EXHIBIT 10.9
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 XXXXX X. XXXXXXX
(the "Employee"), residing at 00 Xxxxxxxx Xxxx, 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 Executive Vice President of
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the 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 $125,000,
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
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performance or 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 BENEFITS;
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AUTOMOBILE. The Employee shall be entitled to participate in any plan of
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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 period
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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 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 the Bank 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
a holding company organized by the Bank pursuant to Conn. Gen. Sec. 36a-181
or performance of acts to effect organization of such a holding company
shall not be considered to violate any duty Employee may have to the Bank.
7. VOLUNTARY ABSENCES. VACATIONS. The Employee shall be entitled, without loss
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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 3 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 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
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Employee except as provided in Section 9. The term
"termination for cause" shall mean termination by 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 the Bank's burden to
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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 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, 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:
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(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
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
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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 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.
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(b) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of 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, 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, 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 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 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, 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
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it shall be the burden of 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 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
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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 the Bank, or (y) the Bank seeks to terminate this
Agreement following knowledge of a potential change in control, but
prior to the potential change in control being terminated, 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
the Bank, plus 5 additional years, for purposes of vesting
and calculation of benefits under any benefit plan of 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/th/ month preceding the
change in control and ending with the date of termination.
The Employee shall be entitled at his option to terminate
his employment with
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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 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.
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(b) A "change of 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 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 or
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
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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)
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 the 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
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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 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
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Name and Title:
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
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