AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT

1)

Termination by NewMil Bancorp or Subsidiary: the Executive’s employment with NewMil Bancorp or its Subsidiary(ies) is involuntarily terminated within two years after a Change in Control, except for termination under Section 4 of this Agreement. For purposes of this Agreement, “Subsidiary” means an entity in which NewMil Bancorp directly or indirectly beneficially owns 50% or more of the outstanding voting securities, or

2)

Termination by the Executive for Good Reason: the Executive terminates his employment with NewMil Bancorp or Subsidiary(ies) for Good Reason (as defined in Section 3) within two years after a Change in Control.

1)

Merger: NewMil Bancorp merges into or consolidates with another corporation, or merges another corporation into NewMil Bancorp, and as a result less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were the holders of NewMil Bancorp’s voting securities 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, or

2)

Acquisition of Significant Share Ownership: a report on Schedule 13D, Schedule TO, 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’s voting securities (but this clause (2) shall not apply to beneficial ownership of voting shares held by a Subsidiary in a fiduciary capacity), or

3)

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

4)

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

 

1)

Lump Sum Payment: NewMil Bancorp shall make a lump sum payment to the Executive in an amount in cash equal to 2.99 times the Executive’s annual compensation. For purposes of this Agreement, annual compensation means (a) the Executive’s annual base salary on the date of the Change in Control or the Executive’s termination of employment, whichever amount is greater, plus (b) any bonuses or incentive compensation earned for the calendar year immediately before the year in which the Change in Control occurred or immediately before the year in which termination of employment occurred, whichever amount is greater, regardless of when the bonus or incentive compensation is or was paid. NewMil Bancorp recognizes that the bon us and incentive compensation earned by the Executive for a particular year’s service might be paid in the year after the calendar year in which the bonus or incentive compensation is earned. The amount payable to the Executive hereunder shall not be reduced to account for the time value of money or discounted to present value. The payment required under this Section 2(a)(1) is payable no later than 5 business days after the date the Executive’s employment terminates. If the Executive terminates employment for Good Reason, the date of termination shall be the date specified by the Executive in his notice of termination.

 

2)

Benefit Plans: NewMil Bancorp shall cause the Executive to become fully vested in any qualified and non-qualified plans, programs or arrangements in which the Executive participated if the plan, program, or arrangement does not address the effect of a change in control. NewMil Bancorp also shall contribute or cause a Subsidiary to contribute to any account of the Executive under a 401(k) plan, retirement plan, or profit-sharing plan the matching and voluntary contributions, if any, that would have been made had the Executive’s employment not terminated before the end of the plan year.

 

3)

Outplacement Assistance: NewMil Bancorp shall pay to the Executive reasonable outplacement expenses in an amount up to $25,000, and NewMil Bancorp shall provide the Executive with the use of office space and reasonable office support facilities, including secretarial assistance, for a period of one year after termination.

4)

Medical Coverage: NewMil Bancorp shall continue or cause to be continued at NewMil Bancorp’s expense health insurance coverage for the Executive and his dependents that is at least as favorable as the coverage maintained on the Executive’s behalf at the time of employment termination. Such coverage shall cease when the Executive becomes employed by another employer or thirty six months after the Executive’s employment terminates, whichever occurs first.

 

1)

Cause Means Commission of Any of the Following Acts: For purposes of this Agreement, “Cause” means the Executive shall have committed any of the following acts —

a)

Fraud, Embezzlement, Theft or Other Crime: an act of fraud, embezzlement, or theft in connection with his duties or in the course of his employment with NewMil Bancorp or a Subsidiary, or commission of a felony or commission of a misdemeanor involving moral turpitude, or

b)

Damage to Property: intentional wrongful damage to the business or property of NewMil Bancorp or Subsidiary(ies), which, in NewMil Bancorp’s sole judgment, causes material harm to NewMil Bancorp or Subsidiary(ies), or

c)

Negligence and Other Actions: gross negligence, insubordination, disloyalty, or dishonesty in the performance of his duties as an officer of NewMil Bancorp or Subsidiary(ies), or

d)

Violation of Law or Policy: intentional violation of any law or significant policy of NewMil Bancorp or Subsidiary(ies) committed in connection with the Executive’s employment, which, in NewMil Bancorp’s sole judgment, has an adverse effect on NewMil Bancorp or Subsidiary(ies), or

e)

Removal: removal of the Executive from office or permanent prohibition of the Executive from participating in the conduct of NewMil Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or

f)

Disclosure of Trade Secrets: intentional wrongful disclosure of secret processes or confidential information of NewMil Bancorp or a Subsidiary, which, in NewMil Bancorp’s sole judgment, causes material harm to NewMil Bancorp or the Subsidiary,

g)

Competing with NewMil Bancorp: intentional wrongful engagement in any competitive activity. For purposes of this Agreement, competitive activity means the Executive’s participation, without the written consent of a senior executive officer of NewMil Bancorp, in the management of any business enterprise if (1) the enterprise engages in substantial and direct competition with NewMil Bancorp, (2) the enterprise’s revenues derived from any product or service competitive with any product or service of NewMil Bancorp or Subsidiary(ies) amounted to 10% or more of the enterprise’s revenues for its most recently completed fiscal year, and (3) NewMil Bancorp’s revenues from the product or service amounted to 10% of NewMi l Bancorp’s revenues for its most recently completed fiscal year. A competitive activity does not include mere ownership of securities in an enterprise and the exercise of rights appurtenant thereto, provided the Executive’s share ownership does not give him practical or legal control of the enterprise. For this purpose, ownership of less than 5% of the enterprise’s outstanding voting securities shall conclusively be presumed to be insufficient for practical or legal control, and ownership of more than 50% shall conclusively be presumed to constitute practical and legal control.

If the Executive is now or hereafter becomes subject to an agreement not to compete with NewMil Bancorp or Subsidiary(ies), a breach by the Executive of that other non-competition agreement shall be grounds for denial of severance and termination benefits for Cause under this clause (g) of Section 4(a)(1). But if the Executive engages in a competitive activity under circumstances justifying denial of severance or termination benefits for Cause under this clause (g), that shall not necessarily be grounds for concluding that the Executive has also breached the other non-competition agreement to which he is or may become subject. This clause (g) is not intended to and shall not be construed to supersede or amend any provision of an employment or non-competition agreement to which the Executive is or may become subject. This clause (g) does not grant to the Executive any right or privilege to engage in other activities or enterprises, whether in competition with NewMil Bancorp or otherwise, or

h)

Termination for Cause under an Employment Agreement: any actions that have caused the Executive to be terminated for cause under any employment agreement existing on the date hereof or hereafter entered into between the Executive and NewMil Bancorp or a Subsidiary.

2)

Definition of “Intentional”: For purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed to have been intentional if it was due primarily to an error in judgment or negligence. An act or failure to act on the Executive’s part shall be considered intentional if it is not in good faith and if it is without a reasonable belief that the action or failure to act is in the best interests of NewMil Bancorp or a Subsidiary.

3)

Termination for Cause Can Occur Solely by Formal Board Action. The Executive shall not be deemed under this Agreement to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of at least three-fourths (¾) of the directors of NewMil Bancorp then in office at a meeting of the board of directors called and held for such purpose, which resolution shall (a) contain findings that, in the good faith opinion of the board, the Executive has committed and act constituting Cause and (b) specify the particulars thereof in detail. Notice of that meeting and the proposed determination of Cause shall be given to the Executive a reasonable amount of time before the board’s meeting. The Executive and his counsel (if the Executive chooses to have counsel present) shall have a reasonable opportunity to be heard by the board at the meeting. Nothing in this Agreement limits the Executive’s or his beneficiaries’ right to contest the validity or propriety of the board’s determination of Cause, and they shall have the right to contest the validity or propriety of the board’s determination of Cause even if that right does not exist under any employment agreement of the Executive

 

1)

Death: the Executive dies while actively employed by NewMil Bancorp or a Subsidiary, or

 

2)

Disability: the Executive becomes totally disabled while actively employed by NewMil Bancorp or a Subsidiary. For purposes of this Agreement, the term “totally disabled” means that because of injury or sickness, the Executive is unable to perform his duties.

(a) If to NewMil Bancorp, to:

NewMil Bancorp, Inc.

19 Main Street

P.O. Box 600

New Milford, Connecticut 06776

Attn: Corporate Secretary

(b) If to the Executive, to:

B. Ian McMahon

19 Main Street

P.O. Box 600

New Milford, Connecticut 06776