Exhibit 10.13
TERRITORIAL SAVINGS
BANK
NON-QUALIFIED
SUPPLEMENTAL
EMPLOYEE STOCK OWNERSHIP
PLAN
1. Purpose
This Non-Qualified Supplemental
Employee Stock Ownership Plan (“Plan”) is intended to
provide Participants (as defined herein) or their Beneficiaries
with the economic value of the annual allocations credited to such
Participant’s account under The Territorial Savings Bank
Employee Stock Ownership Plan (“ESOP”) which may not be
accrued under said ESOP due to the limitations imposed by
Section 415 of the Internal Revenue Code (the
“Code”) and the limitation on includible compensation
imposed by Code Section 401(a)(17). The benefits provided
under this Plan (as described below) are intended to constitute
deferred compensation for “a select group of management or
highly compensated employees” for purposes of the Employee
Retirement Income Security Act of 1974, as amended
(“ERISA”). This Plan is intended to comply with
Section 409A of the Internal Revenue Code (“Code”)
and the regulatory guidance and other guidance issued
thereunder.
2. Definitions
Where the following words and
phrases appear in the Plan, they shall have the respective meaning
as set forth below unless the context clearly indicates the
contrary. Except to the extent otherwise indicated herein, and to
the extent inconsistent with the definitions provided below, the
definitions contained in the ESOP are applicable under the
Plan.
2.1 “ Account ”
means the bookkeeping account to which a Participant’s Annual
ESOP Credits and earnings thereon are credited.
2.2 “ Annual ESOP
Credit ” means the amount credited to the
Participant’s account in the Plan, determined as set forth in
Section 4.1 hereof.
2.3 “ Applicable
Limitations ” means one or more of the following, as
applicable: (i) the maximum limitations on annual additions to
a tax-qualified defined contribution plan under Code
Section 415(c); or (ii) the maximum limitation on the
annual amount of compensation that may, under Code
Section 401(a)(17), be taken into account in determining
contributions to and benefits under tax-qualified plans.
2.4 “ Bank ”
means Territorial Savings Bank.
2.5 “ Beneficiary
” means the person designated by the Participant under the
ESOP to receive the Supplemental ESOP Benefit in the event of the
Participant’s death.
2.6 “ Board of
Directors ” means the Board of Directors of Territorial
Savings Bank.
2.7 “ Change in Control
” shall mean (1) a change in ownership of the Company or
the Bank under paragraph (i) below, or (2) a change in
effective control of the Company or the Bank under paragraph
(ii) below, or (3) a change in the ownership of a
substantial portion of the assets of the Company or the Bank under
paragraph (iii) below:
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i.
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Change in
the ownership of the Bank. A change in the ownership of the Bank shall
occur on the date that any one person, or more than one person
acting as a group (as defined in Treasury Regulation
Section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of
the corporation that, together with stock held by such person or
group, constitutes more than 50% of the total fair market value or
total voting power of the stock of such corporation; or
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ii.
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Change in
the effective control of the Bank . A change in the effective control of the Bank
shall occur on the date that either (i) any one person, or
more than one person acting as a group (as defined in Treasury
Regulation Section 1.409A-3(i)(5)(vi)(D)), acquires (or has
acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of
the Bank possessing 30% or more of the total voting power of the
stock of the Bank; or (ii) a majority of members of the
Bank’s board of Directors is replaced during any 12-month
period by Directors whose appointment or election is not endorsed
by a majority of the members of the corporation’s board of
Directors prior to the date of the appointment or election,
provided that this sub-section (ii) is inapplicable where a
majority shareholder of the Bank is another corporation;
or
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iii.
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Change in
the ownership of a substantial portion of the Bank’s
assets . A change in the
ownership of a substantial portion of the Bank’s assets shall
occur on the date that any one person, or more than one person
acting as a group (as defined in Treasury Regulation
Section 1.409A-3(i)(5)(vii)(C)), acquires (or has acquired
during the 12-month period ending on the date of the most recent
acquisition by such person or persons) assets from the Bank that
have a total gross fair market value equal to or more than 40% of
the total gross fair market value of all of the assets of the
corporation immediately prior to such acquisition or acquisitions.
For this purpose, gross fair market value means the value of the
assets of the corporation, or the value of the assets being
disposed of, determined without regard to any liabilities
associated with such assets. There is no Change in Control event
under this paragraph (iii) when there is a transfer to an
entity that is controlled by the shareholders of the transferring
corporation immediately after the transfer; or
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iv.
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For all
purposes hereunder, the definition of Change in Control shall be
construed to be consistent with the requirements of Treasury
Regulation Section 1.409A-3(i)(5), except to the extent
modified herein.
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2.8 “ Code ”
means the Internal Revenue Code of 1986, as amended from time to
time. Reference to a specific provision of the Code shall include
such provision, any valid regulation or ruling promulgated
thereunder and any comparable provision of future law that amends,
supplements or supersedes such provision.
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2.9 “ Committee ”
means the Compensation Committee of the Board of
Directors.
2.10 “ Company ”
means Territorial Bancorp, Inc.
2.11 “ Effective Date
” means January 1, 2008.
2.12 “ Employee ”
means an employee of the Employer on whose behalf benefits are
payable under the ESOP.
2.13 “ Employer ”
means the Bank or the Company, as applicable, and any successors by
merger, purchase, reorganization or otherwise. If a subsidiary or
affiliate of the Employer adopts the Plan, it shall be deemed the
Employer with respect to its employees.
2.14 “ ERISA ”
means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to a specific provision of
ERISA shall include such provision, any valid regulation or ruling
promulgated thereunder and any comparable provision of future law
that amends, supplements or supersedes such provision.
2.15 “ ESOP ”
means the tax-qualified Territorial Savings Bank Employee Stock
Ownership Plan, and any successor thereto.
2.16 “ Participant
” means an Employee who has been designated for participation
in this Plan pursuant to Section 3.1.
2.17 “ Plan ”
means Territorial Savings Bank Non-Qualified Supplemental Employee
Stock Ownership Plan, as set forth herein and as may be amended
from time to time.
2.18 “Plan Year ”
means the period from January 1 to
December 31.
2.19 “ Separation from
Service ” means the Employee’s death, Retirement or
other termination of employment with the Bank within the meaning of
Code Section 409A. No Separation from Service shall be deemed
to occur due to military leave, sick leave or other bona fide leave
of absence if the period of such leave does not exceed six months
or, if longer, so long as the Employee’s right to
reemployment is provided by law or contract. If the leave exceeds
six months and the Employee’s right to reemployment is not
provided by law or by contract, then the Employee shall have a
Separation from Service on the first date immediately following
such six-month period.
Whether a termination of employment
has occurred is determined based on whether the facts and
circumstances indicate that the Employer and Employee reasonably
anticipated that no further services would be performed after a
certain date or that the level of bona fide services the employee
would perform after such date (whether as an employee or as an
independent contractor) would permanently decrease to no more than
20% of the average level of bona fide services performed over the
immediately preceding 36 months (or such lesser period of time
in
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which the Participant performed services for the
Bank). The determination of whether a Participant has had a
Separation from Service shall be made by applying the presumptions
set forth in the Treasury Regulations under Code
Section 409A.
2.20 “ Specified
Employee ” means any Participant who also satisfies the
definition of “key employee” as such term is defined in
Code Section 416(i) (without regard to paragraph 5 thereof).
In the event a Participant is a Specified Employee, no distribution
shall be made to such Participant upon Separation from Service
(other than due to death or Disability) prior to the first day of
the seventh month following Separation from Service.
2.21 “ Stock ”
means the common stock of the Company, par value $.01 per
share.
2.22 “ Supplemental ESOP
Benefit ” means the benefit provided for a Participant
under this Plan.
2.23 “ Surviving Spouse
” means the legal spouse of a Participant, living at the time
of the death of the Participant.
3.
Participation
3.1 Designation to
Participate . Upon the designation of the Committee, and
subject to the approval of the Board of Directors, Employees may
become Participants at any time during the Plan Year. Each Employee
initially selected by the Committee to participate in the Plan
shall be set forth on Exhibit A attached hereto and made a part
hereof.
3.2 Continuation of
Participation . An Employee who has become a Participant shall
remain a Participant so long as benefits are payable to or with
respect to such Participant under the Plan.
4. Benefit Requirements and
Payments
4.1 Supplemental ESOP
Benefits . A Participant shall be entitled to receive as a
benefit from this Plan the Supplemental ESOP Benefit determined as
set forth herein. In the event of the death of a Participant prior
to the commencement of payment of the Supplemental ESOP Benefit,
the Surviving Spouse of the Participant shall be entitled to
receive as a benefit from this Plan an amount equal to 100% of the
Supplemental ESOP Benefit that would have been payable to the
Participant at the time of his death. The Supplemental ESOP Benefit
shall be that benefit earned by a Participant upon the investment
of the Annual ESOP Credits allocated to his Account. The Annual
ESOP Credit is equal to the sum of the difference (expressed in
dollars) between “(a)” and “(b),”
where:
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(a)
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is the number
of shares of Stock that would have been allocated to the account of
the Participant for a Plan Year under the ESOP and the dividends
and earnings thereon paid during
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