<PAGE>

                                                                   Exhibit 10.11

                              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. 36a181, with a principal place of business
at 550 Summer Street, Stamford, Connecticut 06901 ("Holdings"), CORNERSTONE
BANK, a Connecticut state chartered Bank with its principal executive offices at
550 Summer Street, Stamford, Connecticut 06901 (the "Bank"), (Holdings and Bank
may be referred to together as "Employer") and PAUL H. READER, residing at 181
Carter Street, New Canaan, CT 06840 (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JULY 15, 1998  which agreement is to be superceded by this Agreement; and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 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 Executive Vice President
          ----------
          and Senior Loan 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 a Senior Vice President 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

                                        1

<PAGE>


          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
          ------------
          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 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
          ---------------------
          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

                                        2

<PAGE>

          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; Automobile. The Employee shall be entitled to participate in
          --------------------
          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. At Employee's option, Holdings or the Bank shall
          assume Employee's existing automobile lease and all obligations
          thereunder, including wear and tear and operating expenses, and shall
          be responsible for substitute leases during the term of this
          Agreement.

     5.   Term. The term of employment under this Agreement shall be for the
          ----
          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
          --------------
          responsibilities under this Agreement in accordance with such
          reasonable standards as may be established from time to time by the

                                        3

<PAGE>

          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
          ------------------- ----------
          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 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 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. (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 prove the alleged acts and

                                        4

<PAGE>

               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, profitsharing,
                    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

                                        5

<PAGE>

                    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 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

                                        6

<PAGE>

                    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;

               (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.

                                        7

<PAGE>

     (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 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 Journal), compounded
                                           -----------------------
          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.

                                        8

<PAGE>

     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
               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

                                        9

<PAGE>

               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 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

                                       10

<PAGE>

          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 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. 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 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.

                                       11

<PAGE>

     (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
     --------------
     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
     ----------------
     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
     -----------------------------------------
     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
     -----------------
     solely for convenience and shall not affect, or be used in connection with,
     the interpretation of this Agreement.

                                       12

<PAGE>

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

15.  Governing Law. This Agreement shall be governed by the laws of the State of
     --------------
     Connecticut to the extent applicable, and otherwise by the laws of the
     United States.

16.  Merger. All prior understandings, agreements, representations and
     -------
     warranties, oral and written, between Employer and Employee are merged in
     this Agreement.

                                          CORNERSTONE BANCORP, INC.


                                          By: /s/ Jay M. Forgotson
                                              ----------------------------------
                                          Name and Title:


                                          CORNERSTONE BANK


                                          By: /s/ James P. Jakubek
                                              ----------------------------------
                                          Name and Title:


                                          /s/ Paul H. Reader
                                          --------------------------------------
                                          Paul H. Reader

                                       13