NEWMIL BANK SECOND AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT
Exhibit
10.09
NEWMIL
BANK
SECOND
AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT
This
Second
Amended and Restated Salary Continuation Agreement
(this
“Agreement”) is entered into as of this 20th
day of
December, 2005, by and between NewMil Bank, a Connecticut-chartered savings
bank
(the “Bank”), and Xxxxxxx X. Xxxxx, President and Chief Executive Officer of
NewMil Bancorp, Inc. and the Bank (the “Executive”).
Whereas,
the
Executive has contributed substantially to the success of the Bank and its
parent corporation, NewMil Bancorp, Inc., and the Bank desires that the
Executive continue in its employ,
Whereas,
to
encourage the Executive to remain an employee of the Bank, the Bank is willing
to provide salary continuation benefits to the Executive, payable out of the
Bank’s general assets,
Whereas,
none of
the conditions or events included in the definition of the term “golden
parachute payment” that is set forth in section 18(k)(4)(A)(ii) of the Federal
Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit
Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists
or,
to the best knowledge of the Bank, is contemplated insofar as the Bank is
concerned,
Whereas,
it is
the intent of the parties hereto that this Agreement be considered an unfunded
arrangement maintained primarily to provide supplemental retirement benefits
for
the Executive, and to be considered a non-qualified benefit plan for purposes
of
the Employee Retirement Income Security Act of 1974, as amended. The Executive
is fully advised of the Bank’s financial status,
Whereas,
the
Executive and the Bank entered into an Amended and Restated Salary Continuation
Agreement dated as of January 1, 2002,
Whereas,
the
Bank and the Executive have negotiated and agreed to miscellaneous changes
in
the terms and conditions of the January 1, 2002 Amended and Restated Salary
Continuation Agreement, and
Whereas,
the
Bank and the Executive intend that this Agreement shall amend and restate in
its
entirety the January 1, 2002 Amended and Restated Salary Continuation Agreement,
and that from and after the date of this Agreement the January 1, 2002 Amended
and Restated Salary Continuation Agreement shall be of no further force or
effect.
Now
Therefore,
in
consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
The
following words and phrases used in this Agreement have the meanings
specified:
1.1 “Accrual
Balance”
means
the liability that should be accrued by the Bank under generally accepted
accounting principles (“GAAP”) for the Bank’s obligation to the Executive under
this Agreement, by applying Accounting Principles Board Opinion No. 12, as
amended by Statement of Financial Accounting Standards No. 106, and the
calculation method and discount rate specified hereinafter. The Accrual Balance
shall be calculated assuming a level principal amount and interest as the
discount rate is accrued each period. The principal accrual is determined such
that when it is credited with interest each month, the Accrual Balance at Normal
Retirement Age equals the present value of the normal retirement benefits.
The
discount rate used by the Plan Administrator to determine the Accrual Balance
shall be based on the yield on a 20-year corporate bond rated Aa by Moody’s,
rounded to the nearest ¼%. The initial discount rate is 7.50%. In its sole
discretion, the Plan Administrator may adjust the discount rate to maintain
the
rate within reasonable standards according to GAAP.
1.2 “Beneficiary”
means
each designated person, or the estate of the deceased Executive, entitled to
benefits, if any, upon the death of the Executive determined according to
Article 4.
1.3 “Beneficiary
Designation Form”
means
the form established from time to time by the Plan Administrator that the
Executive completes, signs, and returns to the Plan Administrator to designate
one or more Beneficiaries.
1.4 “Change
in Control”
shall
mean any one of the following events occurs, provided the event constitutes
a
change in control within the meaning of Internal Revenue Code section 409A
and
rules, regulations, and guidance of general application thereunder issued by
the
Department of the Treasury, and provided the occurrence of the event is
objectively determinable and does not require the exercise of judgment or
discretion on the part of the Plan Administrator or any other person
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(a) Change
in Ownership:
a
change in ownership of NewMil Bancorp, Inc., a Delaware corporation of which
the
Bank is a wholly owned subsidiary, occurs on the date any one person or group
accumulates ownership of NewMil Bancorp, Inc.’s stock constituting more than 50%
of the total fair market value or total voting power of NewMil Bancorp, Inc.’s
stock,
(b) Change
in Effective Control:
(1) any
one person, or more than one person acting as a group, acquires within a
12-month period ownership of stock of NewMil Bancorp, Inc. possessing 35% or
more of the total voting power of NewMil Bancorp, Inc.’s stock, or (2) a
majority of NewMil Bancorp, Inc.’s board of directors is replaced during any
12-month period by directors whose appointment or election is not endorsed
in
advance by a majority of NewMil Bancorp, Inc.’s board of directors,
or
2
(c) Change
in Ownership of a Substantial Portion of Assets:
a
change in the ownership of a substantial portion of NewMil Bancorp, Inc.’s
assets occurs on the date any one person, or more than one person acting as
a
group, acquires assets from NewMil Bancorp, Inc. having a total gross fair
market value equal to or exceeding 40% of the total gross fair market value
of
all of the assets of NewMil Bancorp, Inc. immediately before the acquisition
or
acquisitions. For this purpose, gross fair market value means the value of
NewMil Bancorp, Inc.’s assets, or the value of the assets being disposed of,
determined without regard to any liabilities associated with the
assets.
For
purposes of paragraphs (a) through (c) of this Section 1.4, persons shall be
considered to be acting as a group if they would be considered to be acting
as a
group under Internal Revenue Code section 409A and rules, regulations, and
guidance of general application issued thereunder by the Department of the
Treasury. References in this Agreement to Internal Revenue Code section 409A
include rules, regulations, and guidance of general application issued by the
Department of the Treasury under section 409A.
1.5 “Code”
means
the Internal Revenue Code of 1986, as amended.
1.6 “Disability”
means,
because of a medically determinable physical or mental impairment that can
be
expected to result in death or that can be expected to last for a continuous
period of at least 12 months, (a) the Executive is unable to engage in any
substantial gainful activity, or (b) the Executive is receiving income
replacement benefits for a period of at least three months under an accident
and
health plan of the employer. Medical determination of disability may be made
either by the Social Security Administration or by the provider of an accident
or health plan covering employees of the Bank. Upon request of the Plan
Administrator, the Executive must submit proof to the Plan Administrator of
the
Social Security Administration’s or provider’s determination.
1.7 “Early
Retirement Age”
[Intentionally Left Blank]
1.8 “Early
Termination”
means
the Executive’s Separation from Service with the Bank before Normal Retirement
Age for reasons other than death, Disability, Termination for Cause or following
a Change in Control.
1.9 “Early
Termination Date”
means
the date on which Early Termination occurs.
1.10 “Effective
Date”
means
as of January 1, 2002.
1.11 “Normal
Retirement Age”
means
the Executive’s 65th
birthday.
1.12 “Normal
Retirement Date”
means
the later of the Normal Retirement Age or the Executive’s Separation from
Service with the Bank.
1.13 “Person”
means
an individual, corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or other
entity.
1.14 “Plan
Administrator”
means
the plan administrator described in Article 8.
1.15 “Plan
Year”
means
a
twelve-month period commencing on January 1 and ending on December 31 of each
year. The initial Plan Year shall commence on the Effective Date of this
Agreement.
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1.16 “Separation
from Service”
means
the Executive’s service as an executive and independent contractor to the Bank
and any member of a controlled group, as defined in Code section 414, terminates
for any reason, other than because of a leave of absence approved by the Bank
or
the Executive’s death. For purposes of this Agreement, if there is a dispute
about the employment status of the Executive or the date of the Executive’s
Separation from Service, the Bank shall have the sole and absolute right to
decide the dispute unless a Change in Control shall have occurred.
1.17 “Termination
for Cause”
means
the definition of termination for cause specified in any employment or severance
agreement existing on the date hereof or hereafter entered into between the
Executive and NewMil Bancorp, Inc. If the Executive is not a party to an
employment or severance agreement containing a definition of termination for
cause, Termination for Cause means the Bank has terminated the Executive’s
employment for any of the following reasons -
(a) Gross
negligence or gross neglect of duties,
(b) Commission
of a felony or commission of a misdemeanor involving moral turpitude,
or
(c) Fraud,
disloyalty or willful violation of any law or significant Bank policy committed
in connection with the Executive’s employment and resulting in an adverse effect
on the Bank. No act, or failure to act, with an absence of good faith and
without a reasonable belief that his action or failure to act was in the best
interest of the Bank.
ARTICLE
2
LIFETIME
BENEFITS
2.1 Normal
Retirement Benefit.
Upon
the Executive’s Separation from Service on or after the Normal Retirement Age
for reasons other than death, the Bank shall pay to the Executive the benefit
described in this Section 2.1 instead of any other benefit under this
Agreement.
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2.1.1
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Amount
of Benefit.
The annual benefit under this Section 2.1 is $158,000.
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2.1.2
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Payment
of Benefit.
The Bank shall pay the annual benefit to the Executive in 12 equal
monthly
installments payable on the first day of each month, beginning with
the
seventh month after Separation from Service. The annual benefit shall
be
paid to the Executive for 15 years.
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2.2 Early
Termination Benefit.
Upon
Early Termination, the Bank shall pay to the Executive the benefit described
in
this Section 2.2 instead of any other benefit under this
Agreement.
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2.2.1
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Amount
of Benefit.
The benefit under this Section 2.2 is the Early Termination Annual
Benefit
amount set forth in Schedule A for the Plan Year ending immediately
before
the Early Termination Date.
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2.2.2
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Payment
of Benefit.
The Bank shall pay the annual benefit to the Executive in 12 equal
monthly
installments payable on the first day of each month, beginning with
the
later of (a) the seventh month after Separation from Service, or
(b) the
month immediately after the month in which the Executive attains
the
Normal Retirement Age. The annual benefit shall be paid to the Executive
for 15 years.
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2.3 Disability
Benefit.
If the
Executive terminates employment because of Disability before the Normal
Retirement Age, the Bank shall pay to the Executive the benefit described in
this Section 2.3 instead of any other benefit under this Agreement.
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2.3.1
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Amount
of Benefit.
The benefit under this Section 2.3 is the Disability Annual Benefit
amount
set forth in Schedule A for the Plan Year ending immediately before
the
date on which termination of the Executive’s employment
occurs.
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2.3.2
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Payment
of Benefit.
The Bank shall pay the annual benefit to the Executive in 12 equal
monthly
installments payable on the first day of each month, beginning with
the
later of (a) the seventh month after Separation from Service, or
(b) the
month immediately after the month in which the Executive attains
the
Normal Retirement Age. The annual benefit shall be paid to the Executive
for 15 years.
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2.4 Change-in-Control
Benefit.
If a
Change in Control occurs during the term of this Agreement, the Bank shall
pay
to the Executive the benefit described in this Section 2.4 instead of any other
benefit under this Agreement.
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2.4.1
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Amount
of Benefit.
For a Change in Control occurring from the Effective Date of this
Agreement through April 30, 2006, the Change-in-Control Benefit is
determined by taking the Normal Retirement Age Accrual Balance and
discounting that sum back to the Executive’s current age as if the
Executive had an additional 108 months of service and 108 additional
months of age on the date of the Change in Control at a 4% discount
rate.
For a Change in Control occurring from May 1, 2006 through the Normal
Retirement Date, the Change-in-Control Benefit is the Normal Retirement
Age Accrual Balance.
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2.4.2
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Payment
of Benefit.
The Bank shall pay the Change-in-Control benefit under Section 2.4
of this
Agreement to the Executive in one lump sum within three days after
the
Change in Control.
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2.5 Change-in-Control
Payout of Normal Retirement Benefit, Early Termination Benefit, or Disability
Benefit Being Paid to the Executive at the Time of a Change in
Control.
If a
Change in Control occurs at any time during the entire 15-year salary
continuation benefit payment period and if at the time of that Change in Control
the Executive is receiving the benefit provided by Section 2.1.2, Section 2.2.2
or Section 2.3.2, the Bank shall pay the remaining salary continuation benefits
to the Executive in a single lump sum within three days after the Change in
Control. The lump-sum payment due to the Executive as a result of a Change
in
Control shall be an amount equal to the Accrual Balance amount corresponding
to
that particular benefit then being paid.
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2.6 Contradiction
in Terms of Agreement and Schedule A.
If
there is a contradiction in the terms of this Agreement and Schedule A attached
hereto concerning the actual amount of a particular benefit due the Executive
under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of the benefit
set
forth in the Agreement shall control. If the Plan Administrator changes the
discount rate used to calculate the Accrual Balance, the Plan Administrator
shall prepare or cause to be prepared a revised Schedule A, which shall
supersede and replace any and all Schedules A previously prepared under or
attached to this Agreement.
2.7 Savings
Clause Relating to Compliance with Code Section 409A.
Notwithstanding any other provision of this Agreement, if when the Executive’s
employment terminates the Executive is a specified employee, as defined in
Code
section 409A, and if any payments under Article 2 of this Agreement will result
in additional tax or interest to the Executive because of section 409A, the
Executive will not be entitled to the payments under Article 2 until the
earliest of (a) the date that is at least six months after termination of the
Executive’s employment for reasons other than the Executive’s death, (b) the
date of the Executive’s death, or (c) any earlier date that does not result in
additional tax or interest to the Executive under section 409A. If any provision
of this Agreement would subject the Executive to additional tax or interest
under section 409A, the Bank shall reform the provision. However, the Bank
shall
maintain to the maximum extent practicable the original intent of the applicable
provision without subjecting the Executive to additional tax or interest, and
the Bank shall not be required to incur any additional compensation expense
as a
result of the reformed provision. References in this Agreement to Code section
409A include rules, regulations, and guidance of general application issued
by
the Department of the Treasury under Code section 409A.
ARTICLE
3
DEATH
BENEFITS
3.1 Death
During Active Service.
If the
Executive dies in active service to the Bank before the Normal Retirement Age,
the Executive’s Beneficiary shall be entitled solely to the benefit described in
the January 1, 2002 Split Dollar Agreement between the Bank and the
Executive.
3.2 Death
after Separation from Service.
If the
Executive dies after Separation from Service and at Separation from Service
the
Executive is entitled to the normal retirement benefit provided by Section
2.1,
the Early Termination benefit provided by Section 2.2, or the Disability benefit
provided by Section 2.3, the Bank shall pay to the Executive’s Beneficiary the
benefits to which the Executive was entitled at death. Beginning on the first
day of the month after the Executive’s death, the Bank shall pay the benefits to
the Beneficiary at the same time and in the same amounts they would have been
paid to the Executive had the Executive survived. In that case, no death benefit
shall be payable under this Article 3.
3.3 Death
after Receipt of Change-in-Control Benefit.
Anything in this Agreement or in the January 1, 2002 Split Dollar Agreement
to
the contrary notwithstanding, neither the Executive nor the Executive’s
Beneficiary shall be entitled to any further benefits whatsoever under this
Agreement or under the January 1, 2002 Split Dollar Agreement after the
Change-in-Control benefit provided by Section 2.4 is paid to the Executive.
If
any provision of this Agreement, including this Section 3.3, is contrary in
any
way to the terms of the January 1, 2002 Split Dollar Agreement, that agreement
shall be deemed to be amended hereby.
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3.4 Change-in-Control
Payout of Normal Retirement Benefit, Early Termination Benefit or Disability
Benefit Being Paid to the Executive’s Beneficiary at the Time of a Change in
Control.
If a
Change in Control occurs at any time during the entire 15-year salary
continuation benefit payment period and if at the time of that Change in Control
the Executive’s Beneficiary is receiving the benefit provided by Section 2.1.2,
Section 2.2.2, or Section 2.3.2, the Bank shall pay the remaining salary
continuation benefits to the Beneficiary in a single lump sum within three
days
after the Change in Control. The lump-sum payment due to the Beneficiary as
a
result of a Change in Control shall be an amount equal to the Accrual Balance
amount corresponding to that particular benefit then being paid.
ARTICLE
4
BENEFICIARIES
4.1
Beneficiary
Designations.
The
Executive shall have the right at any time to designate a Beneficiary to receive
any benefits payable under this Agreement upon the death of the Executive.
The
Beneficiary designated under this Agreement may be the same as or different
from
the beneficiary designation under any other benefit plan of the Bank in which
the Executive participates.
4.2 Beneficiary
Designation: Change.
The
Executive shall designate a Beneficiary by completing and signing the
Beneficiary Designation Form and delivering it to the Plan Administrator or
its
designated agent. The Executive’s Beneficiary designation shall be deemed
automatically revoked if the Beneficiary predeceases the Executive or if the
Executive names a spouse as Beneficiary and the marriage is subsequently
dissolved. The Executive shall have the right to change a Beneficiary by
completing, signing, and otherwise complying with the terms of the Beneficiary
Designation Form and the Plan Administrator’s rules and procedures, as in effect
from time to time. Upon the acceptance by the Plan Administrator of a new
Beneficiary Designation Form, all Beneficiary designations previously filed
shall be cancelled. The Plan Administrator shall be entitled to rely on the
last
Beneficiary Designation Form filed by the Executive and accepted by the Plan
Administrator before the Executive’s death.
4.3 Acknowledgment.
No
designation or change in designation of a Beneficiary shall be effective until
received, accepted, and acknowledged in writing by the Plan Administrator or
its
designated agent.
4.4 No
Beneficiary Designation.
If the
Executive dies without a valid beneficiary designation, or if all designated
Beneficiaries predecease the Executive, then the Executive’s spouse shall be the
designated Beneficiary. If the Executive has no surviving spouse, the benefits
shall be made to the personal representative of the Executive’s
estate.
4.5 Facility
of Payment.
If a
benefit is payable to a minor, to a person declared incapacitated, or to a
person incapable of handling the disposition of his or her property, the Bank
may pay such benefit to the guardian, legal representative, or person having
the
care or custody of the minor, incapacitated person, or incapable person. The
Bank may require proof of incapacity, minority, or guardianship as it may deem
appropriate before distribution of the benefit. Distribution shall completely
discharge the Bank from all liability for the benefit.
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ARTICLE
5
GENERAL
LIMITATIONS
5.1 Termination
for Cause.
Notwithstanding any provision of this Agreement to the contrary, the Bank shall
not pay any benefit under this Agreement and this Agreement shall terminate
if
Separation from Service is a result of Termination for Cause. The Executive
shall not be deemed to have been terminated for Cause under this Agreement
unless and until there shall have been delivered to the Executive a copy of
a
resolution duly adopted by the affirmative vote of at least three-fourths (¾) of
the directors of the Bank then in office at a meeting of the Board of Directors
called and held for such purpose, which resolution (a) contains findings that,
in the good faith opinion of the Board, the Executive has committed an act
constituting Termination for Cause and (b) specifies the particulars thereof
in
detail. Notice of that meeting and the proposed Termination for Cause shall
be
given to the Executive a reasonable amount of time before the Board’s meeting.
The Executive and his counsel (if the Executive chooses to have counsel present)
shall have a reasonable opportunity to be heard by the Board at the meeting.
Nothing in this Agreement limits the Executive’s or his beneficiaries’ right to
contest the validity or propriety of the Board’s determination of Termination
for Cause, and they shall have the right under Article 6 of this Agreement
to
contest the validity or propriety of the Board’s determination of Termination
for Cause even if that right does not exist under any employment agreement
of
the Executive.
5.2 Misstatement.
No
benefits shall be paid under this Agreement or under the January 1, 2002 Split
Dollar Agreement if the Executive makes any material misstatement of fact on
any
application or resume provided to the Bank or on any application for benefits
provided by the Bank.
5.3 Removal.
If the
Executive is removed from office or permanently prohibited from participating
in
the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations
of the Bank under this Agreement shall terminate as of the effective date of
the
order.
5.4 Default.
Notwithstanding any provision of this Agreement to the contrary, if the Bank
is
in “default” or “in danger of default,” as those terms are defined in section
3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x), all obligations
under this Agreement shall terminate.
5.5 FDIC
Open-Bank Assistance.
All
obligations under this Agreement shall terminate, except to the extent
determined that continuation of the contract is necessary for the continued
operation of the Bank, when the Federal Deposit Insurance Corporation enters
into an agreement to provide assistance to or on behalf of the Bank under the
authority contained in Federal Deposit Insurance Act section 13(c). 12 U.S.C.
1823(c). Rights of the parties that have already vested shall not be affected
by
such action, however.
ARTICLE
6
CLAIMS
AND REVIEW PROCEDURES
6.1 Claims
Procedure.
A
person or beneficiary (“claimant”) who has not received benefits under the
Agreement that he or she believes should be paid shall make a claim for such
benefits as follows -
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6.1.1
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Initiation
- Written Claim.
The claimant initiates a claim by submitting to the Bank a written
claim
for the benefits.
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6.1.2
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Timing
of Bank Response.
The Bank shall respond to the claimant within 90 days after receiving
the
claim. If the Bank determines that special circumstances require
additional time for processing the claim, the Bank may extend the
response
period by an additional 90 days by notifying the claimant in writing
before the end of the initial 90-day period that an additional period
is
required. The notice of extension must state the special circumstances
and
the date by which the Bank expects to render its
decision.
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6.1.3
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Notice
of Decision.
If the Bank denies part or all of the claim, the Bank shall notify
the
claimant in writing of the denial. The Bank shall write the notification
in a manner calculated to be understood by the claimant. The notification
shall set forth -
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6.1.3.1
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the
specific reasons for the denial,
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6.1.3.2
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a
reference to the specific provisions of the Agreement on which the
denial
is based,
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6.1.3.3
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a
description of any additional information or material necessary for
the
claimant to perfect the claim and an explanation of why it is
needed,
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6.1.3.4
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an
explanation of the Agreement’s review procedures and the time limits
applicable to such procedures, and
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6.1.3.5
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a
statement of the claimant’s right to bring a civil action under ERISA
section 502(a) following an adverse benefit determination on
review.
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6.2 Review
Procedure.
If the
Bank denies part or all of the claim, the claimant shall have the opportunity
for a full and fair review by the Bank of the denial, as follows -
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6.2.1
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Initiation
- Written Request.
To initiate the review, the claimant, within 60 days after receiving
the
Bank’s notice of denial, must file with the Bank a written request for
review.
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6.2.2
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Additional
Submissions - Information Access.
The claimant shall then have the opportunity to submit written comments,
documents, records, and other information relating to the claim.
The Bank
shall also provide the claimant, upon request and free of charge,
reasonable access to and copies of all documents, records, and other
information relevant (as defined in applicable ERISA regulations)
to the
claimant’s claim for benefits.
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6.2.3
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Considerations
on Review.
In considering the review, the Bank shall take into account all materials
and information the claimant submits relating to the claim, without
regard
to whether the information was submitted or considered in the initial
benefit determination.
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6.2.4
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Timing
of Bank Response.
The Bank shall respond in writing to the claimant within 60 days
after
receiving the request for review. If the Bank determines that special
circumstances require additional time for processing the claim, the
Bank
may extend the response period by an additional 60 days by notifying
the
claimant in writing before the end of the initial 60-day period that
an
additional period is required. The notice of extension must state
the
special circumstances and the date by which the Bank expects to render
its
decision.
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6.2.5
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Notice
of Decision.
The Bank shall notify the claimant in writing of its decision on
review.
The Bank shall write the notification in a manner calculated to be
understood by the claimant. The notification shall set forth
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6.2.5.1
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the
specific reason for the denial,
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6.2.5.2
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a
reference to the specific provisions of the Agreement on which the
denial
is based,
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6.2.5.3
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a
statement that the claimant is entitled to receive, upon request
and free
of charge, reasonable access to and copies of all documents, records,
and
other information relevant (as defined in applicable ERISA regulations)
to
the claimant’s claim for benefits, and
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6.2.5.4
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a
statement of the claimant’s right to bring a civil action under ERISA
section 502(a).
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ARTICLE
7
MISCELLANEOUS
7.1 Amendments
and Termination.
Subject
to Section 7.16 of this Agreement, this Agreement may be amended solely by
a
written agreement signed by the Bank and by the Executive, and except for
termination occurring under Article 5 this Agreement may be terminated solely
by
a written agreement signed by the Bank and by the Executive.
7.2 Binding
Effect.
This
Agreement shall bind the Executive and the Bank, and their beneficiaries,
survivors, executors, successors, administrators and transferees.
7.3 No
Guarantee of Employment.
This
Agreement is not an employment policy or contract. It does not give the
Executive the right to remain an employee of the Bank, nor does it interfere
with the Bank’s right to discharge the Executive. It also does not require the
Executive to remain an employee nor interfere with the Executive’s right to
terminate employment at any time.
7.4 Non-Transferability.
Benefits under this Agreement cannot be sold, transferred, assigned, pledged,
attached, or encumbered in any manner.
7.5 Successors;
Binding Agreement.
By an
assumption agreement in form and substance satisfactory to the Executive, the
Bank will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Bank to expressly assume and agree to perform this Agreement
in
the same manner and to the same extent that the Bank would be required to
perform this Agreement if no such succession had occurred.
10
7.6 Tax
Withholding.
The
Bank shall withhold any taxes that are required to be withheld from the benefits
provided under this Agreement.
7.7 Applicable
Law.
Except
to the extent preempted by the laws of the United States of America, the
validity, interpretation, construction, and performance of this Agreement shall
be governed by and construed in accordance with the laws of the State of
Connecticut, without giving effect to the principles of conflict of laws of
such
state.
7.8 Unfunded
Arrangement.
The
Executive and his Beneficiary are general unsecured creditors of the Bank for
the payment of benefits under this Agreement. The benefits represent the mere
promise by the Bank to pay such benefits. The rights to benefits are not subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors. Any insurance on the
Executive’s life is a general asset of the Bank to which the Executive and
Beneficiary have no preferred or secured claim.
7.9 Entire
Agreement.
This
Agreement constitutes the entire agreement between the Bank and the Executive
as
to the subject matter hereof. No rights are granted to the Executive by virtue
of this Agreement other than those specifically set forth herein. This Agreement
supersedes in its entirety the January 1, 2002 Amended and Restated Salary
Continuation Agreement, and effective immediately the January 1, 2002 Amended
and Restated Salary Continuation Agreement shall be of no further force or
effect.
7.10 Severability.
If for
any reason any provision of this Agreement is held invalid, such invalidity
shall not affect any other provision of this Agreement not held so invalid,
and
each such other provision shall, to the full extent consistent with the law,
continue in full force and effect. If any provision of this Agreement shall
be
held invalid in part, such invalidity shall in no way affect the remainder
of
such provision, not held so invalid, and the remainder of such provision,
together with all other provisions of this Agreement shall, to the full extent
consistent with the law, continue in full force and effect.
7.11 Headings.
The
headings of Sections herein are included solely for convenience of reference
and
shall not affect the meaning or interpretation of any provision of this
Agreement.
7.12
Notices.
All
notices, requests, demands, and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed, certified or registered mail, return receipt requested, with postage
prepaid, to the following addresses or to such other address as either party
may
designate by like notice. Unless otherwise changed by notice, notice shall
be
properly addressed to the Executive if addressed to the address of the Executive
on the books and records of the Bank at the time of the delivery of such notice,
and properly addressed to the Bank if addressed to the Board of Directors,
NewMil Bank, 00 Xxxx Xxxxxx, X.X. Xxx 000, Xxx Xxxxxxx, Xxxxxxxxxxx
00000-0000.
11
7.13 Payment
of Legal Fees.
The
Bank is aware that upon the occurrence of a Change in Control, then current
management of the Bank could cause or attempt to cause the Bank to refuse to
comply with its obligations under this Agreement, or could institute or cause
or
attempt to cause the Bank to institute litigation seeking to have this Agreement
declared unenforceable, or could take or attempt to take other action to deny
Executive the benefits intended under this Agreement. In these circumstances,
the purpose of this Agreement would be frustrated. It is the intention of the
Bank that the Executive not be required to incur the expenses associated with
the enforcement of his rights under this Agreement, whether by litigation or
other legal action, because the cost and expense thereof would substantially
detract from the benefits intended to be granted to the Executive hereunder,
and
it is the intention of the Bank that the Executive not be forced to negotiate
settlement of his rights under this Agreement under threat of incurring such
expenses. Accordingly, if after a Change in Control occurs it should appear
to
the Executive that (a) the Bank has failed to comply with any of its obligations
under this Agreement, or (b) the Bank or any other person has taken any action
to declare this Agreement void or unenforceable, or instituted any litigation
or
other legal action designed to deny, diminish or to recover from the Executive
the benefits intended to be provided to the Executive hereunder, the Bank
irrevocably authorizes the Executive from time to time to retain counsel of
his
choice at the expense of the Bank as provided in this Section 7.13, to represent
the Executive in connection with the initiation or defense of any litigation
or
other legal action, whether by or against the Bank or any director, officer,
stockholder or other person affiliated with the Bank, in any jurisdiction.
Notwithstanding any existing or previous attorney-client relationship between
the Bank or NewMil Bancorp, Inc. and any counsel chosen by the Executive under
this Section 7.13, the Bank irrevocably consents to the Executive’s entering
into an attorney-client relationship with that counsel, and the Bank and the
Executive agree that a confidential relationship shall exist between the
Executive and that counsel. The fees and expenses of counsel selected from
time
to time by the Executive as provided in this section shall be paid or reimbursed
to the Executive by the Bank on a regular, periodic basis upon presentation
by
the Executive of a statement or statements prepared by such counsel in
accordance with such counsel’s customary practices, up to a maximum aggregate
amount of $500,000, whether suit be brought or not, and whether or not incurred
in trial, bankruptcy, or appellate proceedings. The Bank’s obligation to pay the
Executive’s legal fees provided by this Section 7.13 operates separately from,
and in addition to, any legal fee reimbursement obligation the Bank or the
Bank’s parent NewMil Bancorp, Inc. may have with the Executive by virtue of any
separate employment, severance, or other agreement between the Executive and
the
Bank or NewMil Bancorp, Inc. Anything in this Section 7.13 to the contrary
notwithstanding however, the Bank shall not be required to pay or reimburse
the
Executive’s legal expenses if doing so would violate section 18(k) of the
Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of the Federal
Deposit Insurance Corporation [12 CFR 359.3].
7.14 Internal
Revenue Code Section 280G Gross Up.
(a) If
as a result of a Change in Control the Executive becomes entitled to
acceleration of benefits under this Agreement or under any other plan or
agreement of or with the Bank or NewMil Bancorp, Inc. (together, the “Total
Benefits”), and if any of the Total Benefits will be subject to the Excise Tax
as set forth in sections 280G and 4999 of the Internal Revenue Code of 1986
(the
“Excise Tax”), the Bank shall pay to the Executive the following additional
amounts, consisting of (1) a payment equal to the Excise Tax payable by the
Executive on the Total Benefits under section 4999 of the Internal Revenue
Code
(the “Excise Tax Payment”), and (2) a payment equal to the amount necessary to
provide the Excise Tax Payment net of all income, payroll and excise taxes.
Together, the additional amounts described in clauses (1) and (2) are referred
to in this Agreement as the “Gross-Up Payment Amount.” Payment of the Gross-Up
Payment Amount shall be made in addition to the amount set forth in Section
2.4
hereof.
(b) For
purposes of determining whether any of the Total Benefits will be subject to
the
Excise Tax and the amount of such Excise Tax,
12
(1) any
other
payments or benefits received or to be received by the Executive (whether under
the terms of this Agreement or any other agreement, or other plan or arrangement
with the Bank or NewMil Bancorp, Inc., any person whose actions result in a
Change in Control or any person affiliated with NewMil Bancorp, Inc. or such
person) in connection with a Change in Control or the Executive’s Separation
from Service shall be treated as “parachute payments” within the meaning of
section 280G(b)(2) of the Internal Revenue Code, and all “excess parachute
payments,” within the meaning of section 280G(b)(1), shall be treated as subject
to the Excise Tax, unless in the opinion of the certified public accounting
firm
that is retained by NewMil Bancorp, Inc. as of the date immediately before
the
Change in Control (the “Accounting Firm”), such other payments or benefits (in
whole or in part) represent reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4) of the Internal Revenue
Code,
or are otherwise not subject to the Excise Tax,
(2) the
amount of the Total Benefits which shall be treated as subject to the Excise
Tax
shall be equal to the lesser of (A) the total amount of the Total Benefits
reduced by the amount of such Total Benefits that in the opinion of the
Accounting Firm are not parachute payments, or (B) the amount of excess
parachute payments within the meaning of section 280G(b)(1) (after applying
clause (1) above), and
(3) the
value
of any noncash benefits or any deferred payment or benefit shall be determined
by NewMil Bancorp, Inc.’s Accounting Firm in accordance with the principles of
sections 280G(d)(3) and (4) of the Internal Revenue Code.
(c) For
purposes of determining the Gross-Up Payment Amount, the Executive shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment Amount is
to
be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive’s residence on the date of
Separation from Service, net of the reduction in federal income taxes that
could
be obtained from deduction of state and local taxes (calculated by assuming
that
any reduction under section 68 of the Internal Revenue Code in the amount of
itemized deductions allowable to the Executive applies first to reduce the
amount of state and local income taxes that would otherwise be deductible by
the
Executive, and applicable federal FICA and Medicare withholding
taxes).
(d) If
the
Excise Tax is later determined to be less than the amount taken into account
hereunder at the time of termination of the Executive’s employment, the
Executive shall, when the amount of such reduction in Excise Tax is finally
determined, repay to the Bank the portion of the Gross-Up Payment Amount
attributable to the reduction (plus that portion of the Gross-Up Payment Amount
attributable to the Excise Tax, federal, state and local income taxes and FICA
and Medicare withholding taxes imposed on the Gross-Up Payment Amount being
repaid by the Executive to the extent that such repayment results in a reduction
in Excise Tax, FICA and Medicare withholding taxes and/or a federal, state
or
local income tax deduction). If the Excise Tax is later determined to be more
than the amount taken in account hereunder at the time of termination of the
Executive’s employment (including any payment the existence or amount of which
cannot be determined at the time the Gross-Up Payment Amount is paid), the
Bank
shall make an additional Gross-Up Payment Amount to the Executive of the excess
(plus any interest, penalties or additions payable by the Executive on the
excess) when the amount of the excess is finally determined.
13
7.15 Accounting
Firm Gross-Up Determination.
(a)
Subject to the provisions of Section 7.14, all determinations required to be
made under this Section 7.15, including whether and when a Gross-Up Payment
Amount is required, the Gross-Up Payment Amount and the assumptions used to
arrive at such determination shall be made by the Accounting Firm, which shall
provide detailed supporting calculations both to the Bank and the Executive
within 15 business days after receipt of notice from the Bank or the Executive
that there has been a Gross-Up Payment Amount, or such earlier time as is
requested by the Bank (the “Determination”).
(b) If
the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, the Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder).
(c) All
fees
and expenses of the Accounting Firm shall be borne solely by NewMil Bancorp,
Inc. or the Bank and NewMil Bancorp, Inc. or the Bank shall enter into any
agreement requested by the Accounting Firm in connection with the performance
of
its services hereunder.
(d) If
the
Accounting Firm determines that no Excise Tax is payable by the Executive,
it
shall furnish the Executive with a written opinion to such effect, and to the
effect that failure to report Excise Tax, if any, on the Executive’s applicable
federal income tax return will not result in the imposition of a negligence
or
similar penalty.
(e) Determinations
by the Accounting Firm shall be binding upon the Bank and the
Executive.
(f) As
a
result of the uncertainty in determining whether any of the Total Benefits
will
be subject to the Excise Tax at the time of the Determination, it is possible
that a Gross-Up Payment Amount will not have been made by the Bank that should
have been made (an “Underpayment”), or that a Gross-Up Payment Amount will have
been made that should not have been made (an “Overpayment”). If the Executive is
required to make payment of any additional Excise Tax, the Accounting Firm
shall
determine the amount of the Underpayment that has occurred, and the Underpayment
(together with interest at the rate provided in section 1274(d)(2)(B) of the
Internal Revenue Code) shall be promptly paid by the Bank to or for the benefit
of the Executive. If the Gross-Up Payment Amount exceeds the amount necessary
to
reimburse the Executive for his Excise Tax, the Accounting Firm shall determine
the amount of the Overpayment that has been made, and the Overpayment (together
with interest at the rate provided in section 1274(d)(2)(B) of the Internal
Revenue Code) shall be promptly paid by the Executive to or for the benefit
of
the Bank. If his expenses are reimbursed by the Bank, the Executive shall
cooperate with any reasonable requests by the Bank in any contests or disputes
with the Internal Revenue Service concerning the Excise Tax.
14
7.16 Termination
or Modification of Agreement Because of Changes in Law, Rules, or
Regulations.
The
Bank is entering into this Agreement on the assumption that certain existing
tax
laws, rules, and regulations will continue in effect in their current form.
If
that assumption materially changes and the change has a material detrimental
effect on this Agreement, then the Bank reserves the right to terminate or
modify this Agreement accordingly, subject to obtaining the written consent
of
the Executive, which shall not be unreasonably withheld. This Section 7.16
shall
become null and void effective immediately upon a Change in
Control.
ARTICLE
8
ADMINISTRATION
OF AGREEMENT
8.1 Plan
Administrator Duties.
This
Agreement shall be administered by a Plan Administrator consisting of the board
or such committee or person(s) as the board shall appoint. The Executive may
be
a member of the Plan Administrator. The Plan Administrator shall also have
the
discretion and authority to (a) make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this Agreement
and
(b) decide or resolve any and all questions, including interpretations of this
Agreement, as may arise in connection with the Agreement.
8.2
Agents.
In the
administration of this Agreement, the Plan Administrator may employ agents
and
delegate to them such administrative duties as it sees fit (including acting
through a duly appointed representative) and may from time to time consult
with
counsel, who may be counsel to the Bank.
8.3 Binding
Effect of Decisions.
The
decision or action of the Plan Administrator with respect to any question
arising out of or in connection with the administration, interpretation, and
application of the Agreement and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all persons having any interest
in the Agreement. No Executive or Beneficiary shall be deemed to have any right,
vested or unvested, regarding the continued use of any previously adopted
assumptions, including but not limited to the discount rate and calculation
method described in Section 1.1.
8.4 Indemnity
of Plan Administrator.
The
Bank shall indemnify and hold harmless the members of the Plan Administrator
against any and all claims, losses, damages, expenses, or liabilities arising
from any action or failure to act with respect to this Agreement, except in
the
case of willful misconduct by the Plan Administrator or any of its
members.
8.5 Bank
Information.
To
enable the Plan Administrator to perform its functions, the Bank shall supply
full and timely information to the Plan Administrator on all matters relating
to
the date and circumstances of the retirement, Disability, death, or Separation
from Service of the Executive and such other pertinent information as the Plan
Administrator may reasonably require.
15
In
Witness Whereof,
the
Executive and a duly authorized Bank officer have signed this Second Amended
and
Restated Salary Continuation Agreement as of the date first written
above.
|
The
EXECUTIVE:
|
THE
BANK:
|
|
NEWMIL
BANK
|
|
|
/s/
Xxxxxxx X. Xxxxx
|
|
|
Xxxxxxx
X. Xxxxx
|
By:
/s/
Xxxxx X. Xxxxxxx
|
|
Xxxxx
X. Xxxxxxx
|
|
|
Its:
Secretary
|
|
|
and
by: /s/
Xxxx X. Xxxxxxxx
|
|
|
Xxxx X. Xxxxxxxx
|
|
|
Its: Chairwoman, Salary and Benefits Committee of the Board of
Directors
|
NewMil
Bancorp, Inc., by its undersigned officer hereunto duly authorized, hereby
(1)
agrees to and adopts such of the terms, conditions and obligations of this
Second Amended and Restated Salary Continuation Agreement between NewMil Bank
and Xxxxxxx X. Xxxxx as apply by their terms to NewMil Bancorp, Inc.,
specifically the obligations stated in Section 7.14 and Section 7.15 concerning
Gross-Up Payments, and (2) notwithstanding any existing or previous
attorney-client relationship between NewMil Bancorp, Inc., and any counsel
chosen by the Executive under Section 7.13, irrevocably consents to the
Executive’s entering into an attorney-client relationship with that counsel, and
NewMil Bancorp, Inc., agrees that a confidential relationship shall exist
between the Executive and that counsel.
|
NewMil
Bancorp, Inc.
|
|
|
By:
/s/
Xxxxx X. Xxxxxxx
|
|
|
Xxxxx
X. Xxxxxxx
|
|
|
Its:
Executive Vice President and Secretary
|
|
|
and
by: /s/
Xxxx X. Xxxxxxxx
|
|
|
Xxxx X. Xxxxxxxx
|
|
|
Its: Chairwoman, Salary and Benefits Committee of the Board of
Directors
|
16
