NEWMIL BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of NewMil Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
NEWMIL BANCORP, INC. will be held at the Candlewood Valley Country Club,
New Milford, Connecticut on Friday, October 16, 1998 at 9:30 a.m., for
the purpose of considering and voting on the following matters:
1. To elect three Directors to serve until the Annual Meeting of
Shareholders in 2001 who with the six Directors whose terms of office do
not expire at this meeting, will constitute the full Board.
2. To ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors for the fiscal year ending June 30, 1999.
3. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on August 27, 1998,
are entitled to notice of and to vote at this meeting or any adjournment
thereof.
By order of the Board of Directors,
Betty F. Pacocha
Secretary
New Milford, Connecticut
September 14, 1998
YOUR VOTE IS IMPORTANT. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING, YOU MAY THEN REVOKE YOUR PROXY AND VOTE IN PERSON.
NEWMIL BANCORP, INC.
19 Main Street
New Milford, Connecticut 06776
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 16, 1998
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NewMil Bancorp, Inc. (the
"Corporation"), a Delaware corporation, for the Annual Meeting of
Shareholders of the Corporation to be held at the Candlewood Valley
Country Club, New Milford, Connecticut on Friday, October 16, 1998 at
9:30 a.m. (the "Meeting"), and any adjournments thereof. This Proxy
Statement and the enclosed proxy card are first being given or sent to
shareholders on or about September 14, 1998.
The Corporation will bear the costs of soliciting proxies from its
shareholders. In addition to this solicitation by mail, proxies may be
solicited by Directors, officers and employees of the Corporation and the
Bank by personal interview, telephone or telegram. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial
owners of the Corporation's Common Stock (as hereinafter defined) held of
record by such persons, and the Corporation may reimburse such
custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred in connection therewith.
Only holders of Common Stock of record at the close of business on August
27, 1998 (the "Record Date") are entitled to vote at the Meeting. On
that date, there were 3,830,114 shares of the Corporation's $.50 par
value common stock outstanding (the "Common Stock"). All shares of
Common Stock outstanding carry voting rights and all shareholders are
entitled to one vote per share of Common Stock held by such shareholder
on each matter submitted to vote. Pursuant to the Corporation's Bylaws,
a majority of the outstanding shares entitled to vote, present either in
person or by proxy, will constitute a quorum for transacting business at
the Meeting.
Shares represented by properly executed proxies in the enclosed form will
be voted in accordance with any specifications made therein. Proxies
that contain no directions to the contrary will be voted FOR the election
of all nominees for Director and FOR the ratification of the appointment
of PricewaterhouseCoopers as the Corporation's independent auditors for
the fiscal year ending June 30, 1999. If any other business is properly
presented at this Meeting, the Proxy shall be voted in accordance with
the recommendations of management.
A shareholder who executes and returns a proxy on the enclosed form has
the power to revoke it at any time before it is voted at the Meeting by
filing with the Secretary of the Corporation an instrument revoking it,
or a duly executed proxy bearing a later date, or by attending the
Meeting and voting in person. Attendance at the Meeting will not in and
of itself constitute the revocation of a proxy. Voting by those present
during the conduct of the Meeting will be by ballot.
PRINCIPAL SHAREHOLDERS
The following table shows those persons known to the Corporation
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) to be the beneficial owners of more than
five percent of the Common Stock as of the Record Date. In preparing the
following table, the Corporation has relied on information supplied in
public filings filed by such persons with the Securities and Exchange
Commission and other information available to it. According to this
information, each person listed below is believed to have sole voting and
investment powers with respect to shares beneficially owned except as
noted.
<TABLE>
<S> <C> <C>
Shares
Name and Address Beneficially Percent
of Beneficial Owner Owned of Class
Dimensional Fund Advisor Inc. 296,900 (1) 7.75%
1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401
J. J. Cramer & Co. 280,000 (2) 7.31%
100 Wall Street, 8th Floor
New York, NY 10005
First Manhattan Asset Company 268,550 (3) 7.01%
437 Madison Ave
New York, NY 10022
The Estate of James R. Williams 245,978 (4) 6.42%
RFD #2, Box 281
Millerton, NY 12522
</TABLE>
(1) Dimensional Fund Advisors, Inc.'s beneficially owned shares are
based on a Securities and Exchange Commission 13F filing. Dimensional
Fund Advisors, Inc. ("Dimensional"), a registered investment advisor, is
deemed to have beneficial ownership of 296,900 shares of NewMil Bancorp,
Inc. common stock as of June 30, 1998, all of which hares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, for each of which Dimensional serves as investment
manager. Dimensional disclaims beneficial ownership of all such shares.
(2) J. J. Cramer & Co's beneficially owned shares are based on a
Securities and Exchange Commission Form 13D filing.
(3) First Manhattan Asset Company's beneficially owned shares are
based on a Securities and Exchange Commission 13F filing. First
Manhattan Asset Company ("First Manhattan") is a registered investment
advisor. All shares are reported to be held in investment portfolios of
First Manhattan clients.
(4) Shares owned beneficially by the estate of Mr. Williams are based
on information available to the Corporation.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
In accordance with the Corporation's Bylaws and the applicable laws of
Delaware, responsibility for the management of the Corporation is vested
in the Board of Directors. During the year ended June 30, 1998, the
Board of Directors of the Corporation held sixteen (16) regular and
special meetings. The Board of Directors of the Corporation is comprised
of the same individuals who serve on the Board of Directors of the
Corporation's wholly-owned subsidiary, New Milford Savings Bank (the
"Bank"). Each Director attended at least 75 percent of the meetings of
the Board of Directors of the Corporation and any committee(s) of which
he or she was a member.
During fiscal 1998 many matters ordinarily dealt with by subcommittees
of each Board of Directors were dealt with by the appropriate Board of
Directors as a committee of the whole. The committees of the
Corporation's Board of Directors are the Audit Committee, the Investment
Committee, the Nominating Committee, and the Salary and Benefits
Committee. The committees of the Bank's Board of Directors are the Audit
Committee, the Community Reinvestment Act Committee, the Investment
Committee, the Loan Committee, the Nominating Committee, the Salary and
Benefits Committee, and the Trust Committee.
The Corporation's Audit Committee met three (3) times during fiscal
1998. The Corporation's Audit Committee is responsible, amongst other
things, for oversight of: internal accounting controls; the internal
audit function; the selection of independent accountants; the results of
the annual audit examination; and, relationships with state and federal
regulatory agencies. The members of the Corporation's Audit Committee
are Willis H. Barton, Jr., Joseph Carlson II, Herbert E. Bullock,
Laurie G. Gonthier and Mary C. Williams.
The Corporation's Nominating Committee met two (2) times during fiscal
1998. The Corporation's Nominating Committee recommends to the
Corporation's Board of Directors candidates for director either to be
elected at annual meetings of shareholders or to be appointed by the
Board of Directors from time to time for the purpose of filling any
vacancy on the Board of Directors. Vacancies in directorships may be
filled, until the expiration of the term of the vacated directorship, by
a vote of a majority of the directors then in office. The members of the
Corporation's Nominating Committee are Herbert E. Bullock, Joseph Carlson
II and Laurie G. Gonthier.
The Corporation's Salary and Benefits Committee met two (2) times
during fiscal 1998. The Corporation's and the Bank's Salary and Benefits
Committees make recommendations to their respective Boards of Directors
on compensation for officers and employees, and on benefit plans for
employees of the Corporation and the Bank. The Bank's Salary and
Benefits Committee administers the 1986 Stock Option Plan for officers
and key employees of the Bank, which includes recommendations for the
granting of stock options. The members of the Salary and Benefits
Committee are Willis H. Barton, Jr., Laurie G. Gonthier, John V. Haxo,
Suzanne L. Powers and Mary C. Williams.
The Corporation's Investment Committee met fifteen (15) times during
fiscal year 1998. The Corporation's and the Bank's Investment Committees
approve investment policies and monitor the performance of the
Corporation's and the Bank's investment portfolios. The members of the
Corporation's and the Bank's Investment Committees are Willis H. Barton,
Jr., Joseph Carlson II, Laurie G. Gonthier, John V. Haxo and Francis J.
Wiatr.
Matters ordinarily dealt with by the Bank's Loan Committee were dealt
with during fiscal year 1998 by the Bank's Board of Directors as a
committee of the whole. The Bank's Loan Committee approves the loan
policies of the Bank, approves certain loans and reviews all reports on
the loan portfolio.
Matters ordinarily dealt with by the Bank's Trust Committee were dealt
with during fiscal year 1998 by the Bank's Board of Directors as a
committee of the whole. The Trust Committee approves the trust policies
of the Bank and reviews all trust accounts. The Bank's Trust Committee
no longer administers trust accounts for unrelated third parties. The
Bank remains as Trustee for only one account, New Milford Savings Bank
Pension Plan, and serves as custodian for the New Milford Savings Bank
Foundation. The Bank's Trust Committee, therefore, continues to
administer these accounts. The members of the Bank's Trust Committee are
Herbert E. Bullock, John V. Haxo, and Suzanne L. Powers.
The Bank's Community Reinvestment Act Committee ("CRA") met three (3)
times during fiscal year 1998. The committee was formed as a means of
assuring compliance with the requirements of the Community Reinvestment
Act. The members of the Bank's CRA Committee are Herbert E. Bullock,
Willis H. Barton, Jr., John V. Haxo, Betty F. Pacocha and Francis J.
Wiatr.
DIRECTORS COMPENSATION
Officers of the Corporation who are also directors receive no
compensation as directors. Each non-employee director received an annual
stipend of $7,500 for the fiscal year ended June 30, 1998. Directors
also receive $250 for each Board meeting attended and $150 for each
additional committee meeting attended.
On October 23, 1992, at the 1992 Annual Meeting, the Shareholders
approved the 1992 Stock Option Plan for Outside Directors (the "1992
Plan"). Each non-employee director was granted options to purchase
10,000 shares of Common Stock of the Corporation pursuant to such 1992
Plan, at an exercise price of $3.00, the fair market value of the
Corporation's Common Stock on the date of grant. On October 20, 1995, at
the 1995 Annual Meeting, the Shareholders approved certain amendments to
the 1992 Plan. The 1992 Plan, as amended, provides that on June 30 of
each year each non-employee director shall receive a grant of additional
options of 2,000 shares. In addition, any newly elected non-employee
directors shall receive an initial option grant of 3,000 shares.
Directors who are also employees of the Corporation or the Bank are not
eligible to participate in this 1992 Plan.
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation and the Bylaws of the Corporation
provide for the election of directors by the shareholders. For this
purpose, the Board of Directors is divided into three classes, as nearly
equal in size as possible, with one class elected each year for a
three-year term, to hold office until the end of such term and until
successors have been elected and qualified. The terms of office of the
members of one class expire and a successor class is elected at each
annual meeting of the shareholders. The Corporation's Bylaws contain a
special provision applicable only to a director who is also an officer of
the Corporation; in such case, the officer/director shall be deemed to
have resigned as a director should he or she, for any reason, no longer
be an officer of the Corporation.
At the Meeting, the terms of three directors, Laurie G. Gonthier, Dr.
John V. Haxo and Suzanne L. Powers expire. They have been nominated to
be elected each for a three-year term, expiring at the annual meeting in
2001. In the event that any nominee for director is unable or declines
to serve, which the Board of Directors has no reason to expect, the
attorneys named in the proxy will vote for a substitute designated by the
present Board of Directors.
Nominations of persons for election to the Board of Directors may be
made at a meeting of shareholders by or at the direction of the Board of
Directors or by any shareholder of the Corporation entitled to vote for
the election of directors at the meeting who complies with certain notice
procedures set forth in the Bylaws. Such nominations, other than those
made by or at the direction of the Board of Directors, must be made
pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered to or mailed and
received at the Corporation's principal executive offices not fewer than
60 days nor more than 90 days prior to the annual meeting; provided,
however, that if fewer than 50 days' notice or prior public disclosure of
the date of the annual meeting is given or made to shareholders, notice
by the shareholder to be timely must be received not later than the close
of business on the 10th day following the day on which such notice of the
date of the Meeting was mailed or such public disclosure was made. A
shareholder's notice must set forth (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a
Director, (i) the name, age, business address and residence address of
such person, (ii) the principal occupation or employment of such person,
(iii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by such person, (iv) the total number of
shares of capital stock of the Corporation that will be voted for each
proposed nominee; and (v) any other information relating to such person
that is required to be disclosed in solicitation of proxies for election
of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(including without limitation such person's written consent to being
named in the proxy statement as a nominee and to serving as a Director if
elected) and (b) as to the shareholder giving the notice (i) the name and
address of such shareholder, as they appear on the Corporation's books,
and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by such shareholder.
The following tables set forth information as of the Record Date based
upon the Corporation's and the Bank's books and records and upon
Questionnaires executed by the Corporation's and the Bank's directors and
executive officers, regarding the nominees for election as directors at
the Meeting and each director continuing in office. The tables include
the total number and percentage of shares of Common Stock beneficially
owned by each nominee and by all directors and executive officers as a
group. Each person has sole voting and investment powers with respect to
shares listed as being beneficially owned by them, except as indicated in
the notes following the tables.
NOMINEES FOR ELECTION FOR A THREE YEAR TERM
<TABLE>
<S>
<C> <C> <C> <C>
Positions Held With the
Corporation and the Bank; Has Served
Principal Occupation as a
During the Past Five Years Director
Name and Directorships Age Since
Laurie G. Gonthier Director; Vice President- 48 1990
Investments for Paine
Webber, Middlebury, CT
Dr. John V. Haxo Director; Retired Surgeon 74 1987
Suzanne L. Powers Director; Attorney; 60 1988
Judge of Probate
<C> <C> <C> <C>
Shares of
Term Will Common Stock Percent of
Expire At Beneficially Common Stock
the Annual Owned as of Beneficially
Meeting in August 27, 1998 Owned
Laurie G. Gonthier 2001 25,500(1) 0.66%
Dr. John V. Haxo 2001 19,000(3) 0.49%
Suzanne L. Powers 2001 28,000(4) 0.73%
</TABLE>
(1) Includes 5,000 shares held jointly by Mr. Gonthier with his
spouse, 2,500 shares in Mr. Gonthier's Individual Retirement Account and
options to purchase 18,000 shares of Common Stock exercisable within 60
days of the Record Date.
(2) Dr. Haxo has been a director of the Corporation since its
formation in 1987. Dr. Haxo has been a director of the Bank since 1973.
(3) Includes 1,000 shares held directly by Dr. Haxo and options to
purchase 18,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(4) Includes 1,000 shares held directly by Ms. Powers, 4,000 shares
held jointly by Ms. Powers with her spouse, 5,000 shares held by Ms.
Powers' spouse and options to purchase 18,000 shares of Common Stock
exercisable within 60 days of the Record Date.
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<S>
<C> <C> <C> <C>
Positions Held With the
Corporation and the Bank; Has Served
Principal Occupation as a
During the Past Five Years Director
Name and Directorships Age Since
Willis H. Barton, Jr. Director; Retired Partner 76 1987(1)
in W.G. Barton & Son;
Director of New Milford
Center Cemetery Association
and New Milford Hospital,
New Milford, CT
Herbert E. Bullock Director; Employee, Echo 63 1987(3)
Bay Marina, New Milford, CT
Joseph Carlson II Director; former Vice 59 1997(5)
Chairman and CFO of
Centerbank and Center
Financial
Betty F. Pacocha Director; Secretary of 64 1997(7)
the Corporation and
Executive Vice President
and Secretary of the Bank
Francis J. Wiatr Director; Chairman, President, 48 1994(9)
and CEO of the Corporation and
Bank; Former President and CEO,
Bank of Waterbury, Waterbury,
CT; Former Senior Executive Vice
President, Citytrust, Bridgeport, CT
Mary C. Williams Director; Former Vice 59 1990
President of J & J Log and
Lumber Corp.
<C> <C> <C> <C>
Shares of
Term Will Common Stock Percent of
Expire At Beneficially Common Stock
the Annual Owned as of Beneficially
Meeting in August 27, 1998 Owned
Willis H. Barton, Jr. 2000 26,250(2) 0.68%
Herbert E. Bullock 2000 18,499(4) 0.48%
Joseph Carlson II 2000 15,000(6) 0.39%
Betty F. Pacocha 1999 28,126(8) 0.73%
Francis J. Wiatr 2000 141,200(10) 3.56%
Mary C. Williams 1999 78,000(11) 2.03%
All Directors and 455,061(12) 10.87%(13)
Executive Officers as
a Group (16 Persons)
</TABLE>
(1) Mr. Barton has been a director of the Corporation since its
inception in 1987. Mr. Barton has been a director of the Bank since
1970.
(2) Includes 5,000 shares held jointly with spouse, 1,250 shares held
by spouse and daughter, 2,000 shares held directly and options to
purchase 18,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(3) Mr. Bullock has been a director of the Corporation since its
formation in 1987. Mr. Bullock has been a director of the Bank since
1972.
(4) Includes 400 shares held jointly with spouse and options to
purchase 18,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(5) Mr. Carlson was elected a Director of the Corporation and the Bank
by the Board of Directors on August 21, 1997 to fill the vacancy created
by Mr. Nania upon his retirement from the Corporation and the Bank.
(6) Includes 10,000 shares held directly by Mr. Carlson and options to
purchase 5,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(7) Ms. Pacocha was elected a Director of the Corporation and the Bank
by the Board of Directors on August 21, 1997. Ms. Pacocha has been an
employee of the Bank since 1961 and she has served as Secretary of the
Corporation since 1992.
(8) Includes 3,626 shares held directly by Ms. Pacocha and options to
purchase 24,500 shares of Common Stock exercisable within 60 days of the
Record Date.
(9) Mr. Wiatr was appointed President of the Corporation and President
and Chief Executive Officer ("CEO") of the Bank on March 21, 1994. He
was appointed Chairman and CEO of the Corporation and Chairman of the
Bank on August 5, 1997, to replace the retiring Anthony J. Nania as
Chairman and CEO of the Corporation and Chairman of the Bank.
(10) Includes 6,200 shares held directly by Mr. Wiatr and options to
purchase 135,000 shares of common stock exercisable within 60 days of the
Record Date.
(11) Includes 60,000 shares held directly by Ms. Williams and options
to purchase 18,000 shares of Common Stock exercisable within 60 days of
the Record Date.
(12) Includes 354,500 shares issuable upon the exercise of options
exercisable by such persons within 60 days of the Record Date.
(13) For the purpose of calculating the percentage of Common Stock
beneficially owned by the persons listed in the table, including the
directors and executive officers as a group, the total number of shares
outstanding includes the 354,500 shares issuable upon the exercise of
options which may be exercised by such persons within 60 days of the
Record Date (the "Option Shares").
THE NOMINEES FOR DIRECTOR MUST BE ELECTED BY A MAJORITY OF THE
SHARES PRESENT IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE PROPOSED NOMINEES.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive
officers, and persons who own more than ten percent of a registered class
of the Corporation's equity securities (collectively referred to as the
"Insiders"), to file with the Securities and Exchange Commission and NASD
initial reports of ownership and reports of changes in ownership of any
securities of the Corporation. Insiders are required by the Exchange Act
to furnish the Corporation with copies of all Section 16(a) reports they
file. Based solely on a review of the copies of such reports furnished
to the Corporation and written representations that no other reports were
required, the Corporation believes that during the fiscal year ended June
30, 1998, all Section 16(a) required filings applicable to the
Corporation's Insiders were made, except the following: The non-employee
directors (Ms. Powers and Williams, and Messrs. Barton, Bullock, Carlson,
Gonthier and Haxo) receive annual option grants of 2,000 options each
June 30. The grants are required to be reported to the SEC on Form 5
within 45 days after the end of the Corporation's fiscal year (by August
14). In 1997 and 1998, these forms were filed late by 7 to 29 days.
Also, Mr. Carlson's initial filing on Form 3, due following his
election to the Board, was filed 6 days late.
EXECUTIVE COMPENSATION
The following Cash Compensation Table sets forth cash compensation and
certain other compensation paid or accrued by the Corporation or the Bank
for services in all capacities rendered during fiscal years ended June
30, 1998, 1997 and 1996 to the Corporation's CEO and the three most
highly compensated executive officers of the Corporation and the Bank,
other than the CEO, whose cash compensation for the fiscal year ended
June 30, 1998 determined in accordance with Item 402 of SEC Regulation
S-K exceeded $100,000 (together, the "Named Executives").
Summary Compensation Table
<TABLE>
<S>
<C> <C> <C> <C> <C>
Annual Compensation
Awards
(a) (b) (c) (d) (e)
Name and Other Annual
Principal Compensation
Position Year Salary($) Bonus($) ($)
Francis J. Wiatr(1) 1998 $170,000 $85,000(2) $ -
Chairman, President 1997 170,000 75,000(3) -
and CEO if the 1996 168,462 65,000(4) -
Corporation & the
Bank
B. Ian McMahon 1998 $103,846 $10,000(5) $ -
Senior Vice President 1997 94,423 7,500(6) -
& CFO of the Bank 1996 89,419 15,000(7) -
Anthony J. Nania(1) 1998 $ 16,154 $ - $ -
Past Chairman/CEO of 1997 69,538 - -
the Corporation and 1996 150,000 20,000(9) -
past Chairman of
the Bank
Long Term
Compensation
------------
<C> <C> <C> <C>
(b) (g) (i)
All Other
Options/ Compensation
Year SARs(#) ($)(10)
Francis J. Wiatr (1)
1998 10,000 (8) $ 6,518
1997 - 6,103
1996 50,000 4,676
B. Ian McMahon
1998 5,000 (8) $ 3,669
1997 - 3,693
1996 8,000 2,882
Anthony J. Nania (1)
1998 - $62,985
1997 - 4,261
1996 60,000 4,573
</TABLE>
(1) On August 5, 1997, Mr. Wiatr was appointed Chairman and CEO of the
Corporation and Chairman of the Bank to replace Mr. Nania who retired as
Chairman and CEO of the Corporation and Chairman of the Bank.
(2) Mr. Wiatr will receive a performance bonus of $85,000 for the 1998
fiscal year, the payment of which is deferred until October 31, 2002 and
which is conditioned upon the stock performance of the Corporation.
(3) Mr. Wiatr will receive a performance bonus of $75,000 for the 1997
fiscal year, the payment of which is deferred until October 31, 2001 and
which is conditioned upon the stock performance of the Corporation.
(4) Mr. Wiatr will receive a performance bonus of $65,000 for the 1996
fiscal year, the payment of which is deferred until October 31, 2000 and
which is conditioned upon the stock performance of the Corporation.
(5) Mr. McMahon will receive a performance bonus of $10,000 for the 1998
fiscal year, the payment of which is deferred until October 31, 2002 and
which is conditioned upon the stock performance of the Corporation.
(6) Mr. McMahon received a performance bonus totaling $7,500 for the
1997 fiscal year.
(7) Mr. McMahon received a performance bonus totaling $15,000 for the
1996 fiscal year.
(8) Represents stock option bonus granted on July 28, 1998 based on
performance for the 1998 fiscal year.
(9) Mr. Nania received a performance bonus of $20,000 for the 1996
fiscal year.
(10) The amounts reported for All Other Compensation include the
following: (i) Term life insurance premiums paid by the Corporation or
the Bank in fiscal year 1998, 1997 and 1996 on behalf of each of the
named executives: Mr. Wiatr, $1,775, $1,475 and $1,100, respectively; Mr.
Nania, $0, $2,098 and $1,573, respectively; and Mr. McMahon, $495, $410
and $407, respectively; (ii) Contribution match paid by the Bank under
the Bank's 401K Plan in fiscal year 1998, 1997 and 1996 on behalf of Mr.
Wiatr of $4,743, $4,628 and $3,576 respectively; Mr. Nania of $485,
$2,163 and $3,000 respectively; and Mr. McMahon, $3,174, $3,283 and 2,475
for 1998, 1997 and 1996, respectively; and (iii) Fees of $62,500 paid to
Mr. Nania pursuant to a Consulting Agreement entered into with Mr. Nania
upon his retirement from the Corporation and Bank.
The following table provides detailed information concerning stock
options exercised by the Named Executives during the fiscal year ended
June 30, 1998. This table also provides information concerning the
number and value of specified exercisable ("vested") and unexercisable
("unvested") stock options at June 30, 1998. Finally, this table reports
the value of unexercised "in-the-money" stock options at June 30, 1998,
which represents the positive spread between the exercise price of any
such existing stock options and the fair market value of the
Corporation's Common Stock on June 30, 1998 ($12.84375).
Aggregated Option/SAR Exercises in Fiscal Year Ended June 30, 1998
and June 30, 1998 Option/SAR Value Table
<TABLE>
<S>
<C> <C> <C>
(a) (b) (c)
Shares Acquired Value(a)
Name on Exercise(#) Realized($)
Francis J. Wiatr - -
B. Ian McMahon - -
Anthony J. Nania 50,701 $378,696
<C> <C> <C>
(a) (d) (e)
Number of Value of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at June 30, 1998 at June 30, 1998
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(1)
Francis Wiatr 125,000 / 0 $977,344 / $ -
B. Ian McMahon 20,000 / 0 $157,625 / $ -
Anthony J. Nania 64,299 / 0 $509,768 / $ -
</TABLE>
(1) Based on the average of the bid and asked price of the Corporation's
common stock as reported on The Nasdaq Stock Market on June 30, 1998.
Employment Agreements
The Bank currently has an Employment Agreement with Mr. Wiatr. Mr.
Wiatr's agreement provides for an annual base compensation of $170,000.
Mr. Wiatr also agrees to serve as director of the Corporation and the
Bank (for so long as he continues as an officer of the Corporation and
Bank) for which he will receive no additional compensation. The
Agreement also provides for certain customary benefits, including an
automobile allowance and country club membership.
Mr. Wiatr's agreement provides that if the Corporation or the Bank
experiences a change in control, Mr. Wiatr will be entitled to receive a
lump sum cash payment equal to three times the greater of his
compensation for the last full fiscal year preceding the change in
control or the average of such compensation for the last three full
fiscal years. Such payments are not limited to amounts which would be
fully deductible for federal income tax purposes pursuant to Section 280G
of the Internal Revenue Code of 1986, as amended, and the Corporation (or
its successors) will be additionally obligated to reimburse Mr. Wiatr for
any excise tax he incurs on such payments pursuant to Section 280G and
related I.R.C. provisions. If Mr. Wiatr is terminated before a change in
control occurs, no severance would be due other than a continuation of
benefits for three months and payment for unused vacation time.
The agreement provides that for a period of two (2) years following Mr.
Wiatr's employment with the Bank, he shall not engage in, render advice
or assistance to or be employed on a compensation basis by any person,
firm or entity which is in competition (as defined in the agreement) with
the Bank. In addition, Mr. Wiatr agrees in the agreement not to use or
reveal, at any time during or after the term of the agreement, any
confidential information that he has received during the course of his
employment at the Bank.
The Bank has also entered into one-year change of control agreements
with Mr. McMahon and three other executive officers of the Bank. The
agreements provide that, in the event of a change in control of the
Corporation or Bank, the executive will be entitled to a lump sum cash
payment equal to the greater of his or her compensation for the last full
fiscal year preceding the change in control or the average of such
compensation for the last three full fiscal years. In no event shall
such payments be made in an amount which would cause them to be deemed
non-deductible "excess parachute payments" under Section 280G of the
Internal Revenue Code, as amended.
The Corporation and Bank entered into a Consulting Agreement with Mr.
Nania upon his retirement from the Corporation and Bank. In return for
consulting services and a covenant not to compete, Mr. Nania will be paid
$75,000 for each of the two years of the Consulting Agreement.
EMPLOYEE BENEFIT PLANS
Pension Plan
The Bank maintains a non-contributory defined benefit pension plan (the
"Pension Plan") that is qualified under the Internal Revenue Code and
complies with the requirements of the Employee Retirement Income Security
Act of 1984 ("ERISA").
Effective September 1, 1993 the Pension Plan was curtailed and the
crediting of additional benefits to participants under the Pension Plan
discontinued. Distributions of vested benefits will be made after the
retirement of vested participants. If a participant terminates
employment before attaining the normal retirement date as set forth in
the Pension Plan, the Pension Plan's vesting provisions will govern
whether such participant is entitled to any benefits pursuant to such
Pension Plan.
The Pension Plan covers full-time employees, as of September 1, 1993,
who had attained the age of 21 years and had completed at least six
months service with the Bank at September 1, 1993. The Pension Plan
provides in general for monthly payments to or on behalf of each covered
employee upon such employee's retirement at age 62 or 65, depending upon
whether their employment began before April 1, 1976, or after that date.
Annual payments are based upon the employee's basic annual compensation
for the highest paid three years of employment through September 1, 1993
and such employee's covered months of service to a maximum of 60 percent.
The Pension Plan provides for optional early retirement benefits
provided a participant has attained age 58 and completed at least 25
years of service with the Bank or attained the age of 62 depending on
whether their employment began before April 1, 1976 or after that date.
The Pension Plan also provides death benefits comparable to the benefits
offered in the case of early retirement. To fund the benefits provided
by the Pension Plan, the Bank makes an annual contribution, if required,
for the benefit of eligible employees computed on an actuarial basis. No
contribution was required or made during the last fiscal year.
Contributions to the Pension Plan fund are paid entirely by the Bank and
expenses of administering the Pension Plan are paid from the fund.
The Bank also maintains a supplemental pension plan to provide
retirement benefits for Mr. Wiatr who is not covered under the Pension
Plan.
The following table illustrates annual pension benefits for retirement
in fiscal 1997 at age 65 under the most advantageous Pension Plan
provisions available for various levels of compensation and years of
service. The Bank's Pension Plan does not provide for Social Security
integration.
<TABLE>
<S>
Pension Plan Table
<C> <C> <C> <C> <C> <C>
Average Final Years of Service(b)
Earnings(a) 15 Years 20 Years 25 Years 30 Years 35 Years
- ------------- -------- -------- -------- -------- --------
$ 25,000 $ 7,500 $10,000 $12,500 $15,000 $ 15,000
50,000 15,000 20,000 25,000 30,000 30,000
75,000 22,500 30,000 37,500 45,000 45,000
100,000 30,000 40,000 50,000 60,000 60,000
125,000 37,500 50,000 62,500 75,000 75,000
150,000 45,000 60,000 75,000 90,000 90,000
</TABLE>
(a) Average of highest three years of annual compensation.
(b) Benefits are computed based on the participant's average of
highest three years of annual compensation and the number of months of
service, up to a maximum of 60%. The Pension Plan does not provide for
Social Security integration.
As of June 30, 1997, Mr. Nania's salary for pension benefit purposes
was $146,957, he had one year of service accrued, and his estimated
accrued annual pension benefit payable upon retirement assuming full
vesting (which amount was frozen effective September 1, 1993) was $2,939.
No amounts would be payable to Messrs. Wiatr or McMahon pursuant to
the Pension Plan.
Savings and Protection Plan
Effective April 1, 1994 the Bank amended its Profit-Sharing Plan to add
a 401K provision. This part of the Plan allows for a defined
contribution by employees with a match by the Bank of 50% on the first 6%
of an employee's salary. If an employee elects to contribute greater
than 6% of his or her salary, the Bank's match is capped at 50% of 6% of
the employee's salary. The Bank's matching contribution for the 1998
fiscal year, covering the period from July 1, 1997 to June 30, 1998, was
$74,875. All contributions under the 401K are vested when made, except
to the extent adjustment may be necessary to comply with applicable
allocation restrictions which apply to 401K plans generally.
The Bank maintains a non-contributory profit-sharing feature to the
Profit Sharing Plan which benefits all full-time employees and follows
the same eligibility requirements contained in the Bank's Pension Plan.
The amounts contributed to the Profit-Sharing Plan are determined
annually by the Board of Directors of the Bank on a discretionary basis.
No contributions were made to the profit-sharing feature of the Profit
Sharing Plan in the fiscal year ended June 30, 1998.
The Board of Directors of the Bank reviews the structure of the
Profit-Sharing Plan annually, and makes whatever adjustments it deems
appropriate. The Bank has no long-term agreement or commitment to
maintain the Profit-Sharing Plan.
Supplemental Retirement
The Bank has provided Mr. Wiatr with a Supplemental Retirement
Agreement pursuant to which Mr. Wiatr may receive retirement benefits
beginning at age 65 for 15 years. The amount of retirement benefits are
dependant on his years of service to the Bank up to the maximum age of
65. If Mr. Wiatr's employment with the Bank were to end during fiscal
year 1999, he would be entitled to an annual retirement benefit of
$11,493 beginning at age 65. The Agreement represents an unsecured
general obligation of the Bank, although the Bank has purchased a life
insurance policy on Mr. Wiatr as a funding vehicle for the benefits
obligation.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board of Directors as a whole makes decisions on compensation for
executive officers (with Mr. Wiatr and Ms. Pacocha not participating in
decisions concerning their compensation). The Board is currently
comprised of nine members. Because the business of the Corporation
currently consists of the business of the Bank, no separate cash
compensation is paid to the executive officers of the Corporation.
Except for Mr. Wiatr, who participated in discussions concerning Ms.
Pacocha's compensation, no other members of the Board who participated in
these decisions are employed by the Corporation or the Bank, neither do
any of these members have an interlocking relationship with a
compensation committee of another entity, nor do they participate in any
of the Corporation's or Bank's executive compensation plans.
In addition, the Salary and Benefits Committee, none of whose members
are employees of the Corporation or the Bank, makes recommendations to
the Board of Directors concerning the grant of stock options pursuant to
the 1986 Plan to employees, including director and non-director executive
employees. Based on these recommendations, the Board of Directors makes
decisions regarding the grant of any such options (with Mr. Wiatr and Ms.
Pacocha not participating in decisions concerning themselves). This
Committee also makes recommendations to the Board of Directors on
compensation for other officers and employees and on other benefit plans
for employees of the Corporation and the Bank.
The Board of Directors does not have formal compensation policies. The
Board does, however, consider the Corporation's and the Bank's
performance, the accomplishment of business objectives, and the
individual's contribution to earnings and shareholder value in setting
senior officer compensation levels. The Board also considers the
compensation paid by peer group institutions with the goal of being
competitive in the attraction and retention of qualified executives. The
three principal components of executive officers' compensation are
salary, performance cash bonuses, and stock options granted under the
Corporation's 1986 Plan. The Board considers granting bonuses only when
it determines that performance is meritorious and exceptional, and only
after consideration of such factors as the Bank's performance for such
year compared to prior years, and the time and effort exerted by
management. These decisions are made on a judgmental basis, and not
according to a specific formula. The Corporation's CEO, Mr. Wiatr,
received a salary of $170,000 in fiscal year 1998, the same as in fiscal
year 1997. This salary is required under Mr. Wiatr's employment
contract. The Board chose to recognize meritorious performance by
Messrs. Wiatr and McMahon in the fiscal year ended June 30, 1998 by
awarding performance bonuses as reflected in the Summary Compensation
Table. Mr. Wiatr's bonus of $85,000 represented a $10,000 increase over
his bonus of $75,000 in 1997, based primarily on achievement of
pre-established performance targets (individual and company) and
comparison to local and national total compensation figures for
comparable institutions.
Board of Directors of the Corporation and the Bank
Willis H. Barton, Jr. Betty F. Pacocha (not as to herself)
Herbert E. Bullock Suzanne L. Powers
Joseph Carlson II Francis J. Wiatr (not as to himself)
Laurie G. Gonthier Mary C. Williams
John V. Haxo
PERFORMANCE GRAPH
The following graph compares over the last five years the cumulative
total shareholder return on the Corporation's
Common Stock, based on the market price of the Corporation's Common
Stock, with the cumulative total return of companies
on the S&P 500 Index and the reported total return of companies on the
KBW New England Bank Index. Total return values
were calculated based on cumulative total return values assuming
reinvestment of dividends. The graph assumes a $100
investment on June 30, 1993.
PERFORMANCE GRAPH - Cumulative Shareholder return
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
June 93 June 94 June 95 June 96 June 97 June 98
------- ------- ------- ------- ------- -------
S&P 500 100.00 101.41 127.77 160.91 216.64 281.82
NewMil Bancorp, Inc 100.00 128.57 180.71 200.11 349.43 396.19
KBW New England
Savings Bank Index 100.00 158.22 163.93 213.20 345.72 492.79
</TABLE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the fiscal year ended June 30, 1998, certain directors and
officers of the Corporation and the Bank and associates of such directors
and officers have been and currently are customers of the Bank and the
Corporation and have had banking and other transactions with the Bank and
the Corporation. All transactions, including loans, if any, made to such
persons and their associates (a) were made on substantially the same
terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other customers of the Bank,
(b) were made in the ordinary course of business, and (c) did not involve
more than the normal risk of collectability or present other unfavorable
features.
During the fiscal year ended June 30, 1998 the Bank and the Bank's
Pension Plan and Profit-Sharing Plan paid PaineWebber fees or commissions
totaling $84,954, of which approximately $18,456 was earned by Director
Laurie G. Gonthier a Vice President of Marketing for PaineWebber, in
Middlebury, Connecticut. During the fiscal year ended June 30, 1998 the
Bank paid legal fees totaling $2,415 to the law firm of Powers & Powers
of which director Suzanne L. Powers is a partner. During the fiscal year
ended June 30, 1998 the Bank paid legal fees totaling $1,500 to the law
firm of Nania & Drury of which Anthony J. Nania, past Chairman and CEO of
the Corporation and past Chairman of the Bank is a partner.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1999
The Board of Directors of the Corporation has made arrangements with
PricewaterhouseCoopers LLP, independent certified public accountants, to
be its independent auditors for the fiscal year ending June 30, 1999
subject to ratification by the Corporation's shareholders. Neither the
firm nor any of its partners has any direct or indirect financial
interest in, or any connection (other than as independent auditors) with
the Corporation or the Bank. A representative of PricewaterhouseCoopers
LLP is expected to be present at the Meeting and will be provided with an
opportunity to make a statement if he or she desires to do so and to
respond to shareholders' questions.
THE INDEPENDENT AUDITORS MUST BE RATIFIED BY A MAJORITY OF THE
VOTES PRESENT IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" RATIFICATION.
SHAREHOLDER PROPOSALS
Proposals of the Corporation's shareholders intended to be presented at
the 1999 annual meeting of the Corporation must be received by the
Corporation not later than May 17, 1999, to be included in the
Corporation's proxy statement and form of proxy relating to that meeting.
Any such proposal must comply with Rule 14a-8 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended.
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board of
Directors of the Corporation knew of no other matters to be presented for
action at the Meeting other than as set forth in the Notice of Annual
Meeting of Shareholders and described in this Proxy Statement. If any
other matters properly come before the Meeting or any adjournment(s)
thereof, the proxies will be voted in accordance with the determination
of a majority of the Board of Directors.
By order of the Board of Directors,
BETTY F. PACOCHA
Secretary
September 14, 1998
