Territorial Bancorp Inc. (Form: 8-K, Received: 11/18/2009 10:48:02)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 13, 2009

TERRITORIAL BANCORP INC.
(Exact name of Registrant as specified in its charter)

         Maryland                        1-34403                26-4674701
----------------------------          -------------        --------------------
(State or Other Jurisdiction          (Commission          (I.R.S. Employer
 of Incorporation)                     File Number)         Identification No.)

1132 Bishop Street, Suite 2200, Honolulu, Hawaii 96813
(Address of principal executive offices)

(808) 946-1400
Registrant's telephone number, including area code

Not Applicable

(Former Name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act

(17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act

(17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02. Departure of Directors or Certain Officers; Election of Directors:
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) Employment Agreements. On November 13, 2009, Territorial Bancorp Inc. entered into separate employment agreements with Allan S. Kitagawa, Chairman of the Board, President and Chief Executive Officer, Vernon Hirata, Vice Chairman of the Board, Co-Chief Operating Officer, General Counsel and Corporate Secretary, and Ralph Y. Nakatsuka, Vice Chairman of the Board and Co-Chief Operating Officer. The employment agreements each provide for three-year terms, subject to annual renewal by the board of directors for an additional year beyond the then-current expiration date. The initial base salaries under the employment agreements are $801,954 for Mr. Kitagawa, $282,555 for Mr. Hirata and $282,555 for Mr. Nakatsuka. The employment agreements also provide for participation in employee benefit plans and programs maintained for the benefit of senior management personnel, including discretionary bonuses, participation in stock-based benefit plans, and certain fringe benefits applicable to executive employees, including but not limited to the use of an automobile and cellular phone.

Upon termination of an executive's employment for cause, as defined in each of the employment agreements, the executive will receive no further compensation or benefits under his employment agreement. In the event of the executive's involuntary termination of employment for reasons other than cause, disability, or death, or if the executive resigns under specified circumstances that constitute constructive termination, the executive will receive a single lump sum cash payment equal to the base salary, cash bonus, and employer contributions to benefit plans that would have been payable for the remaining terms of his agreement. In addition, Territorial Bancorp Inc. will continue to provide life, health, and dental coverage for up to three years thereafter, with the executive responsible for his share of the employee premium.

If the executive terminates his employment for any reason other than for cause within 12 months following a change in control of Territorial Bancorp Inc. or Territorial Savings Bank, the wholly-owned subsidiary of Territorial Bancorp Inc., the executive will receive a single lump sum cash payment equal to the greater of (a) the amount he would have received in the event of his involuntary termination of employment for reasons other than cause, disability, or death, or resignation under specified circumstances that constitute constructive termination, or (b) three times his prior five-year average of taxable compensation, less one dollar. In addition, Territorial Bancorp Inc. will continue to provide life, health, and dental coverage for up to three years thereafter, with the executive responsible for his share of the employee premium.

In the event of death, the executive's estate will receive payments of base salary for 60 days immediately thereafter and any other compensation accrued as of the date of death. In the event of termination of employment due to disability, the executive will be entitled to the disability benefits set forth in his employment agreement.

Each executive has entered into a separate employment agreement with Territorial Savings Bank. To the extent payments and benefits are paid to or received by an executive under his employment agreement with Territorial Savings Bank, the payments and benefits paid by Territorial Savings Bank will be subtracted from any payments or benefits paid by Territorial

Bancorp Inc., such that the executive will not receive any duplicate payments or benefits under his employment agreement with Territorial Bancorp Inc.

Upon termination of employment (other than a termination in connection with a change in control), the executive will be required to adhere to a one-year non-competition provision. The executive will be required to release Territorial Bancorp Inc. from any and all claims in order to receive any payments and benefits under his agreement. Territorial Bancorp Inc. will pay all reasonable costs and legal fees of the executive in relation to the enforcement of the employment agreement, provided the executive succeeds on the merits in a legal judgment, arbitration proceeding or settlement. The employment agreement also provides for indemnification of the executive to the fullest extent legally permissible.

The foregoing descriptions of the employment agreements are qualified in their entirety by reference to the employment agreements attached hereto as Exhibit 10.1, Exhibit 10.2, and Exhibit 10.3 of this Current Report, and are incorporated by reference into this Item 5.02.

Non-Qualified Supplemental Employee Stock Ownership Plan. On November 13, 2009, Territorial Savings Bank adopted the Non-Qualified Supplemental Employee Stock Ownership Plan to provide certain executives with benefits to which they would otherwise be entitled under the Territorial Savings Bank Employee Stock Ownership Plan ("ESOP"), but for the limitations imposed by the Internal Revenue Code. A committee appointed by the Territorial Savings Bank's Board of Directors administers the plan.

Each plan year, Territorial Savings Bank will contribute an annual ESOP credit to each participant's plan account. The annual ESOP credit is a cash credit equal the difference between (i) the fair market value of the number of shares of common stock of Territorial Bancorp Inc. and the dividends and earnings thereon that would have been allocated to the participant's ESOP account for the plan year, but for the limitations imposed by the Internal Revenue Code, and (ii) the fair market value of the number of shares of common stock of Territorial Bancorp Inc. and the dividends and earnings thereon actually allocated to the participant's ESOP account for the plan year.

Upon the earlier of: (i) the participant's separation from service; (ii) the participant's disability; (iii) the participant's death; or (iv) a change in control of Territorial Savings Bank or Territorial Bancorp Inc., the participant will be entitled to a single lump sum cash payment equal to the value of the participant's plan account. The cash payment to which the participant is entitled to receive will be paid within 90 days following the participant's distribution triggering event under the plan, provided, however if the participant is a "specified employee" as defined in Section 409A of the Internal Revenue Code and the participant's distribution triggering event is due to his separation from service, the participant's cash payment will be made on the first day of the seventh month following the participant's separation from service.

The foregoing description of the Non-Qualified Supplemental Employee Stock Ownership Plan is qualified in its entirety by reference to the plan attached hereto as Exhibit 10.4 of this Current Report, and is incorporated by reference into this Item 5.02.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired: None

(b) Pro Forma Financial Information: None

(d) Exhibits:

Exhibit 10.1: Employment Agreement for Allan S. Kitagawa

Exhibit 10.2: Employment Agreement for Vernon Hirata

Exhibit 10.3: Employment Agreement for Ralph Y. Nakatsuka

Exhibit 10.4: Non-Qualified Supplemental Employee Stock Ownership Plan

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TERRITORIAL BANCORP INC.

Date: November 13, 2009          By: /s/ Vernon Hirata
                                     ------------------------------------------
                                     Vernon Hirata
                                     Vice Chairman, Co-Chief Operating Officer,
                                     General Counsel, and Corporate Secretary
                                     (Duly Authorized Representative)

TERRITORIAL BANCORP INC.
EMPLOYMENT AGREEMENT

THIS AGREEMENT (the "Agreement") is made and entered into this 13th day of November, 2009, by and between Territorial Bancorp Inc., a corporation located at 1132 Bishop Street, 22nd Floor, Honolulu, Hawaii 96813 (the "Company"), and Allan S. Kitagawa ("Executive").

WITNESSETH

WHEREAS, Executive is currently employed as Chief Executive Officer and President of Territorial Savings Bank (the "Bank"); and

WHEREAS, the Bank has adopted a Plan of Conversion and Reorganization pursuant to which the Bank has become a wholly owned subsidiary of the Company (the "Conversion"); and

WHEREAS, the Company desires to assure itself of the continued availability of the Executive's services as provided in this Agreement; and

WHEREAS, Executive is willing to serve the Company on the terms and conditions hereinafter set forth; and

WHEREAS, Executive has previously entered into a separate employment agreement with the Bank.

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 the date first set forth above (the "Commencement Date"), Executive shall continue to serve in the capacity of Chief Executive Officer and President of the Company. Executive shall continue to render such administrative and management services to the Company as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. Executive shall continue to promote the business of the Company. Executive's other duties shall be such as the Board of Directors of the Company (the "Board of Directors" or "Board") may from time to time reasonably direct, including normal duties as an officer of the Company.

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 Company 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(b) of this Agreement) to terminate his employment under this Agreement and Executive shall have no further obligations under this Agreement.

3. Base Compensation. The Company agrees to pay Executive during the Term of this Agreement (as hereinafter defined in Section 7) a base salary at the rate of $801,954 per annum,

payable in accordance with the customary payroll practices of the Company; 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 Company as of the date of this Agreement and shall be eligible to participate in any future bonus program adopted by the Company 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 Company.

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 Company) in performing services under this Agreement, provided that Executive properly accounts for expenses in accordance with the policies of the Company and provided further that all such reimbursements pursuant to this Section 5 shall be paid promptly by the Company 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 Company 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 Company or as established by the Company 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 Company implements at any time during the term of this Agreement, on the same terms as the Company'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.

reasonable expenses related to the use of such computers or devices. In addition, the Company or the Bank shall 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 Company for senior executive officers, as in effect from time to time.

(e) Financial Planning. Executive shall be entitled to use the services of a tax professional and a personal financial planning professional (which may be the same person or entity for both services (the "Tax Service Professional") of his choosing and seek reimbursement by the Company for the reasonable cost of such Tax Service Professional actually incurred by the Executive. The services to be provided shall include (i) the preparation of all required federal, state and local personal income tax returns, (ii) advice with respect to federal, state and local income tax treatment of cash and other forms of compensation paid to the Executive by the Company and (iii) investment and retirement counseling and estate planning. Notwithstanding the foregoing, the annual cost to the Company of such services shall not exceed $6,000 (the "Annual Cost"). Reimbursement of the Annual Cost shall be paid promptly by the Company and in any event no later than March 15 of the year immediately following the year in which the Annual Cost was incurred. The Annual Cost shall be reviewed annually by the Compensation Committee of the Company and, if increased, shall be reflected in an addendum hereto.

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 thereafter. Commencing on February 1, 2010 and continuing on February 1st of each year thereafter (each an "Anniversary Date"), the disinterested members of the Board of Directors of the Company 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 Company 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 Company 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.

city, town or county in which Executive's normal business office is located or in which the Company or any subsidiary of the Company 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 Company or any subsidiary of the Company. The parties hereto, recognizing that irreparable injury will result to the Company or any subsidiary of the Company, 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 Company 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 Company 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 Company, 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 Company from pursuing any other remedies available to the Company 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 Company is a valuable, special and unique asset of the business of the Company. 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 Company 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 Company. Further, Executive may disclose information regarding the business activities of the Company 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 Company, 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 Company, 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).

(ii) coverage under the Company'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 Company. 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 Company within ninety (90) days after the initial occurrence of such event and that the Company has been given at least thirty (30) days to cure the situation (but the Company 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; (ii) if, in the organizational structure of the Company, Executive would be required to report to a person or persons other than the Board of Directors; (iii) if the Company should fail to maintain Executive's base compensation in effect pursuant to Section 3 of this Agreement, or fail to maintain the existing employee benefit plans or arrangements in which Executive participates as of the date of this Agreement, including any material fringe benefit, bonus plan and/or retirement plan, except to the extent that such reduction in compensation or benefit programs is part of an overall adjustment in compensation and benefits for all employees of the Company and the Executive is otherwise compensated for such an overall adjustment in an equitable manner; (iv) if Executive would be assigned duties and

responsibilities other than those normally associated with his position as referenced in Section 1 of this Agreement; (v) if Executive's responsibilities or authority have in any way been materially diminished or reduced other than for reasons of Just Cause; or (vi) if Executive is not re-elected to the Board of Directors or appointed as Chairman of the Board other than for reasons of Just Cause.

(iv) The sum due under Section 9(b)(i) shall be paid in one lump sum within thirty (30) calendar days after such termination. Notwithstanding the foregoing, in the event Executive is a Specified Employee (within the meaning of Treasury Regulations ss.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 Company without Just Cause.

(v) For purposes of Section 9(b), termination of employment as used herein shall mean "Separation from Service" as defined in Code Section 409A and the Treasury Regulations promulgated thereunder.

(i) Termination by the Company 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 three (3) months under an accident and health plan covering employees of the Company; or (C) Executive is determined to be totally disabled by the Social Security Administration. Executive shall be entitled to receive benefits under any short or long-term disability plan maintained by the Company.

(ii) The Company shall pay Executive, as disability pay, a monthly payment equal to three-quarters (3/4) of Executive's monthly rate of base salary, plus any bonus paid to Executive for the preceding year. These disability payments shall commence within thirty (30) days of the date of Executive's termination due to Disability and will end on the earlier of (A) the date Executive returns to the full-time employment of the Company in the same capacity as he was employed prior to his termination for Disability and pursuant to an employment agreement between Executive and the Company; (B) the date the Executive begins full-time employment with another employer; (C) the date Executive attains the normal age of retirement (as defined in the Company's defined benefit pension plan) or begins receiving benefits under any substitute retirement plan adopted by the Company; or (D) the date of Executive's death. Notwithstanding any other provision to the contrary, the Company's obligation for any payments required to

be made under this Section 9(c) shall be reduced by any proceeds received by Executive from disability income insurance or any other disability policy or plan maintained by the Company for Executive which was paid for by the Company as partial satisfaction of its obligation under this Section 9(c).

(iii) The Company shall cause to be continued life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained by the Company for Executive prior to his termination for Disability. This coverage shall cease upon the earlier of (A) the date Executive returns to the full-time employment of the Company, in the same capacity as he was employed prior to his termination for Disability and pursuant to an employment agreement between Executive and the Company; (B) the date Executive begins full-time employment with another employer; (C) the date Executive attains the normal age of retirement or begins receiving benefits under the Company's retirement plan; or (D) the date of Executive's death.

(iv) Notwithstanding the foregoing, there will be no reduction in the compensation otherwise payable to Executive during any period during which Executive is incapable of performing his duties hereunder by reason of temporary disability.

(d) Termination of Employment by the Board of Directors for Just Cause. In the event Executive's employment is terminated for "Just Cause," no continued payments or benefits shall be due under this Agreement. For purposes of this Agreement, termination for "Just Cause" shall be defined as termination due to Executive's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement Any determination of "Just Cause" as defined by this Section 9(d) shall be determined by a majority vote of the entire membership of the Board of Directors at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that in the good faith opinion of the Board, Executive committed the conduct described above and specifying the particulars thereof.

(e) Voluntary Termination of Employment by Executive Other Than for Good Reason. The voluntary termination of employment by Executive during the term of this Agreement, other than for Good Reason, with the delivery of no less than sixty (60) days written notice to the Board of Directors, entitles Executive to receive only the base salary, vested rights, and all employee benefits up to Executive's termination date.

(f) Termination and Board Membership. To the extent Executive is a member of the board of directors of the Company or the Bank or any of their affiliates on the date of an involuntary termination of employment with the Company or the Bank or a termination of employment for Good Reason, Executive shall be deemed to have automatically resigned from all of the boards of directors immediately following such termination of employment with the Company or the Bank.

(g) Termination and Release of Claims. Any payments to be made under this Agreement shall be contingent on Executive's execution and non-revocation of a mutual release in a form acceptable to the Company and the Bank; provided, however, that if the Company or the Bank refuse to execute such mutual release, the Executive's obligation to execute and not revoke the release as a precondition to receiving such severance benefits shall terminate. The mutual release agreement shall release the Company and the Bank from any and all claims and other actions by Executive and it shall also release the Executive from any and all claims and other actions by the Company and the Bank.

10. Change in Control.

(a) For purposes of this Agreement, a Change in Control of the Company or the Bank shall be deemed to have occurred if and when:

(i) there occurs a change in control of the Company or the Bank within the meaning of the Home Owners Loan Act of 1933 or 12 C.F.R. Part 574 as applied to the Company or the Bank as if it were a federally chartered institution;

(ii) 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 Company or the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Company or the Bank or any successor to the Company or the Bank;

(iii) the Company or the Bank transfers substantially all of its assets to another corporation or entity which is not an affiliate of the Company or the Bank; or

(iv) the Company or the Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Company or the Bank.

For purposes of Section 10 of this Agreement, a Change in Control shall not occur as a result of the Conversion.

(b) If Executive's employment is terminated for any reason other than for Just Cause within twelve months following a Change in Control, Executive shall be entitled to receive the greater of the following:

(i) the amount of the payment and benefits specified in Section 9(b), or

(ii) the amount of the payment and benefits specified in Section 10(c).

Such payment shall be made in a lump sum within thirty (30) days following Executive's termination of employment. For purposes of this
Section 10, termination of employment as used herein shall mean "Separation from Service" as defined in Code Section 409A and the Treasury Regulations promulgated thereunder. Notwithstanding the foregoing, in the event Executive is a Specified Employee (within the meaning of

Treasury Regulations ss.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.

(i) an amount equal to three (3) times his "base amount," as defined in Code Section 280G(b)(3), less one (1) dollar; and

(ii) coverage under the Company's or Bank's life insurance plan 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 Company. 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.

11. Successors and Assigns.

(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets of the Company.

(b) Since the Company is contracting for the unique and personal skills of Executive, Executive shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company.

12. Amendments. No amendments or additions to this Agreement shall be binding upon the parties hereto unless made in writing and signed by both parties, except as herein otherwise specifically provided.

13. Applicable Law. This agreement shall be governed in all respects, whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of Hawaii, except to the extent that Federal law shall be deemed to apply.

14. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

15. Notices. Any notices, requests, demands and other communications provided for or deemed necessary by this Agreement shall be sufficient if set forth in writing and delivered in person or sent by registered or certified mail, postage prepaid, to, in the case of Executive, the last address filed in writing by Executive with the Company, or, in the case of the Company, to the Company at its main office to the attention of the Board of Directors.

16. Indemnification. The Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors' and officers' liability insurance policy at its expense, or in lieu thereof, shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under law and applicable regulation or under any existing indemnification agreement by and between Executive and the Company against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Company (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities). Such expenses and liabilities may include, but are not limited to, judgment, court costs and attorneys' fees and the cost of reasonable settlements. The Company shall pay such expenses and liabilities in advance of a final judicial decision (hereinafter an "advancement of expenses"); provided, however, that, an advancement of expenses incurred by Executive in his capacity as a director or executive officer of the Company (and not in any other capacity in which service was or is rendered by Executive including, without limitation, services to an employee benefit plan) shall be made only upon delivery to the Company of an undertaking, by or on behalf of Executive, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Executive is not entitled to be indemnified for such expenses under this Section 16 or otherwise. Indemnification under this Section 16 shall be made in accordance with 12 C.F.R. ss.545.121 or any successor thereto.

17. Entire Agreement. This Agreement together with any understanding or modifications thereof as may be agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto.

18. Source of Payments. Notwithstanding any provision in this Agreement to the contrary, to the extent payments and benefits, as provided for under this Agreement, are paid or received by Executive under the employment agreement in effect between Executive and the Bank, the payments and benefits paid by the Bank will be subtracted from any amount or benefit due simultaneously to Executive under similar provisions of this Agreement. Payments will be allocated in proportion to the level of activity and the time expended by Executive on activities related to the Company and the Bank, respectively, as determined by the Company and the Bank.

19. Required Regulatory Provisions.

(a) The Company may terminate Executive's employment at any time, but any termination by the Company, other than Termination for Just Cause, shall not prejudice Executive's right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after Termination for Just Cause as defined in Section 9(d) hereinabove.

(b) Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 12 U.S.C. Section 1828(k), FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

20. Arbitration.

(a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by Executive within fifty
(50) miles from the location of the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

(b) In the event any dispute or controversy arising under or in connection with Executive's termination is resolved in favor of Executive, whether by judgment, arbitration or settlement, Executive shall be entitled to the payment of all back-pay, including salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due Executive under this Agreement.

21. Payment of Costs and Legal Fees. All reasonable costs and legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company, if Executive is successful with respect to such dispute or question of interpretation pursuant to a legal judgment, arbitration or settlement. Such reimbursements shall be paid to Executive within two and one-half (2 1/2) months after the dispute is settled or resolved in Executive's favor.

IN WITNESS WHEREOF, the parties have executed this Agreement on the latest date set forth below.

TERRITORIAL BANCORP INC.

November 13, 2009                 By:  /s/ Harold H. Ohama
-----------------                      ----------------------------------------
Date                                   Chairman of the Compensation Committee


November 13, 2009                      /s/ Allan S. Kitagawa
-----------------                      ----------------------------------------
Date                                   Allan S. Kitagawa

TERRITORIAL BANCORP INC.
EMPLOYMENT AGREEMENT

WITNESSETH

WHEREAS, Executive is currently employed as Co-Chief Operating Officer, General Counsel and Corporate Secretary of Territorial Savings Bank (the "Bank"); and

WHEREAS, the Bank has adopted a Plan of Conversion and Reorganization pursuant to which the Bank has become a wholly owned subsidiary of the Company (the "Conversion"); and

WHEREAS, the Company desires to assure itself of the continued availability of the Executive's services as provided in this Agreement; and

WHEREAS, Executive is willing to serve the Company on the terms and conditions hereinafter set forth; and

WHEREAS, Executive has previously entered into a separate employment agreement with the Bank.

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 the date first set forth above (the "Commencement Date"), Executive shall continue to serve in the capacity of Co-Chief Operating Officer, General Counsel and Corporate Secretary of the Company. Executive shall continue to render such administrative and management services to the Company as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. Executive shall continue to promote the business of the Company. Executive's other duties shall be such as the Board of Directors of the Company (the "Board of Directors" or "Board") may from time to time reasonably direct, including normal duties as an officer of the Company.

2. Base Compensation. The Company agrees to pay Executive during the Term of this Agreement (as hereinafter defined in Section 6) a base salary at the rate of $282,555 per annum, payable in accordance with the customary payroll practices of the Company; 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 Company as of the date of this Agreement and shall be eligible to participate in any future bonus program adopted by the

Company 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 Company.

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 Company) in performing services under this Agreement, provided that Executive properly accounts for expenses in accordance with the policies of the Company and provided further that all such reimbursements pursuant to this Section 4 shall be paid promptly by the Company and in any event no later than March 15 of the year immediately following the year in which the expense was incurred.

5. Employee Benefits.

(c) Automobile, Cellular Phone Use, Computer and Memberships. The Company or the Bank shall provide Executive with the use of an automobile in accordance with the Company's or the Bank's automobile policy for executive vice presidents and above, as in effect from time to time. The Company or the Bank shall annually include on Executive's Form W-2 any amount attributable to Executive's personal use of such automobile. The Company or 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 Company or 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 Company or the Bank shall reimburse or pay Executive amounts sufficient to establish or maintain membership in any club or organization (business, social or otherwise) which will benefit the Company or 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 standard policies or practices of the Company for senior executive officers, as in effect from time to time.

(e) Financial Planning. Executive shall be entitled to use the services of a tax professional and a personal financial planning professional (which may be the same person or entity for both services (the "Tax Service Professional") of his choosing and seek reimbursement by the Company for the reasonable cost of such Tax Service Professional actually incurred by the Executive. The services to be provided shall include (i) the preparation of all required federal, state and local personal income tax returns, (ii) advice with respect to federal, state and local income tax treatment of cash and other forms of compensation paid to the Executive by the Company and (iii) investment and retirement counseling and estate planning. Notwithstanding the foregoing, the annual cost to the Company of such services shall not exceed $5,000 (the "Annual Cost"). Reimbursement of the Annual Cost shall be paid promptly by the Company and in any event no later than March 15 of the year immediately following the year in which the Annual Cost was incurred. The Annual Cost shall be reviewed annually by the Compensation Committee of the Company and, if increased, shall be reflected in an addendum hereto.

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 thereafter. Commencing on February 1, 2010 and continuing on February 1st of each year thereafter (each an "Anniversary Date"), the disinterested members of the Board of Directors of the Company 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 14 of this Agreement. The Board of Directors of the Company 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 Company 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.

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 Section 8(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 Company or any subsidiary of the Company 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 Company or any subsidiary of the Company 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 Company or any subsidiary of the Company. The parties hereto, recognizing that irreparable injury will result to the Company or any subsidiary of the Company, 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 Company 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 Company pursuant to Section 8(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 Company, 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 Company from pursuing any other remedies available to the Company for breach or threatened breach, including the recovery of damages from Executive.

(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 Company, solely as a passive or minority investor.

8. Termination.

Executive's employment under this Agreement shall be terminated upon any of the following occurrences:

(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 8(d)) or (ii) such employment is terminated by the Executive for "Good Reason" (as defined in Section 8(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 2 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).

(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 Company within ninety (90) days after the initial occurrence of such event and that the Company has been given at least thirty (30) days to cure the situation (but the Company 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; (ii) if, in the organizational structure of the Company, Executive would be required to report to a person or persons other than the Chief Executive Officer; (iii) if the Company should fail to maintain Executive's base compensation in effect pursuant to
Section 2 of this Agreement, or fail to maintain the existing employee benefit plans or arrangements in which Executive participates as of the date of this Agreement, including any material fringe benefit, bonus plan and/or retirement plan, except to the extent that such reduction in compensation or benefit programs is part of an overall adjustment in compensation and benefits for all employees of the Company and the Executive is otherwise compensated for such an overall adjustment in an equitable manner; (iv) if Executive would be assigned duties and responsibilities other than those normally associated with his position as referenced in Section 1 of this Agreement; (v) if Executive's responsibilities or authority have in any way been materially diminished or reduced other than for reasons of Just Cause; or (vi) if Executive is not annually reappointed as Co-Chief Operating Officer other than for reasons of Just Cause.

(iv) The sum due under Section 8(b)(i) shall be paid in one lump sum within thirty (30) calendar days after such termination. Notwithstanding the foregoing, in the event Executive is a Specified Employee (within the meaning of Treasury Regulations ss.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 Company without Just Cause.

(v) 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.

(iii) The Company shall cause to be continued life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained by

the Company for Executive prior to his termination for Disability. This coverage shall cease upon the earlier of (A) the date Executive returns to the full-time employment of the Company, in the same capacity as he was employed prior to his termination for Disability and pursuant to an employment agreement between Executive and the Company; (B) the date Executive begins full-time employment with another employer; (C) the date Executive attains the normal age of retirement or begins receiving benefits under the Company's retirement plan; or (D) the date of Executive's death.

(d) Termination of Employment by the Board of Directors for Just Cause. In the event Executive's employment is terminated for "Just Cause," no continued payments or benefits shall be due under this Agreement. For purposes of this Agreement, termination for "Just Cause" shall be defined as termination due to Executive's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement Any determination of "Just Cause" as defined by this Section 8(d) shall be determined by a majority vote of the entire membership of the Board of Directors at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that in the good faith opinion of the Board, Executive committed the conduct described above and specifying the particulars thereof.

other actions by Executive and it shall also release the Executive from any and all claims and other actions by the Company and the Bank.

9. Change in Control.

(a) For purposes of this Agreement, a Change in Control of the Company or the Bank shall be deemed to have occurred if and when:

(iii) the Company or the Bank transfers substantially all of its assets to another corporation or entity which is not an affiliate of the Company or the Bank; or

For purposes of Section 9 of this Agreement, a Change in Control shall not occur as a result of the Conversion.

(i) the amount of the payment and benefits specified in Section 8(b), or

(ii) the amount of the payment and benefits specified in Section 9(c).

Such payment shall be made in a lump sum within thirty (30) days following Executive's termination of employment. For purposes of this
Section 9, termination of employment as used herein shall mean "Separation from Service" as defined in Code Section 409A and the Treasury Regulations promulgated thereunder. Notwithstanding the foregoing, in the event Executive is a Specified Employee (within the meaning of Treasury Regulations ss.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.

(i) an amount equal to three (3) times his "base amount," as defined in Code Section 280G(b)(3), less one (1) dollar; and

10. Successors and Assigns.

11. Amendments. No amendments or additions to this Agreement shall be binding upon the parties hereto unless made in writing and signed by both parties, except as herein otherwise specifically provided.

12. Applicable Law. This agreement shall be governed in all respects, whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of Hawaii, except to the extent that Federal law shall be deemed to apply.

13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

14. Notices. Any notices, requests, demands and other communications provided for or deemed necessary by this Agreement shall be sufficient if set forth in writing and delivered in person or sent by registered or certified mail, postage prepaid, to, in the case of Executive, the last address filed in writing by Executive with the Company, or, in the case of the Company, to the Company at its main office to the attention of the Board of Directors.

15. Indemnification. The Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors' and officers' liability insurance policy at its expense, or in lieu thereof, shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under law and applicable regulation or under any existing indemnification agreement by and between Executive and the Company against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Company (whether or not he continues to be a director or officer at the time

of incurring such expenses or liabilities). Such expenses and liabilities may include, but are not limited to, judgment, court costs and attorneys' fees and the cost of reasonable settlements. The Company shall pay such expenses and liabilities in advance of a final judicial decision (hereinafter an "advancement of expenses"); provided, however, that, an advancement of expenses incurred by Executive in his capacity as a director or executive officer of the Company (and not in any other capacity in which service was or is rendered by Executive including, without limitation, services to an employee benefit plan) shall be made only upon delivery to the Company of an undertaking, by or on behalf of Executive, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Executive is not entitled to be indemnified for such expenses under this Section 15 or otherwise. Indemnification under this Section 15 shall be made in accordance with 12 C.F.R. ss.545.121 or any successor thereto.

16. Entire Agreement. This Agreement together with any understanding or modifications thereof as may be agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto.

17. Source of Payments. Notwithstanding any provision in this Agreement to the contrary, to the extent payments and benefits, as provided for under this Agreement, are paid or received by Executive under the employment agreement in effect between Executive and the Bank, the payments and benefits paid by the Bank will be subtracted from any amount or benefit due simultaneously to Executive under similar provisions of this Agreement. Payments will be allocated in proportion to the level of activity and the time expended by Executive on activities related to the Company and the Bank, respectively, as determined by the Company and the Bank.

18. Required Regulatory Provisions.

(b) Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement or otherwise, are subject to and conditioned upon their compliance with Section 12 U.S.C. Section 1828(k), FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

19. Arbitration.

termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

20. Payment of Costs and Legal Fees. All reasonable costs and legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company, if Executive is successful with respect to such dispute or question of interpretation pursuant to a legal judgment, arbitration or settlement. Such reimbursements shall be paid to Executive within two and one-half (2 1/2) months after the dispute is settled or resolved in Executive's favor.

IN WITNESS WHEREOF, the parties have executed this Agreement on the latest date set forth below.

TERRITORIAL BANCORP INC.

November 13, 2009                 By:  /s/ Harold H. Ohama
-----------------                      ----------------------------------------
Date                                   Chairman of the Compensation Committee


November 13, 2009                      /s/ Vernon Hirata
-----------------                      ----------------------------------------
Date                                   Vernon Hirata

TERRITORIAL BANCORP INC.
EMPLOYMENT AGREEMENT

WITNESSETH

WHEREAS, Executive is currently employed as Co-Chief Operating Officer of Territorial Savings Bank (the "Bank"); and

WHEREAS, the Bank has adopted a Plan of Conversion and Reorganization pursuant to which the Bank has become a wholly owned subsidiary of the Company (the "Conversion"); and

WHEREAS, the Company desires to assure itself of the continued availability of the Executive's services as provided in this Agreement; and

WHEREAS, Executive is willing to serve the Company on the terms and conditions hereinafter set forth; and

WHEREAS, Executive has previously entered into a separate employment agreement with the Bank.

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 the date first set forth above (the "Commencement Date"), Executive shall continue to serve in the capacity of Co-Chief Operating Officer of the Company. Executive shall continue to render such administrative and management services to the Company as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. Executive shall continue to promote the business of the Company. Executive's other duties shall be such as the Board of Directors of the Company (the "Board of Directors" or "Board") may from time to time reasonably direct, including normal duties as an officer of the Company.

5. Employee Benefits.

(c) Automobile, Cellular Phone Use, Computer and Memberships. The Company or the Bank shall provide Executive with the use of an automobile in accordance with the Company's or the Bank's automobile policy for executive vice presidents and above, as in effect from time to time. The Company or the Bank shall annually include on Executive's Form W-2 any amount attributable to Executive's personal use of such automobile. The Company or 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 Company or 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 Company or the Bank shall reimburse or pay Executive amounts sufficient to establish or maintain membership in any club or organization (business, social or otherwise) which will benefit the Company or the Bank (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 Company for senior executive officers, as in effect from time to time.

(e) Financial Planning. Executive shall be entitled to use the services of a tax professional and a personal financial planning professional (which may be the same person or entity for both services (the "Tax Service Professional") of his choosing and seek reimbursement by the Company for the reasonable cost of such Tax Service Professional actually incurred by the Executive. The services to be provided shall include (i) the preparation of all required federal, state and local personal income tax returns, (ii) advice with respect to federal, state and local income tax treatment of cash and other forms of compensation paid to the Executive by the Company and (iii) investment and retirement counseling and estate planning. Notwithstanding the foregoing, the annual cost to the Company of such services shall not exceed $5,000 (the "Annual Cost"). Reimbursement of the Annual Cost shall be paid promptly by the Company and in any event no later than March 15 of the year immediately following the year in which the Annual Cost was incurred. The Annual Cost shall be reviewed annually by the Compensation Committee of the Company and, if increased, shall be reflected in an addendum hereto.

7. Noncompetition and Confidentiality.

8. Termination.

Executive's employment under this Agreement shall be terminated upon any of the following occurrences:

(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 8(d)) or (ii) such employment is terminated by the Executive for "Good Reason" (as defined in Section 8(b)(iii), Executive shall be entitled to:

(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 Company within ninety (90) days after the initial occurrence of such event and that the Company has been given at least thirty (30) days to cure the situation (but the Company 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; (ii) if, in the organizational structure of the Company, Executive would be required to report to a person or persons other than the Chief Executive Officer; (iii) if the Company should fail to maintain Executive's base compensation in effect pursuant to
Section 2 of this Agreement, or fail to maintain the existing employee benefit plans or arrangements in which Executive participates as of the date of this Agreement, including any material fringe benefit, bonus plan and/or retirement plan, except to the extent that such reduction in compensation or benefit programs is part of an overall adjustment in compensation and benefits for all employees of the Company and the Executive is otherwise compensated for such an overall adjustment in an equitable manner; (iv) if Executive would be assigned duties and responsibilities other than those normally associated with his position as referenced in Section 1 of this Agreement; (v) if Executive's responsibilities or authority have in any way been materially diminished or reduced other than for reasons of Just Cause; or (vi) if Executive is not annually reappointed as Co-Chief Operating Officer other than for reasons of Just Cause.

(v) 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.

(iii) The Company shall cause to be continued life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained by

(d) Termination of Employment by the Board of Directors for Just Cause. In the event Executive's employment is terminated for "Just Cause," no continued payments or benefits shall be due under this Agreement. For purposes of this Agreement, termination for "Just Cause" shall be defined as termination due to Executive's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement Any determination of "Just Cause" as defined by this Section 8(d) shall be determined by a majority vote of the entire membership of the Board of Directors at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that in the good faith opinion of the Board, Executive committed the conduct described above and specifying the particulars thereof.

other actions by Executive and it shall also release the Executive from any and all claims and other actions by the Company and the Bank.

9. Change in Control.

(a) For purposes of this Agreement, a Change in Control of the Company or the Bank shall be deemed to have occurred if and when:

(iii) the Company or the Bank transfers substantially all of its assets to another corporation or entity which is not an affiliate of the Company or the Bank; or

For purposes of Section 9 of this Agreement, a Change in Control shall not occur as a result of the Conversion.

(i) the amount of the payment and benefits specified in Section 8(b), or

(ii) the amount of the payment and benefits specified in Section 9(c).

(i) an amount equal to three (3) times his "base amount," as defined in Code Section 280G(b)(3), less one (1) dollar; and

10. Successors and Assigns.

incurring such expenses or liabilities). Such expenses and liabilities may include, but are not limited to, judgment, court costs and attorneys' fees and the cost of reasonable settlements. The Company shall pay such expenses and liabilities in advance of a final judicial decision (hereinafter an "advancement of expenses"); provided, however, that, an advancement of expenses incurred by Executive in his capacity as a director or executive officer of the Company (and not in any other capacity in which service was or is rendered by Executive including, without limitation, services to an employee benefit plan) shall be made only upon delivery to the Company of an undertaking, by or on behalf of Executive, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Executive is not entitled to be indemnified for such expenses under this Section 15 or otherwise. Indemnification under this Section 15 shall be made in accordance with 12 C.F.R. ss.545.121 or any successor thereto.

18. Required Regulatory Provisions.

19. Arbitration.

termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement on the latest date set forth below.

TERRITORIAL BANCORP INC.

November 13, 2009                 By:  /s/ Harold H. Ohama
-----------------                      ----------------------------------------
Date                                   Chairman of the Compensation Committee


November 13, 2009                      /s/ Ralph Nakatsuka
-----------------                      ----------------------------------------
Date                                   Ralph Nakatsuka

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:

i. 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

ii. 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

iii. 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

iv. 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.

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.

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, 2009.

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

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:

(a) 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 the Plan Year, but for the Applicable Limitations, multiplied by the fair market value of such Stock on the last day of the Plan Year for which the allocation is made; and

(b) is the number of shares of Stock actually allocated to the account of the Participant for the relevant ESOP Plan Year, multiplied by the fair market value of such Stock on the last day of the Plan Year for which the allocation is made, and the dividends and earnings thereon paid during the Plan Year.

4.2 Investment of Annual ESOP Credits. Participants shall be entitled to invest the Annual ESOP Credits allocated to their Account among a select group of broadly diversified mutual funds selected by the Committee. For these purposes, an investment shall be deemed to be made to a mutual fund (whether or not actually made) when the Participant gives such instruction to the Committee that such investment shall be made. The frequency with which such investment instruction may be given to the Committee shall be determined by the Committee in its sole discretion. If the Employer establishes a rabbi trust and sets aside assets to informally fund the benefit obligation under this Plan, the Committee may permit Participants the opportunity to direct the investment of their Account under the rabbi trust, but the Committee is not obligated to do so. If the Employer establishes a rabbi trust but the Participants are not permitted to actually invest their Accounts through investment in the rabbi trust, the value of a Participant's Account shall nonetheless be determined on the basis of such Participant's deemed investments.

4.3 Incidents of Supplemental ESOP Payments. Benefits under this
Section 4 shall be payable to the Participant in a lump sum within 90 days of the first to occur of:

(a) the Participant's "Separation from Service," other than due to death or Disability;

(b) the Participant's Disability;

(d) a Change in Control of the Bank or the Company.

Notwithstanding anything herein to the contrary, if the Participant is a Specified Employee and the distribution under this Section is due to the Participants Separation from Service, solely to the extent necessary to avoid penalties under Code Section 409A, the distribution (or any part thereof) shall be delayed until the first day of the seventh month following Separation from Service.

4.4 Form of Supplemental ESOP Payments. A Participant's supplemental ESOP benefits under Section 4.1 of this Plan shall be a benefit paid in cash equal to the value of the Participant's Account. The Participant's Account shall be paid to the Participant upon the occurrence of the event and at the time specified in Section 4.3 above.

5. Administration of the Plan

5.1 Committee; Duties. This Plan shall be administered by the Committee which shall consist of not less than three (3) persons appointed by the Board of Directors. The Committee shall have the authority to make, amend, interpret and enforce all appropriate rules

and regulations for the administration of the Plan and decide or resolve any and all questions, including interpretations of this Plan, that may arise in connection with the administration of the Plan; provided, however, that any such interpretations, rules and/or regulations shall be consistent with the requirements of Code Section 409A and any Treasury Regulations or other guidance issued thereunder. A majority vote of the Committee members shall control any decision. Members of the Committee may be Participants under the Plan, so long as a majority of the members are not Participants.

5.2 Agents. The Committee may, from time to time, employ other agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Employer.

5.3 Binding Effect of Decisions. The decision or action of the Committee regarding of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

5.4 Indemnity of Committee. The Employer shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of gross negligence or willful misconduct.

6. Claims Procedure

6.1 Claim. Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee which shall respond in writing within thirty (30) days.

6.2 Denial of Claim. If the claim or request is denied, the written notice of denial shall state:

(a) the reason for denial, with specific reference to the Plan provisions on which the denial is based.

(b) a description of any additional material or information required and an explanation of why it is necessary.

6.3 Review of Claim. Any person whose claim or request is denied or who has not received a response within thirty (30) days may request review by notice given in writing to the Committee. The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.

6.4 Final Decision. The decision on review shall normally be made within sixty (60) days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days. The

decision shall be in writing and shall state the reason and the relevant plan provisions. All decisions on review shall be final and bind all parties concerned.

7. Amendment or Termination

7.1 Amendment of Plan. A majority of the Board of Directors may amend this Plan at any time or from time to time. However, no such amendment shall adversely affect the benefits of the Participant which have accrued prior to such action.

7.2 Plan Termination.

(a) Partial Termination. The Board may partially terminate the Plan by freezing future accruals if, in its judgment, the tax, accounting, or other effects of the continuance of the Plan, or potential payments thereunder, would not be in the best interests of the Employer.

(b) Complete Termination. Subject to the requirements of Code
Section 409A, in the event of complete termination of the Plan, the Plan shall cease to operate and the Employer shall pay out to the Participant his benefit as if the Participant had terminated employment as of the effective date of the complete termination. Such complete termination of the Agreement shall occur only under the following circumstances and conditions:

(i) The Administrator may terminate the Plan within 12 months of a corporate dissolution taxed under Code Section 331, or with approval of a bankruptcy court pursuant to 11 U.S.C. ss.503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participant's gross income in the latest of (i) the calendar year in which the Plan terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or
(iii) the first calendar year in which the payment is administratively practicable.

(ii) The Board may terminate the Plan by Board action taken within the 30 days preceding a Change in Control (but not following a Change in Control), provided that the Plan shall only be treated as terminated if all substantially similar arrangements sponsored by the Employer are terminated so that the Participant and all participants under substantially similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within 12 months of the date of the termination of the arrangements. For these purposes, "Change in Control" shall be defined in accordance with the Treasury Regulations under Code Section 409A.

(iii) The Board may terminate the Plan provided that (A) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank or Company, (B) all arrangements sponsored by the Bank that would be aggregated with this Plan under Treasury Regulations Section 1.409A-1(c) if the Participant covered by this Plan was also covered by any of those other arrangements are also terminated; (C) no payments other than payments that would be payable under the terms of the arrangement if the termination had not occurred are made within 12 months of the termination of the arrangement; (D) all payments are made within 24 months of the termination of the arrangements; and (E) the Bank does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations Section 1.409A-1(c) if the Participant participated in both arrangements, at any time within three years following the date of termination of the arrangement.

8. Miscellaneous

8.1 Unfunded Plan. This Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for a select group of management or highly compensated employees. However, the Employer may elect to fund for the benefits of Participants as described in Section 8.3 below. This Plan will continue to be unfunded for tax purposes and Title I of ERISA even if benefits are funded by the Bank under Section 8.3 below.

8.2 Unsecured General Creditor. The Participant and his Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of the Employer, nor shall they be beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Employer. Such policies or other assets of the Employer shall not be held under any trust for the benefit of Participants, their Beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligations of Employer under this Plan. Any and all of the Employer`s assets shall be, and remain, the general, unpledged, unrestricted assets of the Employer. The Employer`s obligation under the Plan shall be that of an unfunded and unsecured promise of the Employer to pay money in the future.

8.3 Trust Fund. The Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Employer may establish one (1) or more rabbi trusts, with such trustees as the Board may approve, for the purpose of providing for payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Employer`s creditors. To the extent any benefits provided under the Plan are actually paid from any such rabbi trust, the Employer shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Employer.

8.4 Nonassignability. Neither the Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant`s or any other person`s bankruptcy or insolvency.

8.5 Expenses of Plan. All expenses of the Plan will be paid by the Employer.

8.6 Payment of Employment and Code Section 409A Taxes. Any distribution under this Plan shall be reduced by the amount of any taxes required to be withheld from such distribution. This Plan shall permit the acceleration of the time or schedule of a payment to pay employment related taxes as permitted under Treasury Regulation Section 1.409A-3(j) or to pay any taxes that may become due at any time that the arrangement fails to meet the requirements of Code Section 409A and the regulations and other guidance promulgated thereunder. In the latter case, such payments shall not exceed the amount required to be included in income as the result of the failure to comply with the requirements of Code Section 409A.

8.7 Acceleration of Payments. Except as specifically permitted herein or in other sections of this Plan, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated hereunder by the Bank, in accordance with the provisions of Treasury Regulation Section 1.409A-3(j)(4) and any subsequent guidance issued by the United States Treasury Department. Accordingly, payments may be accelerated, in accordance with requirements and conditions of the Treasury Regulations (or subsequent guidance) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the Federal government; (iii) in compliance with ethics laws or conflicts of interest laws; (iv) in limited cash-outs (but not in excess of the limit under Code Section 402(g)(1)(B)); (v) to apply certain offsets in satisfaction of a debt of the Participant to the Bank; (vi) in satisfaction of certain bona fide disputes between the Participant and the Bank; or (vii) for any other purpose set forth in the Treasury Regulations and subsequent guidance.

8.8 Participation by Subsidiaries and Affiliates. If any employer is now or hereafter becomes a subsidiary or affiliated company of the Employer and its employees participate in the ESOP, the Board of Directors may authorize such subsidiary or affiliated company to participate in this Plan upon appropriate action by such employer necessary to adopt the Plan.

8.9 Delivery of Elections to Committee. All elections, designation, requests, notices, instructions and other communications required or permitted under the Plan from the Employer, a Participant, Beneficiary or other person to the Committee shall be on the appropriate form, shall be mailed by first-class mail or delivered to such address as shall be specified by such Committee, and shall be deemed to have been given or delivered only upon actual receipt thereof by such Committee at such location.

8.10 Delivery of Notice to Participants. All notices, statements, reports and other communications required or permitted under the Plan from the Employer or the Committee to any Officer, Participant, Beneficiary or other person, shall be deemed to have been duly given when delivered to, or when mailed by first-class mail, postage prepaid, and addressed to such person at this address last appearing on the records of the Committee.

9. Construction of the Plan

9.1 Construction of the Plan. The provisions of this Plan shall be construed, regulated, and administered according to the laws of the State of Hawaii, to the extent not superseded by Federal law.

9.2 Counterparts. This Plan has been established by the Employer in accordance with the resolutions adopted by the Board of Directors and may be executed in any number of counterparts, each of which shall be deemed to be an original. All the counterparts shall constitute one instrument, which may be sufficiently evidenced by any one counterpart.

9.3 Validity. In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

[signature page follows]

IN WITNESS WHEREOF, the Bank has adopted this Plan, effective as of January 1, 2009.

TERRITORIAL SAVINGS BANK

November 13, 2009                  By: /s/ Harold H. Ohama
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Date                                   Chairman of the Compensation Committee

TERRITORIAL SAVINGS BANK
NONQUALIFIED SUPPLEMENTAL
EMPLOYEE STOCK OWNERSHIP PLAN

Exhibit A

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Name of Participant                    Date of Participation
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Allan S. Kitagawa                      January 1, 2009
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Vernon Hirata                          January 1, 2009
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Ralph Nakatsuka                        January 1, 2009
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