Exhibit 10.8
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 17, 2001 by and among CORNERSTONE BANCORP, INC.,
a Connecticut corporation which is a holding company organized under the
provisions of Conn. Gen. Stat. Sec. 36a-181, with a principal place of business
at 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000 ("Holdings"), CORNERSTONE
BANK, a Connecticut state chartered Bank with its principal executive offices at
000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000 (the "Bank"), (Holdings and Bank
may be referred to together as "Employer") and XXXXXX X. READER, residing at 000
Xxx Xxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx 00000 (the "Employee").
WHEREAS, Employee and Bank entered into a prior employment agreement on
July 1, 1998 which agreement is to be superceded by this Agreement; and
WHEREAS, Holdings, Bank and the Employee desire to enter into an employment
agreement on the terms and conditions set forth herein; and
WHEREAS, Employee commenced employment with Holdings and Bank on March 1,
1985 prior to the execution of this Agreement, and
WHEREAS, in consideration of the execution of this Agreement, Employee has
agreed to remain employed by Holdings and Bank.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. (a) The Employee is employed as Chief Lending Officer of
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the Bank. The Employee shall also serve as a member of and the
Chairman of the Board of Directors of the Bank. The Employee shall
also serve as a member of and the Vice Chairman of the Board of
Directors of Holdings. As an Executive Officer of Holdings and the
Bank, the Employee shall render executive, policy and other management
services to Holdings and the Bank of the type customarily performed by
persons serving in similar capacities with banks or bank holding
companies engaging in the business of banking and related services.
The Employee shall also perform such duties as the Board of Directors
of Holdings (the "Board") may, from time to time, reasonably direct.
During the term of this agreement, there shall be no material increase
or decrease in the duties and responsibilities of the Employee
otherwise than as provided herein, unless the parties otherwise agree
in writing. During the term of this Agreement, the Employee shall not
be
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required to relocate more than 25 miles from Stamford, Connecticut, in
order to perform the services hereunder. Should the Employee be
required to relocate more than 25 miles from Stamford in order to
maintain his position or compensation at least at its present level,
then the employee's employment shall be considered as involuntarily
terminated without cause for purposes of sections 8 and 9 of this
Agreement unless the Employee provides Holdings with a written waiver
of his rights to consider his employment as involuntarily terminated.
(b) Holdings or the Bank may, at their option, select which
party will fulfill each of the obligations due to the Employee under
this Agreement, but shall be jointly and severally liable to the
Employee hereunder.
2. Compensation. Employer agrees to pay the Employee during the term of
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this Agreement an initial salary at an annual rate equal to $128,650,
with the salary to be adjusted annually on July 1, as follows:
July 1, 2001 $116,000
July 1, 2002 $103,250
July 1, 2003 $ 90,500
July 1, 2004 $ 77,750
The salary of the Employee shall not be decreased at any time during
the term of this Agreement from the amount then in effect, unless the
Employee otherwise agrees in writing. Participation in deferred
compensation, discretionary bonus, retirement, and other employee
benefit plans and in fringe benefits shall not reduce the salary then
in effect, payable to the Employee under this Section 2. The salary
under this Section 2 shall be payable to the Employee not less
frequently than monthly. The Employee shall not be entitled to receive
fees for serving as a director of Holdings or the Bank or for serving
as a member of any committee of the Board.
3. Discretionary Bonuses. During the term of this Agreement, the Employee
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shall be entitled to participate in such discretionary bonus
arrangements as may be authorized by the Board. No other compensation
provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such bonuses when and as authorized
by the Board.
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4. Participation in Retirement and Employee Benefit Plans; Fringe
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Benefits; Automobile. The Employee shall be entitled to participate in
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any plan of Holdings or the Bank relating to stock options, stock
purchases, pension, thrift, profit sharing, group life insurance,
supplemental life insurance, medical coverage, disability, education,
or other retirement or employee benefits which Holdings or the Bank
has adopted or may adopt for the benefit of its executive employees.
The Employee shall also be entitled to participate in any other fringe
benefits which are now or may become applicable to Holdings' or the
Bank's executive employees, including the payment of reasonable
business related expenses and expenses for attending annual and
periodic meetings of trade associations, annual country club dues,
fees, expenses and assessments, and any other benefits which are
commensurate with the duties and responsibilities to be performed by
the Employee under this Agreement. The Employee shall also be entitled
to the use of an automobile which shall be chosen by and provided by
Holdings or the Bank and as to which the Bank shall bear all expenses
of operation, including but not limited to repairs, fuel, and parking
charges.
5. Term. The term of employment under this Agreement shall be for the
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period commencing on the date of execution of this Agreement and
ending on the first to occur of (i) the Employee's death or
Disability, (ii) the Employee's voluntary termination of employment,
(iii) the termination of the Employee's employment by Holdings or the
Bank (either for cause or otherwise), or (iv) June 30, 2005, all as
herein provided. For the purposes of this Agreement, "Disability"
shall mean the absence of the Employee from the Employee's duties with
Holdings or the Bank on a full-time basis for 180 consecutive business
days, as a result of incapacity owing to mental or physical illness
which is determined to be total and permanent by a physician selected
by Employer or its insurers and acceptable to the Employee or
Employee's legal representative.
6. Standards. (a) The Employee shall perform the Employee's duties and
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responsibilities under this Agreement in accordance with such
reasonable standards as may be established from time to time by the
Board. The reasonableness of such standards shall be measured against
standards for executive performance generally prevailing in the
banking industry
(b) Performance of duties as an officer, director or
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employee of any affiliate of Holdings or performance of acts to effect
organization of such affiliate shall not be considered to violate any
duty Employee may have to Holdings or the Bank.
7. Voluntary Absences. Vacations. The Employee shall be entitled, without
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loss of pay, to be absent voluntarily for reasonable periods of time
from the performance of Employee's duties and responsibilities under
this Agreement. All such voluntary absences shall be considered paid
vacation time, unless the Board otherwise approves. The Employee shall
be entitled to an annual paid vacation of at least 5 weeks per year or
such longer period as the Board may approve. The timing of paid
vacations shall be scheduled in a reasonable manner by the Employee.
The Employee shall not be entitled (i) to receive any additional
compensation from Holdings or the Bank on account of failure to take a
paid vacation or (ii) to accumulate unused paid vacation time from one
fiscal year to the next.
8. Termination of Employment.
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(a)
(i) The board may terminate the Employee's employment at any time.
The Employee shall have no right to receive compensation or
other benefits for any period after termination for cause or
after voluntary termination by the Employee except as provided
in Section 9. The term "termination for cause" shall mean
termination by Holdings or the Bank because of the Employee'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. In determining incompetence, the
acts or omissions shall be measured against standards generally
prevailing in the banking industry; provided. that it shall be
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Holding's or the Bank's burden to prove the alleged acts and
omissions and the prevailing nature of the standards the Bank
shall have alleged are violated by such acts and/or omissions.
(ii) The parties acknowledge and agree that damages which will result
to Employee for termination by Holdings and/or the
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Bank without cause shall be extremely difficult or impossible to
establish or prove, and agree that, unless the termination is
voluntary or for cause, Holdings and/or the Bank shall be
obligated, concurrently with such termination, to make a lump
sum cash payment to the Employee as liquidated damages of an
amount equal to the sum of (x) 1 times the Employee's then
current annual salary under Section 2 of this Agreement, plus
(y) 1 times the highest bonus awarded to the Employee under
Section 3 of this Agreement at any time during the 36-month
period ending with the date of termination. Employee agrees
that, except for such other payments and benefits to which the
Employee may be entitled as expressly provided by the terms of
this Agreement, such liquidated damages shall be in lieu of all
other claims which Employee may make by reason of such
termination.
(iii) In addition to the liquidated damages above described that are
payable to the Employee for termination without cause, the
following shall apply (the applicable period being referred to
herein as the "Benefits continuation Period") (x) for 12 months
following any termination without cause and (y) for 36 months
following the period referred to in Section 9(a) (iii) hereof:
(1) the Employee shall continue to participate in, and accrue
benefits under, all retirement, pension, profit sharing,
employee stock ownership, thrift, and other deferred
compensation plans of Holdings or the Bank as if the
termination of Employment of the Employee had not occurred
(with the Employee being deemed to receive annually for the
purposes of such plans the Employee's then current salary
(at the time of Employee's termination) under Section 2 of
this Agreement), except to the extent that such continued
participation and accrual is expressly prohibited by law, or
if such plan constitutes a "qualified plan" (a "Qualified
Plan") under Section 401 of the Internal Revenue Code of
1986, as amended (the "Code"), to the extent such continued
participation and accrual is expressly prohibited by the
terms of the Qualified Plan;
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(2) the Employee shall be entitled to continue to receive all
other employee benefits and then existing fringe benefits
referred to in Section 4 hereof as if the termination of
employment had not occurred, provided however, that life,
health, and disability coverage will terminate upon the
Employee becoming eligible for comparable benefits in
connection with the Employee's full-time employment by
another employer and further provided, that if the Employee
dies during the Benefits Continuation Period and prior to
becoming eligible for comparable benefits in connection with
the Employee's full-time employment by another employer, the
health coverage provided to Employee's spouse and dependents
shall be continued, at Holding's or the Bank's expense,
throughout the period ending with the last day of the
calendar month in which occurs the second anniversary of the
Employee's death;
(3) Holdings or the Bank shall, on the date of the Employee's
termination of employment, establish an irrevocable trust
that meets the guidelines set forth in Rev. Proc. 92-64
published by the Internal Revenue Service (as the same may
be modified or supplemented from time to time) (the
"Trust"), the assets of which will be held, subject to the
claims of judgment creditors of Holdings or the Bank, solely
to fund the benefits that the Employee is entitled to under
this Section 8(a) (iii), and Holdings or the Bank shall
transfer to the Trust an amount sufficient (x) to fund any
benefit accrued by the Employee under any defined benefit
pension plan maintained by Holdings or the Bank to the
extent that such defined benefit pension plan is not fully
funded on a termination basis, as determined under the rules
and regulations published by the Pension Benefit Guaranty
Corporation, at the time of termination of the Employee's
employment; and (y) to fund fully all benefits accrued by
the Employee under any defined contribution plan maintained
by Holdings or the Bank to the extent that such benefits are
not fully funded at the time of termination of the
Employee's employment;
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(4) all insurance or other provisions for indemnification,
defense or hold-harmless of officers or directors of
Holdings or the Bank which are in effect on the date the
notice of termination is sent to the Employee shall continue
for the benefit of the Employee with respect to all of
Employee's acts and omissions while an officer or director
as fully and completely as if such termination had not
occurred, and until the final expiration or running of all
periods of limitation against action which may be applicable
to such acts or omissions;
(5) Holdings or the Bank shall, at its sole expense as incurred,
provide the Employee with outplacement services, the scope
and provider of which shall be selected by either Holdings
or the Bank in its sole, reasonable discretion; and
(6) the Employee may, at the expense of Holdings or the Bank,
hire an accounting firm, law firm and/or financial planning
firm, selected by the Employee, to provide the Employee with
advice with respect to the Employee's benefits under this
Agreement.
(b) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of Holdings' affairs or the Bank's
affairs by a notice served under section 8 (e) or 8 (g) of the Federal
Deposit Insurance Act, or any successor statutes thereto, Holdings' or
the Bank's obligations under this Agreement shall be suspended as of
the date of service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, Holdings or the Bank may in its
discretion (i) pay the Employee all or part of the compensation
withheld while such contractual obligations were suspended, and (ii)
reinstate in whole or in part any of the obligations which were
suspended.
(c) If the Employee is removed and/or permanently prohibited from
participating in the conduct of Holdings' or the Bank's affairs by an
order issued under section 8 (e) or 8(g) of the Federal Deposit
Insurance Act or any successor statutes thereto, all obligations of
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Holdings or the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights of the parties shall
not be affected.
(d) Notwithstanding any other provision in this Agreement, Holdings or the
Bank may terminate or suspend this Agreement and the employment of the
Employee hereunder, as if such termination were for cause under
Section 8(a) (i), to the extent required by the laws of the State of
Connecticut related to banking, by applicable federal law relating to
deposit insurance or by regulations or orders issued by the Banking
Commission of the State of Connecticut or the Federal Deposit
Insurance Corporation, or any successor to any of the foregoing,
provided that it shall be the burden of Holdings or the Bank to prove
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that any such action was so required.
(e) In the event the employment of the Employee is terminated by the Bank
without cause under Section 8(a) hereof or the Employee's employment
is terminated voluntarily or involuntarily in accordance with Section
9 hereof, and the Bank fails to make timely payment of the amounts
then owed to the Employee under this Agreement, the Employee shall be
entitled to reimbursement for all reasonable costs, including
attorneys' fees, incurred by the Employee in taking action to collect
such amounts or otherwise to enforce this Agreement, plus interest on
such amounts at the rate of one percent above the prime rate (defined
as the base rate on corporate loans at large U.S. money center
commercial banks as published by The Wall Street Journal), compounded
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monthly, for the period from the date of employment termination until
payment is made to the Employee. Such reimbursement and interest shall
be in addition to all rights to which the Employee is otherwise
entitled under this Agreement.
(f) During the one-year period following termination of employment for any
reason, the Employee may not (i) solicit the employment of any person
who was, at the time of such termination or during the one-year period
preceding the Employee's termination, an employee of the bank, or (ii)
disclose or use in any manner confidential information of the Bank.
9. Change in Control.
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(a) If, either (x) during the term of this Agreement, there is a
change in control of Holdings or the Bank, or (y) Holdings or
Bank seeks
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to terminate this Agreement following knowledge of a potential
change in control, but prior to the potential change in control
being terminated or consummated, as the case may be, the Employee
shall be entitled to the following:
(i) An adjustment in the Employee's then current salary to
give the Employee cumulative cost of living increases
(based on increases in the Consumer Price Index - "CPI"
- for such period) for the period from the date of
execution of this Agreement through the date of the
change in control ("CPI Adjusted Salary"), and annual
increases based on the CPI on each anniversary of the
change in control.
(ii) The crediting to the Employee for years of service with
Holdings or the Bank, plus 5 additional years, for
purposes of vesting and calculation of rights and/or
benefits under any 401(k) plan, stock option, stock
purchase, pension, thrift, profit sharing, group life
insurance, supplemental life insurance, medical
coverage, disability, education or other retirement or
employee benefit plan of Holdings or the Bank or of any
successor entity.
(iii)18 months notice of termination of employment (the "18
month period") during which period the Employee shall
be entitled to receive, without offset for any reason,
(i) payment of the Employee's CPI Adjusted Salary plus
(ii) the highest bonus received by the Employee during
the period commencing with the 36th month preceding
the change in control and ending with the date of
termination. In the event Employee has not completed 36
months of service at such time the dollar amount of the
bonus attributable to this subsection shall be
conclusively presumed to be no less than $50,000. The
Employee shall be entitled at his option to terminate
his employment with the Bank prior to the expiration of
the 18 month period. If the Employee does terminate his
employment prior to the expiration of the 18 month
period, he shall not be entitled to salary for the
portion of the 18 month period he is not employed
Holdings or by the Bank, nor shall he be entitled to
that portion of the bonus which corresponds
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to the period that the Employee is not employed by
Holdings or the Bank. The portion of the bonus to which
the Employee is not entitled as a result of his
termination of his employment shall be determined by
multiplying the bonus by a fraction, the numerator of
which shall be the number of days of the 18 month
period during which the Employee was not employed by
Holdings or the Bank and the denominator of which shall
be 548. Notwithstanding the foregoing, the Employee
shall under all circumstances, to include termination
of employment at his request prior to the expiration of
the 18 month period, be entitled to the amounts
described in Section 9(a)(iv) below. Should the
Employee elect to terminate his employment prior to the
expiration of the 18 month period, all benefits,
rights, and entitlements of the Employee which would
commence at the conclusion of the 18 month period shall
commence at the date of termination of employment. The
18 month period or such shorter period as may occur as
a result of voluntary termination in accordance with
the preceding provisions of this subsection shall be
referred to elsewhere in this Agreement as "the period
referred to in Section 9(a)(iii)".
(iv) Following the period referred to in (iii) above, at the
Employee's election given in writing to Holdings or the
Bank at least 30 days prior to the end of such period
referred to in Section 9(a)(iii), either a lump sum
cash payment or 36 monthly periodic payments, upon
termination, or commencing upon termination, as the
case may be, in an amount equal to the sum of (x) 3
times the Employee's CPI Adjusted Salary, plus (y) 3
times the highest bonus received by the Employee during
the period commencing with the 36th month preceding the
change in control and ending with the date of
termination.
(b) A "change in control", for purposes of this Agreement, shall be
deemed to have taken place if any of the following events (the
Events) occur: (i) any person or group of persons with a unity of
interest or other affiliation sufficient for them to act in
concert becomes the beneficial owner of 25 percent or more of the
total
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number of voting shares of Holdings or the Bank; (ii) any person
(other than the persons named as proxies solicited on behalf of
the Board) holds revocable or irrevocable proxies, as to the
election or removal of directors of Holdings or the Bank, for 25
percent or more of the total number of voting shares of Holdings
or the Bank; (iii) any person has entered into an agreement or
received an option for the acquisition of, beneficial ownership
of 25 percent or more of the total number of voting shares of the
Bank, whether or not the requisite approval for such acquisition
has been received under applicable laws or the respective
regulations issued there-under; or(iv) as the result of, or in
connection with, any cash tender or exchange offer, merger, or
other business combination, sale of assets or contested election,
or any combination of the foregoing transactions, the persons who
were directors of Holdings or the Bank before such transaction
shall cease to constitute at least two-thirds of the Board of
Directors of Holdings or the Bank or any successor corporation.
For purposes of this Section 9(b), a "person" includes an
individual, corporation, partnership, trust, association, joint
venture, pool, syndicate, unincorporated organization,
joint-stock company, or similar organization or group acting in
concert. For purposes of this Section 9, a person shall be deemed
to be a beneficial owner as that term is used in Rule l3d-3 under
the Securities Exchange Act of 1934. The parties recognize that
Holdings is a holding company organized by the Bank pursuant to
Conn. Gen. Stat. Sec. 36a-181. Notwithstanding all of the
foregoing, a "change in control" shall not include the
acquisition of Holdings' and/or the Bank's voting stock by any
other holding company organized by Holdings and/or the Bank
pursuant to Conn. Gen. Stat. Sec. 36a-181 (Holding Company),
unless one or more of the Events described in the preceding
portion of this paragraph occurs prior to the organization of
another Holding Company or as part of a plan which involves the
organization of another Holding Company. Furthermore, should the
Bank organize another Holding Company, and should one of the
Events described in the preceding portion of this paragraph occur
with respect to the other Holding Company (instead of the Bank),
then a change in control shall be deemed to have taken place.
(c) A "potential change in control", for the purposes of this
Agreement, shall be deemed to have taken place, if: (i) any
person commences a tender which, if consummated, would result in
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such person being the beneficial owner of at least 25% of the
voting shares of Holdings or the Bank; (ii) Holdings or the Bank
enters into an agreement the consummation of which will
constitute a change in control; (iii) proxies are solicited by
anyone other than the Board, or (iv) any other event occurs which
is deemed by the Board to be a potential change in control.
Notwithstanding the foregoing, a "potential change in control"
shall not include events which are part of the acquisition of the
Bank's voting stock by a Holding Company organized by the Bank
pursuant to Conn. Gen. Stat. Section 36a-181, unless the Board
deems these events to be a potential change in control.
(d) A potential change in control, for purposes of this Agreement,
shall be deemed to have terminated, if the Board determines in
good faith that a change in control is not likely to occur from
such potential change in control.
(e) In the event that any payment or benefit received by the Employee
under this Section 9 shall constitute an "excess parachute
payment" within the meaning of Section 280G(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), the Bank shall pay
the Employee such amount or amounts (collectively, the
"indemnification amount") as are equal to the amount of any
income, excise or other tax or taxes assessed against the
Employee as a result of the Employee's receipt of the "excess
parachute payment", whether assessed under Section 4999 of the
Code or under any other federal or state tax laws.
10. No Assignment. This Agreement is personal to each of the parties
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hereto. No party may assign or delegate any rights or obligations
hereunder without first obtaining the written consent of the other
party hereto. However, in the event of the death of the Employee all
rights to receive payments hereunder shall become rights of the
Employee's estate.
11. Other Contracts. The Employee shall not, except as provided in Section
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9(a)(iii), during the term of this Agreement, have any other paid
employment other than with an affiliate of Holdings or the Bank,
except with the prior approval of the Board.
12. Amendments or Additions: Action by Board. No amendments or additions
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to this Agreement shall be binding unless in writing and signed by all
parties hereto. The prior approval by a two-thirds affirmative vote of
the
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full Board shall be required in order for the Board to authorize any
amendments or additions to this Agreement, to give any consents or
waivers of provisions of this Agreement, or to take any other action
under this Agreement, including any termination of employment with or
without cause under Section 8(a) hereof.
13. Section Headings. The section headings used in this Agreement are
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included solely for convenience and shall not affect, or be used in
connection with, the interpretation of this Agreement.
14. Severability. The provisions of this Agreement shall be deemed
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severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof.
15. Governing Law. This Agreement shall be governed by the laws of the
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State of Connecticut to the extent applicable, and otherwise by the
laws of the United States.
16. Merger. All prior understandings, agreements, representations and
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warranties, oral and written, between Employer and Employee are merged
in this Agreement.
CORNERSTONE BANCORP, INC.
By:/s/ Xxxxx X. Xxxxxxx
/s/ Xxxxxx X. Reader
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Name and Title:
CORNERSTONE BANK
By:/s/ Xxxxx X. Xxxxxxx
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Name and Title:
/s/ Xxxxxx X. Reader
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Xxxxxx X. Reader
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