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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NewMil Bancorp, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Tyler Cooper & Alcorn, LLP
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
NEWMIL BANCORP, INC.
----------------
Notice of Annual Meeting of Shareholders
----------------
To the Shareholders of NewMil Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of
NEWMIL BANCORP, INC. will be held at the Candlewood Valley Country Club, New
Milford, Connecticut on Wednesday, October 25, 2000 at 10:00 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 2003 who with the six Directors whose terms of office do
not expire at this meeting, will constitute the full Board.
2. To approve an Amendment to the Corporation's 1986 Stock Option Incentive
Plan for Key Officers and Employees.
3. To approve an Amendment to the Corporation's 1992 Stock Option Plan for
Outside Directors.
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors for the fiscal year ending June 30, 2001.
5. 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 September 1, 2000,
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 15, 2000
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.
PLEASE NOTE THAT THE ANNUAL MEETING IS BEING HELD IMMEDIATELY AFTER THE
SPECIAL MEETING OF SHAREHOLDERS CALLED FOR THE PURPOSE OF VOTING ON NEWMIL
BANCORP INC.'S PROPOSED ACQUISITION OF NUTMEG FEDERAL SAVINGS & LOAN
ASSOCIATION. PLEASE TAKE CARE TO RETURN THE SEPARATE PROXY CARDS FOR BOTH
MEETINGS.
<PAGE>
NEWMIL BANCORP, INC.
19 Main Street
New Milford, Connecticut 06776
----------------
Annual Meeting of Shareholders
October 25, 2000
----------------
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 Wednesday, October 25, 2000 at 10:00 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 15, 2000.
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 September
1, 2000 (the "Record Date") are entitled to vote at the Meeting. On that date,
there were 3,611,025 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, FOR the amendment to the Corporations's 1986 Stock Option and
Incentive Plan for Key Officers and Employees, FOR the amendment to
Corporation's 1992 Stock Option Plan for Outside Directors and FOR the
ratification of the appointment of PricewaterhouseCoopers as the Corporation's
independent auditors for the fiscal year ending June 30, 2001. 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.
<PAGE>
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>
<CAPTION>
Shares
Name and Address Beneficially Percent
of Beneficial Owner Owned of Class
------------------- ------------ --------
<S> <C> <C>
Dimensional Fund Advisor Inc.......................... 302,500(1) 8.38%
1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401
First Manhattan Asset Company......................... 233,886(2) 6.48%
437 Madison Ave
New York, NY 10022
Whitney Holdings LLC.................................. 194,800(3) 5.39%
177 Broad Street
Stamford, CT 06901
The Estate of James R. Williams....................... 245,978(4) 6.81%
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 for the quarter ended March
31, 2000. Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 302,500
shares of NewMil Bancorp, Inc. common stock as of March 31, 2000, all of
which shares 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) First Manhattan Asset Company's beneficially owned shares are based on a
Securities and Exchange Commission 13F filing for the quarter ended June
30, 2000. First Manhattan Asset Company ("First Manhattan"), a registered
investment advisor, is deemed to have beneficial ownership of 266,108
shares of NewMil Bancorp, Inc. common stock as of June 30, 2000, all of
which shares are held in investment portfolios of First Manhattan clients.
(3) Whitney Holdings LLC beneficially owned shares are based on a Securities
and Exchange Commission 13F filing for the quarter ended June 30, 2000.
Whitney Holdings LLC, is deemed to have beneficial ownership of 194,800
shares of NewMil Bancorp, Inc. common stock as of June 30, 2000.
(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, 2000, 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
2
<PAGE>
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 year 2000 many matters ordinarily dealt with by subcommittees
of each Board of Directors were dealt with by the 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 year
2000. 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 Herbert E. Bullock, Joseph
Carlson II, Kevin L. Dumas, Laurie G. Gonthier and Mary C. Williams.
The Corporation's Nominating Committee met one (1) time during fiscal year
2000. 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, Suzanne L. Powers and Mary
C. Williams.
The Bank's Salary and Benefits Committee met two (2) times during fiscal
year 2000. The Bank's Salary and Benefits Committee makes recommendations to
the Bank's Board of Directors on compensation for officers and employees, and
on benefit plans for employees of the Bank. The Bank's Salary and Benefits
Committee administers the stock option plans for officers and directors of the
Bank, which includes recommendations for the granting of stock options. The
members of the Salary and Benefits Committee are Laurie G. Gonthier, Suzanne L.
Powers and Mary C. Williams.
The Corporation's Investment Committee met fourteen (14) times during fiscal
year 2000. The Corporation's and the Bank's Investment Committees approve
investment and interest rate risk policies and monitor the performance of the
Corporation's and the Bank's investment portfolios and interest rate risk
positions. The members of the Corporation's and the Bank's Investment
Committees are Joseph Carlson II, Kevin L. Dumas, Laurie G. Gonthier, Robert J.
McCarthy and Francis J. Wiatr.
Matters ordinarily dealt with by the Bank's Loan Committee were dealt with
during the fiscal year 2000 by the Bank's Board of Directors as a committee of
the whole, however, the Bank's Loan Committee met five (5) times during fiscal
year 2000. The Bank's Loan Committee approves the loan policies of the Bank,
approves certain loans and reviews all reports on the loan portfolio. The
members of the Bank's Loan Committee are Joseph Carlson II, Kevin L. Dumas,
Laurie G. Gonthier, Suzanne L. Powers and Francis J. Wiatr.
Matters ordinarily dealt with by the Bank's Trust Committee were dealt with
during fiscal year 2000 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 and Suzanne L. Powers.
3
<PAGE>
The Bank's Community Reinvestment Act Committee ("CRA") met four (4) times
during fiscal year 2000. 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, Betty F. Pacocha and
Francis J. Wiatr.
Directors Compensation
Each non-employee director received an annual stipend of $8,500 for the
fiscal year ended June 30, 2000. Directors also received $350 for each Board
meeting attended and $150 for each additional committee meeting attended.
Officers of the Corporation who are also directors receive no compensation as
directors.
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 at an exercise price equal to the shares'
fair market value at the time of grant. In addition, any newly elected non-
employee directors shall receive an initial option grant of 3,000 shares at an
exercise price equal to the shares' fair market value at the time of grant. The
1992 Plan did not have any options available to be granted at June 30, 2000;
therefore, the Board has proposed an Amendment to the 1992 Plan to add option
shares to the Plan. See "Proposal 3." 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, Herbert E. Bullock, Kevin L.
Dumas and Francis J. Wiatr expire. They have been nominated to be elected each
for a three-year term, expiring at the annual meeting in 2003. 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
4
<PAGE>
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.
On June 21, 2000, the Board of Directors elected Kevin L. Dumas, CPA to
replace Willis H. Barton, Jr, who will retire from the Board at the 2000 Annual
Meeting of Shareholders. Mr. Dumas is the owner of Dumas & Company, Certified
Public Accountants, a CPA firm located in New Milford, Connecticut. Mr. Dumas
has vast experience in management and strategic planning, which, coupled with
his active involvement in the New Milford community, will complement the Board.
Mr. Dumas had served as a Director of NMBT Corporation prior to its acquisition
by Summit Bank in March 2000.
The following tables set forth information as of the Record Date based upon
the Corporation's and the Bank's books and records and information provided by
the 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>
<CAPTION>
Positions Held With
the Corporation and Shares of
the Bank; Principal Has Served Term Will Common Stock Percent of
Occupation During the as a Expire At Beneficially Common Stock
Past Five Years and Director the Annual Owned as of Beneficially
Name Directorships Age Since Meeting in September 1, 2000 Owned
---- --------------------- --- ---------- ---------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Herbert E. Bullock...... Director; Employee, 65 1987(1) 2003 20,400(2) 0.56%
Echo Bay Marina, New
Milford, CT
Kevin L. Dumas.......... Director; Owner of 44 2000(3) 2003 -0- 0.00%
Dumas & Company,
Certified Public
Accounts; Former
Director of NMBT
Corporation
Francis J. Wiatr........ Director; Chairman, 50 1994(4) 2003 151,615(5) 4.04%
President, and CEO of
the Corporation and
Bank
</TABLE>
--------
(1) 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.
(2) Includes 400 shares held jointly by Mr. Bullock with his spouse and options
to purchase 20,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(3) Mr. Dumas was elected a Director of the Corporation and the Bank by the
Board of Directors on June 21, 2000 to fill the vacancy as a result of Mr.
Barton's pending retirement from the Board.
5
<PAGE>
(4) 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.
(5) Includes 6,615 shares held directly by Mr. Wiatr and options to purchase
145,000 shares of common stock exercisable within 60 days of the Record
Date.
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
Positions Held With
the Corporation and Shares of
the Bank; Principal Has Served Term Will Common Stock Percent of
Occupation During the as a Expire At Beneficially Common Stock
Past Five Years and Director the Annual Owned as of Beneficially
Name Directorships Age Since Meeting in September 1, 2000 Owned
---- --------------------- --- ---------- ---------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Carlson II....... Director; Financial 61 1997(1) 2002 17,000(2) 0.47%
Consultant/ Private
Investor; Former Vice
Chairman and CFO of
Centerbank and Center
Financial
Laurie G. Gonthier...... Director; Vice 50 1990 2001 27,500(3) 0.76%
President-
Investments for Paine
Webber, Middlebury,
CT
Robert J. McCarthy...... Director; Former 56 1999(4) 2001 24,000(5) 0.66%
Chairman, President
and Chief Operating
Officer of Norco
Inc., Georgetown, CT
Betty F. Pacocha........ Director; Secretary 66 1997(6) 2002 34,126(7) 0.94%
of the Corporation
and Executive Vice
President and
Secretary of the Bank
Suzanne L. Powers....... Director; Attorney; 62 1988 2001 30,000(8) 0.83%
Former Judge of
Probate
Mary C. Williams........ Director; Retired 61 1990 2002 80,000(9) 2.20%
executive; Former
Selectman of Town of
Kent; Former Vice
President of J & J
Log and Lumber Corp.
All Directors and
Executive Officers as a
Group (16 Persons)..... 514,202(10) 12.91%(11)
</TABLE>
--------
(1) Mr. Carlson was elected a Director of the Corporation and the Bank by the
Board of Directors on August 21, 1997 to fill a vacancy.
(2) Includes 10,000 shares held directly by Mr. Carlson and options to purchase
7,000 shares of Common Stock exercisable within 60 days of the Record Date.
(3) 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 20,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(4) Mr. McCarthy was elected to the Board on August 19, 1999, to fill the
vacancy created by the retirement of Dr. Haxo from the Board.
6
<PAGE>
(5) Includes 5,000 shares held jointly by Mr. McCarthy with his spouse, 5,000
shares held directly by Mr. McCarthy, 11,000 shares held by family members
where Mr. McCarthy has Power of Attorney for those shares and options to
purchase 3,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(6) 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.
(7) Includes 13,626 shares held directly by Ms. Pacocha and options to purchase
20,500 shares of Common Stock exercisable within 60 days of the Record
Date.
(8) 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 20,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(9) Includes 60,000 shares held directly by Ms. Williams and options to
purchase 20,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(10) Includes 373,000 shares issuable upon the exercise of options exercisable
by such persons within 60 days of the Record Date.
(11) For the purpose of calculating the percentage of Common Stock beneficially
owned by the directors and executive officers as a group, the total number
of shares outstanding includes the 393,000 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 UNANIMOUSLY 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 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, 2000, all Section 16(a) required
filings applicable to the Corporation's Insiders were made, except the
following: A Form 5, Annual Statement of Beneficial Ownership of Securities,
for Francis J. Wiatr, executive officer of the Corporation, was filed 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, 2000,
1999 and 1998 to the Corporation's CEO and the four 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, 2000 determined in
accordance with Item 402 of SEC Regulation S-K exceeded $100,000 (together, the
"Named Executives").
7
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Awards Compensation
-------------------------------------- ------------ (i)
(a) (e) (g) All Other
Name and (b) (c) (d) Other Annual Options/ Compensation
Principal Position Year Salary($) Bonus($) Compensation($) SARs(#) ($)(18)
------------------ ---- --------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Francis J. Wiatr........ 2000 $208,846 $125,000(1) $ -- -- $6,743
Chairman, President and 1999 170,000 100,000(2) -- 10,000(15) 6,312
CEO of the Corporation 1998 170,000 85,000(3) -- 10,000(17) 6,518
and the Bank
Betty F. Pacocha........ 2000 107,231 60,000(4) -- -- 3,886
Executive Vice 1999 98,462 50,000(5) -- 6,000(16) 3,559
President 1998 89,539 10,000(6) -- -- 3,403
& Secretary of the Bank
B. Ian McMahon.......... 2000 118,654 15,000(7) -- -- 4,156
Senior Vice President 1999 110,077 10,000(8) -- 3,000(16) 3,817
& CFO of the Bank 1998 103,846 10,000(9) -- 5,000(17) 3,669
Thomas W. Grant......... 2000 109,039 20,000(10) -- -- 3,946
Senior Vice President 1999 104,231 20,000(11) -- 3,000(16) 3,762
of the Bank 1998 99,423 -- -- -- 3,640
Terrence J. Shannon..... 2000 $ 95,039 $ 20,000(12) $ -- -- $7,049
Senior Vice President 1999 84,175 40,000(13) -- 5,000(16) 6,810
of the Bank 1998 79,285 25,000(14) -- 5,000(17) 5,497
</TABLE>
--------
(1) Mr. Wiatr will receive a performance bonus of $125,000 for the 2000 fiscal
year, the payment of which is deferred until October 31, 2004 and which is
conditioned upon the stock performance of the Corporation.
(2) Mr. Wiatr will receive a performance bonus of $100,000 for the 1999 fiscal
year, the payment of which is deferred until October 31, 2003 and which is
conditioned upon the stock performance of the Corporation.
(3) 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.
(4) Ms. Pacocha received a performance bonus totaling $60,000 for the 2000
fiscal year.
(5) Ms. Pacocha received a performance bonus totaling $50,000 for the 1999
fiscal year.
(6) Ms. Pacocha received a performance bonus totaling $10,000 for the 1998
fiscal year.
(7) Mr. McMahon received a performance bonus totaling $15,000 for the 2000
fiscal year.
(8) Mr. McMahon will receive a performance bonus totaling $10,000 for the 1999
fiscal year, the payment of which is deferred until October 31, 2003 and
which is conditioned upon the stock performance of the Corporation.
(9) 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.
(10) Mr. Grant received a performance bonus totaling $20,000 for the 2000 fiscal
year.
(11) Mr. Grant received a performance bonus totaling $20,000 for the 1999 fiscal
year.
(12) Mr. Shannon received a performance bonus totaling $20,000 for the 2000
fiscal year.
(13) Mr. Shannon received a performance bonus totaling $40,000 for the 1999
fiscal year.
(14) Mr. Shannon received a performance bonus totaling $25,000 for the 1998
fiscal year.
(15) Represents stock options granted on September 16, 1999 based on performance
for the 1999 fiscal year.
(16) Represents stock options granted on August 19, 1999 based on performance
for the 1999 fiscal year.
(17) Represents stock options granted on July 28, 1998 based on performance for
the 1998 fiscal year.
(18) 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 2000, 1999 and 1998 on behalf of each of the named executives: Mr.
Wiatr, $1,937, $1,569 and $1,775, respectively; Ms. Pacocha, $629, $605 and
$518, respectively; Mr. McMahon, $552, $515 and $495, respectively; Mr.
Grant, $635, $635 and $576,
8
<PAGE>
respectively; and Mr. Shannon, $4,162, $3,471 and $2,851, respectively; and
(ii) Contribution match paid by the Bank under the Bank's 401K Plan in
fiscal year 2000, 1999 and 1998 on behalf of Mr. Wiatr, $4,806, $4,743 and
$4,743 respectively; Ms. Pacocha, $3,257, $2,954 and $2,885 respectively;
Mr. McMahon, $3,604, $3,302 and $3,174 respectively; Mr. Grant, $3,311,
$3,127 and $3,064; and Mr. Shannon, $2,887, $3,339 and $2,646 respectively.
The following table provides detailed information concerning stock options
exercised by the Named Executives during the fiscal year ended June 30, 2000.
This table also provides information concerning the number and value of
specified exercisable ("vested") and unexercisable ("unvested") stock options
at June 30, 2000. Finally, this table reports the value of unexercised "in-
the-money" stock options at June 30, 2000, 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, 2000
($10.09375).
Aggregated Option/SAR Exercises in Fiscal Year Ended June 30, 1999
and June 30, 2000 Option/SAR Value Table
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Number of Value of Unexercised In-the-
Shares Unexercised Options/SARs Money Options/SARs at June
Acquired Value(1) at June 30, 2000 30, 2000
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- -------------- ----------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Francis J. Wiatr........ -- -- 145,000 / 0 $ 633,594 / $ --
Betty F. Pacocha........ 3,000 $8,156 27,500 / 0 $ 134,391 / $ --
B. Ian McMahon.......... -- -- 26,500 / 0 $ 91,984 / $ --
Thomas W. Grant......... -- -- 20,000 / 0 $ 61,406 / $ --
Terrence J. Shannon..... -- -- 26,000 / 0 $ 75,000 / $ --
</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, 2000.
Options/SAR Grants
The following table provides detailed information concerning stock options
granted to the Named Executives pursuant to the 1986 Plan during the fiscal
year ended June 30, 2000. In addition, in accordance with SEC rules, this
table shows potential realizable gains that would exist for these options for
the Named Executives. These potential gains are based on assumed annualized
rates of stock price appreciation of 5% and 10% from the date the options were
granted over the full 10 year option term.
Options/SAR Grants in Fiscal Year Ended June 30, 2000
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants Over Option Term
---------------------------------------------- ------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/SARs Exercise
Granted to or Base
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh) Date 5%($)(2) 10%($)(2)
---- ------------- ------------ -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Francis J. Wiatr........ 10,000(3) 18.3 10.8750 09/15/09 68,390 173,320
Betty F. Pacocha........ 6,000(4) 11.0 10.9375 08/19/09 41,271 104,589
B. Ian McMahon.......... 3,000(4) 5.5 10.9375 08/18/09 20,636 52,295
Thomas W. Grant......... 5,000(4) 9.2 10.9375 08/18/09 34,393 87,158
Terrence J. Shannon..... 5,000(4) 9.2 10.9375 08/18/09 34,393 87,158
</TABLE>
--------
9
<PAGE>
(1) Options granted pursuant to the 1986 Plan will terminate on the earlier of
ten years from the date of grant or three months following the employee's
ceasing to be employed by the Corporation or the Bank. Under the terms of
the 1986 Plan, the Salary and Benefits Committee retains limited discretion
to modify the terms of outstanding options, including the repricing of
options, under certain conditions.
(2) The resulting stock price for the grant expiring on August 19, 2009 would
be $17.816 at 5% and $28.369 at 10% compounded annually for 10 years. The
resulting stock price for the grant expiring on September 16, 2009 would be
$17.714 at 5% and $28.207 at 10% compounded annually for 10 years.
(3) Represents stock options granted on September 16, 1999 based on performance
for the 1999 fiscal year.
(4) Represents stock options granted on August 19, 1999 based on performance
for the 1999 fiscal year.
Employment Agreements
The Bank currently has an Employment Agreement with Mr. Wiatr. Mr. Wiatr's
agreement currently provides for an annual base compensation of $215,000. 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
Ms. Pacocha, Mr. McMahon, Mr. Grant, Mr. Shannon and one other executive
officer of the Bank. In addition, the Bank has also entered into six-month
change of control agreements with 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.
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").
10
<PAGE>
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 following table illustrates annual pension benefits for retirement in
fiscal 2000 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.
Pension Plan Table
<TABLE>
<CAPTION>
Average Years of Service(b)
Final -----------------------------------------------------------------------
Earnings(a) 15 Years 20 Years 25 Years 30 Years 35 Years
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 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, 2000, Ms. Pacocha's salary for pension benefit purposes was
$57,188, she had thirty-two years of service accrued. No amounts would be
payable to Messrs. Wiatr, McMahon, Grant, or Shannon 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
11
<PAGE>
capped at 50% of 6% of the employee's salary. The Bank amended the Plan, as of
January 1, 2000, to change the match to 100% of the first 3% of the employee's
salary and 50% of the next 2% of the employee's salary. After January 1, 2000,
if an employee elects to contribute greater than 5% of his or her salary, the
Bank's match is capped at 100% of the first 3% and 50% of the next 2% of the
employee's salary. The Bank's total matching contribution for the fiscal year
ended June 30, 2000, was $99,759. 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, 2000.
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 Plan
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 the fiscal year 2001, he would be entitled to an
annual retirement benefit of $21,119 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
ten 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
12
<PAGE>
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 $210,000 in
fiscal year 2000 and $170,000 in fiscal year 1999. This salary is required
under Mr. Wiatr's employment contract. The Board chose to recognize meritorious
performance by Messrs. Wiatr, McMahon, Grant, Shannon and Ms. Pacocha in the
fiscal year ended June 30, 2000 by awarding performance bonuses as reflected in
the Summary Compensation Table. Mr. Wiatr's bonus of $125,000 represented a
$25,000 increase over his bonus of $100,000 in the prior year, 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
<TABLE>
<S> <C>
Willis H. Barton, Jr. Robert J. McCarthy
Herbert E. Bullock Betty F. Pacocha (not as to herself)
Joseph Carlson II Suzanne L. Powers
Kevin L. Dumas Francis J. Wiatr (not as to himself)
Laurie G. Gonthier Mary C. Williams
</TABLE>
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Board of Directors has adopted a written charter for the Audit
Committee. The members of the Audit Committee are independent from management
and the Corporation. All Audit Committee members are considered to be
financially literate by the Board of Directors of the Corporation. At least one
member of the Audit Committee has accounting or related financial management
expertise.
The Audit Committee has reviewed and discussed the audited financial
statements, for June 30, 2000, with management. The Audit Committee has
discussed with PricewaterhouseCoopers LLP the matters required by Statement on
Auditing Standards No. 61. The Audit Committee has received from
PricewaterhouseCoopers LLP the disclosures required by Independence Standards
Board Standard No. 1. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the auditors' independence from the Corporation.
Based upon these discussions the Audit Committee has recommended to the Board
of Directors that the audited financial statements be included in the
Corporation's Form 10-K, for the year ended June 30, 2000.
Audit Committee of the Board of Directors of the Corporation and the Bank
Herbert E. Bullock
Joseph Carlson II
Kevin L. Dumas
Laurie G. Gonthier
Mary C. Williams
13
<PAGE>
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 SNL New England Thrift 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, 1995.
[GRAPH]
S&P 500 NewMil Bancorp, Inc SNL New England Thrift
1995 $100.00 $100.00 $100.00
1996 125.90 110.70 127.60
1997 169.60 193.40 208.10
1998 220.60 219.20 289.60
1999 270.70 194.70 246.30
2000 290.20 186.50 191.10
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the fiscal year ended June 30, 2000, 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.
14
<PAGE>
PROPOSAL 2
AMENDMENT OF THE 1986 STOCK OPTION AND INCENTIVE PLAN FOR KEY OFFICERS AND
EMPLOYEES
The Board of Directors has adopted an amendment to and restated the
Corporation's 1986 Stock Option and Incentive Plan (the "Plan") subject to
approval by shareholders, pursuant to which the aggregate number of shares of
stock subject to options which may be granted under the Plan will increase from
its present 525,000 shares to 615,000 shares (an increase of 90,000 shares).
Set forth below is a description of the Plan substantially in the form
presented in the Bank's 1986 proxy statement pursuant to which the shareholders
originally approved the Plan. The Plan was amended by the shareholders in
October 1994 to extend the term of the Plan until 2005, to increase the number
of option shares from 296,000 to 446,000 and to make other technical changes.
The Plan was amended by the shareholders in October 1997 to increase the number
of option shares from 446,000 to 525,000. The Plan is designed to allow the
Corporation and the Bank to attract and to retain key personnel through the use
of an executive stock incentive plan. The Plan provides for incentive stock
options and nonqualified stock options ("Stock Options"), stock appreciation
rights ("SAR"), and performance awards. The maximum number of shares reserved
for the Plan is presently 525,000 and, if the amendment is approved, will
increase to 615,000.
The Amendment is subject to approval by the shareholders. Options already
granted pursuant to the Plan are not affected by the proposed Amendment.
Although utilizing substantially the language of the Plan as amended in 1994,
the Amendment will be deemed to be a new plan for the purposes of Internal
Revenue Code of 1986, as amended, Section 422(b)(3) with respect to all options
not previously granted.
The Plan is administered by the Salary and Benefits Committee of the Bank's
Board of Directors. The Committee will select full-time key employees eligible
to participate, determine the terms of the awards, interpret the Plan and make
all other determinations for administering the Plan. No person who may be in a
position to receive a Plan option may be a member of the Salary and Benefits
Committee; therefore, Mr. Wiatr and Ms. Pacocha are not and may not be (as long
as they are full-time employees) members of that Committee.
The Plan provides that certain of the Stock Options are intended to qualify
as "Incentive Stock Options" within the meaning of Section 422A of the Code.
Incentive Stock Options may entitle the optionees to favorable federal income
tax treatment if certain required holding periods are met. Other Stock Options
will be granted as nonqualifying Stock Options. Incentive Stock Options will be
issued at an option price based upon the fair market value of the shares of
Common Stock on the date of grant. Nonqualifying Stock Options will be issued
at an option price determined by the Board, but may not be less than 85 percent
of the market value of the Corporation's stock at the time the option is
issued. Exercise of a Stock Option will be subject to terms and conditions set
by the Board and set forth in the instrument evidencing the Stock Option. Stock
Options may be exercised with either cash or shares of Common Stock. The date
of expiration of a Stock Option will be fixed by the Board, but may not be
longer than ten years from the date of grant.
For an option to qualify as an incentive option, the optionee generally must
be an employee of the Corporation or a subsidiary from the date the option is
granted through a date within three months before the date of exercise.
As to incentive options, the Corporation will not be entitled to any
deduction for tax purposes upon grant or exercise of an incentive option if the
optionee holds the shares for at least two years after the date of grant or one
year from the date of option exercise, whichever is later. If all of the
requirements for incentive stock options are met, except for the special
holding period rules set forth in the preceding sentence, the Corporation will
be allowed a deduction when the optionee disposes of the stock, generally in an
amount equal to the excess of the fair market vale of the stock at the time the
option was exercised over the option exercise pri (but not in excess of the
gain realized on the sale). When the optionee exercises a nonqualifying option,
the Corporation will be entitled to a tax deduction in an amount equal to the
difference between the exercise price
15
<PAGE>
and the fair market value of the stock on the date of exercise (or, if the
optionee is subject to certain restrictions imposed by the securities laws,
upon lapse of those restrictions, unless the optionee makes a special tax
election within 30 days after exercise to have income determined without regard
to restrictions). An optionee of nonqualified options will not recognize income
for federal income tax purposes on the grant of options, but will recognize
ordinary income on the date of exercise equal to the difference between the
exercise price and the fair market value of the stock acquired through exercise
of the option.
SARs may be granted in conjunction with all or any part of any Stock Option.
SARs entitle the holder of a Stock Option with respect to which SARs are
granted to surrender the Stock Option, or any applicable unexercised portion
thereof, and to receive the difference (the "SAR Difference") between (i) fair
market value of the shares of Common Stock subject to the surrendered option at
the time the SARs are exercised and (ii) the option price of such shares. The
Bank, at the sole discretion of the Board, will pay such difference either by
delivery of shares of Common Stock or cash or some combination of Common Stock
and cash. SARs may be exercised at such time or times and to the extent, but
only to the extent, that the related Stock Options may be exercised, and only
after the holder has held the SAR and related Stock option for a period of at
least six months. The SAR holder will recognize income for federal income tax
purposes, and the Corporation will be entitled to a deduction for federal
income tax purposes, upon receipt of and in the amount of the SAR Difference.
Performance awards may be granted by the Board from time to time as an
additional incentive to management accountability and as a means of performance
measurement. Awards may be measured against individual achievements, those of
the Corporation or both. Upon making an award, the Board will determine the
stated value of such award (the "Stated Value"). The Stated Value will be a
function of the fair market value of a share of Common Stock. The earnings of
an award (the "Performance Shares") by the key employee will be calculated by
reference to a performance target for such shares for a prescribed period of
time. The performance target will be based on a specific dollar amount of
growth or on a percentage rate of improvement in such elements as the
Corporation's earnings per share, net income before securities transactions,
return on equity or other such measures related to growth or improvement of the
Corporation as the Board shall determine. To the extent that a performance
target is either not achieved or is exceeded, the Board shall determine the
value deemed to have been earned. Performance Share payments will be made in
cash or Common Stock or some combination of cash and Common Stock, at the
discretion of the Board. The recipient will recognize income for federal income
tax purposes, and the Corporation will be entitled to a deduction for federal
income tax purposes, in the amount of and at the time of earning Performance
Shares.
Stock Options and SARs will expire based upon a schedule following
termination of employment due to retirement, disability or death. All
Performance Shares covered by a performance award agreement at the time of
termination of employment due to retirement, disability or death will be
subject to payment at the end of their term, in the determination of the Board.
Upon their termination of employment for any reason other than retirement,
disability or death, all Stock Options and SARs will terminate on the earlier
of their expiration date or thirty days following termination. In no event may
a Stock Option or SAR be exercised after the expiration of its term.
At the present time, the Salary and Benefits Committee has not identified
any potential recipients of Stock Options, SARs or Performance Shares which may
be granted in the future under the proposed amendment to the Plan. Currently,
21,464 option shares are available for grant under the Plan; there are no SARs
or Performance Shares outstanding. Future awards may be granted to any full-
time employee of the Bank or Corporation, of which there were approximately 118
as of June 30, 2000. The 90,000 additional option shares would have a market
value of $956,250 in the aggregate based upon a fair market value of $10.625
per share on September 1, 2000.
THE ADOPTION OF THE AMENDMENT TO THE 1986 STOCK OPTION AND INCENTIVE PLAN
MUST BE RATIFIED BY THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE SHARES
PRESENT IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
16
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE ADOPTION OF THE AMENDMENT TO THE 1986 STOCK OPTION AND INCENTIVE PLAN.
PROPOSAL 3
AMENDMENT OF THE 1992 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The Board of Directors has adopted an amendment to and restated the
Corporation's 1992 Stock Option Plan For Outside Directors (the "Directors
Plan") subject to approval by shareholders, pursuant to which the aggregate
number of shares of stock subject to options which may be granted under the
Directors Plan will increase from its present 130,000 shares to 190,000 shares
(an increase of 60,000 shares). Set forth below is a description of the
Directors Plan, as amended by shareholders in 1995 and as proposed to be
amended here. The Directors Plan is designed to allow the Corporation and the
Bank to attract and to retain the continued services of non-employee directors
of the Corporation with the requisite qualifications and to encourage such
directors to secure or increase on reasonable terms their stock ownership in
the Corporation. The maximum number of shares reserved for the Plan is
presently 130,000 (all of which have been issued) and, if the amendment is
approved, will increase to 190,000.
The Amendment is subject to approval by the shareholders. Options already
granted pursuant to the Directors Plan are not affected by the proposed
Amendment. Although utilizing substantially the language of the Directors Plan
as amended in 1995, the Amendment will be deemed to be a new plan for the
purposes of Internal Revenue Code of 1986, as amended, Section 422(b)(3) with
respect to all options not previously granted.
The Directors Plan, as amended, provides for automatic option grants of
2,000 shares to each non-employee director of the Corporation as of June 30 of
each year (the grant for June 30, 2000 will be on October 25, 2000, assuming
adoption of this proposal); newly elected non-employee directors receive option
grants of 3,000 shares. All options are granted at an exercise price equal to
the fair market value of the shares on the date of grant and are for a term of
10 years following the grant. No option may be exercised until six months after
it is granted, and may not be assigned or transferred except by will and/or by
the laws of descent and distribution and may be exercised during the life of
any participant only by the participant. Federal income tax consequences of
option grants and exercises to non-employee directors are as set forth for
"nonqualifying options" in "Proposal 2" above.
The Directors Plan is administered by the Salary and Benefits Committee of
the Bank's Board of Directors (the "Committee"). The Committee has the
authority to interpret the Directors Plan, to prescribe, amend and rescind
rules and regulations relating to it and to make all other determinations with
respect to the administration of the Directors Plan. The Committee, however,
has no discretion to determine the non-employee directors who will receive
options, the number of shares subject to options, or the term upon which, the
times at which or the periods within which shares may be acquired or the
options may be acquired and exercised, all of such terms being prescribed in
the Plan itself.
If the amendment to the Directors Plan is approved, the maximum number of
190,000 shares of Common Stock may be issued to individuals upon exercise of
Options under the Directors Plan, except that such amount may be adjusted for
stock dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchange of shares, separations, reorganizations or
liquidations. Options may be granted only to members of the Board of Directors
of the Corporation who are not otherwise employees of the Corporation or any of
its subsidiaries on the date of the grant.
If the amendment to the Directors Plan is approved, each non-employee
director of the Bank will continue to receive an annual grant of an Option to
purchase 2,000 shares of Common Stock, (the market value of which, at September
1, 2000, would be $21,250). Mr. Dumas, if elected as anticipated would receive
an initial grant to purchase 3,000 shares.
17
<PAGE>
The 60,000 additional option shares would have a market value of $637,500 in
the aggregate based upon a fair market value of $10.625 per share on September
1, 2000.
THE ADOPTION OF THE AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS MUST BE RATIFIED BY THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF
THE SHARES PRESENT IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE ADOPTION OF THE AMENDMENT TO THE 1992 STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS.
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2001
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, 2001 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 UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" RATIFICATION.
SHAREHOLDER PROPOSALS
Proposals of the Corporation's shareholders intended to be presented at the
2001 annual meeting of the Corporation must be received by the Corporation not
later than May 18, 2001, 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 15, 2000
18
<PAGE>
SECOND AMENDED AND RESTATED
1986 STOCK OPTION AND INCENTIVE PLAN
FOR OFFICERS AND KEY EMPLOYEES
OF
NEWMIL BANCORP, INC.
1. Purpose. This 1986 Stock Option and Incentive Plan (the "Plan") of NewMil
-------
Bancorp, Inc. (the "Corporation") is intended to advance the interests of
the Corporation and the New Milford Savings Bank (the "Bank") by providing
certain of their employees with an additional incentive, encouraging stock
ownership by such employees, increasing their proprietary interest in the
success of the Corporation and the Bank and encouraging them to remain
employees of the Corporation and the Bank. This Plan was originally
adopted in 1986 and was amended in 1994 to extend the Plan until 2005 and
to increase the number of option shares from 296,000 to 446,000; again in
1997 to increase the number of option shares from 446,000 to 525,000; and
again in 2000 to increase the number of option shares from 525,000 to
615,000. At the time of adopting the 2000 amendment, 21,464 option shares
remained available under the Plan which, with the 90,000 additional option
shares authorized in 2000, amounted to 111,464.
2. Definitions. Whenever used herein, the following terms shall have the
-----------
meanings set forth below:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Code" means the Internal revenue Code of 1986, as it may be amended
from time to time.
(c) "Committee" means the Salary and Benefits Committee appointed by the
Board to administer this Plan pursuant to Section 3 hereof.
(d) "Disability" means a permanent and total disability as defined in
Section 422(c)(6) of the Code.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(f) "Fair Market Value" means the average of closing bid and ask prices
for the Shares on the date as of which the determination is made (or
if no such quotation occurred on that date, on the next preceding date
on which there was such a quotation), as made available for
publication by the National Association of Securities Dealers
Automated Quotation System, or if no such prices are available, the
fair market value as determined by rules to be adopted by the
Committee.
(g) "Grantee" means an employee of the Corporation or one of its
subsidiaries to whom an option is granted.
(h) "New Milford Group" means the Corporation or the Bank, or a
corporation, or a parent corporation or subsidiary corporation of
them, issuing or assuming an Option in a transaction of the type
described in Section 424(a) of the Code. The terms "parent
corporation" and "subsidiary corporation" shall have the meanings
assigned to such terms by Section 424 of the Code.
(i) "Incentive Stock Option" means an Option granted pursuant to the
Incentive Stock Option provisions as set forth in Part II of this
Plan.
(j) "Nonqualified Stock Option" means an Option granted pursuant to the
Nonqualified Stock Option provisions as set forth in Part III of this
Plan.
(k) "Option" means an option to purchase Shares pursuant to this Plan.
<PAGE>
(l) "Participant" means an individual to whom an Option is granted, or a
Performance Award is made under this Plan.
(m) "Performance Award" means an award made to a Participant pursuant to
Part IV of this Plan.
(n) "Shares" means shares of the Corporation's common stock.
(o) "Stock Appreciation Right" means a stock appreciation right granted to
a Participant pursuant to Section 3 of Part II or Part III of this
Plan.
3. Administration. This Plan shall be administered by a Salary and Benefits
--------------
Committee appointed by the Board. The Committee shall consist of three
members of the Board who are not eligible to participate in the Plan. The
Board, at its pleasure, may remove members from or add members to the
Committee. A majority of Committee members shall constitute a quorum of
members, and the actions of the majority shall be final and binding on the
whole Committee.
In addition to the other powers granted to the Committee under this Plan,
the Committee shall have the power, subject to the terms of this Plan: (i)
to determine which of the eligible employees shall be granted Options,
Stock Appreciation Rights and Performance Awards; (ii) to determine the
time or times when Options, Stock Appreciation Rights and Performance
Awards shall be granted and to determine the number of Shares subject to
each Option, Stock Appreciation Right and Performance Award; (iii) to grant
Options with or without related Stock Appreciation Rights; (iv) to
determine whether Stock Appreciation Rights and Performance Awards shall be
settled in cash, in Shares, or in a combination of cash and Shares; (v) to
accelerate or extend (except for Incentive Stock Options) the date on which
a previously granted Option or Stock Appreciation Right may be exercised
(including extensions after the employee has left the employ of the
Corporation or Bank); (vi) to prescribe the form of agreement evidencing
Options, Stock Appreciation Rights and Performance Awards granted pursuant
to this Plan; (vii) to establish corporate performance goals for purposes
of the granting of Performance Awards; and (viii) to construe and interpret
this Plan and the agreements evidencing Options, Stock Appreciation Rights
and Performance Shares granted pursuant to this Plan, and to make all other
determinations and take all other actions necessary or advisable for the
administration of this Plan.
Notwithstanding the above, the Board shall not appoint any member of the
Board to the Committee if, during the one-year period immediately prior to
such proposed appointment, the member received a grant or award pursuant to
the Plan or any other plan of the Corporation other than the 1992 Stock
Option Plan for Outside Directors.
4. Eligibility. The individuals who shall be eligible to receive Options,
-----------
Stock Appreciation Rights and Performance Awards shall be such full-time
employees employed by a member of the "New Milford Group" as shall be
selected by the Committee. Without otherwise limiting the foregoing, no
individual is eligible to receive any grant under this Plan if, at the
time, he is also eligible to receive options under any stock option plan
for any member of the New Milford Group maintained for outside directors of
such member, such as the Corporation's 1992 Stock Option Plan for Outside
Directors. Participants chosen to participate under this Plan may be
granted an Incentive Stock Option (with or without a related Stock
Appreciation Right), a Nonqualified Stock Option (with or without a related
Stock Appreciation right), Performance Awards or any combination thereof;
provided, however, that no person shall be eligible to receive or exercise
any rights under this Plan for a period of one (1) year following the
effective date of this Plan if such person owns, directly or indirectly,
five percent (5%) or more of the Bank's total outstanding Shares or would
own such amount as a result of the exercise of Options or Performance
Awards granted hereunder.
5. Shares Subject to this Program. The Shares subject to Options, Stock
------------------------------
Appreciation Rights and Performance Awards shall be either authorized and
unissued Shares or treasury Shares. The aggregate number of Shares
-2-
<PAGE>
which may be issued pursuant to the exercise of Options and Stock
Appreciation Rights and granted pursuant to a Performance Award under this
Program shall be 615,000. Except as provided below, if an Option shall
expire and terminate for any reason, in whole or in part, without being
exercised, or if any Shares subject to a Performance Award shall be
forfeited for any reason, the number of Shares as to which such expired or
terminated Option shall not have been exercised or so forfeited may again
become available for the grant of Options, Stock Appreciation Rights or
Performance Awards. If a Stock Appreciation Right is exercised in whole or
in part, and, as a result the related Nonqualified Stock Option or
Incentive Stock Option is cancelled to the extent of the number of Shares
with respect to which the Stock Appreciation Right was exercised, such
number of Shares shall not again be available for the grant of Options,
Stock Appreciation Rights or Performance Awards.
6. No Tandem Options. There shall be no terms and conditions under an Option
-----------------
which provide that the exercise of an Incentive Stock Option reduces the
number of Shares for which a Nonqualified Stock Option may be exercised;
and there shall be no terms and conditions under an Option which provide
that the exercise of a Nonqualified Stock Option reduces the number of
Shares for which an Incentive Stock Option may be exercised.
II. INCENTIVE STOCK OPTION PROVISIONS
1. Grant of Incentive Stock Options. Subject to the provisions of this Part
--------------------------------
II, the Committee shall from time to time determine those individuals
eligible pursuant to Section 4 of Part I to whom Incentive Stock Options
shall be granted and the number of Shares subject to, and terms and
conditions of, such Options. The aggregate Fair Market Value, as
determined as of the date any Incentive Stock Option is granted of the
Shares for which an individual has been or may be granted Incentive Stock
Options (under all plans of the New Milford Group) which are exerciseable
for the first time in any calendar year shall not exceed $100,000, or such
excess Options shall be treated as Options which are not Incentive Stock
Options. Anything herein to the contrary notwithstanding, no Incentive
Stock Option shall be granted to an employee if, at the time the Incentive
Stock Option is granted, such employee owns stock possessing more than 10%
of the total combined voting power of all classes of stock of any member of
the New Milford Group unless the option price is at least 110% of the Fair
Market Value of the Shares subject to the Incentive Stock Option at the
time the Incentive Stock Option is granted and the Incentive Stock Option
is not exercisable after the expiration of five (5) years from the date the
Incentive Stock Option is granted.
2. Terms and Conditions of Incentive Stock Options. Each Incentive Stock
-----------------------------------------------
Option may be evidenced by an option agreement which shall be in such form
as the Committee shall from time to time approve, and which shall comply
with and be subject to the following terms and conditions:
(a) Number of Shares. Each Incentive Stock Option agreement shall state
----------------
the number of shares covered by the agreement.
(b) Option Price and Method of Payment. The option price of each
----------------------------------
Incentive Stock Option shall be the Fair Market Value of the Shares on
the date the Incentive Stock Option is granted. The option price
shall be payable on exercise of the Option (i) in cash or by certified
check, bank draft or postal or express money order, (ii) by the
surrender of Shares then owned by the Participant, or (iii) partially
in accordance with clause (i) and partially in accordance with clause
(ii) of this Section 2(b). Shares so surrendered in accordance with
clause (ii) or (iii) shall be valued at the Fair Market Value thereof
on the date of exercise, surrender of such Shares to be evidenced by
delivery of the certificate(s) representing such Shares in such
manner, and endorsed in such form, or accompanied by stock powers
endorsed in such form, as the Committee may determine.
(c) Option Period.
-------------
-3-
<PAGE>
(i) General. The period during which an Incentive Stock Option
-------
shall be exercisable shall not exceed ten (10) years from the date
such Incentive Stock Option is granted; provided, however, that such
Option may be sooner terminated in accordance with the provisions of
this Section 2(c). Subject to the foregoing, the Committee may
establish a period or periods with respect to all or any part of the
Incentive Stock Option during which such Option may not be exercised
and at the time of a subsequent grant of an Incentive Stock Option or
at such longer time as the Committee may determine accelerate the
right of the Participant to exercise all or any part of the Incentive
Stock Option not then exercisable. The number of Shares which may be
purchased at any one time shall be 50 Shares, a multiple thereof or
the total number at the time purchasable under the Incentive Stock
Option.
(ii) Termination of Employment. If the Participant ceases to be an
-------------------------
employee of any member of New Milford Group for any reason other than
Disability or death, any then outstanding Incentive Stock Option held
by the Participant shall terminate on the earlier of the date on which
such Option would otherwise expire or three (3) months after such
termination of employment, and such Option shall be exercisable, prior
to its termination, to the extent it was exercisable as of the date of
termination of employment. The Committee may, in its discretion,
extend the period for exercise beyond three (3) months after
termination, in which case the Incentive Stock Option shall be deemed
to be a Nonqualified Stock Option.
(iii) Disability. If a Participant's employment is terminated by
----------
reason of Disability, any then outstanding Incentive Stock Option held
by the Participant shall terminate on the earlier of the date on which
such Option would otherwise expire or one (1) year after such
termination of employment, and such Option shall be exercisable, prior
to its termination, to the extent it was exercisable as of the date of
termination of employment. The Committee may, in its discretion,
extend the time period for exercise beyond the one (1) year, in which
case the Incentive Stock Option shall be deemed to be a Nonqualified
Stock Option.
(iv) Death. If a Participant's employment is terminated by death,
-----
the representative of the Participant's estate or beneficiaries
thereof to whom the Option has been transferred shall have the right
during the one (1) year period following the date of the Participant's
death to exercise any then outstanding Incentive Stock Options in
whole or in part. The number of Shares in respect of which an
Incentive Stock Option may be exercised after a Participant's death
shall be the number of Shares in respect of which such Option could be
exercised as of the date of the Participant's death. In no event may
the period for exercising an Incentive Stock Option extend beyond the
date on which such Option would otherwise expire. The Committee may,
in its discretion, extend the time period for exercise beyond the one
(1) year, in which case the Incentive Stock Option shall be deemed to
be a Nonqualified Stock Option.
(d) Non-transferability. An Incentive Stock Option shall not be
-------------------
transferable or assignable by the Participant other than by will or
the laws of descent and distribution; and shall be exercisable during
the Participant's lifetime only by the Participant.
(e) Separate Agreements. Nonqualified Options and/or Performance Awards
-------------------
may not be memorialized in the same agreement as an Incentive Stock
Option.
3. Stock Appreciation Rights.
-------------------------
(a) Grant. Stock Appreciation Rights related to all or any portion of an
-----
Incentive Stock Option may be granted by the Committee to any
Participant in connection with the grant of an Incentive Stock Option
to such Participant. Each Stock Appreciation Right shall be subject
to such terms and conditions
-4-
<PAGE>
(which may include limitations as to the time and when such Stock
Appreciation Right becomes exercisable and when it ceases to be
exercisable that are more restrictive than the limitations on the
exercise of the Incentive Stock Option to which it relates) not
inconsistent with the provisions of this Part II as shall be
determined by the Committee and included in the agreement relating to
such Incentive Stock Option and Stock Appreciation Right, subject in
any event, however, to the following terms and conditions of this
Section 3.
(b) Exercise. No Stock Appreciation Right shall be exercisable after the
--------
date the related Incentive Stock Option shall cease to be exercisable,
and no Stock Appreciation Right shall be exercisable with respect to
such related Incentive Stock Option or portion thereof unless such
Incentive Stock Option or portion thereof shall itself be exercisable
at that time. A Stock Appreciation Right shall be exercised only upon
surrender of the related Incentive Stock Option or portion thereof in
respect of which the Stock Appreciation Right is then being exercised.
A Stock Appreciation Right related to an Incentive Stock Option shall
be exercisable only at a date when the then Fair Market Value of a
Share exceeds the option price per share specified in the related
Incentive Stock Option.
(c) Amount of Payment. On exercise of a Stock Appreciation Right, a
-----------------
Participant shall be entitled to receive an amount equal to the
product of (i) the amount by which the Fair Market Value of a Share on
the date of exercise of the Stock Appreciation Right exceeds the
option price per share specified in the related Incentive Stock Option
and (ii) the number of shares in respect of which the Stock
Appreciation Right shall have been exercised.
(d) Form of Payment. The Committee shall have the sole discretion either
---------------
(i) to determine the form in which payment in settlement of a Stock
Appreciation Right will be made (i.e., cash, Shares or any combination
thereof), or (ii) to consent to or disapprove the election by the
Participant to receive cash in full or partial settlement of a Stock
Appreciation Right, such consent or disapproval to be given at any
time after the election to which it relates. If settlement of a Stock
Appreciation Right, or portion thereof, is to be made in the form of
Shares, the number of Shares to be distributed shall be the largest
whole number obtained by dividing the cash sum otherwise distributable
in respect of such settlement by the Fair Market Value of a Share on
the date of exercise of the Stock Appreciation Right. The value of
any fractional Share shall be paid in cash.
(e) Effect of Exercise of Right or Related Option. If the related
---------------------------------------------
Incentive Stock Option is exercised in whole or in part, then the
Stock Appreciation Right with respect to the Shares purchased pursuant
to such exercise (but not with respect to any unpurchased Shares)
shall be terminated as of the date of exercise.
(f) Non-transferability. A Stock Appreciation Right shall not be
-------------------
transferable or assignable by the Participant other than by will or by
the laws of descent and distribution, shall not be transferred other
than together with the Incentive Stock Option to which it relates, and
shall be exercisable during the Participant's lifetime only by the
Participant.
(g) Termination of Employment. If the Participant ceases to be an
-------------------------
employee of any member of the New Milford Group for any reason, each
outstanding Stock Appreciation Right shall only be exercisable for
such period and to such extent as the related Incentive Stock Option
or portion thereof.
III. NONQUALIFIED STOCK OPTION PROVISIONS
1. Grant of Nonqualified Stock Options. Subject to the provisions of this
-----------------------------------
Part III, the Committee shall from time to time determine those individuals
eligible pursuant to Section 4 of Part I to whom Nonqualified Stock Options
shall be granted and the number of shares subject to, and terms and
conditions of, such Options.
-5-
<PAGE>
2. Terms and Conditions of Nonqualified Stock Options. Each Nonqualified
--------------------------------------------------
Stock Option may be evidenced by an option agreement which shall be in such
form as the Board shall from time to time approve, and which shall comply
with and be subject to the following terms and conditions:
(a) Number of Shares. Each Nonqualified Stock Option agreement shall
----------------
state the number of Shares covered by the agreement.
(b) Option Price and Method of Payment. The option price of each
----------------------------------
Nonqualified Stock Option shall be such price as the Committee, in its
discretion, shall establish, and the Committee may, in its discretion,
reduce the option price of such Option at any time prior to the
exercise of the Option; provided, however, that the option price may
not be less than 85% of the Fair Market Value, if any, of the Shares.
The option price shall be payable on exercise of the Option (i) in
cash or by certified check, bank draft or postal or express money
order, (ii) by the surrender of Shares then owned by the Participant,
or (iii) partially in accordance with clause (i) and partially in
accordance with clause (ii) of this Section 2(b). Shares so
surrendered in accordance with clause (ii) or (iii) shall be valued at
the Fair Market Value thereof on the date of exercise, surrender of
such Shares to be evidenced by delivery of the certificate(s)
representing such Shares in such manner, and endorsed in such form, or
accompanied by stock powers endorsed in such form, as the Committee
may determine.
(c) Option Period.
-------------
(i) General. The period during which a Nonqualified Stock Option
-------
shall be exercisable shall not exceed ten (10) years from the
date such Nonqualified Stock Option is granted; provided,
however, that such Option may be sooner terminated in accordance
with the provisions of this Section 2(c). Subject to the
foregoing, the Committee may establish a period or periods with
respect to all or any part of the Nonqualified Stock Option
during which such Option may not be exercised and at the time of
a subsequent grant of a Nonqualified Stock Option or at such
other time as the Committee may determine accelerate the right
of the Participant to exercise all or any part of the
Nonqualified Stock Option not then exercisable. The number of
Shares which may be purchased at any one time shall be 50
Shares, a multiple thereof or the total number at any time
purchasable under the Nonqualified Stock Option.
(ii) Termination of Employment. If the Participant ceases to be an
-------------------------
employee of any member of the New Milford Group for any reason
other than Disability or death, any outstanding Nonqualified
Stock Option held by the Participant shall terminate on the
earlier of (i) the date on which such Option would otherwise
expire, or (ii) three (3) months after such a termination of
employment or such longer period as the Committee may determine
in its sole discretion with respect to any individual grant at
the time of grant or termination; and such Option shall be
exercisable to the extent it was exercisable as of the date of
termination of employment.
(iii) Disability. If a Participant's employment is terminated by
----------
Disability, the terms of any then outstanding Nonqualified Stock
Option held by the Participant shall terminate on the earlier of
(i) the date on which such Option would otherwise expire, or
(ii) one (1) year after such termination of employment or such
longer period as the Committee may determine in its sole
discretion with respect to any individual grant at the time of
grant or Disability; and such Option shall be exercisable to the
extent it was exercisable as of the date of termination of
employment.
(iv) Death. If a Participant's employment is terminated by death,
-----
the representative of the Participant's estate or beneficiaries
thereof to whom the Option has been transferred shall
-6-
<PAGE>
have the right during the one (1) year period following the date
of the Participant's death to exercise any then outstanding
Nonqualified Stock Options in whole or in part or such longer
period as the Committee may determine in its sole discretion
with respect to any individual grant at the time of grant or
subsequent to death. The number of Shares in respect to which a
Nonqualified Stock Option may be exercised after a Participant's
death shall be the number of shares in respect of which such
Option could be exercised as of the date of the Participant's
death. In no event may the period for exercising a Nonqualified
Stock Option extend beyond the date on which such Option would
otherwise expire.
(d) Non-transferability. A Nonqualified Stock Option shall not be
-------------------
transferable or assignable by the Participant other than by will or
the laws of descent and distribution, and shall be exercisable during
the Participant's lifetime only by the Participant.
3. Stock Appreciation Rights.
-------------------------
(a) Grant. Stock Appreciation Rights related to all or any portion of a
-----
Nonqualified Stock Option may be granted by the Committee to any
Participant in connection with the grant of a Nonqualified Stock
Option or unexercised portion thereof held by the Participant at any
time and from time to time during the term thereof. Each Stock
Appreciation Right shall be subject to such terms and conditions
(which may include limitations as to the time when such Stock
Appreciation Right becomes exercisable and when it ceases to be
exercisable that are more restrictive then the limitations on the
exercise of the Nonqualified Stock Option to which it relates) not
inconsistent with the provisions of this Part III as shall be
determined by the Committee and included in the agreement relating to
such Nonqualified Stock Option and Stock Appreciation Right, subject
in any event, however, to the following terms and conditions of this
Section 3.
(b) Exercise. No Stock Appreciation Right shall be exercisable with
--------
respect to such related Nonqualified Stock Option or portion thereof
unless such Nonqualified Stock Option or portion shall itself be
exercisable at that time. A Stock Appreciation Right shall be
exercised only upon surrender of the related Nonqualified Stock Option
or portion thereof in respect of which the Stock Appreciation Right is
then being exercised.
(c) Amount of Payment. On exercise of a Stock Appreciation Right, a
-----------------
Participant shall be entitled to receive an amount equal to the
product of (i) the amount by which the Fair Market Value of a Share on
the date of exercise of the Stock Appreciation Right exceeds the
option price per share specified in the related Nonqualified Stock
Option and (ii) the number of shares in respect to which the Stock
Appreciation Right shall have been exercised.
(d) Form of Payment. The Committee shall have the sole discretion either
---------------
(i) to determine the form in which payment in settlement of a Stock
Appreciation Right will be made (i.e., cash, Shares or any combination
thereof), or (ii) to consent to or disapprove the election by the
Participant to receive cash in full or partial settlement of the Stock
Appreciation Right, such consent or disapproval to be given at any
time after the election to which it relates. If settlement of a Stock
Appreciation Right, or portion thereof, is to be made in the form of
Shares, the number of Shares to be distributed and shall be the
largest whole number obtained by dividing the cash sum otherwise
distributable in respect of such settlement by the Fair Market Value
of a Share on the date of exercise of the Stock Appreciation Right.
The value of any fractional Share shall be paid in cash.
(e) Effect of Exercise of Right or Related Option. If the related
---------------------------------------------
Nonqualified Stock Option is exercised in whole or in part, then the
Stock Appreciation Right with respect to the Shares purchased pursuant
to such exercise (but not with respect to any unpurchased Shares)
shall be terminated as of the date of exercise.
-7-
<PAGE>
(f) Non-transferability. A Stock Appreciation Right shall not be
-------------------
transferable or assignable by the Participant other than by will or
the laws of descent and distribution, shall not be transferred other
than together with the Nonqualified Stock Option to which it relates,
and shall be exercisable during the Participant's lifetime only by the
Participant.
(g) Termination of Employment. If the Participant ceases to be an
-------------------------
employee of any member of the New Milford Group for any reason, each
outstanding Stock Appreciation Right shall be exercisable for such
period and to such extent as the related Nonqualified Stock Option or
portion thereof.
IV. PERFORMANCE AWARD PROVISIONS
1. Grant of Performance Awards. Subject to the provisions of this Part IV,
---------------------------
the Committee shall from time to time determine those individuals eligible
pursuant to Section 4 of Part I to whom Performance Awards shall be granted
and the amount and terms and conditions of such Performance Awards.
2. Terms and Conditions of Performance Awards. Each grant of Performance
------------------------------------------
Awards shall be evidenced by an agreement which shall be in such form as
the Committee shall from time to time approve, and which shall comply with
and be subject to the following terms and conditions:
(a) Amount of Award. Each Performance Award agreement shall state the
---------------
number of Shares covered by the agreement which become payable if the
performance criteria specified in the agreement are achieved.
(b) Performance Criteria. Each time the Committee approves the granting
--------------------
of Performance Awards, it shall establish corporate performance goals
to be attained by the Bank or individual Participants or both and the
date or dates (i.e., earn-out dates) by which such goals must be
achieved for the Participant to be entitled to payment of an award.
These goals shall be subject to subsequent modification by the
Committee, as appropriate based on changes in business conditions. To
the extent that a performance goal is either not achieved or is
exceeded by the applicable earn-out date or dates specified in the
agreement, the amount of the award to be earned shall be determined by
the Committee.
(c) Disability of Death. No Performance Award shall be paid for any
-------------------
period after the termination of the Participant's employment;
provided, however, that if a Participant's employment is terminated by
Disability or death, then the Committee shall determine the extent to
which any Shares covered by a Performance Award agreement but not yet
payable shall become payable.
(d) Form of Payment. The Committee shall have the sole discretion to
---------------
determine the form in which payment of the Performance Award shall be
made (i.e., in cash, in Shares, or in any combination thereof).
Instead of distributing the number of Shares covered by the
Performance Award agreement as of the applicable earn-out date, the
Committee may distribute the cash equivalent (determined on the basis
of Fair Market Value of a Share at such earn-out date) for all or a
portion of such Shares.
V. MISCELLANEOUS
1. Effective Date. This Plan, as amended, shall become effective on August
--------------
16, 2000; provided, however, that if the Plan is not approved by the
holders of a majority of the outstanding Shares of the Bank prior to
December 31, 2000, this amended Plan and all Options, Stock Appreciation
Rights and Performance Awards granted hereunder shall be null and void and
shall be of no effect.
-8-
<PAGE>
2. Duration of Program. Unless sooner terminated, the Plan shall terminate on
-------------------
October 31, 2005. No Incentive Stock Option, Nonqualified Stock Options or
Performance Awards may be granted after the termination of this Plan;
provided, however, that except as otherwise provided in Section 1 of this
Part V, termination of the Plan shall not affect any Options, Stock
Appreciation Rights or Performance Awards previously granted, which such
Options, Stock Appreciation Rights and Performance Awards shall remain in
effect until exercised, surrendered or cancelled, or until they have
expired, all in accordance with their terms.
3. Changes in Capital Structure, etc. In the event of changes in the
---------------------------------
outstanding common shares of the Corporation by reasons of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combinations or
exchange of shares, separations, reorganizations, or liquidations, the
number of Shares available under the Plan in the aggregate and the maximum
number of Shares as to which Options, Stock Appreciation Rights and
Performance Awards may be granted to any Participant shall be
correspondingly adjusted by the Committee. In addition, the Committee
shall make appropriate adjustments in the number of Shares as to which
outstanding Options, Stock Appreciation Rights, or portions thereof then
unexercised, shall relate, to the end that the Participant's proportionate
interest shall be maintained as before the occurrence of such events; such
adjustment shall be made without change in the total price applicable to
the unexercisable portion of Options and with a corresponding adjustment in
the option price per Share.
4. Change in Control
-----------------
(a) Upon the occurrence of a Change in Control (as hereinafter defined):
(1) All Options shall become immediately exercisable in full for the
remainder of their terms. Grantees, other than Grantees who are
subject to Section 16 of the Exchange Act, shall have the right
to have the Corporation purchase the Options as to which no Stock
Appreciation Rights have been granted for cash for a period of
thirty days following a Change in Control at the Acceleration
Price (as hereinafter defined). Such Options held by Grantees who
are subject to Section 16 of the Exchange Act for which at least
six months has elapsed from the date of grant of such Options at
the date of the Change in Control shall be automatically
purchased by the Corporation at the Acceleration Price upon a
Change in Control, with payment to be made within thirty days of
such Change in Control.
(2) All Stock Appreciation Rights shall become immediately
exercisable in full for cash at the Acceleration Price, which
shall be paid by the Corporation within a period of thirty days
following a Change in Control, provided that such Stock
Appreciation Rights held by Grantees who are subject to Section
16 of the Exchange Act for which at least six months has elapsed
from the date of grant of such rights at the date of the Change
in Control shall be automatically purchased by the Corporation at
the Acceleration Price upon a Change in Control, with payment to
be made within thirty days of such Change in Control.
(b) (1) The "Acceleration Price" is the excess over the option price of
the highest of the following on the date of a Change in Control:
(i) the highest reported sales price of the Common Stock within
the sixty days preceding the date of the Change in Control,
as reported on any securities exchange or quotation system
upon which the Common Stock is traded,
(ii) the highest price of the Common Stock reported in a Form F-
11 or an amendment thereto as paid within the sixty days
preceding the date of the Change in Control,
(iii) the highest tender offer price paid for the Common
Stock, and
-9-
<PAGE>
(iv) any cash merger or similar price.
(2) For Incentive Stock Options and Stock Appreciation Rights granted
with respect to Incentive Stock Options, the Acceleration Price
is limited to the spread between the Fair Market Value on the
date of the purchase of such awards by the Corporation and the
option price.
(c) A "Change in Control" is the occurrence of any one of the following
events:
(i) any Person (other than a Grantee, the Corporation or any
trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation (or of any
subsidiary of the Corporation) is or becomes an "Acquiring
Person";
(ii) less than eighty percent (80%) of the total membership of
the Board shall be Continuing Directors; or
(iii) the shareholders of the Corporation shall approve a merger
or consolidation of the Corporation or a plan of complete
liquidation of the Corporation or an agreement for the sale
or disposition by the Corporation of all or substantially
all of the Corporation's assets to another Person, except
in any such case in a transaction in which immediately
after such merger, consolidation or sale, exchange or
transfer, the shareholders of the Corporation, in their
capacities as such and as a result thereof, shall own at
least 50 percent in voting power of the then outstanding
securities of the Corporation or of any surviving Person
pursuant to any such merger (or of its parent), the
consolidated corporation or business entity in any such
consolidation, or of the other Person to which such sale,
exchange or transfer of assets is made.
(d) A "Change in Control" shall be deemed not to have occurred if such
event is mandated or directed by a regulatory body having jurisdiction
over the Corporation's operations.
(e) For purposes of this Section 4:
(1) "Acquiring Person" shall mean any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act)
of securities of the Corporation representing twenty-five percent
(25%) or more of the combined voting power of the Corporation's
then outstanding voting securities, unless such Person has filed
Form F-11A and all required amendments thereto with respect to its
holdings and continues to hold such securities for investment in a
manner qualifying such Person to utilize Form F-11A for reporting
of ownership.
(2) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act as in effect on the date
hereof.
(3) "Continuing Directors" shall mean any member of the Board who was
a member of the Board prior to the date hereof, and any successor
of a Continuing Director while such successor is a member of the
Board who is not an Acquiring Person or an Affiliate or Associate
of an Acquiring Person or of any such Affiliate or Associate and
is recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
(4) "Person" shall mean any individual, corporation, partnership,
group, association or other "person", as such term is used in
Section 13(d) and 14(d) of the Exchange Act.
-10-
<PAGE>
5. Rights as Shareholder. A Participant entitled to Shares as a result of the
---------------------
exercise of an Option or Stock Appreciation Right or grant of a Performance
Share shall not be deemed for any purpose to be, or have rights as, a
shareholder of the Corporation or the Corporation by virtue of such
exercise, except to the extent a stock certificate is issued therefor and
then only from the date such certificate is issued. No adjustments shall
be made for dividends or distributions or other rights for which the record
date is prior to the date such stock certificate is issued.
6. Expenses. The expenses of this Plan shall be paid by the Corporation or
--------
the Bank.
7. Withholding. Any person exercising an Option or Stock Appreciation Right
-----------
or becoming vested in a Performance Award shall be required to pay to the
appropriate member of New Milford Group the amount of any taxes such member
is required by law to withhold with respect to the exercise of such Option
or Stock Appreciation Right or vested Performance Award. Such payment
shall be due on the date such member is required by law to withhold such
taxes. In the event that such payment is not made when due, the
Corporation or the Bank shall have the right to deduct, to the extent
permitted by law, from any payment of any kind otherwise due to such person
from any member of the New Milford Group, all or part of the amount
required to be withheld (including cash payable in settlement of a Stock
Appreciation Right).
8. Compliance with Applicable Law. Notwithstanding anything herein to the
------------------------------
contrary, the Corporation shall not be obligated to cause to be issued or
delivered any certificates evidencing Shares to be delivered pursuant to
the exercise of an Option or Stock Appreciation Right or Performance Award,
unless and until the Corporation is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all
applicable laws and regulations of governmental authority. The Corporation
shall in no event be obligated to register any securities pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended) or to
take any other action in order to cause the issuance and delivery of such
certificates to comply with any such law or regulation. The Board may
require, as a condition of the issuance and delivery of such certificates
and in order to ensure compliance with such laws and regulations, that the
Participant make such covenants, agreements and representations as the
Committee, in its sole discretion, deems necessary or desirable.
9. Application of Funds. Any cash proceeds received by the Corporation from
--------------------
the sale of Shares pursuant to Options will be used for general corporate
purposes.
10. Amendment of the Plan. The Board may from time to time suspend or
---------------------
discontinue this Plan or revise or amend it in any respect whatsoever;
provided, however, that any amendment requiring stockholder approval under
Rule 16b-3 of the Securities Exchange Act of 1934, as it may be hereafter
amended, shall not be made without such approval. No such suspension,
discontinuance, revision or amendment shall in any manner affect any grant
theretofore made without the consent of the Participant or the transferee
of the Participant, unless necessary to comply with applicable law.
-11-
<PAGE>
SECOND AMENDED AND RESTATED
1992 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
OF
NEWMIL BANCORP, INC.
1. Purpose.
The purpose of this Amended and Restated 1992 Stock Option Plan For Outside
Directors (the "Plan") is to attract and retain the continued services of non-
employee directors of NewMil Bancorp, Inc. (the "Corporation") with the
requisite qualifications and to encourage such directors to secure or increase
on reasonable terms their stock ownership in the Corporation. The Board of
Directors of the Corporation (the "Board") believes that the granting of options
(the "Options") under the Plan will promote continuity of management and
increased personal interest in the welfare of the Corporation by those who are
responsible for shaping and carrying out the long-range plans of the Corporation
and securing its continued growth and financial success.
The Plan was originally adopted in 1992 and was amended in 1995 and again
in 2000. The last amendment increased the number of option shares from 130,000
to 190,000; at the time of adoption of the last amendment, all 130,000 option
shares had been granted.
2. Effective Date of the Plan.
The Plan became effective on August 16, 2000 (the "Effective Date")
contingent upon its approval by the shareholders of the Corporation.
3. Stock Subject to Plan.
190,000 in the aggregate of the authorized but unissued shares of the
Corporation's common stock, $.50 par value per share (the "Shares") and/or
treasury Shares shall be reserved for issuance upon the exercise of Options. If
any Options expire or terminate for any reason without having been exercised in
full, the unpurchased Shares subject thereto shall again be available for the
grant of Options.
4. Administration.
The Plan shall be administered by the Committee referred to in Section 5
hereof. Subject to the provisions of the Plan, the Committee shall have
authority in its discretion to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it and to make all other
determinations necessary or advisable for the administration of the Plan;
provided, however, that the Committee shall have no discretion to determine the
non-employee directors who will receive Options, the number of Shares subject to
Options, the terms upon which, the times at which or the periods within which
Shares may be acquired or the Options may be acquired and exercised.
5. Committee.
The Committee shall consist of at least three members of the Board each of
whom shall be a non-employee director as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, and as such Rule may be hereafter amended. Each
member of the committee shall be a person who is not an employee of the
Corporation or any subsidiary of the Corporation, and who has not received a
grant of an option to acquire common stock of the Corporation since the
beginning of the preceding fiscal year under any plan maintained by the
Corporation other than this Plan. The Committee shall be appointed by the Board,
which may at any time and from time to time remove any member of the Committee,
with or without cause, appoint additional members to the Committee and fill
vacancies, however caused, in the Committee. A majority of the members of the
Committee shall constitute a quorum. All determinations of the Committee shall
be made by a majority of its members. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully effective as if it had been made at a meeting duly called and
held.
<PAGE>
6. Eligibility.
An Option may be granted only to members of the Board who are not otherwise
employees of the Corporation or any of its subsidiaries on the date of grant
(the "Participants").
7. Grant of Options and Option Price.
(a) Participants on the Effective Date. Each individual who was a
Participant on the Effective Date was automatically granted on the
Effective Date an Option to purchase 10,000 Shares.
(b) Future Participants. Directors who are newly elected to the board
after the Effective Date shall receive an automatic grant of an Option
to purchase 3,000 Shares on the date of such election (or, if elected
by the Board, on the date of the annual meeting of the shareholders of
the Corporation immediately following such election); provided, that
such automatic grant shall only be made if the director is a
Participant on such date, and such automatic grant shall be subject to
pro rata reduction to the extent that the number of Shares subject to
future grant under the Plan is not sufficient to make the full
automatic grants required to be made pursuant to the Plan on such
date.
(c) Additional Grants. Each director who was re-elected as a director at
the annual meeting of shareholders in 1993, 1994 and 1995 received an
automatic grant of Options to purchase 2,000 Shares. Each director who
is a director of the Corporation on June 30, 1996 and on each June 30
thereafter during the term of this Plan shall automatically be granted
an Option to purchase 2,000 Shares; provided, that such automatic
grant shall only be made if the director is a Participant on each such
date and such automatic grant shall be subject to pro rata reduction
(or elimination) to the extent that the number of Shares subject to
grant under the Plan at that time is not sufficient to make the
automatic grants required to be made pursuant to the Plan on such
date.
(d) Price. The initial per Share price to be paid by a Participant upon
the exercise of an Option shall be equal to the fair market value of a
Share on the date of grant. For the purposes hereof, the fair market
value of a Share on any date shall be equal to the average of the
closing bid and asked prices for the Shares on such date (or if no
such quotation occurred on that date, on the next preceding date on
which there was such a quotation), as made available for publication
by the National Association of Securities Dealers Automated Quotation
System, or if no such prices are available, the fair market value as
determined by rules to be adopted by the Committee.
8. Option Period.
Participants shall be granted Options which are exercisable for a period of
ten (10) years from the date of the granting thereof. Notwithstanding the
foregoing, no Option granted under this Plan shall be exercisable until six (6)
months after the grant thereof pursuant to the provisions of Rule 16b-3, as such
rule may be hereafter amended.
9. Exercise of Option.
Subject to Section 8, an Option may be exercised in whole or in part at any
time after the date it is granted and only by a written notice of intent to
exercise the Option with respect to a specified number of Shares and payment to
the Corporation in cash or by certified check, bank draft or postal or express
money order, of the amount of the Option exercise price for the number of Shares
with respect to which the Option is then exercised. The number of Shares which
may be purchased at any one time shall be 100 Shares, a multiple thereof, or the
total number at the time purchasable under the Option.
10. Transferability.
No Option shall be assignable or transferable except by will and/or by the
laws of descent and distribution and, during the life of any Participant, each
Option granted to the Participant may be exercised only by the Participant.
-2-
<PAGE>
11. Ceasing to be a Director.
(a) Termination. If a Participant terminates service as a director for any
reason other than those set forth in clause (b) below, any outstanding
Option held by the Participant shall terminate on the earlier of the
date on which such Option would otherwise expire or three (3) years
after such termination.
(b) Disability, Death or Retirement. If a Participant's service as a
director is terminated by disability (which condition constitutes
total disability under the federal Social Security Acts), death, or
retirement upon attaining age seventy (70), the Participant or the
representative of the Participant's estate or beneficiaries thereof to
whom the Option has been transferred shall have the right to exercise
any outstanding Option until the date on which such Option would
otherwise expire.
12. Duration of Plan.
Unless sooner terminated, the Plan shall terminate on October 31, 2005. No
Options may be granted after the termination of this Plan; provided, however,
that termination of the Plan shall not affect any Options previously granted,
which Options shall remain in effect until exercised, surrendered or cancelled,
or until they have expired, all in accordance with their terms.
13. Changes in Capital Structure, etc.
In the event of changes in the outstanding common stock of the Corporation
by reasons of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combination or exchange of shares, separations, reorganizations,
or liquidations, the number of Shares available under the Plan in the aggregate
and the number of Shares as to which Options may be granted to any Participant
shall be correspondingly adjusted by the Committee. In addition, the Committee
shall make appropriate adjustments in the number of Shares as to which
outstanding Options, or portions thereof then unexercised, shall relate, to the
end that the Participant's appropriate interest shall be maintained as before
the occurrence of such event; such adjustment shall be made without change in
the total price applicable to the unexercised portion of the Options and with a
corresponding adjustment in the option price per Share.
14. Rights as Shareholder.
A Participant entitled to Shares as a result of the exercise of an Option
shall not be deemed for any purpose to be, or have rights as, a shareholder of
the Corporation by virtue of such exercise, except to the extent a stock
certificate is issued therefor and then only from the date such certificate is
issued. No adjustments shall be made for dividends or distributions or other
rights for which the record date is prior to the date such stock certificate is
issued.
15. Expenses.
The expenses of this Plan shall be paid by the Corporation.
16. Compliance with Applicable Law.
Notwithstanding anything herein to the contrary, the Corporation shall not
be obligated to cause to be issued or delivered any certificates evidencing
Shares to be delivered pursuant to the exercise of an Option, unless and until
the Corporation is advised by its counsel that the issuance and delivery of such
certificates is in compliance with all applicable laws and regulations of
governmental authority. The Corporation shall in no event be obligated to
register any securities pursuant to the Securities Act of 1933 (as now in effect
or as hereafter amended) or to take any other action in order to cause the
issuance and delivery of such certificates to comply with any such law or
regulation. The Committee may require as a condition of the issuance and
delivery of such certificates and in order to ensure compliance with such laws
and regulations, that the Participant make such covenants, agreements and
representations as the Committee, in its sole discretion, deems necessary or
desirable.
-3-
<PAGE>
17. Application of Funds.
Any cash proceeds received by the Corporation from the sale of Shares
pursuant to options will be used for general corporate purposes.
18. Amendment of the Plan.
The Board may from time to time suspend or discontinue this Plan or revise
or amend it in any respect whatsoever; provided, however, that any amendment
requiring stockholder approval under Rule 16b-3, as in effect on the Effective
Date and as it may be subsequently amended, shall not be made without such
approval; and provided further, that the provisions of Sections 6 and 7 of this
Plan may not be amended more than once every six (6) months, except as otherwise
provided in or permitted by Rule 16b-3. No such suspension, discontinuance,
revision or amendment shall in any manner affect any grant theretofore made
without the consent of the Participant or the transferee of the Participant,
unless necessary to comply with applicable law.
-4-
<PAGE>
PROXY NEWMIL BANCORP, INC. PROXY
19 Main Street
New Milford, Connecticut 06776
2000 ANNUAL MEETING OF SHAREHOLDERS -- OCTOBER 25, 2000
This proxy is solicited on behalf of the Board of Directors of NewMil Bancorp,
Inc.
The undersigned shareholder of NewMil Bancorp, Inc. hereby appoints Joseph
Carlson II, Suzanne L. Powers and Mary C. Williams and each of them the proxies
of the undersigned with full power of substitution to vote all the shares of
NewMil Bancorp, Inc. held of record by the undersigned on September 1, 2000, at
the Annual Meeting of Shareholders of the Corporation to be held at the
Candlewood Valley Country Club, in New Milford, Connecticut, at 10:00 a.m. on
Wednesday, October 25, 2000 and at any adjournment(s) thereof, with all the
power which the undersigned would have if personally present, hereby revoking
any proxy heretofore given. A majority of said proxies or their substitutes who
attend the meeting (or if only one shall be present, then that one) may
exercise all of the powers hereby granted.
This proxy when properly signed will be voted in the manner directed herein
by the undersigned shareholder. If no specification is made, this proxy will be
voted "FOR" all nominees for Director and "FOR" proposal 2, "FOR" proposal 3
and "FOR" proposal 4. If any other business is properly presented at this
Annual Meeting, or any adjournment(s) thereof, this proxy will be voted in
accordance with the determination of a majority of the Board of Directors.
The undersigned hereby acknowledges receipt of the proxy statement for the
Meeting and instructs the proxies to vote as follows:
1. ELECTION OF DIRECTORS:
Herbert E. Bullock, Kevin L. Dumas and Francis J. Wiatr
[_] FOR all nominees listed above [_] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary all nominees listed above
below)
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
[_] For all nominees except:_____________________________
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
<PAGE>
2. PROPOSAL TO APPROVE AN AMENDMENT to the Corporation's 1986 Stock Option
Incentive Plan for Key Officers and Employees.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. PROPOSAL TO APPROVE AN AMENDMENT to the Corporation's 1992 Stock Option Plan
for Outside Directors.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. PROPOSAL TO RATIFY THE APPOINTMENT OF PricewaterhouseCoopers LLP as
independent auditors of NewMil Bancorp, Inc. for the fiscal year ending June
30, 2001.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. With discretionary authority to vote upon such other matters as may properly
come before the Meeting.
Please sign exactly as your name appears
on this proxy card. When signing as a fi-
duciary or representative--attorney, ex-
ecutor, administrator, trustee or guard-
ian--please give your full title as such.
Proxies signed by a corporation must be
signed in the full corporate name by the
President or otherwise duly authorized
officer. Proxies signed by a partnership
must be signed in the partnership name by
a duly authorized person.
Date: ____________________________________
------------------------------------------
Signature
------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[_] I PLAN TO ATTEND MEETING
[_]------------ --------------
ACCOUNT COMMON
NUMBER
