Exhibit 10.9
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 XXXXX X. XXXXXXX, residing at 00
Xxxxxxxx Xxxx, Xxxxxx, XX 00000 (the "Employee").
WHEREAS, Employee and Bank entered into a prior employment agreement on
July 15, 1998 which agreement is to be superceded by this Agreement; and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 November
1, 1991 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 President and Chief
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Executive Officer of the Bank. The Employee shall also serve as a
member of the Board of Directors of the Bank. Employee shall also
serve as the Executive Vice President and Chief Operating Officer of
Holdings. The Employee shall also serve as a member 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 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 $150,000,
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
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 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
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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 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, ,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,
or (iii) the termination of the Employee's employment by Holdings or
the Bank (either for cause or otherwise), 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
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(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 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 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 Holdings and/or the Bank
without cause shall be extremely difficult or impossible
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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. (a) If, either (x) during the term of this
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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
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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. 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 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
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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 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
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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 13d-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. Notwith-standing 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 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
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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 Holdings or 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 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.
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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.
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/ Xxx X. Xxxxxxxxx
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Name and Title:
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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