no
such succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to their respective
businesses and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.

          9.   Miscellaneous. (a) This Agreement shall be governed by and
               --------------
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
<PAGE>

          (b)  All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

          If to the Executive:
          -------------------

               Michael E. O'Neill

               22nd Floor, Pacific Century Tower

               130 Merchant Street

               Honolulu, HI 96813

          If to the Company:
          -----------------

               Pacific Century Financial Corporation

               130 Merchant Street

               Honolulu, HI 96813

               Attention: General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

          (c)  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

          (d)  The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

          (e)  The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 3(c) of this Agreement, shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
<PAGE>

          IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board of Directors of the
Company, has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.

                                               /S/ MICHAEL E. O'NEILL
                                          -------------------------------
                                          MICHAEL E. O'NEILL

                                          PACIFIC CENTURY FINANCIAL CORPORATION

                                          By   /S/ MARY G. BITTERMAN
                                             ----------------------------
                                          Name:    MARY G. BITTERMAN
                                          Title:   LEAD DIRECTOR

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