Exhibit 10.4
TERRITORIAL SAVINGS
BANK
EMPLOYMENT
AGREEMENT
THIS
AGREEMENT is 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 Vernon Hirata
(“Executive”).
WHEREAS , Executive and the Bank entered into an
agreement dated on January 1, 2003 (the “Predecessor
Agreement”), pursuant to which Executive served as Executive
Vice President and General Counsel 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 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 Co-Chief Operating Officer, General Counsel and
Corporate Secretary 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. Base Compensation.
The Bank agrees to pay Executive
during the Term of this Agreement (as hereinafter defined in
Section 6) a base salary at the rate of $269,100 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.
3. 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.
4. 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.
5. 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 nontax-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 forexecutive 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 reimburse or pay
amounts sufficient to establish or maintain Executive’s
membership in any approved club or organization (business, social
or otherwise) which will benefit the Bank or is related to the
practice of law (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
policies or practices of the Bank for senior executive officers, as
in effect from time to time.
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6. 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, 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 15 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 annually 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 notice to Executive as soon as possible after such review as
to whether the Agreement is to be extended.
7. 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 Sections 8(b) or (e) 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 7(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 Sections 8(b) or (e) 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 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
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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 7 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.
8. 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. In the event
the Board of Directors terminates Executive’s employment
without “Just Cause” (as defined in Section 8(d)),
Executive shall be entitled to:
(i) his base salary for the
remaining term of the Agreement, including any renewals or
extensions thereof, at the highest annual rate in effect pursuant
to Section 2 of this Agreement for any of the twelve
(12) months immediately preceding the date of such
termination, plus annual cash bonuses for each year (prorated in
the event of partial years) remaining under such term at the
highest annual amount received by the Employee in any of the three
(3) calendar years preceding the termination, and shall also
receive 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).
(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.
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The sum due under
Section 8(b)(i) shall be paid in one lump sum within thirty
(30) calendar days following such termination. Notwithstanding
the foregoing, in the event Executive is a Specified Employee
(within the meaning of Treasury Regulations §1.409A-1(i)),
then, to the extent necessary to avoid penalties under Code
Section 409A, payment shall be withheld and shall be paid to
Executive on the first day of the seventh month following
Executive’s termination of employment by the Bank without
Just Cause.
For purposes of Section 8(b),
termination of employment as used herein shall mean
“Separation from Service” as defined in Code
Section 409A and the Treasury Regulations promulgated
thereunder.
(c)
Disability.
(i) Termination by the Bank of
Executive’s employment based on “Disability”
shall occur if: (A) Executive is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to
result in death, or last for a continuous period of not less than
twelve (12) months; (B) by reason of any medically
determinable physical or mental impairment that can be expected to
result in death, or last for continuous period of not less than
twelve (12) months, Executive is receiving income replacement
benefits for a period of not less than 3 months under an accident
and health plan covering employees of the Bank; or
(C) Executive is determined to be totally disabled by the
Social Security Administration. Executive shal
