Exhibit 10.16
TERRITORIAL SAVINGS
BANK
SEPARATION PAY
PLAN
AND
SUMMARY PLAN
DESCRIPTION
ARTICLE 1. ESTABLISHMENT OF THE
PLAN
Section 1.1 Establishment of the Plan .
Effective January 1, 2009 (the
“Effective Date”), Territorial Savings Bank (the
“Bank”) established a self-insured severance pay plan
(the “Plan”), which provides benefits in the event
Eligible Employees (as defined below) have an involuntary
Separation from Service (as defined below) following a Change in
Control (as defined below) of the Bank or Territorial Bancorp Inc.,
the holding company of the Bank (the “Company”). This
document also is designed to satisfy the requirements of a summary
plan description.
Section 1.2 Plan Year . The Plan Year is the
calendar year.
ARTICLE 2.
PARTICIPATION
Section 2.1 Eligible Employees . Each Eligible
Employee, as hereafter defined, will become a Participant in the
Plan on the later of:
(a) the first day immediately
following the date on which the Eligible Employee has completed one
year of continuous service with the Bank; or
(b) the Effective Date.
Notwithstanding the preceding, each
officer and department head who is an Eligible Employee will become
a Participant on his or her date of hire with the Bank.
The term “Eligible
Employee” means any regular full-time or part-time employee
of the Bank, excluding (1) any employee covered under an
employment agreement or a change in control agreement (or similar
agreement) providing severance pay and (2) any employee who is
not paid a base compensation. For purposes of this Section,
continuous service will be measured from an employee’s most
recent date of hire or rehire. If any employee is separated from
service for any reason, he or she will be treated as a new employee
upon reemployment and will not resume participation in the Plan
until the completion of one year of continuous service following
reemployment.
ARTICLE 3. BENEFITS AND PAYMENT
OF BENEFITS
Section 3.1 In General . Each Participant
whose employment is involuntarily terminated, as defined in
Treasury Regulations Section 1.409A-1(n), (other than for
personal performance reasons) within 24 months after a Change in
Control (as defined below) will be eligible for separation pay
benefits described in Section 3.2.
(a) In any event, no benefits will
be payable under this Plan to any Participant:
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(1)
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whose
employment with the Bank is terminated due to the sale of a
business unit or subsidiary if continued employment is offered to
the Participant; or
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(2)
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whose position
is eliminated for any other reason if the Bank makes any offer of
employment to the Participant:
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(i) at a location within 40 miles of
the Participant’s current place of employment; and
(ii) for a position for which the
Participant holds the minimum qualifications; or
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(3)
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who refuses to
sign a release in a form acceptable to the Bank.
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(b) For purposes of this Plan, a
“Change in Control” means any of the
following:
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(1)
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Merger : The Company or the Bank merges into or
consolidates with another entity, or merges another bank or
corporation into the Bank or the Company, and as a result, less
than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held
by persons who were stockholders of the Company or the Bank
immediately before the merger or consolidation;
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(2)
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Acquisition
of Significant Share Ownership : There is filed, or is required to be filed, a
report on Schedule 13D or another form or schedule (other than
Schedule 13G) required under Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended, if the schedule
discloses that the filing person or persons acting in concert has
or have become the beneficial owner of 25% or more of a class of
the Company’s or the Bank’s voting securities;
provided, however, this clause (ii) shall not apply to
beneficial ownership of the Company’s or the Bank’s
voting shares held in a fiduciary capacity by an entity of which
the Company directly or indirectly beneficially owns 50% or more of
its outstanding voting securities;
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(3)
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Change in Board
Composition : During any
period of two consecutive years, individuals who constitute the
Company’s or the Bank’s Board of Directors at the
beginning of the two-year period cease for any reason to constitute
at least a majority of the Company’s or the Bank’s
Board of Directors; provided, however,
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that for purposes of this
clause (iii), each director who is first elected by the board (or
first nominated by the board for election by the stockholders) by a
vote of at least two-thirds ( 2 / 3 ) of the directors who were
directors at the beginning of the two-year period shall be deemed
to have also been a director at the beginning of such period;
or
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(4)
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Sale of
Assets : The Company or
the Bank sells to a third party all or substantially all of its
assets.
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Notwithstanding anything in this
Plan to the contrary, in no event shall the merger of any
subsidiary or affiliate of the Company into another subsidiary or
affiliate of the Company constitute a “Change in
Control” for purposes of this Plan.
3.2 Benefit Amount
.
(a) A Participant’s separation
pay benefit will be based on the Participant’s rate of base
compensation in effect at the Participant’s date of
Separation from Service, excluding commissions, bonuses, incentive
payments and any type of equity or equity-based compensation. The
amount of a Participant’s separation pay shall equal one
month of separation pay for each full year of service during which
the Participant was employed by the Bank, with a minimum of one
month of separation pay and a maximum of 24 months of separation
pay; provided, however, that Participants who are at the level of
senior vice president and above on the date of their Separation
from Service shall receive a minimum of 12 months of separation
pay.
(b) Notwithstanding section
(a) above, in any event, the amount of the separation pay paid
to any Participant shall not exceed two times the lesser of:
(i) the Participant’s annualized compensation based on
his or her annual rate of pay for the calendar year preceding the
year of the Separation from Service (adjusted for any regularly
scheduled increase during that year that was expected to continue
indefinitely if the Participant had not separated from service); or
(ii) the maximum amount that may be taken into account under a
tax-qualified retirement plan under Code Section 401(a)(17)
for the year in which the Participant’s Separation from
Service occurred (i.e., for 2008, the 401(a)(17) amount was
$230,000). All separation payments shall be paid no later than the
last day of the second calendar year following the year in which
the Separation from Service occurs. Accordingly, this Plan is
intended to be exempt from Code Section 409A under the
exception for separation pay plans set forth in Treasury
Regulations Section 1.409A-1(b)(9), as published in the final
regulations issued in April 2007.
(c) All payments hereunder are
contingent upon the Participant’s involuntary termination of
employment qualifying as a “Separation from Service,”
as defined in Treasury Regulations Section 1.409A-1(h).
Furthermore, to the extent a Participant is a “Specified
Employee,” as defined in Treasury Regulations
Section 1.409A-1(i), solely to the extent necessary to avoid
penalties under Code Section 409A, payments shall be delayed
until the first day of the seventh month following such
Participant’s Separation from Service.
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Section 3.3
Form of Benefit Payment
.
(a) Separation Pay . A
Participant will receive separation pay in the form of direct
deposit to his or her bank account in accordance with the normal
payroll process over the period of the separation pay. All
applicable payroll taxes and withholding will be applied.
Separation pay will begin by the second pay period following
Separation from Service and upon execution by the Participant of
all required documentation to process payments. Separation pay
under this Plan is not eligible to be treated as compensation under
any other employee benefit plan maintained by the Bank, unless
specifically authorized by such other employee benefit
plan.
(b) Health Insurance Continuation
Coverage . In addition to separation pay described above,
Participants who are at the level of senior vice president and
above on the date of their Separation from Service shall also be
eligible to continue to participate in the Bank’s health
insurance coverages for a period of up to one year after the date
of his or her Separation from Service. Such health insurance
continuation coverage shall be based on the same cost-sharing terms
and conditions with respect to the employer-paid and employee-paid
portion of such coverages as was in effect on the date of the
Participant’s Separation from Service. If the Participant
obtains health insurance coverage from a new employer, coverage
under this paragraph shall cease as of the date that coverage under
the new employer’s health insurance plan begins. Any health
insurance continuation coverage provided under this paragraph shall
not be counted towards federal or state-mandated
“COBRA” health care continuation coverage, such that,
upon the expiration of coverage under this paragraph, the
Participant shall experience a COBRA qualifying event, effective as
of the date that coverage under this paragraph ceases.
Section 3.4 Forfeitures of Benefits . A
Participant will forfeit his or her right to any unpaid separation
pay benefits and health insurance continuation coverage if he or
she is reemployed by the Bank in any position that meets the
criteria in Section 3.1(a)(2) above.
Section 3.5 Applying for Benefits .
Notwithstanding any other provision of the Plan to the contrary, no
separation pay or health insurance continuation benefits shall be
paid to any Participant unless he or she applies for the benefits
by completing and signing forms provided by the Plan Administrator,
including an application for benefits. Uniform rules regarding
completion and submission of such forms shall be prescribed by the
Plan Administrator.
ARTICLE 4. ADMINISTRATION OF
PLAN
Section 4.1 Appointment of Plan Administrator and
Responsibility for Administration of Plan . The Bank shall
serve as Plan Administrator and Claims Administrator and shall
administer this Plan in accordance with its terms. The Plan
Administrator may designate other persons to carry out the
responsibilities to control and manage the operation of the
Plan.
Section 4.2 Agents . The Plan Administrator
may employ such agents, including counsel, as it may deem advisable
for the administration of the Plan. Such agents need not be
Participants under the Plan.
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Section 4.3 Compensation . The Bank shall pay
all the expenses of the Plan Administrator. The Bank shall
indemnify the Plan Administrator and any employees of the Bank to
whom responsibilities have been delegated under Section 4.1
against any liability incurred in the course of administration of
the Plan, except liab
