Exhibit 10.10
TERRITORIAL SAVINGS
BANK
AMENDED AND
RESTATED
EXECUTIVE DEFERRED INCENTIVE
AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE
DEFERRED INCENTIVE AGREEMENT (the “Agreement”) is
entered into as of January 1, 2008, by and between TERRITORIAL
SAVINGS BANK, a federally-chartered savings bank located in
Honolulu, Hawaii (the “Bank”), and ALLAN S. KITAGAWA,
Chairman and Chief Executive Officer of the Bank (the
“Executive”).
WHEREAS, the Bank and Executive
entered into the Executive Deferred Incentive Agreement (the
“Predecessor Agreement”), effective January 1,
2004, in order to provide specified benefits to the Executive, a
member of a select group of management or highly compensated
employees who contribute materially to the continued growth,
development and future business success of the Bank; and
WHEREAS, Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”)
provides that certain nonqualified deferred compensation
arrangements such as the Predecessor Agreement must comply with its
terms and the Treasury Regulations issued thereunder or the
recipient of such compensation shall be subject to additional taxes
and penalties; and
WHEREAS, the Bank and the Executive
desire to amend and restate the Predecessor Agreement in the manner
set forth herein in order to conform such agreement to Code
Section 409A; and
WHEREAS, the Agreement shall
supersede the Predecessor Agreement and no benefits shall accrue
hereunder on or after August 29, 2007.
NOW, THEREFORE, in consideration of
the premises and the mutual promises herein contained, the Bank and
the Executive agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the
following words and phrases shall have the meanings
specified:
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1.1
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“
Beneficiary ” means each designated person, or the
estate of the Executive, entitled to benefits, if any, upon the
death of the Executive determined pursuant to Article 6.
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1.2
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“
Board ” means the Board of Directors of the Bank as
from time to time constituted.
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1.3
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“
Beneficiary Designation Form ” means the form
established from time to time by the Plan Administrator that the
Executive completes, signs and returns to the Plan Administrator to
designate one or more beneficiaries.
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1.4
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“
Change in Control ” means:
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(a) There occurs a “change of
control” of the Bank within the meaning of the Home Owners
Loan Act of 1933 or 12 C.F.R. Part 574 as applied to the Bank as if
it were a federally chartered institution; or
(b) As a result of, or in connection
with, any merger or other business combination, sale of assets or
contested election, wherein the persons who were non-employee
directors of the Bank before such transaction or event cease to
constitute a majority of the Board of Directors of the Bank or any
successor to the Bank; or
(c) The Bank transfers substantially
all of its assets to another corporation or entity, which is not an
affiliate of the Bank; or
(d) The Bank is merged or
consolidated with another corporation or entity and, as a result of
such merger or consolidation, less than 60% of the equity interest
in the surviving or resulting corporation is owned by the former
shareholders or depositors of the Bank.
A Change in Control shall not occur
as a result of a conversion of the Bank from the mutual to stock
form of organization (including without limitation, through the
formation of a stock holding company) (“Conversion”) or
reorganization of the Bank into the mutual holding company form of
ownership (“Reorganization”).
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1.5
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“
Code ” means the Internal Revenue Code of 1986, as
amended.
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1.6
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“
Deferral Account ” means the Bank’s accounting
of the accumulated Incentive Awards, if any, plus accrued
interest.
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1.7
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“
Disability ” or “Disabled” means that the
Executive: (a) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months; or (b) is, by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three
(3) months under an accident and health plan covering
employees of the Executive’s employer; or (c) is
determined to be disabled by the Social Security
Administration.
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1.8
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“
Early Termination ” means Separation from Service
before Normal Retirement Age for reasons other than death,
Disability, or Termination for Cause, or within thirty-six
(36) months following a Change in Control.
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1.9
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“
Effective Date ” of this Agreement shall be
January 1, 2008.
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1.10
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“ Exhibit A ”
means the exhibit attached to this Agreement and made a part hereof
that sets forth the criteria for determining Incentive Awards. The
Board, in its sole discretion, may change the criteria from one
Plan Year to the next. The Bank shall notify the
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2
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Executive in writing, within
thirty (30) days of the beginning of each Plan Year, of such
changes. Once such written notice is given, the criteria shall not
change for such Plan Year without the Executive’s written
consent.
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1.11
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“
Incentive Award ” means the amount, if any, awarded to
the Executive and automatically deferred according to Article 2 of
this Agreement.
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1.12
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“
Normal Retirement Age ” means the date the Executive
attains age sixty-five (65).
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1.13
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“ Plan
Administrator ” means the plan administrator described in
Article 8.
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1.14
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“ Plan
Year ” means a twelve-month period commencing on
January 1 and ending on December 31 of each year. The
initial Plan Year shall commence on the Effective Date of this
Agreement and end on the following December 31.
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1.15
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“
Separation from Service ” means the Executive’s
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 Executive’s
right to reemployment is provided by law or contract. If the leave
exceeds six months and the Executive’s right to reemployment
is not provided by law or by contract, then the Executive shall
have a Separation from Service on the first date immediately
following such six-month period.
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Whether a Separation from Service
has occurred is determined based on whether the facts and
circumstances indicate that the Bank and the Executive reasonably
anticipated that no further services would be performed after a
certain date or that the level of bona fide services the Executive
would perform after such date (whether as an employee or as an
Independent contractor) would permanently decrease to no more than
forty-nine percent (49%) of the average level of bona fide
services performed over the immediately preceding thirty-six
(36) months (or such lesser period of time in which the
Executive performed services for the Bank). The determination of
whether the Executive has had a Separation from Service shall be
made by applying the presumptions set forth in the Treasury
Regulations under Code Section 409A.
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1.15a
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“
Specified Employee ” means an employee who at the time
of Separation from Service is a key employee of the Bank, if any
stock of the Bank is publicly traded on an established securities
market or otherwise. For purposes of this Agreement, an employee is
a key employee if the employee meets the requirements of Code
Section 416(i)(1)(A)(i), (ii), or (iii) (applied in
accordance with the regulations thereunder and disregarding section
416(i)(5)) at any time during the 12-month period ending on
December 31 (the “identification period”). If the
employee is a key employee during an identification period, the
employee is treated as a key employee for purposes of this
Agreement during the twelve (12) month period that begins on
the first day of April following the close of the identification
period.
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1.16
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“
Termination for Cause ” has the meaning set forth in
Section 7.1.
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Article 2
Incentive Award
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2.1
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Incentive
Award . For each Plan
Year, the Bank shall determine the Executive’s Incentive
Award in accordance with the criteria on Exhibit A.
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2.2
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Incentive
Deferral . Within sixty
(60) days following the end of each Plan Year, the Bank shall
declare the Incentive Award for the most recently completed Plan
Year and credit such amount to the Deferral Account. Effective
August 29, 2007, no further Incentive Awards shall be made
under the Plan.
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Article 3
Deferral Account
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3.1
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Establishing
and Crediting . The Bank
shall establish a Deferral Account on its books for the Executive
and shall credit to the Deferral Account the following
amounts:
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3.1.1
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Incentive
Awards . Effective
August 29, 2007, no Incentive Awards shall be credited to the
Executive’s Deferred Account.
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3.1.2
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Interest . With respect to Incentive Awards that were
credited to the Executive’s Deferred Account under the
Predecessor Agreement, interest shall be rewarded as
follows:
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(a)
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On the last day
of each month and immediately prior to the payment of any benefits,
but only until commencement of benefit payments under this
Agreement, interest shall be credited on the Deferral Account at an
annual rate equal to seven percent (7.0%), compounded
annually.
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(b)
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On the last day
of each month during any applicable installment period, interest
shall be credited on the unpaid Deferral Account balance at an
annual rate equal to seven percent (7.0%), compounded annually. The
Board, in its sole discretion, may change the rate in this
Section 3.1.2(b) only on a prospective basis and only prior to
the commencement of installment payments.
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3.2
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Statement of
Accounts . The Plan
Administrator shall provide to the Executive, within one hundred
twenty (120) days after the end of each Plan Year, a statement
setting forth the Deferral Account balance.
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3.3
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Accounting
Device Only . The
Deferral Account is solely a device for measuring amounts to be
paid under this Agreement, if any. The Deferral Account is not a
trust fund of any kind. The Executive is a general unsecured
creditor of the Bank for the payment of benefits. The benefits
represent the mere Bank promise to pay such benefits.
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The Executive’s rights are not
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by the
Executive’s creditors.
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Article 4
Distributions During
Lifetime
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4.1
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Time and
Form of Benefit. Upon the
earlier of the Executive’s attainment of Normal Retirement
Age, Early Termination, termination due to Disability, or
Separation from Service within thirty-six (36) months
following a Change in Control, the Bank shall pay to the Executive
the benefit described in this Section 4.1 in lieu of any other
benefit under this Article.
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4.1.1
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Amount of
Benefit . The benefit
under this Section 4.1 is the Deferral Account balance as of
the Executive’s Normal Retirement Age, Early Termination,
termination due to Disability, or Separation from Service within
thirty-six months following a Change in Control.
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4.1.2
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Payment of
Benefit . The Bank shall
pay the benefit to the Executive in a single cash lump-sum
distribution within thirty (30) days following the earlier of
the date of the Executive’s Normal Retirement Age, Early
Termination, termination due to Disability, or Separation from
Service within thirty-six (36) months following a Change in
Control.
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4.2
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Restriction on Timing of
Payment .
Notwithstanding any provision of this Agreement to the contrary, in
the event the Executive is a Specified Employee, then to the extent
necessary to avoid penalties under Code Section 409A, any
payment under Section 4.1 that is payable due to the
Executive’s Separation from Service shall be withheld and
paid to the Executive on the first day of the seventh month
following the Executive’s Separation from Service. The
withheld amounts plus interest, compounded monthly at the rate
designated in accordance with Section 3.1.2, shall be paid to
the Executive on the first day of the seventh (7
th
) month
following the Executive’s date of Separation from
Service.
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Article 5
Distributions at
Death
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5.1
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Death During
Active Service . If the
Executive dies while in active service to the Bank, the Bank shall
pay to the Beneficiary the Deferral Account balance as of the date
of the Executive’s death. This benefit shall be paid to the
Beneficiary in a single cash lump-sum distribution within sixty
(60) days following the date of the Executive’s
death.
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5.2
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Death After
Separation from Service But Before Benefit Payments
Commence . If the
Executive is entitled to benefit payments under this Agreement, but
dies prior to the payment of said benefit, the Bank shall pay to
the Beneficiary the same benefits that the Executive was entitled
to prior to death except that the benefit payments shall be made
within sixty (60) days following the date of the
Executive’s death.
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5
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