EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into effective as of this day of
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,2002, by and between Xxxxxxx X. Xxxxx (the "Executive")
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and NewMil Bancorp, Inc., a Delaware corporation.
WHEREAS, the Executive is the Chairman, President and Chief Executive
Officer of NewMil Bancorp, Inc., possessing unique skills, knowledge, and
experience relating to NewMil Bancorp, Inc.'s business, and the Executive has
made and is expected to continue to make major contributions to the
profitability, growth and financial strength of NewMil Bancorp, Inc. and its
affiliates,
WHEREAS, NewMil Bancorp, Inc. recognizes that, as is the case for most
companies, the possibility of a Change in Control (as defined herein) exists,
WHEREAS, NewMil Bancorp, Inc. desires to assure itself of the current and
future continuity of management and desires to establish minimum severance
benefits for certain of its officers and other key employees, including the
Executive, if a Change in Control occurs,
WHEREAS, NewMil Bancorp, Inc. wishes to ensure that officers and other key
employees are not practically disabled from discharging their duties if a
proposed or actual transaction involving a Change in Control arises,
WHEREAS, NewMil Bancorp, Inc. desires to provide additional inducement for
the Executive to remain in the employ of NewMil Bancorp, Inc. as President and
Chief Executive Officer,
WHEREAS, NewMil Bancorp, Inc. and the Executive desire to set forth in this
Agreement the terms and conditions of the Executive's employment,
WHEREAS, the Executive and NewMil Bank, a Connecticut-chartered savings
bank and wholly owned subsidiary of NewMil Bancorp, Inc., entered into an
"Employment Agreement" dated as of March 28, 1994, as amended by the First
Amendment dated October 20, 1996 and by the Second Amendment dated August 3,
1998, but the parties hereto intend that this Agreement supersede and replace in
its entirety that "Employment Agreement,"
WHEREAS, NewMil Bank and the Executive entered into an Amended and Restated
Salary Continuation Agreement dated as of , 2002, and the
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parties hereto intend that this Agreement shall have no effect on the Amended
and Restated Salary Continuation Agreement except as may be explicitly stated in
this Agreement, and NewMil Bancorp, Inc. and the Executive intend that the
Amended and Restated Salary Continuation Agreement, as the same may be amended
and restated after the date of this Agreement, shall continue in full force and
effect, and
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 NewMil Bancorp, Inc., is contemplated
insofar as NewMil Bancorp, Inc. or any of its affiliates is concerned.
NOW THEREFORE, in consideration of these premises, the mutual covenants
contained herein, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows.
ARTICLE 1
EMPLOYMENT
1.1 EMPLOYMENT. NewMil Bancorp, Inc. hereby employs the Executive to serve
NewMil Bancorp, Inc. as its President and Chief Executive Officer according to
the terms and conditions of this Agreement and for the period stated in Section
3 of this Agreement, and the Executive hereby accepts employment according to
the terms and conditions of this Agreement and for the period stated in Section
3 of this Agreement.
1.2 SERVICE ON THE BOARD OF DIRECTORS. (a) Board of Directors of NewMil
Bancorp, Inc. NewMil Bancorp, Inc. shall nominate the Executive for election as
a director at such times as necessary so that the Executive may, if elected by
stockholders, remain a director of NewMil Bancorp, Inc. throughout the term of
this Agreement. The Executive hereby consents to serve as a director of NewMil
Bancorp, Inc., and the Executive hereby consents to being named as a director of
NewMil Bancorp, Inc. in documents filed by NewMil Bancorp, Inc. with the
Securities and Exchange Commission.
(b) Board of Directors of NewMil Bank. The Executive is currently serving
as a director of NewMil Bank. The board of directors of NewMil Bancorp, Inc. and
the board of directors of NewMil Bank shall undertake every lawful effort to
ensure that the Executive continues throughout the term of his employment to be
elected or reelected as a director of NewMil Bank.
ARTICLE 2
DUTIES
As President and Chief Executive Officer, the Executive shall serve under
the direction of NewMil Bancorp, Inc.'s board of directors and in accordance
with NewMil Bancorp, Inc.'s Certificate of Incorporation and Bylaws, as each may
be amended or restated from time to time. The Executive shall report directly to
the board of directors. He shall serve NewMil Bancorp, Inc. faithfully,
diligently, competently, and to the best of his ability, and he shall
exclusively devote his full time, energy, and attention to the business of
NewMil Bancorp, Inc. and to the promotion of its interests throughout the term
of this Agreement. Without the written consent of NewMil Bancorp, Inc.'s board
of directors, the Executive shall not render services to or for any person,
firm, corporation, or other entity or organization in exchange for compensation,
regardless of the form in which such compensation is paid and regardless of
whether it is paid directly or indirectly to the Executive. Nothing in this
Article 2 shall prevent the Executive from managing his personal investments and
affairs, provided that doing so does not interfere with the proper performance
of his duties and responsibilities as President and Chief Executive Officer.
ARTICLE 3
TERM OF EMPLOYMENT
The initial term of this Agreement shall be for a period of three years,
commencing , 2002. On the first anniversary of the
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, 2002 effective date of this Agreement and on each anniversary thereafter this
Agreement shall be extended automatically for one additional year unless NewMil
Bancorp, Inc.'s board of directors determines C
(a) that the Executive's performance has not met the board's
expectations, and
(b) that the term shall not be extended.
If the board of directors determines not to extend the term, it shall
promptly notify the Executive in writing. If the board decides not to extend the
term of this Agreement, this Agreement shall nevertheless remain in force until
its term expires. The board's decision not to extend the term of this Agreement
shall not C by itself C give the Executive any rights under this Agreement to
claim an adverse change in his position, compensation or circumstances or
otherwise to claim entitlement to severance or termination benefits under
Articles 6 or 7 of this Agreement. References herein to the term of this
Agreement shall refer to the initial term, as the same may be extended. Unless
sooner terminated, the Executive's employment shall terminate when he reaches
age 65.
ARTICLE 4
COMPENSATION AND OTHER BENEFITS
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4.1 BASE SALARY. In consideration of the Executive's performance of his
obligations under this Agreement, NewMil Bancorp, Inc. shall cause NewMil Bank
to pay the Executive a salary at the annual rate of not less than $325,000,
payable in semi-monthly installments. The Executive's salary shall be subject to
annual review by the Salary and Benefits Committee of NewMil Bancorp, Inc.'s
board of directors. The Executive's salary, as the same may be adjusted from
time to time as a result of annual review by the Salary and Benefits Committee
and board action, is referred to in this Agreement as the "Base Salary."
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4.2 BENEFIT PLANS AND PERQUISITES. The Executive shall be entitled
throughout the term of this Agreement to participate in any and all officer or
employee compensation, bonus, incentive, and benefit plans in effect from time
to time, including without limitation plans providing pension, medical, dental,
disability, and group life benefits, and 401(k) retirement plans, and to receive
any and all other fringe benefits provided from time to time, provided that the
Executive satisfies the eligibility requirements for any such plans or benefits.
Without limiting the generality of the foregoing C
(a) Participation in Stock Plans. The Executive shall be eligible to
participate in NewMil Bancorp, Inc.'s Second Amended and Restated 1986 Stock
Option and Incentive Plan for Officers and Key Employees (the "Stock Option
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Plan") and other stock compensation, incentive, bonus, or purchase plans
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existing on the date of this Agreement or adopted during the term of this
Agreement for the benefit of officers or employees.
(b) Supplemental Retirement Plan. In 2005, on the third anniversary of the
execution of this Agreement and continuing every third anniversary thereafter
until payments under the Amended and Restated Salary Continuation Agreement
commence, NewMil Bancorp, Inc. will cause NewMil Bank to review the Amended and
Restated Salary Continuation Agreement for reasonableness of the Executive's
retirement benefits, taking into account projected benefits under the Amended
and Restated Salary Continuation Agreement, benefits under 401(k) plan(s) of
NewMil Bancorp, Inc. and subsidiaries, and the employer's portion of Social
Security benefits. The parties acknowledge that this triennial review obligation
is set forth in Section 7.18 of the Amended and Restated Salary Continuation
Agreement.
(c) Life and Disability Insurance. (1) NewMil Bank is and shall remain the
owner of, and shall pay or cause to be paid all premiums as and when due on, the
Massachusetts Mutual Life Insurance Company policy on the Executive's life
(Policy Number 9681589 dated March 1, 1997), which policy has a face amount of
$1,112,282, as well as any replacement or substitute or additional whole life
policy on the Executive's life obtained in the future.
(2) The Executive shall also be eligible to participate in any life
insurance and long-term disability plans maintained by NewMil Bancorp, Inc. and
subsidiaries from time to time during the term of this Agreement if any other
executive officers are entitled to participate in any such plans, subject to the
terms and provisions of such plans.
(d) Automobile. The Executive shall receive an automobile allowance or use
of company-owned vehicles consistent with past practice.
(e) Reimbursement of Business Expenses. The Executive shall be entitled to
reimbursement for all reasonable business expenses incurred in performing his
obligations under this Agreement, including but not limited to all reasonable
business travel and entertainment expenses incurred while acting at the request
of or in the service of NewMil Bancorp, Inc. or NewMil Bank, provided such
expenses are incurred and accounted for in accordance with the policies and
procedures established from time to time by NewMil Bancorp, Inc. or NewMil Bank.
4.3 VACATION. The Executive shall be entitled to six weeks of paid vacation
annually and paid sick leave in accordance with the policies established from
time to time by NewMil Bancorp, Inc. or NewMil Bank. Unused vacation and sick
leave shall not accrue from year to year but shall be used, if at all, during
the calendar year in which they are first available, unless otherwise agreed to
by NewMil Bancorp, Inc.'s board.
ARTICLE 5
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TERMINATION OF EMPLOYMENT
5.1 TERMINATION BY NEWMIL BANCORP, INC. (a) Death, Disability, or
Retirement. The Executive's employment shall terminate automatically on the date
of the Executive's death or on the date of the Executive's retirement. By
delivery of 30 days' advance written notice to the Executive, NewMil Bancorp,
Inc. also may terminate the Executive's employment if the Executive is
determined to be disabled, as defined in paragraph (e) below.
(b) Termination Without Cause. With 90 days' advance written notice to the
Executive, NewMil Bancorp, Inc. may terminate the Executive's employment without
Cause.
(c) Termination with Cause. Effective on the date on which termination
notice is given to the Executive and without the requirement of advance notice
to the Executive, NewMil Bancorp, Inc. may terminate the Executive's employment
with Cause. The Executive shall be deemed to have resigned as a director of
NewMil Bancorp, Inc. and NewMil Bank effective immediately after termination of
the Executive's employment for Cause under this Agreement, regardless of whether
the Executive submits a formal, written resignation as director.
The Executive shall not be deemed to have been terminated for Cause under
this Agreement unless and until there is delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of at least three-fourths (:) of
the directors of NewMil Bancorp, Inc. then in office at a meeting of the board
of directors called and held for such purpose, which resolution shall (1)
contain findings that, in the good faith opinion of the board, the Executive has
committed an act constituting Cause, and (2) specify 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 Cause.
(d) Definition of Cause. For purposes of this Agreement, "Cause" means any
of the following C -----
(1) an intentional act of fraud, embezzlement, or theft by the
Executive in the course of his employment with NewMil Bancorp, Inc. or
NewMil Bank. For purposes of this Agreement, no act or failure to act on
the part of the Executive shall be deemed to have been intentional if it
was due primarily to an error in judgment or negligence. An act or failure
to act on the Executive's part shall be considered intentional if it is not
in good faith and if it is without a reasonable belief that the action or
failure to act is in the best interests of NewMil Bancorp, Inc.,
(2) intentional wrongful damage by the Executive to the business or
property of NewMil Bancorp, Inc. or NewMil Bank, causing material harm to
NewMil Bancorp, Inc. or NewMil Bank,
(3) material breach by the Executive of this Agreement,
(4) gross negligence or insubordination by the Executive in the
performance of his duties as an officer of NewMil Bancorp, Inc. or NewMil
Bank,
(5) breach by the Executive of his fiduciary duties to NewMil Bancorp,
Inc. and its stockholders or misconduct involving dishonesty, in either
case whether in his capacity as an officer or as a director of NewMil
Bancorp, Inc.,
(6) conviction of the Executive for a felony or conviction of a
misdemeanor involving moral turpitude,
(7) intentional violation of any law or significant policy of NewMil
Bancorp, Inc. or NewMil Bank committed in connection with the Executive's
employment, which, in NewMil Bancorp, Inc.'s sole judgment, has an adverse
effect on NewMil Bancorp, Inc. or NewMil Bank, or
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(8) removal of the Executive from office or permanent prohibition of
the Executive from participating in the conduct of NewMil 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).
(e) Definition of Disability. For purposes of this Agreement, the Executive
shall be deemed to be "disabled" if an independent physician selected by NewMil
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Bancorp, Inc. and reasonably acceptable to the Executive or his legal
representative determines that, because of illness or accident, the Executive is
unable to perform his duties and will be unable to perform his duties for a
period of 180 consecutive days or for any period of eight of 12 consecutive
months. The Executive shall not be deemed to be disabled, however, if he returns
to work on a full-time basis within 30 days after NewMil Bancorp, Inc. gives him
notice of termination due to disability. NewMil Bancorp, Inc. may require the
Executive to submit to such physical or mental evaluations and tests as NewMil
Bancorp, Inc.'s board of directors deems appropriate.
5.2 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment with 30 days' advance written notice to NewMil Bancorp, Inc., whether
with or without Good Reason. If the Executive terminates for Good Reason, the
termination will take effect at the conclusion of the 30-day period unless the
event or circumstance constituting Good Reason is cured by NewMil Bancorp, Inc.
or unless the notice of termination for Good Reason is revoked by the Executive
within the 30-day period. For purposes of this Agreement, "Good Reason" means
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any of the following events occur
(a) Reduction in Base Salary: involuntary reduction in the Executive's Base
Salary,
(b) Reduced Participation in Bonus, Incentive, Compensation, and Other
Plans: involuntary reduction in the Executive's bonus, incentive, and other
compensation award opportunities under NewMil Bancorp, Inc.'s benefit plans and
NewMil Bank's benefit plans, unless in the case of either company a company-wide
reduction of all officers' award opportunities occurs simultaneously,
(c) Participation in Benefit Plans: involuntary discontinuance of the
Executive's participation in any officer or employee benefit plans maintained by
NewMil Bancorp, Inc. or by NewMil Bank, unless such plans are discontinued by
reason of law or loss of tax deductibility to NewMil Bancorp, Inc. with respect
to contributions to such plans, or are discontinued as a matter of NewMil
Bancorp, Inc. policy or NewMil Bank policy applied equally to all participants
in such plans,
(d) Reduction in Responsibilities or Status: assignment to the Executive of
duties or responsibilities that are materially inconsistent with the Executive's
position as NewMil Bancorp, Inc.'s principal executive officer or that represent
a reduction of his authority; any other action by NewMil Bancorp, Inc. or its
successor that results in a material reduction or material adverse change in the
Executive's position, authority, duties or responsibilities; failure to appoint
or reappoint the Executive as President and Chief Executive Officer of NewMil
Bancorp, Inc.; failure to nominate the Executive as a director of NewMil
Bancorp, Inc.; or failure to elect or reelect the Executive or cause the
Executive to be elected or reelected to the board of directors of NewMil Bank in
accordance with Section 1.2(b) of this Agreement without the Executive's written
consent,
(e) Failure to Obtain Assumption Agreement: failure to obtain an assumption
of NewMil Bancorp, Inc.'s obligations under this Agreement by any successor to
NewMil Bancorp, Inc., regardless of whether such entity becomes a successor to
NewMil Bancorp, Inc. as a result of a merger, consolidation, sale of assets, or
other form of reorganization,
(f) Termination without Compliance with this Agreement: termination by
NewMil Bancorp, Inc. of Executive's employment effected in a manner that does
not satisfy the requirements of this Agreement,
(g) Material Breach: a material breach of this Agreement by NewMil Bancorp,
Inc. that is not corrected within a reasonable time, or
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(h) Relocation of the Executive: relocation of NewMil Bancorp, Inc.'s
principal executive offices, or requiring the Executive to change his principal
work location, to any location that is more than 15 miles from the location of
NewMil Bancorp, Inc.'s principal executive offices on the date of this
Agreement.
5.3 NOTICE. Any purported termination by NewMil Bancorp, Inc. or by the
Executive shall be communicated by written notice of termination to the other
party. The notice must state the specific termination provision of this
Agreement relied upon. The notice must also state the date on which termination
shall become effective, which shall be a date not earlier than the date of the
termination notice. If termination is for Cause or with Good Reason, the notice
must state in reasonable detail the facts and circumstances forming the basis
for termination of the Executive's employment.
ARTICLE 6
COMPENSATION AND BENEFITS UPON TERMINATION
6.1 DEATH. If the Executive's employment terminates because of his death,
any bonus earned by the Executive or accrued by NewMil Bank for his benefit but
not paid at the time of the Executive's death and any compensation shall be paid
to the Executive's estate. NewMil Bancorp, Inc. shall also provide or cause to
be provided to the Executive or his estate such other benefits as may be
available under NewMil Bancorp, Inc.'s or NewMil Bank's benefit plans and
policies.
6.2 DISABILITY. If the Executive's employment terminates because of his
disability, the Executive shall be entitled to receive the Base Salary to which
he was entitled through the date on which termination became effective and
continuing for six months thereafter, any unpaid bonus or incentive compensation
due to the Executive for the calendar year preceding the calendar year in which
the termination became effective, any payments the Executive is eligible to
receive under any disability insurance program in which the Executive
participates, and such other benefits as may be available to the Executive
through NewMil Bancorp, Inc.'s or NewMil Bank's benefit plans and policies.
6.3 CAUSE. If the Executive's employment terminates for Cause, the
Executive shall be entitled to receive the Base Salary to which he was entitled
through the date on which termination became effective, and such other benefits
as may be available to him through NewMil Bancorp, Inc.'s or NewMil Bank's
benefit plans and policies in effect on the date of termination.
6.4 TERMINATION BY NEWMIL BANCORP, INC. WITHOUT CAUSE AND TERMINATION BY
THE EXECUTIVE FOR GOOD Reason. (a) Continued Base Salary. If NewMil Bancorp,
Inc. terminates the Executive's employment without Cause or if the Executive
terminates employment for Good Reason, the Executive's Base Salary and other
benefits under Section 4.2 of this Agreement shall continue for a period of 36
months from the date of termination (other than continued participation in
NewMil Bancorp, Inc.'s or subsidiary's 401(k) retirement plan(s) or any stock
plans). The parties hereto acknowledge and agree that the compensation and
benefits that may be payable to the Executive under this Section 6.4 shall not
be payable if compensation and benefits are payable or shall have been
previously paid to the Executive under Article 7 of this Agreement. That is, the
parties acknowledge and agree that the Executive shall not be entitled to
duplicate compensation and benefit payments under this Section 6.4 and under
Article 7 if the Executive's employment is terminated without Cause or if the
Executive terminates employment with Good Reason within 24 months after a Change
in Control.
(b) Cash-out of the Value of Unvested Stock Options. If NewMil Bancorp,
Inc. terminates the Executive's employment without Cause or if the Executive
terminates employment with Good Reason before full vesting of stock option or
other stock-based awards then held by him, the Executive shall be entitled to
receive from NewMil Bancorp, Inc. an amount in cash equal to the value of the
unvested stock options or stock awards as of the effective date of termination.
Amounts payable under this paragraph (b) shall be paid in a single lump sum
within 90 days after termination of the Executive's employment.
(c) Cash-out of the Executive's 401(k) Plan Account. If NewMil Bancorp,
Inc. terminates the Executive's employment without Cause or if the Executive
terminates employment with Good Reason before full vesting of the
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amounts then credited to his matching and profit-sharing contributions account
under NewMil Bancorp, Inc.'s 401(k) plan(s), the Executive shall be entitled to
receive from NewMil Bancorp, Inc. an amount in cash equal to the value of any
unvested contributions as of the effective date of termination. Amounts payable
under this paragraph (c) shall be paid in a single lump sum within 90 days after
termination of the Executive's employment.
(d) Outplacement and Support. If NewMil Bancorp, Inc. terminates the
Executive's employment without Cause or if the Executive terminates employment
with Good Reason, NewMil Bancorp, Inc. shall pay to the Executive reasonable
outplacement expenses in an amount up to $25,000, and NewMil Bancorp, Inc. shall
provide the Executive with the use of office space and reasonable office support
facilities, including secretarial assistance, for a period of one year after
termination.
(e) Medical Coverage. If NewMil Bancorp, Inc. terminates the Executive's
employment without Cause or if the Executive terminates employment with Good
Reason, NewMil Bancorp, Inc. shall continue or cause to be continued at NewMil
Bancorp, Inc.'s expense life, health, and disability insurance coverage for the
Executive and his dependents that is at least as favorable as the coverage
maintained by or on the Executive's behalf at the time of termination. Such
coverage shall cease when the Executive becomes employed by another employer or
thirty six months after NewMil Bancorp, Inc. terminates the Executive's
employment without Cause or thirty-six months after the Executive terminates
employment with Good Reason, whichever occurs first.
6.5 TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. If the
Executive terminates employment with NewMil Bancorp, Inc. other than for Good
Reason, the Executive's entitlement under this Article 6 shall be limited to the
Base Salary to which he is entitled through the date on which his termination
becomes effective, such other benefits as may be available to him through NewMil
Bancorp, Inc.'s or NewMil Bank's benefit plans and policies, and such other
benefits as may be specified in this Agreement.
ARTICLE 7
CHANGE IN CONTROL BENEFITS
7.1 CHANGE IN CONTROL BENEFITS. (a) Lump Sum Payment. If a Change in
Control occurs during the term of this Agreement, NewMil Bancorp, Inc. shall
make a lump sum payment to the Executive in an amount in cash equal to three
times the Executive's annual compensation. For this purpose, annual compensation
means (1) the Executive's Base Salary at the time of the Change in Control, plus
(2) any bonuses or incentive compensation earned for the calendar year
immediately preceding the year in which the Change in Control occurs, regardless
of when the bonus(es) or incentive compensation earned for the preceding
calendar year is paid and regardless of whether all or part of the bonus or
incentive compensation is subject to mandatory or elective deferral. The amount
payable to the Executive hereunder shall not be reduced to account for the time
value of money or discounted to present value. The payment required under this
paragraph (c) is payable no later than five business days after the Change in
Control, and
(b) Benefit Plans. If a Change in Control occurs during the term of this
Agreement, NewMil Bancorp, Inc. shall cause the Executive to become fully vested
in any qualified and non-qualified plans, programs or arrangements in which the
Executive participated if the plan, program, or arrangement does not address the
effect of a change in control. NewMil Bancorp, Inc. also shall contribute or
cause to be contributed to the Executive's 401(k) plan account the matching and
profit-sharing contributions, if any, that would have been made had the
Executive's employment not terminated before the end of the plan year. NewMil
Bancorp, Inc. shall also continue or cause to be continued life, health and
disability insurance coverage for the Executive and his dependents that is at
least as favorable as the coverage maintained by or on the Executive's behalf
before his termination. The insurance coverage may cease when the Executive
becomes employed by another employer or thirty six months after the Executive's
employment terminates, whichever occurs first.
7.2 DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement,
"Change in Control" means any of the following events occur C
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(a) Merger. NewMil Bancorp, Inc. merges into or consolidates with another
corporation, or merges another corporation into NewMil Bancorp, Inc., and as a
result less than 50% of the combined voting power of the resulting corporation
immediately after the merger or consolidation is held by persons who were the
holders of NewMil Bancorp, Inc.'s voting securities immediately before the
merger or consolidation. For purposes of this Agreement, the term "person" means
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an individual, corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or other
entity,
(b) Acquisition of Significant Share Ownership. A report on Schedule 13D or
another form or schedule (other than Schedule 13G) is filed or is required to be
filed under sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if
the schedule discloses that the filing person or persons acting in concert has
or have become the beneficial owner of 25% or more of a class of NewMil Bancorp,
Inc.'s voting securities, but this paragraph (b) shall not apply to beneficial
ownership of voting shares of NewMil Bancorp, Inc. held in a fiduciary capacity
by an entity in which NewMil Bancorp, Inc. directly or indirectly beneficially
owns 50% or more of the outstanding voting securities,
(c) Change in Board Composition. during any period of two consecutive
years, individuals who constitute NewMil Bancorp, Inc.'s board of directors at
the beginning of the two-year period cease for any reason to constitute at least
a majority thereof; provided, however, that C for purposes of this paragraph (c)
C each director who is first elected by the board (or first nominated by the
board for election by stockholders) by a vote of at least two-thirds (b) of the
directors who were directors at the beginning of the period shall be deemed to
have been a director at the beginning of the two-year period, or
(d) Sale of Assets. NewMil Bancorp, Inc. sells to a third party all or
substantially all of NewMil Bancorp, Inc.'s assets. For this purpose, sale of
all or substantially all of NewMil Bancorp, Inc.'s assets includes sale of the
shares or assets of NewMil Bank.
7.3 NO MULTIPLE SEVERANCE PAYMENTS. If the Executive receives payment under
Section 7.1 of the full amount of the Change in Control payments to which he is
entitled as the result of termination of employment after a Change in Control,
he shall not be entitled to any additional severance benefits under Section 6.4
of this Agreement.
ARTICLE 8
CONFIDENTIALITY
8.1 NON-DISCLOSURE. The Executive covenants and agrees that he will not
reveal to any person, firm, or corporation any confidential information of any
nature concerning NewMil Bancorp, Inc. or its business, or anything connected
therewith. As used in this Article 8, the term "confidential information" means
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all of NewMil Bancorp, Inc.'s confidential and proprietary information and trade
secrets in existence on the date hereof or at any time during the term of this
Agreement, including but not limited to C
(a) the whole or any portion or phase of any business plans, financial
information, purchasing data, supplier data, accounting data or other
financial information,
(b) the whole or any portion or phase of any research and development
information, design procedures, algorithms or processes or other technical
information,
(c) the whole or any portion or phase of any marketing or sales
information, sales records, customer lists, prices, sales projections or
other sales information, and
(d) trade secrets, as defined from time to time by the laws of the
State of Connecticut.
Notwithstanding the foregoing, confidential information excludes information
that C as of the date hereof or at any time after the date hereof C is published
or disseminated without obligation of confidence or that becomes a part of the
public domain (1) by or through action of NewMil Bancorp, Inc., or (2) otherwise
than by or at the direction of
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the Executive. This Section 8.1 does not prohibit disclosure required by an
order of a court having jurisdiction or a subpoena from an appropriate
governmental agency or disclosure made by the Executive in the ordinary course
of business and within the scope of his authority.
8.2 RETURN OF MATERIALS. The Executive agrees to deliver or return to
NewMil Bancorp, Inc. upon termination, upon expiration of this Agreement, or as
soon thereafter as possible, all written information and any other similar items
furnished by NewMil Bancorp, Inc. or prepared by the Executive in connection
with his services hereunder. The Executive will retain no copies thereof after
termination of this Agreement or termination of the Executive's employment with
NewMil Bancorp, Inc..
8.3 INJUNCTIVE RELIEF. The Executive acknowledges that it is impossible to
measure in money the damages that will accrue to NewMil Bancorp, Inc. if the
Executive fails to observe the obligations imposed on him by this Article 8.
Accordingly, if NewMil Bancorp, Inc. institutes an action to enforce the
provisions hereof, the Executive hereby waives the claim or defense that an
adequate remedy at law is available to NewMil Bancorp, Inc., and the Executive
agrees not to urge in any such action the claim or defense that an adequate
remedy at law exists.
8.4 AFFILIATES' CONFIDENTIAL INFORMATION IS COVERED; CONFIDENTIALITY
OBLIGATION SURVIVES TERMINATION. For purposes of this Article 8, the term
"NewMil Bancorp, Inc." shall include NewMil Bank and any affiliate of NewMil
Bank. For purposes of this Agreement, the term "affiliate" means any entity that
---------
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with NewMil Bank. The rights and
obligations set forth in this Article 8 shall survive termination of this
Agreement.
ARTICLE 9
INDEMNIFICATION AND INSURANCE
9.1 INDEMNIFICATION. Subject to the exclusions contained in Section 9.6,
NewMil Bancorp, Inc. shall indemnify the Executive with respect to his
activities as a director, officer, employee, or agent of NewMil Bancorp, Inc. C
or as a person who is serving or has served at the request of NewMil Bancorp,
Inc. ("representative") as a director, officer, employee, agent, or trustee of
--------------
an affiliated corporation, joint venture, trust, or other enterprise, domestic
or foreign, in which NewMil Bancorp, Inc. has a direct or indirect ownership
interest C against expenses (including without limitation attorneys' fees,
judgments, fines, and amounts paid in settlement) actually and reasonably
incurred by him ("Expenses") in connection with any claim against the Executive
--------
that is the subject of any threatened, pending, or completed action, suit, or
other type of proceeding, whether civil, criminal, administrative,
investigative, or otherwise and whether formal or informal (a "Proceeding"), to
----------
which the Executive was, is, or is threatened to be made a party by reason of
the Executive being or having been such a director, officer, employee, agent, or
representative, to the extent of the highest and most advantageous to the
Executive, as determined by the Executive, of one or any combination of the
following C
(a) The benefits provided by NewMil Bancorp, Inc.'s Certificate of
Incorporation, as amended or restated (the "Certificate of
--------------
Incorporation") or Bylaws, or the Certificate or Articles of
-------------
Incorporation/Association or Bylaws of an affiliated entity of which
the Executive serves as a representative, in each case as in effect on
the date hereof,
(b) The benefits provided by NewMil Bancorp, Inc.'s Certificate of
Incorporation or Bylaws, or the Certificate or Articles of
Incorporation/Association or Bylaws of an affiliated entity of which
the Executive serves as a representative, in each case as in effect at
the time Expenses are incurred by the Executive,
(c) The benefits allowable under Delaware law in effect at the date
hereof,
(d) The benefits allowable under the law of the jurisdiction under
which NewMil Bancorp, Inc. exists at the time Expenses are incurred by
the Executive,
9
(e) The benefits available under any liability insurance obtained by
NewMil Bancorp, Inc. in effect when a claim is made against the
Executive,
(f) The benefits available under any liability insurance obtained by
NewMil Bancorp, Inc. in effect at the time Expenses are incurred by
the Executive, and
(g) Such other benefits as are or may be otherwise available to the
Executive.
Combination of two or more of the benefits provided by (a) through (g)
shall be available unless the Applicable Document (as hereafter defined)
requires that the benefits provided therein be exclusive of other benefits. The
document or law providing for the benefits listed in items (a) through (g) above
is called the "Applicable Document" in this Article 9. NewMil Bancorp, Inc.
-------------------
hereby undertakes to use its best efforts to assist the Executive, in all proper
and legal ways, to obtain the benefits selected by the Executive under
paragraphs (a) through (g) above.
For purposes of this Agreement, references to "other enterprises" shall
include employee benefit plans for employees of NewMil Bancorp, Inc. or of any
affiliated entity, without regard to ownership of such plans; references to
"fines" shall include any excise taxes assessed on the Executive with respect to
any employee benefit plan; references to "serving at the request of NewMil
Bancorp, Inc." shall include any service as a director, officer, employee or
agent of NewMil Bancorp, Inc. which imposes duties on, or involves services by,
the Executive with respect to an employee benefit plan, its participants or
beneficiaries; references to the masculine shall include the feminine;
references to the singular shall include the plural and vice versa; and if the
Executive acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan,
he shall be deemed to have acted in a manner consistent with the standards
required for indemnification by NewMil Bancorp, Inc. under the Applicable
Documents.
9.2 INSURANCE. NewMil Bancorp, Inc. shall maintain liability insurance for
so long as the Executive's services are covered hereunder, provided and to the
extent that such insurance is available on a basis acceptable to NewMil Bancorp,
Inc.. However, NewMil Bancorp, Inc. agrees that the provisions hereof shall
remain in effect regardless of whether liability or other insurance coverage is
at any time obtained or retained by NewMil Bancorp, Inc.. But payments made to
the Executive under an insurance policy obtained or retained by NewMil Bancorp,
Inc. shall reduce NewMil Bancorp, Inc.'s obligation to make payments hereunder
by the amount of the payments made under any such insurance policy.
9.3 PAYMENT OF EXPENSES. At the Executive's request C after the Executive
gives to NewMil Bancorp, Inc. written notice and an undertaking to repay such
amounts so paid on the Executive's behalf if it shall ultimately be determined
under the Applicable Document that the Executive is not entitled to be
indemnified by NewMil Bancorp, Inc. for such Expenses C NewMil Bancorp, Inc.
shall pay Expenses as and when incurred by the Executive. That portion of
Expenses representing attorneys' fees and other costs incurred in defending any
proceeding shall be paid by NewMil Bancorp, Inc. within 30 days after NewMil
Bancorp, Inc. receives the request and reasonable documentation evidencing the
amount and nature of the Expenses, subject to its also having received such a
notice and undertaking.
9.4 ADDITIONAL RIGHTS. The indemnification provided in this Agreement shall
not be exclusive of any other indemnification or right to which the Executive
may be entitled and shall continue after the Executive has ceased to occupy a
position as an officer, director, employee, agent, or representative as
described in Section 9.1 above with respect to Proceedings relating to or
arising out of the Executive's acts or omissions during his service in such
position. The benefits provided to the Executive under this Agreement for the
Executive's service as a representative shall be payable if and only if and only
to the extent that reimbursement to the Executive by the affiliated entity with
which the Executive has served as a representative, whether pursuant to
agreement, applicable law, articles of incorporation or association, by-laws or
regulations of the entity, or insurance maintained by such affiliated entity, is
insufficient to compensate the Executive for Expenses actually incurred and
otherwise payable by NewMil Bancorp, Inc. under this Agreement. Any payments in
fact made to or on behalf of the Executive directly
10
or indirectly by the affiliated entity with which the Executive served as a
representative shall reduce the obligation of NewMil Bancorp, Inc. hereunder.
9.5 NOTICE TO COMPANY. The Executive shall provide to NewMil Bancorp, Inc.
prompt written notice of any Proceeding brought, threatened, asserted, or
commenced against the Executive with respect to which the Executive may assert a
right to indemnification hereunder; provided, however, that failure to provide
such notice shall not in any way limit the Executive's rights under this
Agreement.
9.6 EXCLUSIONS. (a) Notwithstanding the scope of indemnification available
to the Executive from time to time under any Applicable Document, no
indemnification, reimbursement, or payment shall be required of NewMil Bancorp,
Inc. hereunder for C
(1) any claim or any part thereof as to which the Executive shall have
been determined by a court of competent jurisdiction, from which no appeal
is or can be taken, by clear and convincing evidence, to have acted with
deliberate intent to cause injury to NewMil Bancorp, Inc. or with reckless
disregard for the best interests of NewMil Bancorp, Inc.,
(2) any claim or any part thereof arising under Section 16(b) of the
Securities Exchange Act of 1934 pursuant to which the Executive shall be
obligated to pay any penalty, fine, settlement or judgment,
(3) any obligation of the Executive based upon or attributable to the
Executive gaining in fact any personal gain, profit, or advantage to which
he was not entitled, or
(4) any proceeding initiated by the Executive without the consent or
authorization of NewMil Bancorp, Inc.'s board of directors, but this
exclusion shall not apply to any claims brought by the Executive (a) to
enforce his rights under this Agreement, or (b) in any Proceeding initiated
by another person or entity, regardless of whether such claims are brought
by the Executive against a person or entity who was or was not otherwise a
party to the proceeding.
(b) Furthermore, anything herein to the contrary notwithstanding, nothing
in this Article 9 requires indemnification, reimbursement, or payment by NewMil
Bancorp, Inc., and the Executive shall not be entitled to demand
indemnification, reimbursement, or payment under this Article 9, if and to the
extent indemnification, reimbursement, or payment constitutes a "prohibited
indemnification payment" within the meaning of Federal Deposit Insurance
Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)].
ARTICLE 10
MISCELLANEOUS
10.1 SUCCESSORS AND ASSIGNS. (a) This Agreement Is Binding on NewMil
Bancorp, Inc.'s Successors. This Agreement shall be binding upon NewMil Bancorp,
Inc. and any successor to NewMil Bancorp, Inc., including any persons acquiring
directly or indirectly all or substantially all of the business or assets of
NewMil Bancorp, Inc. by purchase, merger, consolidation, reorganization or
otherwise. Any such successor shall thereafter be deemed to be "NewMil Bancorp,
Inc." for purposes of this Agreement. But this Agreement and NewMil Bancorp,
Inc.'s obligations under this Agreement are not otherwise assignable,
transferable or delegable by NewMil Bancorp, Inc.. By agreement in form and
substance satisfactory to the Executive, NewMil Bancorp, Inc. shall require any
successor to all or substantially all of the business or assets of NewMil
Bancorp, Inc. expressly to assume and agree to perform this Agreement in the
same manner and to the same extent NewMil Bancorp, Inc. would be required to
perform if no such succession had occurred.
(b) This Agreement Is Enforceable by the Executive and His Heirs. This
Agreement will inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributes and legatees.
11
(c) This Agreement Is Personal in Nature and Is Not Assignable. This
Agreement is personal in nature. Without written consent of the other party,
neither party shall assign, transfer or delegate this Agreement or any rights or
obligations under this Agreement, except as expressly provided herein. Without
limiting the generality or effect of the foregoing, the Executive's right to
receive payments hereunder is not assignable or transferable, whether by pledge,
creation of a security interest, or otherwise, except for a transfer by the
Executive's will or by the laws of descent and distribution. If the Executive
attempts an assignment or transfer that is contrary to this Section 10.1, NewMil
Bancorp, Inc. shall have no liability to pay any amount to the assignee or
transferee.
10.2 GOVERNING LAW, JURISDICTION AND FORUM. This Agreement shall be
construed under and governed by the internal laws of the State of Connecticut
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Connecticut or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Connecticut. By entering into this Agreement, the Executive acknowledges that he
is subject to the jurisdiction of both the federal and state courts in the State
of Connecticut. Any actions or proceedings instituted under this Agreement shall
be brought and tried solely in courts located in the County of Litchfield, State
of Connecticut, or in the federal court having jurisdiction in New Milford,
Connecticut. The Executive expressly waives his rights to have any such actions
or proceedings brought or tried elsewhere.
10.3 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties concerning the employment of the Executive by NewMil Bancorp, Inc.,
and any oral or written statements, representations, agreements, or
understandings made or entered into prior to or contemporaneously with the
execution of this Agreement, are hereby rescinded, revoked, and rendered null
and void by the parties. Anything herein to the contrary notwithstanding
however, nothing in this Agreement shall affect the Amended and Restated Salary
Continuation Agreement dated as of January , 2002 by and between NewMil Bank and
the Executive. The Amended and Restated Salary Continuation Agreement and the
parties' rights and obligations thereunder shall remain in full force and effect
according to the terms of that agreement, as the same may be amended and
restated after the date of this Agreement. Benefits payable under this Agreement
shall not be reduced by any benefits payable under the Amended and Restated
Salary Continuation Agreement, and benefits payable under the Amended and
Restated Salary Continuation Agreement shall not be reduced by any benefits
payable under this Agreement.
Without limiting the generality of the foregoing, the parties hereto
acknowledge and agree that this Agreement supersedes in its entirety the
"Employment Agreement" entered into by the Executive and NewMil Bank as of March
28, 1994, as amended by the First Amendment dated October 20, 1996 and the
Second Amendment dated August 3, 1998, which shall hereafter be void and of no
force or effect.
Both parties hereto having participated in the negotiation and drafting of
this Agreement, they hereby agree that there shall not be strict interpretation
against either party in connection with any review of this Agreement in which
interpretation thereof is an issue.
10.4 NOTICES. Any notice required or permitted under this Agreement shall
be deemed to have been effectively made or given if in writing and personally
delivered, delivered by mail properly addressed in a sealed envelope, postage
prepaid by certified or registered mail, delivered by a reputable overnight
delivery service, or sent by facsimile. 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 NewMil Bancorp, Inc. at the time of
the delivery of such notice, and properly addressed to NewMil Bancorp, Inc. if
addressed to NewMil Bancorp, Inc., 00 Xxxx Xxxxxx, X.X. Xxx 000, Xxx Xxxxxxx,
Xxxxxxxxxxx 00000, Attention: Secretary.
10.5 SEVERABILITY. In the case of conflict between any provision of this
Agreement and any statute, regulation or judicial precedent, the latter shall
prevail, but the affected provisions of this Agreement shall be curtailed and
limited solely to the extent necessary to bring them within the requirements of
law. If any provision of this Agreement is held by a court of competent
jurisdiction to be indefinite, invalid, void or voidable, or otherwise
unenforceable, the balance of this Agreement shall continue in full force and
effect unless such construction would clearly be contrary to the intentions of
the parties or would result in an injustice.
12
10.6 CAPTIONS AND COUNTERPARTS. The captions in this Agreement are inserted
solely for convenience. The captions in no way define, limit, or describe the
scope or intent of this Agreement. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
10.7 PAYMENT OF LEGAL FEES. (a) The Executive May Enforce this Agreement
Through Legal Action. NewMil Bancorp, Inc. irrevocably authorizes the Executive
to retain from time to time counsel of the Executive's choice to advise and
represent him in the interpretation, enforcement, or defense of the parties'
rights and responsibilities under this Agreement if C
(1) the Executive concludes that NewMil Bancorp, Inc. has failed to
comply with any of its obligations under Section 7.1 of this
Agreement, or
(2) if following a Change in Control NewMil Bancorp, Inc. or any other
person takes or threatens to take any action to declare this Agreement
void or unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive under
this Agreement,
including without limitation the initiation or defense of any litigation or
other legal action, whether by or against NewMil Bancorp, Inc. or any director,
officer, stockholder, or other person affiliated with NewMil Bancorp, Inc., in
any jurisdiction.
(b) Fees and Expenses Will Be Paid by NewMil Bancorp, Inc. NewMil Bancorp,
Inc. desires that the Executive not be required to incur legal fees and the
related costs and expenses associated with the interpretation, enforcement or
defense of his rights under this Agreement by litigation or otherwise, because
the amounts thereof would substantially detract from the benefits intended to be
extended to the Executive under this Agreement. Therefore, even if the Executive
does not prevail in whole or in part in the litigation or other legal action
associated with the interpretation, enforcement, or defense of his rights under
this Agreement pursuant to the immediately preceding subparagraph (a), NewMil
Bancorp, Inc. hereby agrees to pay and be solely financially responsible for any
and all attorneys' and related fees, costs and expenses incurred by the
Executive in the litigation or other legal action, up to a maximum of $500,000.
The fees and expenses of counsel selected by the Executive shall be paid or
reimbursed to the Executive by NewMil Bancorp, Inc. on a regular, periodic
basis, upon presentation by the Executive of a statement or statements prepared
by such counsel in accordance with counsel's customary practices. Anything
herein to the contrary notwithstanding, nothing in this Agreement authorizes
NewMil Bancorp, Inc. to pay or the Executive to demand payment of fees, costs
and expenses if and to the extent payment of fees, costs and expenses
constitutes a "prohibited indemnification payment" within the meaning of Federal
Deposit Insurance Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)].
(c) The Executive May Use NewMil Bancorp, Inc.'s Counsel. Notwithstanding
any existing or previous attorney-client relationship between NewMil Bancorp,
Inc. and any counsel chosen by the Executive under paragraph (a), NewMil
Bancorp, Inc. irrevocably consents to the Executive's entering into an
attorney-client relationship with that counsel, and NewMil Bancorp, Inc. and the
Executive agree that a confidential relationship shall exist between the
Executive and that counsel.
10.8 NO DUTY TO MITIGATE. NewMil Bancorp, Inc. hereby acknowledges that it
will be difficult and could be impossible (a) for the Executive to find
reasonably comparable employment after his employment terminates, and (b) to
measure the amount of damages the Executive may suffer as a result of
termination. Additionally, NewMil Bancorp, Inc. acknowledges that its general
severance pay plans do not provide for mitigation, offset or reduction of any
severance payment received thereunder. Accordingly, NewMil Bancorp, Inc. further
acknowledges that the payment of severance and termination benefits under this
Agreement is reasonable and shall be liquidated damages. The Executive shall not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment. Moreover, the amount of any payment provided for in
this Agreement shall not be reduced by any compensation earned or benefits
provided as the result of employment of the Executive or as a result of the
Executive being self-employed after termination of his employment.
13
10.9 AMENDMENT AND WAIVER. This Agreement may not be amended, released,
discharged, abandoned, changed, or modified in any manner, except by an
instrument in writing signed by each of the parties hereto. The failure of any
party hereto to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part thereof or the right of
any party thereafter to enforce each and every such provision. No waiver or any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach.
10.10 INTERNAL REVENUE CODE SECTION 280G GROSS-UP. (a) Additional Payment
to Account for Excise Taxes. 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 NewMil Bank or NewMil Bancorp, Inc.,
including accelerated vesting of stock options granted under the Stock Option
Plan and acceleration of benefits under any other benefit, compensation, or
incentive plan or arrangement with NewMil Bancorp, Inc. or NewMil Bank
(collectively, the "Total Benefits"), and if any part of the Total Benefits is
--------------
subject to the Excise Tax under section 280G and section 4999 of the Internal
Revenue Code (the "Excise Tax"), NewMil Bancorp, Inc. 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." Payment
----------------
of the Gross-Up Payment shall be made in addition to the amount set forth in
Article 7 hereof.
(b) Calculating the Excise Tax. For purposes of determining whether any of
the Total Benefits will be subject to the Excise Tax and for purposes of
determining the amount of the Excise Tax,
(1) Determination of "Parachute Payments" Subject to the Excise Tax:
any other payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive's
termination of employment (whether under the terms of this Agreement
or any other agreement, the Stock Option Plan or any other benefit
plan or arrangement with NewMil Bancorp, Inc., NewMil Bank, any person
whose actions result in a Change in Control or any person affiliated
with NewMil Bancorp, Inc., NewMil Bank or such person) 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 do not constitute (in whole or
----
in part) parachute payments, or such excess parachute payments
represent (in whole or in part) reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the
Internal Revenue Code in excess (as defined in section 280G(b)(3) of
the Internal Revenue Code), or are otherwise not subject to the Excise
Tax,
(2) Calculation of Benefits Subject to Excise Tax: the amount of the
Total Benefits that 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) Value of Noncash Benefits and Deferred Payments: the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Accounting Firm in accordance with the principles of
sections 280G(d)(3) and (4) of the Internal Revenue Code.
(c) Assumed Marginal Income Tax Rate. For purposes of determining the
amount of the Gross-Up Payments, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar years in which the Gross-Up Payments are 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 termination
14
of employment, net of the reduction in federal income taxes that can be obtained
from deduction of such 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 such state and local income taxes that would otherwise be deductible
by the Executive, and applicable federal FICA and Medicare withholding taxes.)
(d) Return of Reduced Excise Tax Payment or Payment of Additional Excise
Tax. If the Excise Tax is later determined to be less than the amount taken into
account hereunder when the Executive's employment terminated, the Executive
shall repay to NewMil Bancorp, Inc. C when the amount of the reduction in Excise
Tax is finally determined C the portion of the Gross-Up Payments attributable to
the reduction (plus that portion of the Gross-Up Payments attributable to the
Excise Tax, federal, state and local income taxes and FICA and Medicare
withholding taxes imposed on the Gross-Up Payments being repaid by the Executive
to the extent that the 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 into
account hereunder when the Executive's employment terminated (due, for example,
to a payment whose existence or amount cannot be determined at the time of the
Gross-Up Payments), NewMil Bancorp, Inc. shall make an additional Gross-Up
Payment to the Executive for that excess (plus any interest, penalties or
additions payable by the Executive for the excess) when the amount of the excess
is finally determined.
10.11 GROSS-UP DETERMINATION. (a) The Accounting Firm Shall Determine
Whether a Gross-Up Payment is Required. Subject to the provisions of Section
10.10 , all determinations required to be made under this Section 10.11 C
including whether and when a Gross-Up Payment is required, the amount of the
Gross-Up Payment and the assumptions to be used to arrive at the determination
(collectively, the "Determination") C shall be made by the Accounting Firm,
-------------
which shall provide detailed supporting calculations both to NewMil Bancorp,
Inc. and to the Executive within 15 business days after receipt of notice from
NewMil Bancorp, Inc. or the Executive that there has been a Gross-Up Payment, or
such earlier time as is requested by NewMil Bancorp, Inc..
(b) Fees and Expenses of the Accounting Firm and Agreement with the
Accounting Firm. All fees and expenses of the Accounting Firm shall be borne
solely by NewMil Bancorp, Inc. or NewMil Bank. NewMil Bancorp, Inc. and NewMil
Bank shall enter into any agreement requested by the Accounting Firm in
connection with the performance of its services hereunder.
(c) Accounting Firm's Opinion. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, the Accounting Firm shall furnish the
Executive with a written opinion to that 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.
(d) Accounting Firm's Determination Is Binding. The Determination by the
Accounting Firm shall be binding on NewMil Bancorp, Inc., NewMil Bank and the
Executive.
(e) Underpayment and Overpayment. Because 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 Gross-Up Payments that should have
been made will not have been made by NewMil Bancorp, Inc. ("Underpayment"), or
------------
that Gross-Up Payments will be made that should not have been made by NewMil
Bancorp, Inc. ("Overpayment").
-----------
If, after a Determination by the Accounting Firm, the Executive is required
to make a payment of additional Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred. The Underpayment (together
with interest at the rate provided in section 1274(d)(2)(B) of the Internal
Revenue Code) shall be paid promptly by NewMil Bancorp, Inc. to or for the
benefit of the Executive.
If the amount of the Gross-Up Payment 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. The
15
Overpayment (together with interest at the rate provided in section
1274(d)(2)(B) of the Internal Revenue Code) shall be paid promptly by the
Executive to or for the benefit of NewMil Bancorp, Inc.. Provided that his
expenses are reimbursed by NewMil Bancorp, Inc. or NewMil Bank, the Executive
shall cooperate with any reasonable requests by NewMil Bancorp, Inc. in any
contests or disputes with the Internal Revenue Service relating to the Excise
Tax.
(f) Accounting Firm Conflict of Interest. 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 (in which
case the term "Accounting Firm" as used in this Agreement shall be deemed to
refer to the accounting firm appointed by the Executive under this paragraph).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
WITNESSES NEWMIL BANCORP, INC.
By:
------------------------------ Xxxxx X. Xxxxxxx
-------------------------------------
Its: Secretary
------------------------------
By:
----------------------------
Xxxx X. Xxxxxxxx
Its: Chairwoman, Salary and Benefits
Committee of the Board of Directors
WITNESSES EXECUTIVE
Xxxxxxx X. Xxxxx
------------------------------
16
County of Litchfield )
) ss:
State of Connecticut )
Before me this day of , 2002, personally appeared the
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above named and Xxxxxxx X. Xxxxx, who acknowledged that they did sign the
foregoing instrument and that the same was their free act and deed.
----------------------------
(Notary Seal) Notary Public
My Commission Expires: