Exhibit 10.2
TERRITORIAL SAVINGS
BANK
EMPLOYMENT
AGREEMENT
THIS
AGREEMENT (the “Agreement”)
entered into this 29th day of October, 2008, by and between
Territorial Savings Bank located at 1132 Bishop Street, 22
nd
Floor, Honolulu,
Hawaii 96813 (the “Bank”), and Allan S. Kitagawa
(“Executive”).
WHEREAS , Executive and Bank entered into an agreement
dated on March 27, 2002 (the “Prior Agreement”),
pursuant to which Executive serves as Chairman, Chief Executive
Officer and President of the Bank; and
WHEREAS , Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”), effective
January 1, 2005, requires deferred compensation arrangements,
including those set forth in employment agreements, to comply with
its provisions and restrictions and limitations on payments of
deferred compensation; and
WHEREAS , Code Section 409A and the Treasury
Regulations issued thereunder necessitate changes to the Prior
Agreement; and
WHEREAS , Executive has agreed to such changes;
and
WHEREAS , the parties hereto desire to set forth the
terms of the revised Agreement and the continuing employment
relationship between the Bank and Executive, and the Prior
Agreement is hereby replaced in its entirety by this
Agreement.
NOW, THEREFORE
, in consideration of the mutual
covenants herein contained, and upon the other terms and conditions
hereinafter provided, the parties hereby agree as
follows:
1. Employment
. During the term of this Agreement,
which is effective as of October 29, 2008 (the
“Commencement Date”), Executive shall serve in the
capacity of Chief Executive Officer and President of the Bank.
Executive shall render such administrative and management services
to the Bank as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity.
Executive shall promote the business of the Bank. Executive’s
other duties shall be such as the Board of Directors of the Bank
(the “Board of Directors” or “Board”) may
from time to time reasonably direct, including normal duties as an
officer of the Bank.
2. Service on the Board of
Directors . During the
term of this Agreement, Executive will continue to serve on the
Board of Directors of the Bank as a director. If at any time during
the term of this Agreement Executive shall fail to be re-nominated
to the Board of Directors or re-appointed as the Chairman of the
Board other than for reasons of Just Cause (as defined in
Section 9(d) of this Agreement), Executive shall have
“Good Reason” (as defined in Section 9(e) of this
Agreement) to terminate his employment under this Agreement and
Executive shall have no further obligations under this
Agreement.
3. Base Compensation
. The Bank agrees to pay Executive
during the Term of this Agreement (as hereinafter defined in
Section 7) a base salary at the rate of $753,480 per
annum,
payable in accordance with the customary payroll
practices of the Bank; provided, however, that the rate of
Executive’s base salary shall be reviewed by the Board of
Directors not less often than annually, and Executive shall be
entitled to receive annual increases at such percentage or in such
an amount as the Board of Directors, in its sole discretion, may
decide.
4. Discretionary Bonus
. Executive shall be entitled to
receive an annual bonus in an amount which is based on the bonus
program maintained by the Bank as of the date of this Agreement and
shall be eligible to participate in any future bonus program
adopted by the Bank in an equitable manner. No other compensation
provided for in this Agreement shall be deemed a substitute for
Executive’s right to receive bonuses when and as declared by
the Board of Directors or as provided for by any plan or program of
the Bank.
5. Expenses
. During the term of this Agreement,
Executive shall be entitled to receive prompt reimbursement of all
reasonable expenses incurred (in accordance with the policies and
procedures of the Bank) in performing services under this
Agreement, provided that Executive properly accounts for expenses
in accordance with the policies of the Bank and provided further
that all such reimbursements pursuant to this Section 5 shall
be paid promptly by the Bank and in any event no later than
March 15 of the year immediately following the year in which
the expense was incurred.
6. Employee
Benefits.
(a) Participation in
Retirement and Executive Benefit Plans . Executive shall be
entitled, while employed under the terms of this Agreement, to
receive all benefits under any tax-qualified or non-qualified
employee benefit plan or arrangement in effect as of the date of
this Agreement or that the Bank implements at any time during the
term of this Agreement. Executive shall be entitled to participate
in such future plans or arrangements on the same terms as other
employees of the Bank or as established by the Bank for Executive
or other selected employees.
(b) Fringe Benefits .
Executive shall be entitled to receive any benefits under any
fringe benefit plan or policy that is in effect as of the date of
this Agreement, including any discount or reduced fee employee loan
program, or that the Bank implements at any time during the term of
this Agreement, on the same terms as the Bank’s senior
management employees. Nothing paid to Executive under any plan or
arrangement presently in effect or made available in the future
will be deemed to be in lieu of base salary or other compensation
to Executive under this Agreement.
(c) Automobile, Cellular Phone
Use, Computer and Memberships . The Bank shall provide
Executive with the use of an automobile in accordance with the
Bank’s automobile policy for executive vice presidents and
above, as in effect from time to time. The Bank shall annually
include on Executive’s Form W-2 any amount attributable to
Executive’s personal use of such automobile. The Bank shall
also provide Executive with the use of a cellular phone and shall
pay (or reimburse Executive) for all reasonable expenses related to
the use of such phone. The Bank shall also provide Executive with
the use of a personal digital assistant or similar device, and
home, portable and office computers and shall pay (or reimburse
Executive) for all reasonable expenses related to the use of such
computers or devices. In addition, the Bank shall
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reimburse or pay Executive amounts sufficient to
establish or maintain membership in any club or organization
(business, social or otherwise) to which Executive is a member as
of the date of this Agreement, including but not limited to the
Waialae Country Club and Plaza Club (including such fees or dues
relating to the use of the club or organization).
(d) Paid Leave Time .
Executive shall be entitled to leave time in accordance with the
standard policies or practices of the Bank for senior executive
officers, as in effect from time to time.
7. Term of Agreement
. Executive’s employment under
this Agreement shall be deemed to have commenced as of the
Commencement Date and shall continue for a period of thirty-six
(36) calendar months from the Commencement Date. Commencing on
the first anniversary of the Commencement Date and continuing on
each anniversary thereafter (each an “Anniversary
Date”), the disinterested members of the Board of Directors
of the Bank may extend the Agreement an additional year such that
the remaining term of the Agreement shall be thirty-six
(36) months, unless Executive elects not to extend the term of
this Agreement by giving written notice in accordance with
Section 16 of this Agreement. The Board of Directors of the
Bank will review the Agreement and Executive’s performance
annually for purposes of determining whether to extend the
Agreement and the rationale and results thereof shall be included
in the minutes of the Board’s meeting. The Board of Directors
of the Bank shall give written notice to Executive as soon as
possible after such review as to whether the Agreement is to be
extended; provided, however, if the Board fails to conduct such
review or if written notice of nonrenewal is provided to Executive,
then in such case the term of this Agreement shall become fixed and
shall cease at the end of thirty-six (36) full calendar months
following the Anniversary Date.
8. Noncompetition and
Confidentiality.
(a) Executive shall devote his full
time and attention to the performance of his employment under this
Agreement. Upon any termination of Executive’s employment
hereunder pursuant to Section 9(b) of this Agreement (other
than a termination which occurs after the effective date of a
Change in Control), Executive agrees not to compete with the Bank
for a period of one (1) year following such termination in any
city, town or county in which Executive’s normal business
office is located or in which the Bank has an office or has filed
an application for regulatory approval to establish an office,
determined as of the effective date of such termination, except as
agreed to pursuant to a resolution duly adopted by the Board of
Directors. Executive agrees that during such period and within said
cities, towns and counties, Executive shall not work for or advise,
consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or
other business activities of the Bank. The parties hereto,
recognizing that irreparable injury will result to the Bank, and
their business and property in the event of Executive’s
breach of this Section 8(a), agree that in the event of any
such breach by Executive, the Bank will be entitled, in addition to
any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive’s
partners, agents, servants, employees and all persons acting for or
under the direction of Executive. Executive represents and admits
that in the event he terminates employment with the Bank pursuant
to Section 9(b) of this Agreement, Executive’s
experience and capabilities are such that Executive can obtain
employment in a business engaged in other lines and/or of a
different nature than the Bank, and that the enforcement of a
remedy by way of
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injunction will not prevent Executive from
earning a livelihood. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to
the Bank for breach or threatened breach, including the recovery of
damages from Executive.
(b) Executive recognizes and
acknowledges that the knowledge of the business activities and
plans for business activities of the Bank is a valuable, special
and unique asset of the business of the Bank. Executive will not,
during or after the term of his employment, disclose any knowledge
of the past, present, planned or considered business activities of
the Bank to any person, firm, corporation, or other entity for any
reason or purpose whatsoever. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the
Bank. Further, Executive may disclose information regarding the
business activities of the Bank to the Office of Thrift Supervision
(“OTS”) or other regulatory or judicial body pursuant
to a formal regulatory request or subpoena.
(c) Nothing contained in this
Section 8 shall be deemed to prevent or limit the right of
Executive to invest in any entity which conducts business similar
to that of the Bank, solely as a passive or minority
investor.
9. Termination.
Executive’s employment under
this Agreement shall be terminated upon any of the following
occurrences:
(a) Death .
Executive’s employment under this Agreement shall terminate
upon his death. Executive’s estate shall be entitled to
receive payments of base salary, payable in accordance with the
regular payroll practices of the Bank, for sixty (60) days
immediately following the date of Executive’s death and any
other compensation accrued as of the date of death.
(b) Termination of Employment
by the Board of Directors Without Just Cause or by the Executive
for Good Reason . In the event that (i) the Board of
Directors terminates Executive’s employment without
“Just Cause” (as defined in Section 9(d)) or
(ii) such employment is terminated by the Executive for
“Good Reason” (as defined in Section 9(b)(iii),
Executive shall be entitled to:
(i) his base salary for the
remaining term of the Agreement, including any renewals or
extensions thereof, at the current rate in effect pursuant to
Section 3 of this Agreement, plus the amount of the annual
cash bonus earned in the calendar year preceding the year of
termination, and a cash equivalent amount equal to the additional
retirement benefits under any retirement program (whether
tax-qualified or non-qualified) that Executive would have been
entitled to had his employment continued through the remaining term
of the Agreement (with the amount of benefits determined by
reference to the benefits received by the Executive or accrued on
his behalf under such programs during the twelve (12) months
preceding his termination).
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(ii) coverage under the Bank’s
life insurance plans and non-taxable medical, health, and dental
plans (each being a “Welfare Plan”) in the same manner
in which Executive received coverage on the last day of his
employment with the Bank. Executive and his covered dependents (if
any) shall continue participating in such Welfare Plans, subject to
the same premium contributions (if any) on the part of Executive as
were required immediately prior to his termination until the
earlier of (i) his death; (ii) his employment by another
employer other than one of which he is the majority owner; or
(iii) three (3) years from his termination
date.
(iii) For purposes of this
Agreement, termination of Executive’s employment hereunder
for “Good Reason” shall be limited to Executive’s
voluntary termination of employment after the occurrence of any of
the following events which have not been consented to in advance by
Executive in writing; provided that Executive has given written
notice to the Bank within ninety (90) days after the initial
occurrence of such event and that the Bank has been given at least
thirty (30) days to cure the situation (but the Bank may waive
its right to cure): (i) if Executive would be required to move
his personal residence or perform his principal executive functions
more than twenty-five (25) miles from Executive’s
primary office as of the Commencement Date;
