Exhibit 10.13

 

NEWMIL BANK

DIRECTOR DEFERRED COMPENSATION AGREEMENT

 

THIS DIRECTOR DEFERRED COMPENSATION AGREEMENT (this “Agreement”) is made as of
this 22 day of January 2003, by and between NewMil Bank, a
Connecticut-chartered, FDIC-insured savings bank located in New Milford,
Connecticut (the “Bank”), and Joseph Carlson II (the “Director”).

 

WHEREAS, the Director serves as a director of NewMil Bank and NewMil Bancorp,
Inc.,

 

WHEREAS, the Director and the Bank intend by this Agreement to provide for
payment of benefits if the Director’s service terminates within 12 months after
a change in control of NewMil Bancorp, Inc., and

 

NOW THEREFORE, in consideration of these premises and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Director and the Bank hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

Whenever used in this Agreement, the following words and phrases shall have the
meanings specified:

 

1.1 “Change in Control” means if any one of the following events occurs —

 

(a) Merger: NewMil Bancorp, Inc. merges into or consolidates with another
corporation, or merges another corporation into NewMil Bancorp, Inc., and as a
result less than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held by persons who
were stockholders of NewMil Bancorp, Inc. immediately before the merger or
consolidation. For purposes of this Agreement, the term person means an
individual, corporation, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or other entity,

 

(b) Acquisition of Significant Share Ownership: a report on Schedule 13D or
another form or schedule (other than Schedule 13G) is filed or is required to be
filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if
the schedule discloses that the filing person or persons acting in concert has
or have become the beneficial owner of 25% or more of a class of NewMil Bancorp,
Inc.’s voting securities, but this clause (b) shall not apply to beneficial
ownership of NewMil Bancorp, Inc. voting shares held in a fiduciary capacity by
an entity of which NewMil Bancorp, Inc. directly or indirectly beneficially owns
50% or more of its outstanding voting securities,

 

(c) Change in Board Composition: during any period of two consecutive years,
individuals who constitute NewMil Bancorp, Inc.’s Board of Directors at the
beginning of the two-year period cease for any reason to constitute at least a
majority of NewMil Bancorp, Inc.’s Board of Directors; provided, however, that —
for purposes of this clause (c) — each director who is first elected by the
board (or first nominated by the board for election by stockholders) by a vote
of at least two-thirds (2/3) of the directors who were directors at the
beginning of the period shall be deemed to have been a director at the beginning
of the two-year period, or

 

(d) Sale of Assets: NewMil Bancorp, Inc. sells to a third party all or
substantially all of NewMil Bancorp, Inc.’s assets. For purposes of this
Agreement, sale of substantially all of NewMil Bancorp, Inc.’s assets includes
sale of the shares or assets of NewMil Bank.

 

1.2 “Code” means the Internal Revenue Code of 1986, as amended.

 

1

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

1.3 “Compensation” means the total directors’ fees payable to the Director
during a Plan Year.

 

1.4 “Deferral Account” means the Bank’s accounting of the Director’s accumulated
Deferrals, plus accrued interest.

 

1.5 “Deferrals” means the amount of the Director’s Compensation that the
Director elects to defer according to this Agreement.

 

1.6 “Disability” means the Director’s inability to perform substantially all
normal duties of a director, as determined by the Bank’s Board of Directors in
its sole discretion. As a condition to any benefits, the Bank may require the
Director to submit to such physical or mental evaluations and tests as the Board
of Directors deems appropriate.

 

1.7 “Effective Date” means January 22, 2003.

 

1.8 “Election Form” means the Form attached as Exhibit 1.

 

1.9 “Normal Retirement Age” means the Director’s 65th birthday.

 

1.10 “Normal Retirement Date” means the later of the Normal Retirement Age or
Termination of Service.

 

1.11 “Plan Year” means the calendar year.

 

1.12 “Termination for Cause” means the Bank’s board of directors or a duly
authorized committee of the board of directors determines at any time that the
Director will not be nominated by the board or committee for reelection as a
director of NewMil Bancorp after the expiration of his current term, or if the
Director is removed as a director of the Bank, in either case because of the
Director’s —

 

  (a) Gross negligence or gross neglect of duties,

 

  (b) Commission of a felony or commission of a misdemeanor involving moral
turpitude,

 

  (c) Fraud, disloyalty or willful violation of any law or significant Bank
policy, or

 

  (d) Removal from service or permanent prohibition from participation in the
conduct of the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1)
of the Federal Deposit Insurance Act [12U.S.C. 1818(e)(4) or (g)(1)].

 

1.13 “Termination of Service” means that the Director ceases to be a member for
the Bank’s Board of Directors for any reason whatsoever.

 

ARTICLE 2

 

DEFERRAL ELECTION

 

2.1 Initial Election. The Director shall make an initial deferral election under
this Agreement by filing with the Bank a signed Election Form within 30 days
after the Effective Date of this Agreement. The Election Form shall set forth
the amount of Compensation to be deferred and shall be effective to defer
Compensation earned after the date the Election Form is received by the Bank.

 

2.2 Election Changes. Upon the Bank’s approval, the Director may modify the
amount of Compensation to be deferred annually by filing a new Election Form
with the Bank prior to the beginning of the Plan Year in which the Compensation
is to be deferred. The modified deferral election shall not be effective until
the calendar year following the year in which the subsequent Election Form is
received and approved by the Bank.

 

ARTICLE 3

 

DEFERRAL ACCOUNT

 

3.1 Establishing and Crediting. The Bank shall establish a Deferral Account on
its books for the Director and shall credit to the Deferral Account the
following amounts:

 

3.1.2 Deferrals. The portion of the Compensation deferred by the Director as of
the time the Compensation would have otherwise been paid to the Director.

 

2

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

3.1.3 Interest. At the end of each Plan Year under this Agreement, but only
until commencement of benefit payments under this Agreement, unless otherwise
stated, interest is to be credited on the account balance at an annual rate of
interest for that Plan Year, compounded monthly, equal to the monthly average
yield on United States Treasury securities adjusted to a constant maturity of
five years as published by the Board of Governors of the Federal Reserve System
in statistical release H.15 (the “Index”). The interest credited for a Plan Year
shall be based upon the Index during the month of December for the current Plan
Year.

 

3.2 Statement of Accounts. The Bank shall provide to the Director, within 120
days after the end of each Plan Year, a statement setting forth the Deferral
Account balance.

 

3.3 Accounting Device Only. The Deferral Account is solely a device for
measuring amounts to be paid under this Agreement. The Deferral Account is not a
trust fund of any kind. The Director is a general unsecured creditor of the Bank
for the payment of benefits. The benefits represent the mere Bank promise to pay
such benefits. The Director’s rights are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by the Director’s creditors.

 

ARTICLE 4

 

BENEFITS DURING LIFETIME

 

4.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Bank shall
pay to the Director the benefit described in this Section 4.1 in lieu of any
other benefit under this Agreement.

 

4.1.1 Amount of Benefit. The benefit under this Section 4.1 is the Deferral
Account balance at the Director’s Normal Retirement Date.

 

4.1.2 Payment of Benefit. The Bank shall pay the benefit to the Director in the
form elected by the Director in the Election Form commencing with the month
following the Director’s Normal Retirement Date. If the Director elects payment
of the benefit as other than a lump sum, the Bank will continue to credit
interest pursuant to the formula of Section 3.1.3, compounded monthly, on the
remaining account balance during any applicable installment period.

 

4.2 Early Retirement Benefit. Upon Termination of Service prior to the Normal
Retirement Age for reasons other than death, Change in Control or Disability,
the Bank shall pay to the Director the benefit described in this Section 4.2 in
lieu of any other benefit under this Agreement.

 

4.2.1 Amount of Benefit. The benefit under this Section 4.2 is the Deferral
Account balance at the Director’s Termination of Service.

 

4.2.2 Payment of Benefit. The Bank shall pay the benefit to the Director in the
form elected by the Director in the Election Form commencing with the month
following the Director’s Normal Retirement Age. If the Director elects payment
of the benefit as other than a lump sum, the Bank will continue to credit
interest pursuant to the formula of Section 3.1.3, compounded monthly, on the
remaining account balance during any applicable installment period.

 

4.3 Disability Benefit. If the Director terminates service due to Disability
prior to Normal Retirement Age, the Bank shall pay to the Director the benefit
described in this Section 4.3 in lieu of any other benefit under this Agreement.

 

4.3.1 Amount of Benefit. The benefit under this Section 4.3 is the Deferral
Account balance at the Director’s Termination of Service.

 

4.3.2 Payment of Benefit. The Bank shall pay the benefit to the Director in the
form elected by the Director in the Election Form commencing with the month
following the Director’s Termination of Service. If the Director elects payment
of the benefit as other than a lump sum, the Bank will

 

3

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

continue to credit interest pursuant to the formula of Section 3.1.3, compounded
monthly, on the remaining account balance during any applicable installment
period.

 

4.4 Change in Control Benefit. Upon a Change in Control, followed within twelve
(12) months by the Director’s Termination of Service for reasons other than
death or Disability, the Bank shall pay to the Director the benefit described in
this Section 4.4 in lieu of any other benefit under this Agreement.

 

4.4.1 Amount of Benefit. The benefit under this Section 4.4 is the Deferral
Account balance on the Director’s Termination of Service.

 

4.4.2 Payment of Benefit. The Bank shall pay the benefit to the Director in a
lump sum within 30 days after the Director’s Termination of Service.

 

4.5 Payout of Normal Retirement Benefit, Early Termination Benefit, or
Disability Benefits after a Change in Control. If a Change in Control occurs
when the Director is receiving benefits provided by Sections 4.1, 4.2 or 4.3 of
this Agreement, the Bank shall pay the remaining benefits to the Director in a
single lump sum within three days after the Change in Control. The lump-sum
payment shall be an amount equal to the Director’s Deferral Account balance
remaining unpaid.

 

4.6 Hardship Distribution. Upon the Board of Director’s determination (following
petition by the Director) that the Director has suffered an unforeseeable
financial emergency, the Bank shall distribute to the Director all or a portion
of the Deferral Account balance as determined by the Bank.

 

ARTICLE 5

 

DEATH BENEFITS

 

5.1 Death During Active Service. If the Director dies while in the service of
the Bank, the Bank shall pay to the Director’s beneficiary the early retirement
benefit described in Section 4.2 in lieu of any other benefit under this
Agreement.

 

5.2 Death During Payment of a Benefit. If the Director dies after any benefit
payments have commenced under this Agreement but before receiving all such
payments, the Bank shall pay the remaining benefits to the Director’s
beneficiary in a lump sum distribution. The lump sum distribution will equal the
Director’s Deferral Account as of the time of death.

 

5.3 Death After Termination of Service But Before Benefit Payments Commence. If
the Director is entitled to benefit payments under this Agreement but dies prior
to the commencement of said benefit payments, the Bank shall pay the same
benefit payments to the Director’s beneficiary that the Director was entitled to
prior to death except that the benefit payments shall be paid in a lump sum
distribution equal to the Director’s Deferral Account balance on the first day
of the month following the date of the Director’s death.

 

ARTICLE 6

 

BENEFICIARIES

 

6.1 Beneficiary Designations. The Director shall designate a beneficiary by
filing a written designation with the Bank. The Director may revoke or modify
the designation at any time by filing a new designation. However, designations
will only be effective if signed by the Director and received by the Bank during
the Director’s lifetime. The Director’s beneficiary designation shall be deemed
automatically revoked if the beneficiary predeceases the Director or if the
Director names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Director dies without a valid beneficiary designation, all
payments shall be made to the Director’s estate.

 

6.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Bank may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Bank may require proof of incompetence, minority
or guardianship as it

 

4

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

may deem appropriate prior to distribution of the benefit. Such distribution
shall completely discharge the Bank from all liability with respect to such
benefit.

 

ARTICLE 7

 

GENERAL LIMITATIONS

 

7.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Bank shall not pay any benefit under this Agreement that is in
excess of the Director’s Deferrals (i.e., the deferred compensation account
balance under Section 3.1.1, the amount deferred under Section 3.1.2, and the
interest earned on the Deferral Account) if Termination of Service is due to the
Director’s actions resulting in Termination for Cause. The Director’s Deferrals
shall be paid to the Director in a manner to be determined by the Bank. No
interest shall be credited to the Deferrals during any applicable installment
period.

 

7.2 General. Notwithstanding anything to the contrary contained in this
Agreement, the Director is entitled to only one benefit which shall be
determined by the first event to occur which is dealt with by this Agreement.
Subsequent occurrence of events dealt with by this Agreement shall not entitle
the Director or his or her beneficiaries to other or further benefits under this
Agreement.

 

7.3 Tax Consequences. The Bank does not insure or guarantee the tax consequences
of payments provided hereunder for matters beyond its control, and the Director
certifies that his decision to reduce and defer receipt of his compensation is
not due to any reliance upon financial, tax or legal advice given by the Bank,
and of its employees, agents, accountants or legal advisors.

 

ARTICLE 8

 

CLAIMS AND REVIEW PROCEDURES

 

8.1 Claims Procedure. The Bank shall notify any person or entity that makes a
claim for benefits under this Agreement (the “Claimant”) in writing, within 90
days of Claimant’s written application for benefits, of his or her eligibility
or non-eligibility for benefits under this Agreement. If the Bank determines
that the Claimant is not eligible for benefits or full benefits, the notice
shall set forth (a) the specific reasons for such denial, (b) a specific
reference to the provisions of this Agreement on which the denial is based, (c)
a description of any additional information or material necessary for the
Claimant to perfect his or her claim, and a description of why it is needed, and
(d) an explanation of this Agreement’s claims review procedure and other
appropriate information as to the steps to be taken if the Claimant wishes to
have the claim reviewed. If the Bank determines that there are special
circumstances requiring additional time to make a decision, the Bank shall
notify the Claimant of the special circumstances and the date by which a
decision is expected to be made, and may extend the time for up to an additional
90 days.

 

8.2 Review Procedure. If the Claimant is determined by the Bank not to be
eligible for benefits, or if the Claimant believes that he or she is entitled to
greater or different benefits, the Claimant shall have the opportunity to have
such claim reviewed by the Bank by filing a petition for review with the Bank
within 60 days after receipt of the notice issued by the Bank. Said petition
shall state the specific reasons, which the Claimant believes entitle him or her
to benefits or to greater or different benefits. Within 60 days after receipt by
the Bank of the petition, the Bank shall afford the Claimant (and counsel, if
any) an opportunity to present his or her position to the Bank verbally or in
writing, and the Claimant (or counsel) shall have the right to review the
pertinent documents. The Bank shall notify the Claimant of its decision in
writing within the 60-day period, stating specifically the basis of its
decision, written in a manner to be understood by the Claimant and the specific
provisions of this Agreement on which the decision is based. If, because of the
need for a hearing, the 60-day period is not sufficient, the decision may be
deferred for up to another 60 days at the election of the Bank, but notice of
this deferral shall be given to the Claimant.

 

5

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

ARTICLE 9

 

AMENDMENTS AND TERMINATION

 

This Agreement may be amended or terminated only by a written agreement signed
by the Bank and the Director. In no event shall this Agreement be terminated
without payment to the Director of the Deferral Account balance attributable to
the Director’s Deferrals and interest credited on such amounts unless the
Agreement terminates as a result of Termination for Cause in which event the
Director forfeits the interest credited on the Director’s Deferrals.

 

Notwithstanding the previous paragraph in this Article 9, the Bank may amend or
terminate this Agreement at any time if, pursuant to legislative, judicial or
regulatory action, continuation of this Agreement would (a) cause benefits to be
taxable to the Director prior to actual receipt, or (b) result in significant
financial penalties or other significantly detrimental ramifications to the Bank
(other than the financial impact of paying the benefits). In no event shall this
Agreement be terminated under this paragraph without payment to the Director of
the Deferral Account balance attributable to the Director’s Deferrals and
interest credited on such amounts.

 

ARTICLE 10

 

MISCELLANEOUS

 

10.1 Binding Effect. This Agreement shall bind the Director and the Bank and
their beneficiaries, survivors, executors, administrators and transferees.

 

10.2 No Guarantee of Employment. This Agreement is not a contract for services.
It does not give the Director the right to remain a director of the Bank, nor
does it interfere with shareholders’ right to replace the Director. It also does
not require the Director to remain a director nor interfere with the Director’s
right to terminate services at any time.

 

10.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

 

10.4 Tax Withholding. The Bank shall withhold any taxes required to be withheld
from the benefits provided under this Agreement.

 

10.5 Applicable Law. This Agreement and all rights hereunder shall be governed
by the laws of Connecticut, except to the extent the laws of the United States
of America otherwise require.

 

10.6 Unfunded Arrangement. The Director and the Director’s beneficiary are
general unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Director’s life is a general
asset of the Bank to which the Director and the Director’s beneficiary have no
preferred or secured claim.

 

10.7 Reorganization. The Bank shall not merge or consolidate into or with
another Bank, or reorganize, or sell substantially all of its assets to another
Bank, firm, or person unless such succeeding or continuing Bank, firm, or person
agrees to assume and discharge the obligations of the Bank under this Agreement.
Upon the occurrence of such event, the term “Bank” as used in this Agreement
shall be deemed to refer to the successor or survivor Bank.

 

10.8 Entire Agreement. This Agreement constitutes the entire agreement between
the Bank and the Director as to the subject matter hereof. No rights are granted
to the Director under this Agreement other than those specifically set forth
herein. This Agreement supersedes and replaces in its entirety the Deferred
Compensation Agreement with Director dated between the Director and the Bank, as
successor to Nutmeg.

 

10.9 Administration. The Bank shall have powers which are necessary to
administer this Agreement, including but not limited to —

 

  (a) interpreting the provisions of this Agreement,

 

6

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

  (b) establishing and revising the method of accounting for this Agreement,

 

  (c) maintaining a record of benefit payments, and

 

  (d) establishing rules and prescribing any forms necessary or desirable to
administer this Agreement.

 

10.10 Named Fiduciary. The Bank shall be the named fiduciary and plan
administrator under this Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.

 

IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have
executed this Agreement as of the day and year first written above.

 

DIRECTOR:           NEWMIL BANK:         By:    

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

         

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

Joseph Carlson II           Francis J. Wiatr         Its:   Chairman, President
& CEO

 

7

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

Exhibit 1

 

NEWMIL BANK

 

DIRECTOR DEFERRED COMPENSATION AGREEMENT

 

Deferral Election

 

I elect to defer my Compensation under this Agreement with the Bank, as follows:

 

Amount of Deferral

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

  

Duration

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

[Initial and Complete one]

____ I elect to defer ____% of my Compensation annually.

____ I elect to defer $______ of my Compensation annually.

____ I elect not to defer any of my Compensation.

  

[Initial One]

____ One Year only

____ For ______ [Insert Number] Years

_____ Until Termination of Service

_____ Until ___________,

_______________ (date)

 

Form of Benefit

 

I elect to receive benefits under the Director Deferred Compensation Agreement
in the following form:

 

[Initial One]

 

             Lump Sum

 

             Equal monthly installments for One Hundred Twenty (120) months

 

I understand that I may not change the form of benefit elected, even if I later
change the amount of my deferrals under the Director Deferred Compensation
Agreement without written approval of the Board of Directors of the Bank.

 

Upon the Bank’s approval, I understand that I may change the amount and duration
of my deferrals by filing a new election form with the Bank; provided, however,
that any subsequent election will not be effective until the calendar year
following the year in which the new election is received by the Bank.

 

Signature:        

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

Date:

 

January 22, 2003

 

Received by the Bank this 22 day of January 2003.

 

By:        

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

Title:

       

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

 

8

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

Beneficiary Designation

 

NEWMIL BANK

 

DIRECTOR DEFERRED COMPENSATION AGREEMENT

 

I designate the following as beneficiary of benefits under this Director
Deferred Compensation Agreement payable following my death:

 

Primary:                                    
                                        
                                        
                                        
                                                                           

 

Contingent:                                    
                                        
                                        
                                        
                                                                     

 

Note: To name a trust as beneficiary, please provide the name of the trustee(s)
and the exact name and date of the trust agreement.

 

I understand that I may change these beneficiary designations by filing a new
written designation with the Bank. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.

 

Signature:        

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

Date:

   

 

Received by the Bank this 22 day of January 2003.

 

By:        

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

Title:

       

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

 

9