Exhibit 10.11
EMPLOYMENT AGREEMENT
AGREEMENT, dated as July 15, 1998, by and among CORNERSTONE BANK, a
Connecticut State chartered bank (the "Bank") with its principal executive
offices at 000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, and XXXX X. READER
(the "Employee"), residing at 000 Xxxxxx Xxxxxx, Xxx Xxxxxx, XX 00000.
WHEREAS, the Bank and the Employee desire to enter into an employment
agreement on the terms and conditions set forth herein.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The employee is employed as Senior Vice President of the
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Bank. As an executive officer of the Bank, the Employee shall render
executive, policy, and other management services to the Bank of the
type customarily performed by persons serving in similar executive
officer capacities with banks engaging in the business of the Bank.
The Employee shall also perform such duties as the Board of Directors
of the Bank (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 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 at least 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 the Bank with a written waiver
of his rights to consider his employment as involuntarily terminated.
2. Compensation. The Bank agrees to pay the Employee during the term of
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this Agreement an initial salary at an annual rate equal to $100,000
with the salary to be increased as determined by the Board. At least
once during each calendar year during the period in which this
Agreement is in effect, the Board shall consider increasing the
employee's salary then in effect; provided, however, that the Board
shall be under no obligation to grant any such increase. In
considering salary increases, the Board shall take into account
increases in the cost of living and shall also consider performance or
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merit increases. 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 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.
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 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 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 the Bank's executive employees,
including the payment of reasonable business related expenses and
expenses for attending annual and periodic meetings of trade
associations, 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 provided by 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 hereof and ending on the
first to occur of (i) the Employee's death or Disability, (ii) the
Employee's voluntary termination employment, or (iii) the termination
of the Employee's employment by the Bank (either for cause or
otherwise), all as herein provided. For the purposes of this
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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 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
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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 Holding's or the
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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 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
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deferred compensation plans of 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;
(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 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) 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 the Bank, solely to fund the benefits that the Employee is
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entitled to under this Section 8(a) (iii), and 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 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 the Bank to the extent that such benefits are not
fully funded at the time of termination of the Employee's
employment;
(4) all insurance or other provisions for indemnification, defense or
hold-harmless of officers or directors of 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) 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 the Bank in Bank's sole, reasonable
discretion; and
(6) the Employee may, at the expense of 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 the Bank's affairs by a notice served
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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 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
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or the Bank to prove 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
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Journal), compounded monthly, for the period from the date of employment
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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.
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(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.
(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 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 36'h 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
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month period he is not employed by the Bank, nor shall he be
entitled to that portion of the bonus which corresponds to the
period that the Employee is not employed by 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 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 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 36/th/
month preceding the change in control and ending with the date of
termination.
(b) A "change be in control", for purposes of this Agreement, shall 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
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interest or other affiliation sufficient for them to act in
concert becomes the beneficial owner of 25 percent or more of the
total number of voting shares of 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 the Bank, for 25 percent or more of
the total number of voting shares of 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 thereunder;
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 the Bank before
such transaction shall cease to constitute at least two-thirds of
the Board of Directors of 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 13d-3 under
the Securities Exchange Act of 1934. Notwithstanding the
foregoing, a "change in control" shall not include the
acquisition of the Bank's voting stock by a holding company
organized by the Bank pursuant to Conn. Gen. Stat. Sec. 36a-181
(Holding Company), unless one or more of the Events described in
the preceding paragraph occurs prior to the organization of a
Holding Company or as part of a plan which involves the
organization of a Holding Company. Furthermore, should the Bank
organize a Holding Company, and should one of the Events
described in the preceding paragraph occur with respect to the
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 such
person being the beneficial owner of at least 25% of the Bank's
voting shares; (ii) the Bank enters into an agreement the
consummation of which will constitute a change in control; (iii)
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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 hereto. No
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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 Bank, except with the prior
approval of the Board.
12. Amendments or Additions: Action by Board. No amendments or additions to
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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 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
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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 included
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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 severable
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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 State of
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Connecticut to the extent applicable, and otherwise by the laws of the
United States.
CORNERSTONE BANK
By /s/ Xxxxxx X. Reader, President
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Name and Title:
/s/ Xxxx X. Reader
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XXXX X. READER
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