[Logo] Banknorth Group, Inc.
March 28, 1997
Dear Fellow Shareholders:
You are cordially invited to attend our Annual Meeting of Shareholders to be
held at the Ramada Inn and Conference Center, Williston Road, South
Burlington, Vermont, on Tuesday, May 13, 1997 at 3:00 p.m. A formal notice
of meeting and proxy statement are attached.
At the meeting you will be asked to elect four directors, to approve the
1997 Equity Compensation Plan, to approve an amendment and restatement of
the 1994 Deferred Compensation Plan for Directors and Selected Executives
and to ratify the selection of the Company's independent auditors for 1997.
In addition, management will report on the Company's affairs and a
discussion period will be provided for questions and answers.
We hope that many of you will be able to attend our Annual Meeting. I look
forward to seeing you there.
Sincerely,
/s/ William H. Chadwick
William H. Chadwick
President and Chief Executive Officer
300 Financial Plaza, Burlington, Vermont 05401 (802) 658-9959
[Logo] Banknorth Group, Inc.
300 Financial Plaza
Burlington, Vermont 05401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1997
The Annual Meeting of Shareholders of Banknorth Group, Inc. will be
held at the Ramada Inn and Conference Center, Williston Road, South
Burlington, Vermont, on Tuesday, May 13, 1997, at 3:00 p.m., for the
following purposes:
1. To elect four directors to serve until the Annual Meeting of
Shareholders in 2000;
2. To consider and act upon the adoption of the Banknorth 1997 Equity
Compensation Plan;
3. To consider and act upon the adoption of an amendment and
restatement of the 1994 Deferred Compensation Plan for Directors
and Selected Executives of Banknorth and Participating
Affiliates;
4. To ratify the selection of independent auditors of the Company for
1997; and
5. To transact such other business as may properly be brought before
the meeting.
Only holders of Banknorth Group, Inc. Common Stock of record as of the
close of business on March 17, 1997 are entitled to notice of, and to vote
at, the Annual Meeting. A list of such shareholders will be available for
examination by any shareholder ten days prior to the meeting during ordinary
business hours at the Company's offices at 300 Financial Plaza in
Burlington, Vermont, and at the offices of The Howard Bank, N.A., Williston
Road, South Burlington, Vermont.
By order of the Board of Directors,
/s/ Thomas M. Dowling
THOMAS M. DOWLING
Secretary
Burlington, Vermont
March 28, 1997
YOUR VOTE IS IMPORTANT
WE URGE YOU TO FILL IN, DATE, SIGN AND RETURN YOUR PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO BE PRESENT
AT THE MEETING. IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY
AND VOTE IN PERSON IF YOU SO DESIRE.
BANKNORTH GROUP, INC.
300 Financial Plaza
Burlington, Vermont 05401
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 13, 1997
This proxy statement is furnished in connection with the solicitation
of proxies by or on behalf of the Board of Directors of Banknorth Group,
Inc. (the "Company") for use at the Annual Meeting of Shareholders to be
held on Tuesday, May 13, 1997, at 3:00 p.m., at the Ramada Inn and
Conference Center, Williston Road, South Burlington, Vermont, or at any
adjournment or adjournments thereof.
Proxy cards duly executed and returned by a shareholder will be voted
as directed on the card. If no choice is specified, the proxy will be voted
(i) FOR the election of the four nominees for director named in the proxy to
serve until the Annual Meeting of Shareholders in 2000, (ii) FOR approval of
the Banknorth 1997 Equity Compensation Plan; (iii) FOR the amendment and
restatement of the 1994 Deferred Compensation Plan for Directors and
Selected Executives of Banknorth and Participating Affiliates; and (iv) FOR
ratification of the independent public accounting firm of KPMG Peat Marwick
LLP as the independent auditors of the Company for the ensuing year. If
other matters are voted upon, the persons named in the proxy and acting
thereunder will vote in accordance with the recommendations of management
pursuant to the discretionary authority conferred in the proxy. Any proxy
may be revoked by written notice to the Secretary of the Company prior to
the voting of such proxy.
All expenses of this solicitation will be paid by the Company. This
solicitation of proxies by mail may be followed by solicitation either in
person, or by letter or telephone, by officers of the Company or by officers
or employees of its wholly-owned banking subsidiaries, First Vermont Bank
and Trust Company ("First Vermont Bank"), The Howard Bank, N.A., Franklin
Lamoille Bank, Granite Savings Bank and Trust Company ("Granite Bank"), the
Woodstock National Bank, Farmington National Bank, First Massachusetts Bank,
N.A. and The Stratevest Group, N.A. The Company will request brokers, banks
and other similar agents or fiduciaries to forward proxy materials to
beneficial owners of stock and, if requested, will reimburse them for the
costs thereof.
Under the rules of the Securities and Exchange Commission ("SEC"),
boxes and a blank space are provided on the proxy card for shareholders to
designate whether they wish to vote "for", "against", or "abstain" on any
proposal, or to withhold authority to vote for one or more of the Company's
nominees for director. Under Delaware law and the Company's By-laws, a
majority of the shares entitled to vote, represented in person or by proxy,
will constitute a quorum at the meeting. Votes withheld from director
nominees, abstentions and broker non-votes (as defined below) are counted
for purposes of determining whether a quorum is present and for determining
the number of votes required to adopt a proposal. Assuming a quorum is
present, a majority of the shares represented at the meeting in person or by
proxy will be required to elect a nominee for director, to approve the 1997
Equity Compensation Plan, to approve the amendment and restatement of the
Deferred Compensation Plan for Directors and Selected Executives, to ratify
the selection of the Company's independent auditors and to approve any other
matter voted on. Since votes withheld from director nominees and abstentions
and broker non-votes on other proposals are treated as shares present at the
meeting, they would have the effect of a vote against the nominee or
proposal, as the case may be. A broker non-vote occurs when a broker who
holds shares in street name for a customer does not have the authority under
applicable stock exchange or broker self-regulatory organization rules to
cast a vote on a particular matter (despite having voted the proxy on one or
more other, discretionary matters) because such matter is deemed non-
discretionary and the broker's customer has not furnished voting
instructions. The difference between the number of votes cast by a broker on
discretionary and non-discretionary proposals represents broker non-votes on
the non-discretionary proposals.
This proxy statement and accompanying proxy card were first sent to
shareholders on or about March 28, 1997. A copy of the Company's Annual
Report to Shareholders containing its audited financial statements for 1996
accompanies this proxy statement.
VOTING SECURITIES
Only holders of record of the Company's shares of common stock
outstanding as of the close of business on March 17, 1997 will be entitled
to notice of and to vote at the Annual Meeting. As of such date, there were
7,826,648 shares of the Company's common stock issued and outstanding. Each
such share is entitled to one vote on all matters presented to the
shareholders for vote.
As of February 1, 1997, the Company's wholly-owned trust company
subsidiary, The Stratevest Group, N.A. ("Stratevest"), had sole voting and
investment power over approximately 258,453 shares, or 3.3% of the
outstanding shares. In addition, as of such date Stratevest held as
fiduciary approximately 115,380 shares, or 1.47% of the outstanding shares,
as to which it had shared voting or investment power or sought voting
instructions from donors, beneficiaries, co-trustees or co-executors. In
cases in which Stratevest does not have sole voting control under the
governing instrument, Stratevest will vote shares of the Company's common
stock in accordance with instructions from donors, beneficiaries, co-
trustees or co-executors and will not vote such shares unless instructions
are received. Shares held by Stratevest as fiduciary over which it has sole
voting power under either the governing instrument or applicable statute
will be voted in a manner that best serves the interests of trust
beneficiaries.
Except as otherwise noted in the following sentence, the Company is
not aware of any individual, person, entity or group within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act")
which owns beneficially more than 5% of the Company's outstanding common
stock. In accordance with Section 13(g) under the Exchange Act, the Company
has been informed that John Hancock Mutual Life Insurance Company and
related entities own, in the aggregate, 453,000 shares, representing 5.8% of
the Company's outstanding stock, with sole voting and investment power over
such shares vested in John Hancock Advisors, Inc., an affiliated investment
advisor.
Stock Ownership of Directors and Executive Officers
The following table shows the amount of common stock owned
beneficially, directly or indirectly, by each director and nominee for
director, by each of the executive officers named in the summary
compensation table presented elsewhere in this proxy statement, and by all
incumbent directors, nominees and executive officers of the Company as a
group. Except as otherwise indicated in the footnotes to the table (i) share
data is as of March 1, 1997; and (ii) the named individuals possess sole
voting and investment power over the shares listed.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Shareholder or Group Owned(1) of Class
--------------------------------------------------------------------------
<S> <C> <C>
Incumbent Directors and Nominees
Thomas J. Amidon, Esq. .......................... 7,543 .096%
Jacqueline D. Arthur............................. 100 .001
Nordahl L. Brue, Esq. ........................... 2,352 .030
Robert A. Carrara................................ 1,869 .024
William H. Chadwick(2)........................... 52,862 .675
Susan C. Crampton, CPA(3)........................ 5,153 .066
Richard J. Fleming............................... 2,160 .028
Luther Frederick Hackett(4)...................... 44,100 .563
Kathleen Hoisington............................. 500 .006
Richard M. Narkewicz, M.D.(5).................... 1,990 .025
John B. Packard(6)............................... 100 .001
R. Allan Paul, Esq.(7)........................... 5,880 .075
Angelo P. Pizzagalli(8).......................... 4,359 .056
Margaret E. Richey(9)............................ 114,947 1.469
Thomas P. Salmon, Esq.(10)....................... 837 .011
Certain Executive Officers
Thomas J. Pruitt(11)............................. 27,600 .353%
Robert M. Gillis (12)............................ 31,325 .400
Richard J. Fitzpatrick(13)....................... 21,449 .274
Owen H. Becker(14)............................... 2,015 .026
All Directors, Nominees and Executive
Officers as a Group (19 individuals)............. 327,141 4.179%
- --------------------
<F1> Includes (i) 27,842 shares with respect to which voting or investment
powers are shared; (ii) 77,243 shares as to which beneficial ownership
is disclaimed; (iii) 39,950 shares of performance stock awarded to
certain members of the group under the Company's Long Term Executive
Incentive Plan (the "Long Term Plan"); (iv) 47,050 shares certain
members of the group have the right to acquire upon exercise of
options granted under the Long Term Plan; and (v) approximately 21,206
shares in which certain members of the group have an indirect interest
by virtue of their participation in a pooled Company stock fund
maintained under the Company's 401(k) Plan. Share information relating
to the 401(k) Plan is as of December 31, 1996, the date of the most
recent Plan report.
<F2> Includes (i) 4,936 shares held by Mr. Chadwick indirectly through the
Company's 401(k) Plan; (ii) 18,000 shares of performance stock granted
under the Company's Long Term Plan; and (iii) 9,000 shares Mr.
Chadwick has the right to acquire upon exercise of options awarded to
him under the Company's Long Term Plan.
<F3> Includes 1,062 shares held by Mrs. Crampton jointly with her husband
and 2,040 shares held by her husband.
<F4> Includes 39,752 shares held by various corporations controlled by Mr.
Hackett and 50 shares held by Mr. Hackett's wife, as to which
beneficial ownership is disclaimed.
<F5> Includes 1,923 shares held by Dr. Narkewicz jointly with his wife as to
which voting and investment power is shared.
<F6> Acquired by Mr. Packard on March 20, 1997.
<F7> Includes 2,287 shares held by Mr. Paul's wife as to which Mr. Paul
disclaims beneficial ownership.
<F8> Includes 3,359 shares held by Pizzagalli Construction Company, Inc., an
affiliate of Mr. Pizzagalli, and voting and investment power is
shared.
<F9> In accordance with applicable rules of the Securities and Exchange
Commission, the shareholdings disclosed in the table for Margaret
Richey include (i) all of the 28,439 shares held by Southworth
Corporation, an affiliate of Mrs. Richey, and (ii) all of the 47,637
shares held by the Milne Family Trust, of which Mrs. Richey is a co-
trustee and whose beneficiaries include Mrs. Richey's adult children.
Mrs. Richey shares voting and investment power over all of such
shares. Mrs. Richey disclaims beneficial ownership of (i) 18,959 of
the shares held by Southworth Corporation, (ii) 37,659 of the shares
held by the Milne Family Trust and (iii) 18,000 shares held by Mrs.
Richey's husband. After giving effect to such disclaimers, Mrs.
Richey's percentage ownership of the Company's outstanding common
stock is .515%.
<F10> Includes 288 shares held by Mr. Salmon's wife as to which Mr. Salmon
disclaims beneficial ownership.
<F11> Includes (i) 3,200 shares held by Mr. Pruitt indirectly through the
Company's 401(k) Plan; (ii) 8,700 shares of performance stock granted
under the Company's Long Term Plan; and (iii) 15,450 shares that Mr.
Pruitt has the right to acquire upon exercise of options awarded under
the Long Term Plan.
<F12> Includes (i) 9,814 shares held by Mr. Gillis indirectly through the
Company's 401(k) Plan; (ii) 6,750 shares of performance stock granted
under the Company's Long Term Plan; and (iii) 12,300 shares that Mr.
Gillis has the right to acquire upon exercise of options awarded under
the Long Term Plan.
<F13> Includes (i) 2,991 shares held by Mr. Fitzpatrick indirectly through
the Company's 401(k) Plan; (ii) 4,750 shares of performance stock
granted under the Company's Long Term Plan; and (iii) 10,300 shares
that Mr. Fitzpatrick has the right to acquire upon exercise of options
awarded under the Long Term Plan.
<F14> Includes (i) 265 shares held by Mr. Becker indirectly through the
Company's 401(k) Plan; and (ii) 1,750 shares of performance stock
granted under the Company's Long Term Plan.
</TABLE>
--------------------
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors to file with the Securities and Exchange Commission reports of
their ownership and changes in ownership of the Company's equity securities
and to furnish the Company with copies of all such reports. Except as noted
in the following sentence, and based solely on its review of copies of
Section 16 reports received by it, or on written representations from
certain reporting persons that no filings were required for those persons,
the Company believes that during 1996 all Section 16(a) filing requirements
applicable to its officers and directors were complied with. During 1996
Director Pizzagalli inadvertently failed to file with the SEC on a timely
basis a Form 4 report relating to his purchase of 1,000 shares of the
Company's Common Stock.
ARTICLE 1
ELECTION OF DIRECTORS
The Certificate of Incorporation and By-laws of the Company provide
for division of the Board of Directors into three classes, as nearly equal
in number as possible, each class serving for a period of three years.
During 1996 the Board of Directors consisted of fourteen persons. In May,
1996, Director Stephen E. Baker retired from the Board, and in December
Jacqueline D. Arthur of Beverly, Massachusetts was appointed to fill the
remainder of Mr. Baker's term. The Board has fixed at fourteen the number of
directors for the ensuing year. The following three incumbent directors,
whose terms expire at the 1997 Annual Meeting, have been nominated by the
Board of Directors to stand for re-election to serve a three-year term
expiring in 2000: Richard J. Fleming, Luther F. Hackett (Chairman of the
Board) and Richard M. Narkewicz, M.D. Incumbent director Margaret E. Richey,
whose term will also expire at the 1997 Annual Meeting, has chosen not to
stand for re-election. The Board of Directors has nominated John B. Packard
of Raymond, New Hampshire to stand for election to a three year term
expiring in 2000 to fill the vacancy to be created upon Ms. Richey's
retirement.
Unless authority is withheld, proxies solicited hereby will be voted
in favor of each of the four nominees to serve a three-year term expiring at
the Annual Meeting in 2000. If for any reason not now known by the Company
any of such nominees should not be able to serve, proxies will be voted for
a substitute nominee or nominees designated by the Board of Directors, or
for fewer than four nominees if the Board has instead voted to fix the
number of Directors at fewer than fourteen, as the Directors deem
appropriate.
Set forth in the table below is certain information concerning each of
the nominees and other incumbent directors. The dates indicated for service
on the Company's Board of Directors include service on the boards of the
Company's predecessor bank holding companies, but not the subsidiaries.
<TABLE>
<CAPTION>
Served as
Director
Name and Age Since Principal Occupation
- ---------------------------------------------------------------------------------------------------------
Nominees for Director whose terms (if elected) will expire in 2000:
<S> <C> <C>
Richard J. Fleming, 65............. 1994 Chairman, Fleming Oil Company, Inc.
Brattleboro, VT
(petroleum products distributor)
Luther Frederick Hackett, 63....... 1983 President, Hackett, Valine & MacDonald, Inc.
(Chairman of the Board of South Burlington, VT
Banknorth Group, Inc.) (insurance agency)
Richard M. Narkewicz, M.D., 63..... 1983 Physician, CHP/Timber Lane Pediatrics; President,
Timber Lane Medical Center, Inc.
South Burlington, VT
John B. Packard, 51................ President, Gemini Valve, Inc.
Raymond, NH
(manufacturer, valves and controls)
Incumbent Directors whose terms will expire in 1999:
Nordahl L. Brue, Esq., 52.......... 1994 Principal, Champlain Management Services, Inc.
(quick-service restaurants)
and Waterbury Holdings, Inc.
(food processing)
Burlington, VT
Kathleen Hoisington, 54............ 1996 President, Hoisington Realty, Inc.
Bennington, VT
(real estate agency)
R. Allan Paul, Esq., 65............ 1983 Counsel, Paul, Frank & Collins, Inc.
Burlington, VT
(law firm)
Angelo P. Pizzagalli, 62........... 1983 President, Pizzagalli Construction Company
South Burlington, VT
Thomas P. Salmon, Esq., 64......... 1982 President, University of Vermont
Burlington, VT
Incumbent Directors whose terms will expire in 1998:
Thomas J. Amidon, Esq., 57......... 1982 Attorney at Law
Stowe, VT
Jacqueline D. Arthur, 47........... 1996 Vice President and Chief Financial Officer,
CP Clare Corporation
Beverly, MA
(electronics manufacturer)
Robert A. Carrara, 57.............. 1983 Vice President and Treasurer, J.P. Carrara & Sons, Inc.
North Clarendon, VT
(concrete products)
William H. Chadwick, 60............ 1987 President and Chief Executive Officer,
Banknorth Group, Inc.
Burlington, VT
Susan C. Crampton, C.P.A. 56....... 1985 Principal, The Vermont Partnership
Jericho, VT
(business consultants)
</TABLE>
Except as set forth below, each of the individuals listed in the
foregoing table has been employed by the firm or has had the occupation set
forth opposite his or her name for the past five years. In addition to
serving as a principal of Champlain Management Services, Inc. and Waterbury
Holdings, Inc., Mr. Brue holds various positions or interests in affiliated
companies and also practices law as a principal in the law firm of Sheehey
Brue Gray & Furlong, P.C., Burlington, Vermont. Prior to Mr. Salmon's
appointment as President of the University of Vermont in February, 1993, he
served as Interim President of the University beginning in November, 1991.
Before he joined the University, Mr. Salmon practiced law as a partner in
the law firm of Salmon & Nostrand, Bellows Falls, Vermont. Prior to joining
CP Clare Corporation, Ms. Arthur served as the Vice President and Chief
Financial Officer of T Cell Sciences, Inc., a biotechnology firm in Needham,
Massachusetts, and as Vice President-Finance of M/A Com, Inc., a defense
electronics manufacturer in Burlington, Massachusetts.
Certain of the nominees and incumbent directors also serve as
directors of other companies registered or filing reports under the
Securities Exchange Act of 1934, or investment companies registered under
the Investment Company Act of 1940, as follows:
Mr. Brue - Green Mountain Power Corporation and Quality Dining, Inc.
Mr. Hackett - Central Vermont Public Service Corporation and Vermont
Electric Power Company, Inc.
Mr. Salmon - Green Mountain Power Corporation (Chairman of the Board)
and National Life Insurance Company
Committees of the Board and Meeting Attendance
During 1996 the Company's Board of Directors held eleven regular
meetings and one special meeting. Each incumbent director attended at least
75% of the aggregate of all meetings of the Company's Board of Directors and
committees of which he or she was a member.
The Company's Board of Directors has standing Executive, Audit,
Compensation and Nominating Committees. Members of the committees are
appointed annually by the Board of Directors.
The Executive Committee has substantially all powers of the Board of
Directors in the management of the business and affairs of the Company
between meetings of the Board of Directors. The present members of the
Company's Executive Committee are Angelo P. Pizzagalli (Chair), Luther F.
Hackett, Susan C. Crampton, William H. Chadwick, Richard M. Narkewicz, M.D.,
R. Allan Paul and Thomas P. Salmon. During 1996, the Executive Committee met
three times.
The functions of the Audit Committee are to recommend to the Company's
Board of Directors the engagement of independent accountants and to review
with the independent accountants the scope and results of the audits, the
Company's internal controls and the professional services furnished by the
independent accountants. The Audit Committee also has oversight
responsibility for the Company's consolidated loan review functions. The
present members of the Company's Audit Committee are R. Allan Paul (Chair),
Susan C. Crampton (Vice Chair), Thomas J. Amidon, Robert A. Carrara,
Margaret E. Richey, Kathleen Hoisington and Jacqueline D. Arthur. Chairman
of the Board Hackett attends meetings of the Committee ex officio, but is
not a member of the Committee and does not vote on matters considered by the
Committee. During 1996 the Audit Committee met four times.
The Nominating Committee is responsible for recommending candidates
for election as Directors of the Company and its subsidiaries. The Committee
will consider recommendations by stockholders for nomination as Directors,
provided such recommendations are submitted in writing to the Secretary of
the Company. The present members of the Nominating Committee are Thomas P.
Salmon (Chair), Nordahl L. Brue, Robert A. Carrara, William H. Chadwick,
Richard J. Fleming, Kathleen Hoisington and Angelo P. Pizzagalli. Chairman
of the Board Hackett attends meetings of the Committee ex officio, but is
not a member of the Committee and does not vote on matters considered by the
Committee. During 1996 the Nominating Committee met three times.
The functions and membership of the Company's Compensation Committee
are described below under the caption "Compensation Committee Interlocks and
Insider Participation."
Compensation Committee Interlocks and Insider Participation
The Company is not aware of the existence of any interlocking
relationships between the senior management of the Company and that of any
other company.
During 1996 the following directors served on the Compensation
Committee of the Board: Richard N. Narkewicz, M.D. (Chair), Thomas J.
Amidon, Nordahl L. Brue, Richard J. Fleming, Luther F. Hackett, Margaret E.
Richey and Jacqueline D. Arthur. Stephen E. Baker served as committee chair
until his retirement in May, 1996. President and Chief Executive Officer
William H. Chadwick attends meetings of the Compensation Committee ex
officio, but is not a member of the Committee and does not participate in
its votes. The function of the Company's Compensation Committee is to review
and to make recommendations to the Board of Directors concerning
compensation and benefits paid to the Company's employees and to the Boards
of Directors of the Company's subsidiaries. A Report of the Compensation
Committee on matters relating to executive compensation is set forth below
in this proxy statement under the caption "COMPENSATION COMMITTEE REPORT".
During 1996 the Compensation Committee met four times.
Certain members of the Compensation Committee, or persons or entities
with which they are affiliated, had transactions with the Company or its
subsidiaries during 1996 as follows: Thomas J. Amidon is an attorney who
practices law in Stowe, Vermont. Nordahl L. Brue is a principal and Vice
President of the law firm of Sheehey Brue Gray & Furlong, P.C. in
Burlington, Vermont. The law firms of Messrs. Amidon and Brue performed
various legal services for the Company or its subsidiaries during 1996 and
it is expected that they will also perform legal services for the Company or
its subsidiaries during 1997.
Other Director Affiliations and Related Transactions
R. Allan Paul is a senior member of the law firm of Paul, Frank &
Collins, Inc. in Burlington, Vermont. Thomas P. Salmon is a partner in the
law firm of Salmon & Nostrand in Bellows Falls, Vermont, although since
joining the University of Vermont in November, 1991, he has not actively
engaged in the practice of law. Susan C. Crampton's husband is a part owner
of the law firm of Gravel and Shea in Burlington, Vermont. Each of these law
firms performed various legal services for the Company or its subsidiaries
during 1996 and it is expected that they will perform legal services for the
Company or its subsidiaries during 1997.
The Company's banking subsidiaries have had, and in the future expect
to have, banking transactions with directors and officers of the Company,
with their immediate families and with corporations and organizations with
which the directors and officers are affiliated. These transactions were
undertaken in the ordinary course of business, on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and do not involve more
than normal risk of collectibility or present any other unfavorable
features.
Directors' Fees
Directors of the Company who are not also salaried employees of the
Company or its subsidiaries receive an annual retainer of $10,000. The Chair
of the Board receives an additional annual retainer of $20,000. All
directors other than salaried employees of the Company receive $600 for each
Board meeting attended and $600 for each committee meeting attended, except
that if a committee meeting is held on the same day as a Board meeting the
committee meeting fee is $400. Chairs of the Company's standing committees
receive an annual retainer of $2,000. Directors are reimbursed for their
out-of-pocket expenses incurred in attending meetings of the Board or its
committees.
Deferred Compensation Plan
Directors may elect to defer current receipt of some or all of their
fees under the 1994 Deferred Compensation Plan For Directors and Selected
Executives of Banknorth Group, Inc. and Participating Affiliates. Under the
present terms of the plan, deferrals are credited to a cash account which
bears interest (adjusted annually) at a rate equal to one-half a percentage
point above the one-year Treasury bill rate, or at the participant's
election, to a so-called "phantom stock" account, whose underlying value is
based on the market value and performance of the Company's common stock.
Payment of deferrals is made only in cash and will begin upon the
participant's retirement, death or disability, or at an earlier or later
date elected by the participant. Amounts deferred and interest and other
accruals under the plan represent a general unsecured obligation of the
Company and no assets of the Company have been segregated to meet the
Company's obligations under the plan.
The Board of Directors has adopted an amendment and restatement of
the Plan, subject to shareholder approval at the Annual Meeting, which is
designed to replace the phantom stock units with a more tangible equity
interest by providing for allocations in the form of restricted stock units
and payout from that account in the form of common stock. The proposed
amendments are described under the caption "ARTICLE 3 - PROPOSAL TO AMEND
AND RESTATE THE 1994 DEFERRED COMPENSATION PLAN FOR DIRECTORS AND SELECTED
EXECUTIVES".
Directors' Stock Ownership Guidelines
Because the Board believes that ownership of Company stock helps align
management and shareholder interests the Board has adopted stock ownership
guidelines for directors and certain officers. The stock ownership
guidelines for certain of the Company's executive officers are described
below under the caption "COMPENSATION COMMITTEE REPORT". The stock ownership
guidelines for directors as initially adopted in 1994 recommended that each
director own Company stock having a market value equal to at least three
times the amount of the director's annual retainer. Consistent with the
Company's heightened emphasis on encouraging stock ownership among
directors, the Board during 1996 revised the stock ownership guidelines to
increase the recommended amount of stock ownership from three, to five,
times the amount of the director's annual retainer. If a director fails to
achieve the recommended level of stock ownership within five years, the
director will receive his or her retainer partially in the form of the
Company's stock. Under the revised guidelines phantom stock units are
considered in satisfying the stock ownership test, but stock options are
not.
Directors Emeriti
Several former directors of the Company have been appointed to serve
as Directors Emeriti. Under By-law amendments adopted by the Board of
Directors in 1996, only individuals who were directors of the Company on
February 27, 1996 and who continue to serve until their retirement will
qualify for appointment to the status of Directors Emeriti provided that
they retire following attainment of age 65 but prior to the first Annual
Meeting after attainment of age 67. Directors Emeriti are entitled to attend
meetings of the Board of Directors, but do not vote on matters acted upon
by the Board, nor is their presence counted for purposes of determining a
quorum. Director Emeritus status terminates at the Annual Meeting following
attainment of age 72. The Director Emeritus designation will terminate after
all individuals who served on the Board of Directors on February 27, 1996
(14 individuals including two of the Directors Emeriti named below) have
served as Directors Emeriti. Each Director Emeritus is paid an annual
retainer of $10,000, but receives no meeting or other fees. The present
Directors Emeriti are Stephen E. Baker, Lawrence H. Reilly, Theodore H.
Thomas, Jr. and Elizabeth G. Woods. Margaret E. Richey will be appointed a
Director Emeritus upon her retirement from the Board at 1997 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 1.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The Committee is composed
of seven independent, non-employee directors. Recommendations of the
Committee on compensation are submitted to the full Board of Directors for
approval.
Based on the Committee's recommendation, the Board has approved the
following principal objectives for the Company's executive compensation
policies:
-- To increase management's focus on long-term strategic plans to
further the growth in the earnings of the Company.
-- To increase management's focus on decisions to maximize annual
earnings.
-- To link shareholder and management interests by tying a
significant portion of executive compensation rewards to changes
in shareholder values.
-- To link shareholder and management interests by encouraging
executive stock ownership.
-- To attract experienced management
-- To retain quality management.
To reach these objectives, the executive compensation program contains
three components:
1. Base salary with possible annual merit increases based upon
individual performance.
2. Short-term cash incentive payments based on meeting annual plans
and budgets approved by the Board of Directors and based upon a
comparison to a select group of peer banks.
3. Long-term stock and stock-based cash awards, for meeting
performance goals approved by the Board of Directors over a two
to five year period and based primarily on corporate
performance.
The Committee believes that this compensation program fairly balances
individual, subsidiary and corporate performance and recognizes both the
short-term and long-term objectives of the Company.
It is the philosophy of the Committee to place significant emphasis on
incentive compensation, which reduces the relative amount of compensation
that is fixed. Compensation for management positions is a mix of three
components. For example, the portions of total compensation for the
President and Chief Executive Officer ("CEO") under the approved plan, which
would be earned if the Company meets performance objectives would be:
<TABLE>
<S> <C>
Base Salary................................. 45%
Short-Term Cash Incentives.................. 22
Long-Term Stock Awards...................... 33
---
Total Compensation.......................... 100%
===
</TABLE>
In general, the greater the executive's responsibilities, the greater
is the portion of his or her potential total compensation that is tied to
performance incentives and to the value of the Company's common stock. The
Board believes that this approach properly reflects the greater potential
impact senior management has on the strength and performance of the Company
over the longer term.
In 1993 the Board established a peer group of like-sized, publicly
traded commercial banking organizations to use for executive compensation
comparisons. The Board also approved an executive compensation program that
matches total compensation levels of the CEO and other executives to those
of the peer group. In 1996, the peer group consisted of 41 companies. 34 of
the 41 are included in the NASDAQ Bank Stock Index referred to in the stock
performance graph on page 13. There is no published data readily available
on the combined stock performance of the peer group, though the Compensation
Committee does review the relative stock performance over both one and five
year periods of individual companies included in the group.
Section 162(m) of the Internal Revenue Code limits the deductibility
of executive compensation (currently $1 million per covered individual). As
the compensation levels paid by the Company to its executives are below the
deductibility limit, this provision does not at present have any impact on
the Company. Nevertheless the Board, upon recommendation of the Compensation
Committee, has determined that as a matter of policy, compensation levels
for the Company's executives should be structured to preserve tax
deductibility, should Section 162(m) impact the Company in the future.
Components of Compensation
Base Salary. Consistent with the philosophy described above, the base
salary of executive officers is generally targeted to be below the median of
comparable businesses. Base salaries for all managers are reviewed annually
and salaries may be increased based on individual contributions to the
Company. Each position is assigned to a grade level and each grade level has
a range of base salary.
Management and the Compensation Committee works with the consulting
firm of Watson Wyatt Worldwide in updating a point factor system for grading
jobs, creating a salary grade structure for all jobs, and setting the pay
ranges and midpoints for each grade. The pay ranges were increased for 1997,
based on annual survey information from Watson Wyatt Worldwide. The midpoint
for the President and CEO for 1997 is $330,630.
Mr. Chadwick's base salary was increased from $260,000 to $275,000 in
1996. The other senior executives who were below the midpoint for their
grade level and whose performance met or exceeded expectations, were also
given base salary increases in 1996. All salary increases for senior
executives were approved by the Compensation Committee.
Short-Term Cash Incentives. Executive personnel of the Company and its
subsidiaries may earn cash incentives for meeting annual goals established
by the Board under the Management Incentive Compensation Plan. Incentives
for the parent company executives are based 100% on corporate performance.
Incentives for the subsidiary presidents are based 50% on corporate
performance and 50% on the respective subsidiary's performance. Incentives
for designated members of senior management of each subsidiary are based 25%
on corporate performance and 75% on the respective subsidiary's performance.
The requirements of the Company to meet its overall goal must be met before
any incentives are paid for the subsidiary's performance. The Board retains
the discretion under the Plan to adjust the performance targets and/or
payment amounts at any time in cases of significant non-recurring events.
For 1996, there were five levels of incentives for participants.
Possible incentives for the President and CEO ranged between 0% and 150% of
salary paid for the calendar year and for the other four most highly
compensated executives, between 0% and 120%. Performance targets for the
Company included targets based on net income, return on average equity
(ROAE) and return on average assets (ROAA); performance targets for each
subsidiary are based on its contributions to the Company's net income and on
that subsidiary's ROAA, as well as the subsidiary's Efficiency Ratio and
ratio of Salary plus Benefits to Earning Assets.
A performance-based peer comparison component was added in 1994 to
emphasize the Board's desire to rank in the higher percentiles of the peer
group's performance. ROAE, ROAA, Net Interest Margin, the ratio of Net
Operating Expenses to Average Assets, and Non-performing Assets to Total
Assets were chosen as peer group measures due to the high correlation
between those measures and the market value of publicly traded commercial
banking company stocks.
Based on 1996 performance, the President and CEO earned an incentive
award of 15.87% of base salary. The other four most highly compensated
executive officers of the Company earned incentive awards for 1996 ranging
from 11.11% to 23.06% of base salary.
Long-Term Stock Awards. Improvements in the Company's long-term
performance, as evidenced by meeting Board-adopted goals for ROAE and ROAA
and increased market value of its stock, are rewarded under the
Comprehensive Long-Term Executive Incentive Plan (the "Plan"). The Plan
provides for discretionary awards to executives designated by the
Compensation Committee. Awards may include stock options, stock appreciation
rights, restricted stock, performance shares, restricted stock units and
performance share units. Because awards of options and stock appreciation
rights are keyed to the market value of the Company's stock at the time of
grant, the future value of those awards is entirely dependent on increases
in the market value of the Company's stock.
During 1996, the Board of Directors issued non-qualified stock options
for 131,500 shares and awarded 11,400 performance shares (restricted stock
with performance-based restrictions). The award amounts were set to
approximate the compensation mix described above. The CEO received options
for 10,000 shares and received 3,000 performance shares. These awards were
the highest of any Company executive. The other four most highly compensated
executive officers of the Company received, in the aggregate, options for
12,500 shares and 3,450 performance shares, with vesting of performance
shares over five years tied to attainment of annual ROAE and ROAA targets.
The Board envisions that future option and performance share and unit
awards will be consistent with the emphasis on performance-driven
compensation and will be consistent with the mix of components of
compensation described earlier in this report. Typically, the Compensation
Committee meets to consider awards of stock-based compensation in time for
action on its recommendations at the July Board meeting. The Committee and
the Board consider stock-based awards annually based on the targeted
compensation mix described above and not based upon prior or anticipated
future awards. As described below under the caption "ARTICLE 2 - PROPOSAL TO
ADOPT THE 1997 EQUITY COMPENSATION PLAN," the Board of Directors, on
recommendation of the Committee, is proposing the adoption of a new long
term executive incentive plan to replace the existing plan.
The Company's increased emphasis on stock-based compensation is
further reflected in the proposed amendments to the 1994 Deferred
Compensation Plan for Directors and Selected Executives, described below
under the caption "ARTICLE 3 - PROPOSAL TO AMEND AND RESTATE THE 1994
DEFERRED COMPENSATION PLAN FOR DIRECTORS AND SELECTED EXECUTIVES," which
have been adopted by the Board upon the Committee's recommendation, subject
to shareholder approval.
Executive Stock Ownership Guidelines
In order to further align executive and shareholder interests the
Board in 1994 adopted stock ownership guidelines for the Company's
executives. (Similar guidelines were also adopted for the Directors). The
guidelines recommend that executives own Company stock equal in market value
to specified multiples of their base salary. The recommended multiple for
the CEO is three times base salary and for the next four most highly
compensated executive officers, the recommended multiple is two times base
salary. If an executive has not attained these levels of stock ownership
within five years, the executive may subsequently receive stock in lieu of
cash awards to which the executive may otherwise be entitled. Stock options
are excluded from the stock ownership calculations under the guidelines.
Banknorth Group, Inc. Compensation Committee
Richard M. Narkewicz, M.D., Chair
Thomas J. Amidon, Esq. Nordahl L. Brue, Esq.
Luther F. Hackett Margaret E. Richey
Richard J. Fleming Jacqueline D. Arthur
Pursuant to Item 402(a)(9) of Regulation S-K promulgated by the
Securities and Exchange Commission (SEC), neither the foregoing Report nor
the material set forth below under the caption "STOCK PERFORMANCE
COMPARISON" shall be deemed to be filed with the SEC for purposes of the
Securities Exchange Act of 1934, nor shall such Report or such material be
deemed to be incorporated by reference in any past or future filing by the
Company under the Securities Exchange Act of 1934 or the Securities Act of
1933, as amended.
STOCK PERFORMANCE COMPARISON
Set forth below is a line-graph presentation comparing the change in
cumulative, five-year shareholder returns on the Company's stock with
cumulative, five-year returns of two peer indices--the Nasdaq U.S. Companies
Stock Index and the Nasdaq Bank Stock Index. Both indices are unmanaged and
published by Nasdaq.
Comparative Five-Year Total Returns*
BKNG Comparison to NASDAQ U.S. Companies and NASDAQ Banks
<TABLE>
<CAPTION>
NASDAQ NASDAQ NASDAQ
US BANK BKNG
-------------------------------
<C> <C> <C> <C> <C>
December 1991 100.000 100.000 100.000
January 1992 105.847 104.999 123.529
February 1992 108.246 110.512 167.647
March 1992 103.137 112.116 164.706
April 1992 98.714 117.271 147.059
May 1992 99.996 122.563 104.706
June 1992 96.086 122.234 155.882
July 1992 99.490 125.321 152.941
August 1992 96.449 123.036 147.059
September 1992 100.034 126.037 164.706
October 1992 103.974 128.686 164.706
November 1992 112.247 137.070 160.294
December 1992 116.378 145.546 158.824
January 1993 119.691 151.200 214.706
February 1993 115.226 154.775 215.882
March 1993 118.561 161.042 224.754
April 1993 118.843 154.475 208.489
May 1993 120.281 151.351 199.321
June 1993 120.837 155.636 206.759
July 1993 120.980 161.192 229.071
August 1993 127.233 165.485 233.236
September 1993 131.022 170.127 236.226
October 1993 133.967 167.641 245.197
November 1993 129.972 160.925 222.471
December 1993 133.595 165.983 234.497
January 1994 137.650 168.710 249.528
February 1994 136.363 166.589 239.307
March 1994 127.976 163.976 219.617
April 1994 126.315 169.277 233.248
May 1994 126.624 176.995 244.154
June 1994 121.993 177.004 251.020
July 1994 124.495 179.460 289.932
August 1994 132.432 184.046 310.075
September 1994 132.093 178.965 297.795
October 1994 134.689 173.588 279.375
November 1994 130.221 166.341 287.357
December 1994 130.586 165.379 271.907
January 1995 131.318 170.939 315.165
February 1995 138.263 179.298 314.918
March 1995 142.361 181.067 293.092
April 1995 146.843 186.085 305.564
May 1995 150.630 191.756 320.905
June 1995 162.836 199.908 338.208
July 1995 174.805 209.327 372.816
August 1995 178.348 220.563 399.306
September 1995 182.449 225.657 421.490
October 1995 181.404 229.340 402.475
November 1995 185.663 241.104 437.082
December 1995 184.675 246.309 491.318
January 1996 185.588 246.961 430.701
February 1996 192.660 250.348 437.082
March 1996 193.301 256.092 453.151
April 1996 209.340 254.775 449.937
May 1996 218.952 259.057 430.654
June 1996 209.081 260.359 443.606
July 1996 190.460 257.166 424.178
August 1996 201.129 275.241 459.796
September 1996 216.524 288.504 487.514
October 1996 214.136 301.087 450.013
November 1996 227.396 323.622 505.449
December 1996 227.158 325.611 544.835
Assumes $100 invested at the close of trading day preceding the first day of
the fifth preceding fiscal year in BKNG common stock, NASDAQ, and NASDAQ Banks.
<F*> Cumulative total return assumes reinvestment of dividends.
</TABLE>
ARTICLE 2
PROPOSAL TO ADOPT THE 1997 EQUITY COMPENSATION PLAN
The Board of Directors has adopted, subject to shareholder approval,
the 1997 Equity Compensation Plan (the "Equity Compensation Plan" or the
"1997 Plan") for directors, officers and other key employees of the Company
and its subsidiaries. That plan, as well as the proposed amendment and
restatement of the 1994 Deferred Compensation Plan for Directors and
Selected Executives described under Article 3 of this proxy statement, will
assist the Board in its continuing effort to link director and management
compensation more closely to Company performance and increases in
shareholder value. The Board also believes that the plans will assist the
Company in attracting, retaining and motivating individuals of high caliber
to serve as directors, officers or key employees of the Company and its
subsidiaries.
The 1997 Equity Compensation Plan is similar in many respects to the
Company's Comprehensive Long-Term Executive Incentive Plan for Officers and
Other Key Employees, which has been in effect since its approval by the
shareholders in 1990 (the "1990 Plan"). Both plans contain four award
components: stock options, stock appreciation rights, restricted stock and
restricted stock units (including restricted stock and units having
performance conditions, sometimes referred to below as "performance stock"
or "performance stock units"). Although the two plans are very similar,
there are certain differences between them (described below), including the
class of individuals eligible to participate. The 1997 Plan, if approved,
will replace the 1990 Plan and no additional awards will be made under the
1990 Plan.
The material features of the Equity Compensation Plan are described
below, as are any material differences from the 1990 Plan and such
description is qualified in its entirety by reference to the full text of
the 1997 Plan, set forth as Exhibit A to this proxy statement.
Administration and Eligibility
The Equity Compensation Plan provides for administration by the Board
of Directors, or by a committee designated by the Board. It is expected that
the Board will designate its Compensation Committee to administer the Plan.
The present members of the Committee are listed on page 13 above. The Plan
requires that any awards be approved by the Board of Directors, even if
administration of the Plan has been delegated to a committee.
Eligibility for awards will be limited to directors and director
nominees of the Company and its subsidiaries and to those officers and other
key employees of the Company and its subsidiaries who are designated
annually by the Board and are in positions in which they may contribute
significantly to the profitability of the Company. This class of eligible
participants is broader than under the 1990 Plan in that the 1997 Plan,
unlike the 1990 Plan, permits awards to be made to directors and also
permits contingent awards to be made to director nominees. The vesting of a
contingent award to a director nominee is subject to the nominee's
subsequent election or appointment to the Board of the Company or
subsidiary, as the case may be, and would terminate automatically if the
individual failed, for whatever reason, to be elected or appointed to the
board. The Board of Directors believes that including directors and director
nominees in the class of eligible individuals will assist in recruiting new
Board members of high caliber and will provide added flexibility in
designing appropriate Board compensation packages.
Assuming that the Equity Compensation Plan is adopted, it is expected
that approximately 79 directors of the Company and its subsidiaries will
become eligible to receive awards under the Plan. The number of officers and
key employees eligible to receive awards under the new plan will be the same
as under the 1990 Plan (approximately 80 individuals at this time). However,
because the designation of participants each year is subject to the
discretion of the Board, no prediction can be made at this time as to the
exact number of directors, director nominees, officers or employees who may
be designated to participate in the future.
Awards under the 1990 Plan to the five most highly compensated
executive officers of the Company are disclosed in the summary compensation
table and in the Option/SAR grants table on pages 23 and 25, respectively,
of this proxy statement.
Stock Options and Stock Appreciation Rights
Stock Options. Participants may be granted options to purchase shares
of the Company's common stock at a fixed price and during a specified period
of time. In the discretion of the Board, the options granted under the Plan
may consist of options designed to qualify for tax purposes as "incentive
stock options" or may consist of "non-qualified" options. Special
requirements applicable to incentive stock options are noted below.
Exercise Price and Holding Period. The exercise price of stock options
must be at least equal to 100% of the fair market value of the optioned
stock on the day the option is granted. (On March 21, 1997, the closing
price of the Company's common stock was $40.00 per share.) The optionee may
pay for the optioned shares with either cash or other shares of the
Company's common stock (valued at their fair market value), including shares
withheld upon exercise of the option. The Plan requires that non-qualified
stock options be held for at least six months and incentive stock options
for at least one year, prior to exercise. Subject to the foregoing, options
are exercisable in whole or in part at such time or times as the Board may
determine, but in any event not later than ten (10) years after the date of
the grant.
Cashless Exercise Features. The Equity Compensation Plan includes
provisions authorizing the exercise of a stock option through a so-called
"cashless exercise" procedure. Under that procedure an optionholder may
arrange with his broker to sell all or some of the shares issuable upon
exercise and to remit a portion of the proceeds to the Company in payment of
the exercise price of the option. The 1997 Plan also permits the
optionholder to pay for all or part of the exercise price of an option
through the withholding of shares (valued at their current fair market
value) issuable upon exercise of the option. While these exercise procedures
were sometimes utilized under the 1990 Plan in the Board's discretion, they
are now expressly recognized in the 1997 Plan and the optionholder is
granted the right to elect to utilize them.
Tax Withholding Rights. The Equity Compensation Plan permits the
optionholder to have shares withheld by the Company upon exercise of an
option (based on their current fair market value), in payment of tax
withholding obligations resulting from the exercise. Under the 1990 Plan,
use of tax withholding procedures is within the discretion of the Board of
Directors.
Transferability of Options. Except in certain limited cases noted
below, options granted under the 1997 Plan are generally not transferable.
Under both the 1990 Plan and the 1997 Plan, if an optionee's service as a
director or employment by the Company or its subsidiaries is terminated
other than by reason of death, disability or retirement, any option
otherwise still in effect will expire at the close of business on the date
of such termination. If an optionee dies or becomes permanently disabled,
any option otherwise still in effect is exercisable for a period of up to
twelve (12) months thereafter and will expire at the end of such period. In
the case of retired optionees, the exercise period for options otherwise
still in effect expires no later than three (3) months following retirement.
As permitted under rule changes adopted by the Securities and Exchange
Commission during 1996, the 1997 Plan provides that the Board, in its
discretion, may provide that any non-qualified stock options (but not
incentive options) may be transferred by the optionee during his lifetime,
provided that such transfer is made by bona fide gift and the transferee is
a member of the optionee's family, a trust established for the benefit of
the optionee or members of the optionee's family, or a charitable trust or
other tax exempt entity under Section 501(c)(3) of the Internal Revenue
Code. Any such transferable option will be exercisable only during the
period and to the extent such option would otherwise have been exercisable
if retained by the grantee, will not include any award of tandem stock
appreciation rights, and will contain appropriate restrictions on the
further transfer of the option by the transferee. Transferable options will
also contain such other conditions and restrictions as the Board may deem
advisable. Consistent with applicable SEC rules in effect at the time of its
adoption, the 1990 Plan does not permit issuance of transferable options.
Special Requirements for Incentive Stock Options. An incentive stock
option must contain certain additional conditions. In particular, incentive
stock options may not be issued to non-employee directors or non-employee
director nominees and the aggregate fair market value (as of the date the
option is granted) of stock for which the employee may exercise incentive
stock options in any calendar year may not exceed one hundred thousand
dollars ($100,000). If the optionee is a ten percent (10%) or more
shareholder of the Company, the option price must be equal to at least one
hundred ten percent (110%) of the fair market value of the stock on the date
the option is granted and the option period may not exceed five (5) years.
Stock Appreciation Rights. In addition to granting stock options, the
Board may in its discretion grant stock appreciation rights, either as
"freestanding stock appreciation rights" or as "associated stock
appreciation rights." A freestanding stock appreciation right is a right
granted to the holder to receive an amount equal to the increase in the
market value of a stated number of shares between the date the stock
appreciation right is granted and the date it is exercised. An associated
stock appreciation right is a right granted in conjunction with a stock
option, at the time the option is granted or at any time thereafter, to
receive an amount equal to the increase in value of the optioned shares to
which it relates between the date the stock appreciation right is granted
and the date the right is exercised.
Payment by the Company upon exercise of a stock appreciation right may
be made in cash or common stock or a combination of the two, as the Board
may determine. Upon the exercise of an associated stock appreciation right
in whole or in part, the underlying stock option or portion thereof, as the
case may be, must be surrendered unexercised. Similarly, upon exercise of a
stock option to which an associated stock appreciation right relates, the
associated stock appreciation right must be surrendered unexercised.
Associated stock appreciation rights are only exercisable to the extent that
the underlying option is otherwise exercisable. Freestanding stock
appreciation rights are exercisable in accordance with the terms of the
grant.
Restricted Stock and Restricted Stock Units
Participants in the Equity Compensation Plan may be awarded restricted
stock, common stock of the Company awarded on a contingent basis. In
general, restricted stock becomes unrestricted common stock upon the
expiration of a five year restriction period beginning on the date the
restricted stock is granted, and upon the satisfaction of any other
restrictions that the Board may establish in its sole discretion at the time
of the grant. Restricted stock which includes attainment of performance
goals as a condition to full or partial vesting is referred to in the Plan
as "performance shares" and the related restricted stock units as
"performance share units."
In the Board's discretion, participants may also be granted units
("restricted stock units") equal to 50% of the number of shares of
restricted stock granted to them. As with restricted stock, the restricted
stock units are generally subject to a five year restriction period or to
such other restrictions as the Board may, in its discretion, impose at the
time of the award. Upon the expiration of the restriction period or any
other restrictions established by the Board, the participant will be
entitled to a cash award equal to the fair market value of one share of
common stock for each restricted stock unit, valued as of the date the
restrictions expire.
During the restriction period, participants will be entitled to
receive dividends paid on the restricted stock and will be entitled to vote
the restricted stock on all matters submitted to shareholders, but they will
not be entitled to sell or otherwise transfer such stock. No dividends will
be payable on restricted stock units, nor will they have voting rights.
Restricted stock units will not be transferable.
If a participant terminates his service as a director or his
employment with the Company and its subsidiaries before the expiration of
the restriction period and satisfaction of any other applicable
restrictions, for any reason other than death, disability or retirement, all
such participant's restricted stock and restricted stock units will be
forfeited. If a participant retires, dies, or becomes disabled prior to the
expiration of the restriction period and satisfaction of any other
applicable restrictions, his restricted stock and restricted stock units
will be forfeited unless the Board, in its sole discretion, waives the
restriction period and other restrictions and distributes the award to the
participant.
Federal Income Tax Consequences.
Stock Options. Under current federal income tax laws, stock options
that qualify as incentive stock options are accorded special treatment.
Specifically, the optionee is not currently taxed upon the grant of the
option, nor upon its exercise if the holding period requirements contained
in the Internal Revenue Code are met, including the requirement that the
optionee remain an employee of the Company or a subsidiary during the period
beginning with the date of grant of the option and ending on the day three
months (one year if the employee becomes disabled) before the date the
option is exercised. Upon subsequent disposition of shares acquired upon the
exercise of an incentive stock option, the federal income tax consequences
will depend upon when the disposition occurs and on the type of disposition.
If the shares are disposed of by the participant after the end of the one-
year period beginning on the day after the day the shares are issued to the
participant, and also after the end of the two-year period beginning on the
day after the day the option was granted, any gain or loss realized upon
such disposition will be long-term capital gain or loss, and the Company
will not be entitled to any business expense deduction in respect of the
option or its exercise.
Generally, if the shares acquired upon exercise of an incentive stock
option are disposed of by the participant in a taxable disposition within
the one-year period beginning the day after the day the shares are issued to
the participant, or within the two-year period beginning on the day after
the day the option was granted, the excess, if any, of the amount realized
(up to the fair market value of the shares on the exercise date) over the
option price will be compensation taxable to the participant as ordinary
income. The Company will be entitled to a business expense deduction equal
to the amount of ordinary income realized by the participant.
In general, an optionee will not be taxed upon the granting of a non-
qualified stock option, but will realize taxable compensation upon the
exercise of the option measured by the difference between the fair market
value of the shares on the date of exercise and the exercise price. The
Company will be entitled to a corresponding business expense deduction. Upon
subsequent disposition of the shares, the participant will realize long or
short-term capital gain or loss, depending on the holding period of the
shares.
If a participant elects to tender shares of the Company's common stock
in partial or full payment of the option price for shares to be acquired
through the exercise of an option, generally the participant will not
recognize any gain or loss on such tendered shares. However, if the shares
tendered were previously acquired upon the exercise of an incentive stock
option within one year, the tender of such shares will be a taxable
disposition with the tax consequences described above for the disposition
within one year of shares acquired upon the exercise of an incentive stock
option. If shares are tendered upon the exercise of an option which would
result in the receipt of compensation, as described above, the Company will
be entitled to a business expense deduction in an amount equal only to the
fair market value of the number of shares received upon exercise which is in
excess of the number of tendered shares, less any cash paid upon exercise.
Stock Appreciation Rights. In general, upon the exercise of either a
freestanding or an associated stock appreciation right, the cash, and the
fair market value of any shares received in payment of the right, will be
taxable to the optionee as ordinary income. The Company will be entitled to
a corresponding business expense deduction.
Restricted Stock and Restricted Stock Units. Restricted stock and
restricted stock units are not taxable to the participant upon receipt but
will be taxed as ordinary income if and when paid (i.e., upon expiration of
the five (5) year period or other restrictions, if any). The amount realized
will be the fair market value of the stock received on the date the
restrictions are lifted, in the case of restricted stock, and the amount of
the cash received, in the case of restricted stock units. The Company is
entitled to a business expense deduction in the amount of the dividends paid
on the restricted stock prior to the expiration or satisfaction of all
applicable restrictions. A participant may, however, elect under Section
83(b) of the Internal Revenue Code to recognize ordinary compensation income
in the year the Restricted Stock Grant is awarded in an amount equal to the
fair market value of the Common Stock at that time, determined without
regard to the restrictions. In this event, the Company will be entitled to a
deduction in the same year, provided it complies with the applicable
withholding requirements for federal tax purposes. Any gain or loss
recognized by the grantee upon subsequent disposition of the Common Stock
will be capital gain or loss. If, after making the election, any Common
Stock subject to a Restricted Stock Grant is forfeited, or if the market
value declines during the restriction period, the grantee is not entitled to
any tax deduction or tax refund.
Individual Limit on Annual Awards
The Equity Compensation Plan provides that awards of stock options,
freestanding stock appreciation rights and restricted stock to any
individual participant in any year may not be made with respect to more than
50,000 shares, in the aggregate. This limitation, which is not contained in
the 1990 Plan, is designed to help ensure that awards under the Plan will
qualify as "performance based compensation" for purposes of Section 162(m)
of the Internal Revenue Code, which limits the deductibility of executive
compensation in certain circumstances.
Term of the Plan; Shares Subject to the Plan
Unless the Plan is sooner terminated, awards may be made under the
Equity Compensation Plan during a ten (10) year period following shareholder
approval of the Plan. The time for exercise of options and stock
appreciation rights and the restriction period of restricted stock and
restricted stock units awarded under the Plan may extend beyond such ten
(10) year period.
The total number of shares of the Company's common stock that may be
awarded pursuant to the Plan may not exceed five hundred and twenty-five
thousand (525,000) shares, which number includes approximately 75,000 shares
previously authorized but not yet awarded under the 1990 Plan. Shares
awarded under the Plan may be either newly-issued shares or previously
issued shares that have been reacquired by the Company.
The number of shares that may be awarded under the Plan (including the
number of shares specified in the individual limit on annual awards) is
subject to adjustment in certain circumstances, such as in the case of stock
dividends, stock splits, recapitalizations, consolidations and mergers (in
which the Company is the surviving entity). In the event of a consolidation
or merger in which the Company is not the surviving entity or in the event
another corporation acquires twenty-five percent (25%) or more of the
Company's outstanding voting stock, all options and stock appreciation
rights will automatically become exercisable, and all restricted stock
awards will vest and all restricted stock unit awards will be paid. Under
the 1990 Plan, acceleration of exercisability and vesting of awards in such
circumstances required a vote of the Board of Directors.
No awards have yet been made under the Equity Compensation Plan and no
awards will be made under that Plan unless the Plan is approved by the
shareholders. If approved the Equity Compensation Plan will supersede the
1990 Plan.
Plan Amendment
The Equity Compensation Plan may be amended by the Board of Directors
from time to time, except that the approval of the shareholders of the
Company would be required to approve an increase in the maximum number of
shares available under the Plan, except for automatic increases due to stock
dividends, stock splits, recapitalizations, mergers or certain other
extraordinary corporate transactions.
Vote Required
In accordance with applicable laws, approval of the Equity
Compensation Plan will require the affirmative vote of at least a majority
of the shares of the Company's common stock present or represented at the
meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 2.
ARTICLE 3
PROPOSAL TO AMEND AND RESTATE THE 1994 DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND SELECTED EXECUTIVES
In 1994 the Board of Directors adopted a Deferred Compensation Plan
for Directors and Selected Executives of the Company and its subsidiaries
(the "Deferred Compensation Plan" or the "Plan"), pursuant to which
participants may elect to defer receipt of some or all of their director
fees, salary or other compensation. The Plan was later amended in certain
respects in 1996. As described in more detail below, the Board now proposes
to further amend and restate the Plan, subject to shareholder approval, in
order to change the nature of the Plan from a cash-only phantom stock plan
to one which gives participants the opportunity to utilize deferrals to
increase their ownership stake in the Company through the purchase of Common
Stock of the Company.
The proposed amendments to the Plan have been adopted by the Board as
part of the Board's overall effort to increase stock ownership levels among
the directors and officers and to thereby tie more closely the long-term
economic interests of directors and management to those of the Company's
shareholders. The Board also believes that the amendments to the Plan are
desirable from an accounting standpoint because they will reduce income
statement volatility resulting from the phantom stock account feature of the
existing Plan.
The material terms of the Plan as proposed to be amended and restated
are described below and such description is qualified in its entirety by
reference to the full text of the amended and restated Plan, which is set
forth as Exhibit B to this proxy statement.
Administration and Eligibility
The Plan is administered by the Board of Directors, which also has the
authority to interpret its provisions.
Non-employee directors of the Company and its subsidiaries, and those
executive officers of the Company and its subsidiaries designated from time
to time by resolution of the Company's Board of Directors, are eligible to
participate in the Plan. At present, thirty-three of the seventy-nine
individuals serving as non-employee directors, and one of the nineteen
designated eligible executive officers are currently deferring compensation
pursuant to the Plan.
Deferrals and Crediting of Accounts
Under both the current and the proposed amended and restated Plan,
participants may elect annually to defer receipt of all or a portion of
their fees, salary or other compensation and may allocate those deferrals
between two accounts, in their discretion. Elections are irrevocable for the
year to which they relate. Deferrals do not reduce benefits payable under
any other benefit plan of the Company and benefits under such plans are
calculated without regard to the election to defer current receipt of such
compensation.
Under the current Plan deferrals may be credited to one or two
bookkeeping accounts as selected by the participant, (i) a cash account,
bearing interest at a rate (adjusted annually) equal to one half percent
(1/2%) above the then-current coupon rate of a one-year U.S. Treasury bill,
and/or (ii) a so-called "phantom stock" account, whose performance matches
that of the Company's common stock. Deferrals under both accounts are
credited as of a calendar quarter-end. The number of phantom stock units
initially credited to an account upon deferral is based on the amount
deferred, divided by the per share price of the Company's common stock as of
the quarter-end. Once credited, phantom stock accounts are credited with
additional phantom stock units based on dividends and other distributions
made with respect to the Company's stock as though such phantom stock were
actually outstanding. However, no shares of common stock are actually issued
or reserved for issuance in connection with accruals under phantom stock
accounts, and payment of benefits from such accounts is made solely in cash
and is based on the market value of the Company's common stock at the time
of distribution.
Under both the current and the proposed amended and restated Plan,
balances may not be transferred between the cash account and the phantom
stock account, but participants are permitted to change their elections, as
to future deferrals, at least annually. Participants are fully vested in
their account balances under the Plan. Participants may elect to receive
payments in a lump sum or in annual installments for a fixed period of up to
fifteen (15) years. Payments are deferred until after termination of the
participant's duties as a director or officer, the participant's death or
disability, or on such other date as the participant may elect, subject to
certain limitations. If a participant dies before all sums due have been
paid in full, the balance will be paid to the participant's designated
beneficiary or beneficiaries in a lump sum or in installments, as previously
selected by the participant. The Board of Directors, in its discretion, may
accelerate payments due under the Plan, after the first payment has become
due, in certain circumstances, including the participant's disability or
financial hardship.
Under both the current and proposed amended and restated Plan, Plan
accounts are not held in trust or in escrow for participants. The Plan
represents an unfunded obligation of the Company; no assets are segregated
from the Company's general assets for purposes of paying accrued benefits.
Conversion to Restricted Stock Unit Account
The proposed amended and restated 1994 Deferred Compensation Plan
would replace, prospectively, the phantom stock account with a restricted
stock account. Credits of restricted stock units to that account, including
fractional units, would be made based on the amount of compensation
deferred, divided by the fair market value of one share of the Company's
common stock as of the applicable quarter-end. Restricted stock units would
earn dividends and other distributions on the Company's common stock
generally, which would be deemed reinvested in additional allocations of
restricted stock units. No adjustment to the number of units or to the
accrued benefit would be made based on fluctuations in the value of the
Company's common stock after initial crediting, other than adjustments to
reflect stock splits, stock dividends, reclassifications, and other pro rata
changes effected in the Company's common stock generally. Payment of
benefits out of the restricted stock account would be made only in the form
of common stock and not cash and may be made in a single distribution or in
installments, as the participant may elect.
If approved by the shareholders, the Plan amendments will take effect
on July 1, 1997 and current participants will be afforded the opportunity to
elect to transfer their phantom stock account balances (if any) to a
restricted stock account as of such date. The conversion will be effected by
crediting the restricted stock account with the same number of units that
exist in the phantom stock account on the conversion date. In connection
with the account conversion, Participants will be allowed a special mid-year
election to revise their deferral elections prospectively for the balance of
the 1997 calendar year. The Board has the discretion to grant Participants
additional opportunities to elect to convert phantom stock account balances
to restricted stock accounts. After the effective date of the Plan
amendments, no new deferrals will be permitted into any phantom stock
accounts but phantom stock accounts that have not been converted to
restricted stock accounts will continue to be administered under the terms
of the 1994 Deferred Compensation Plan as in effect prior to amendment and
restatement.
The number of restricted stock units to be credited to participants
with compensation deferrals pursuant to the Plan will depend upon a number
of factors that cannot be accurately determined at this time, including the
number of participants, the amount of the deferrals into the restricted
stock account, the number of phantom stock units to be converted into
restricted stock units and the market value of the Company's stock at the
time the restricted stock accounts are credited with compensation deferrals.
It is the intention of the Board at this time to utilize treasury shares to
satisfy the distribution requirements of the plan, although the Board would
have the discretion to utilize newly-issued shares should it be deemed
advisable.
Accounting Treatment
Under applicable accounting rules, phantom stock units must be
revalued at the end of each calendar quarter and a charge made against the
Company's earnings representing the appreciation during such period in the
value of the units, as measured by the market value of the Company's common
stock. In the event of a subsequent decline in the market price of the
Company's common stock, a reversal of prior charges is made in the amount of
such decline (but not in excess of the aggregate prior charges). Under the
Plan as amended and restated, the charge to the Company's earnings in the
amount of the deferral into a restricted stock account would be made at the
time of the deferral, and subsequent changes in the market value of the
Company's stock would not require periodic charges to the Company's
earnings, thereby reducing income statement volatility.
Federal Income Tax Consequences
Amounts deferred under the Plan are not taxed to the participant upon
deferral or crediting to the participant's Plan account(s) but distributions
will be taxed to the employee as ordinary income upon distribution. For
distributions of stock from a restricted stock account, the amount realized
will be the fair market value of the stock distributed. The Company will be
entitled to a business expense deduction in the amount of the income
realized by the participant.
Further Plan Amendments
The amended and restated Plan may be further amended by the Board of
Directors from time to time, except that no amendment may be adopted which
divests a participant of the credits to his accounts, without the consent of
such participant. The proposed amendment and restatement of the Plan
facilitates future plan amendments by the Board of Directors without
participant consent.
Vote Required
In accordance with applicable laws, approval of the amended and
restated 1994 Deferred Compensation Plan will require the affirmative vote
of at least a majority of the shares of the Company's common stock present
or represented at the meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 3.
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive
officers of the Company.
<TABLE>
<CAPTION>
Position with the Company
Name and Age and Occupation for Past Five Years
- ------------------------------------------------------------------------------------
<S> <C>
William H. Chadwick, 60 President, Chief Executive Officer and Director,
Banknorth; Chair, Banknorth Policy Committee.
Thomas J. Pruitt, 54 Executive Vice President and Chief Financial Officer,
Banknorth and Member, Banknorth Policy Committee.
Robert M. Gillis, 59 Executive Vice President, Banknorth and Member,
Banknorth Policy Committee; President, Chief Executive
Officer and Director, First Vermont Bank.
Richard J. Fitzpatrick, 47 Executive Vice President, Banknorth and Member,
Banknorth Policy Committee (since 1992); President,
Chief Executive Officer and Director, Howard Bank
(since 1994); Previously: Executive Vice
President and Managing Director - Loans, Banknorth
(1992-1994).
Owen H. Becker, 59 Executive Vice President-Administration, Banknorth and
Member, Banknorth Policy Committee (since 1995).
Previously: Consultant, Vermont State Colleges (May,
1994 to December, 1994); Director of Human Resources
and Community Relations, Stowe Mountain Resort, Stowe,
Vermont (November, 1993 to May, 1994); and Site
Services Manager, IBM, Inc., Burlington, Vermont
(prior to November 1993).
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation, and certain
other compensation, paid to the Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company for
services rendered to the Company and its subsidiaries in all capacities
during each of the years 1994, 1995 and 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------- ------------------------------------------
Securities
Restricted Underlying All
Stock Options/ Other
Name and Principal Position Year Salary(1) Bonus Awards(2) SARs(#)(3) Compensation(4)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William Chadwick, President 1996 $272,096 $ 43,195 $142,875 10,000 $6,000
and Chief Executive Officer 1995 256,154 172,812 126,000 10,000 3,354
of the Company 1994 237,650 114,782 138,000 9,000 5,814
Thomas J. Pruitt, Executive 1996 $182,115 $ 20,238 $ 57,150 5,000 $6,000
Vice President and Chief 1995 168,077 80,752 63,000 5,500 5,855
Financial Officer of 1994 159,422 53,901 69,000 3,500 5,314
the Company
Robert M. Gillis, Executive Vice 1996 $155,000 $ 35,737 $ 35,719 2,500 $6,000
President of the Company; 1995 155,000 83,958 42,000 2,500 5,352
President and Chief Executive 1994 155,000 60,641 51,750 3,000 5,485
Officer, First Vermont Bank
and Trust Company
Richard J. Fitzpatrick, 1996 $154,038 $ 24,261 $ 35,719 2,500 $6,000
Executive Vice President of the 1995 144,000 74,248 42,000 2,500 5,898
Company; President and Chief 1994 126,778 43,288 51,750 3,000 5,839
Executive Officer, The
Howard Bank, N.A.
Owen H. Becker, Executive 1996 $128,077 $ 14,233 $ 35,719 2,500 $5,634
Vice President--Administration 1995 108,884 52,146 42,000 0 2,383
of the Company(5)
- --------------------
<F1> Includes voluntary pre-tax and after-tax salary deferrals under the
Company's Employee Savings (401(k)) Plan.
<F2> During 1996, performance shares were awarded to the named executives
under the Company's Long Term Executive Incentive Plan (the "Long Term
Plan"), as follows: Mr. Chadwick, 3,000 shares; Mr. Pruitt, 1,200
shares; Mr. Gillis, 750 shares; Mr. Fitzpatrick, 750 shares and Mr.
Becker, 750 shares. Performance share units entitling the holder to
receive a cash payment upon vesting equal to 50% of the value of the
underlying shares were also awarded with the performance shares.
Vesting of both the performance shares and performance share units
awarded in 1996 requires continuous service through the restriction
period ending five years after the date of grant and is subject to the
additional condition that vesting will occur in 25% increments only in
any of the calendar years 1996 through 2000 in which the Company
achieves a return on average equity of at least 13% and a return on
average assets of at least 1.1%. All awards will vest immediately upon
a change in control of the Company. Holders of performance stock are
entitled to receive dividends on the performance stock during the
restriction period if and to the extent dividends are paid on the
Company's common stock generally. No dividends are paid on performance
stock units. The amounts disclosed in the table include the value of
both the performance stock and performance stock units on the
respective dates of grant ($31.75 per share for restricted stock
awarded in 1996), without regard to restrictions. As of December 31,
1996, the total number of unvested shares of performance stock held by
the individuals named in the table, together with the market value of
those shares and related performance stock units on such date ($41.50
per share), without regard to restrictions, was as follows: Mr.
Chadwick, 18,000 shares, $1,120,500; Mr. Pruitt, 8,700 shares,
$541,575; Mr. Gillis, 6,750 shares, $420,188; Mr. Fitzpatrick, 4,750
shares, $295,688 and Mr. Becker, 1,750 shares, $108,938.
<F3> The numbers shown in the table represent the number of shares
underlying stock options granted to the named executives under the
Long Term Plan during each of the years shown. Contingent stock
appreciation rights (SARs), exercisable only in the event of a change
in control of the Company, were also awarded in tandem with such
options. All options shown in the table are subject to a two-year
holding period from the date of grant before they become exercisable,
and expire ten years from the date of grant. Options and tandem SARs
become immediately exercisable upon a change in control of the Company
regardless of whether the two year holding period has been met. All
1996 options and tandem SARs were issued at an exercise price of
$31.75 per share, which represents the fair market value of the
Company's stock on the date of grant (July 23, 1996).
<F4> Represents employer matching contributions under the Company's Employee
Savings (401(k)) Plan.
<F5> Mr. Becker joined the Company in January, 1995.
</TABLE>
--------------------
COMPENSATION AND BENEFIT PLANS
Banknorth Group Comprehensive Long Term Executive Incentive Plan
Executives may receive awards of stock options, stock appreciation
rights and restricted stock and restricted stock units (including
performance shares and performance share units) under the Company's
Comprehensive Long Term Executive Incentive Plan (the "Long Term Plan").
Eligibility is limited to those officers and other key executive personnel
of the Company and its subsidiaries who are in positions in which they may
contribute significantly to the profitability of the Company. Eligible
employees are designated annually by the Board of Directors, upon
recommendation of the Compensation Committee, which administers the Plan.
The Plan was approved by the shareholders in 1990 and provides that up to
500,000 shares may be issued, subject to certain adjustments such as for
recapitalizations, stock splits and stock dividends. The Plan terminates in
the year 2000 and any new Plan will require shareholder approval. As
described above under Article 3, a new plan, entitled The 1997 Equity
Compensation Plan, which would replace the Long Term Plan, has been adopted
by the Board of Directors, subject to approval by the shareholders at the
Annual Meeting.
The following table sets forth certain information regarding the grant
of stock options and tandem contingent stock appreciation rights under the
Company's Long Term Plan made during 1996 to the five executive officers
named in the summary compensation table.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration Grant Date
Name Granted(#)(1) Fiscal Year Price($/Sh)(2) Date(3) Value(4)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William H. Chadwick 10,000 7.6% $31.75 7/23/06 $75,100
Thomas J. Pruitt 5,000 3.8% 31.75 7/23/06 37,550
Robert M. Gillis 2,500 1.9% 31.75 7/23/06 18,775
Richard J. Fitzpatrick 2,500 1.9% 31.75 7/23/06 18,775
Owen H. Becker 2,500 1.9% 31.75 7/23/06 18,775
- --------------------
<F1> Each option carries a contingent, tandem stock appreciation right
exercisable only in the event of a change in control of the Company. A
SAR entitles the holder upon exercise to receive a cash payment equal
to the difference between the exercise prices of the underlying stock
option and the market price of the stock on the date of exercise.
<F2> Represents the fair market value of the Company's common stock on the
date of grant. The exercise price may be paid in cash or (unless the
Board determines otherwise) in shares of the Company's stock valued at
their fair market value on the date of exercise, or a combination of
the two.
<F3> All options listed in the table (a) were granted on July 23, 1996, (b)
are subject to a two-year holding period before they become
exercisable and (c) are subject to early termination following the
optionee's termination of employment during the option period.
<F4> Represents a discounted present value of $7.51 per share, determined
using the Black-Scholes valuation method, and assuming a grant date
market price and option exercise price of $31.75 per share, an
expected life of 5 years for the options, an annual dividend yield of
3.13%, expected market value volatility of 24% and an alternative,
risk free investment rate of 6.14% per year.
</TABLE>
In assessing the grant date values in the foregoing table it should be
kept in mind that no matter what theoretical value is placed on a stock
option on the date of grant, its ultimate value will be dependent on the
market value of the Company's stock at a future date and that value will in
large part depend, in turn, on the efforts of its executives to foster the
future success of the Company.
The following table sets forth certain information regarding year-end
values of outstanding stock options issued under the Long Term Plan to the
executive officers named in the summary compensation table, as well as
information on option exercises during 1996 by such officers.
Aggregated Option/SAR Exercises in Last Fiscal Year,
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Number Options/SARs Options/SARs
of Shares at FY-End(#)(3) at FY-End($)(2)
Underlying -----------------------------------
Options/SARs Value Exercisable/ Exercisable/
Name Exercised Realized(2) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William H. Chadwick 19,900(1) $383,813 9,000/20,000 $166,500/$232,500
Thomas J. Pruitt N/A N/A 15,450/10,500 $370,125/$123,000
Robert M. Gillis N/A N/A 12,300/5,000 $298,750/$58,125
Richard J. Fitzpatrick N/A N/A 10,300/5,000 $237,750/$58,125
Owen H. Becker N/A N/A 0/2,500 $0/$24,375
- --------------------
<F1> Mr. Chadwick elected to pay the exercise price of the options and a
portion of his tax withholding obligations resulting from the
exercise, through withholding by the Company of a sufficient number of
shares (valued at their fair market value at the date of exercise).
Mr. Chadwick received, in the aggregate, 8,716 shares of stock upon
exercise, net of such share withholdings.
<F2> Represents the difference between the option exercise price (whether
paid in cash or by withholding of shares or by tender of other shares
of the Company's common stock, valued at their fair market value on
the date of exercise) and the market value of the stock on the date of
exercise.
<F3> Amounts disclosed relate only to options. The tandem stock appreciation
rights related to such options are contingent and become exercisable
only in the event of a change in control of the Company. Year- end
values are based on the market value of the Company's stock on
December 31, 1996 ($41.50 per share), less the applicable option
exercise prices.
</TABLE>
Awards of performance shares and performance share units made pursuant
to the Long Term Plan during the last three years to the five executives
named in the summary compensation table are disclosed in the table and
accompanying footnotes.
Banknorth Group Management Incentive Compensation Plan
The Company's Management Incentive Compensation Plan, which provides
short-term performance incentives, is described above under the caption
"COMPENSATION COMMITTEE REPORT." Awards earned under the Plan for services
rendered during the last three years by the five executives named in the
summary compensation table are disclosed in the table and accompanying
footnotes.
Banknorth Group, Inc. Employee Savings (401(k)) Plan
The Company maintains an Employee Savings Plan (also known as a 401(k)
Plan) which provides a means for eligible employees to accumulate savings
and investment income without payment of current income taxes. Employees who
have completed at least three months of service, as defined in the Plan, and
are scheduled to work at least twenty hours per week are eligible to
participate. An eligible employee who elects to participate in the Plan may
authorize the Company to contribute to the Plan for his or her account
between 1% and 15% of eligible compensation on a pre-tax basis or between 1%
and 10% on an after-tax basis, or a combination of both, up to a maximum of
15% of eligible compensation. The Company makes a matching contribution in
cash or stock equal to 66 2/3% of the employee's contributions up to a
maximum of 6% of eligible compensation. A participant may direct the
investment of his Plan account among various portfolios maintained by The
Stratevest Group, N.A. which serves as the trustee of the Plan. Participants
are at all times fully vested in their Plan accounts. Generally,
distribution of employee contributions is deferred until the participant's
death, disability, retirement or other termination of employment, except in
cases of financial hardship. Voluntary deferrals and matching employer
contributions credited in the years 1994 through 1996 to the Plan accounts
of the executives named in the summary compensation table are reflected in
the table and accompanying footnotes.
Deferred Compensation Plan
The 1994 Deferred Compensation Plan for Directors and Selected
Executive Officers of Banknorth Group, Inc. and Participating Affiliates,
pursuant to which participants may elect to defer receipt of all or a
portion of their cash compensation, is described above under the caption
"ARTICLE 3 - PROPOSAL TO AMEND AND RESTATE THE 1994 DEFERRED COMPENSATION
PLAN FOR DIRECTORS AND SELECTED EXECUTIVES."
Contracts with Management
The Company and Mr. Chadwick are parties to an employment agreement
which provides for a renewable one-year contract term, with an automatic
three-year extension in the event of a change in control of the Company.
Under the agreement Mr. Chadwick is entitled to continue to receive 100% of
his salary and benefits, including bonuses, for the remaining contract term
in the event of an involuntary termination of his employment, which is
defined to include a termination by Mr. Chadwick for good reason, such as
material reduction in his responsibilities or authority.
In addition to the agreement with Mr. Chadwick, the Company has
entered into change of control agreements with five executive officers,
including the following three executive officers named in the summary
compensation table: Messrs. Fitzpatrick, Gillis and Pruitt. The agreements
provide that the executive is entitled to continue his employment with the
Company for a period of two years following a change in control of the
Company. In the event of an involuntary termination of his employment during
such two-year period (including a termination by the executive for good
reason) the executive is entitled to continue to receive his salary and
benefits, including bonuses, for the remaining contract term.
For purposes of all of the agreements referred to above, a change in
control is deemed to have occurred if (i) any person (including an
individual, entity or group) directly or indirectly owns, controls or has
power to vote 25% or more of the Company's voting stock, (ii) any person
controls the election of a majority of the Company's directors, or (iii) the
Board of Directors determines that any person directly or indirectly
exercises a controlling influence over the management or policies of the
Company. Payments under the contracts are limited to the extent necessary to
avoid characterization as excess compensation under Section 280G of the
Internal Revenue Code.
The Board of Directors believes that the compensation protection
afforded by the change of control agreements will facilitate an impartial
assessment by management of any change of control situation by minimizing
the possibility of conflicting personal financial interests.
Banknorth Group, Inc. Employee Pension Plan
The Company maintains a non-contributory, trusteed retirement income
plan for the benefit of all employees of the Company and its subsidiaries
who are 21 years of age or older and who have completed at least 1,000 hours
of service during a one-year period, as defined in the plan. Pension
benefits under the Plan are based on the participant's average annual
compensation, years of service and Social Security covered compensation at
the date of retirement. For purposes of the Plan "average annual
compensation" is defined as the highest average of the annual compensation
earned during any three consecutive years during the ten years prior to
retirement; "Social Security covered compensation" is the average of the
taxable Social Security wage bases in effect during the last 35 years before
attainment of Social Security normal retirement age; and a "year of service"
is ordinarily a year in which a participant has worked at least 1,000 hours.
A participant who retires on or after age 55 having at least 10 years of
service is entitled to early retirement benefits, with the amount of the
benefit (if paid in installments) reduced to reflect payment over a longer
period of time. Participants in the Plan are fully vested after completion
of five years of service. Pension benefits are payable as a joint or single
life annuity or (in certain circumstances) as a lump sum, at the election of
the participant. Death benefits are payable to an employee's spouse in
certain circumstances if an employee who is vested in the Plan dies prior to
retirement. Benefit calculations under the Plan are subject to the annual
benefit limitation under Internal Revenue Code Section 415 ($120,000 for
1996 and $125,000 for 1997) and to the limitation on annual covered
compensation under Internal Revenue Code Section 401(a)(17) ($150,000 for
1996 and $160,000 for 1997). However, as described below under the caption
"Supplemental Retirement Benefits" the Company has entered into supplemental
retirement agreements with certain officers who would be affected by these
limitations.
Special "grandfather provisions" apply to certain employees of the
Company or its subsidiaries who were covered under prior plans.
The following table represents estimated annual benefits payable under
the Plan upon retirement at age 65 in 1997 to participants in specified
compensation and years of service classifications. Actual benefits for
certain retirees covered by the grandfather provisions referred to above may
exceed the amounts shown in the table.
<TABLE>
<CAPTION>
Assumed Average
Three-Year Years of Service
Annual ---------------------------------------------------------
Compensation 10 15 20 25 30 35
--------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 25,000....................... $ 3,250 $ 4,875 $ 6,500 $ 8,125 $ 8,938 $ 9,760
$ 50,000....................... 7,845 11,768 15,690 19,613 21,238 22,863
$ 75,000....................... 12,720 19,080 25,440 31,801 34,238 36,676
$100,000....................... 17,595 26,393 35,190 43,988 47,238 50,488
$125,000....................... 22,470 33,705 44,940 56,176 60,238 64,301
$150,000....................... 27,345 41,018 54,690 68,363 73,238 78,113
$175,000 & Higher.............. 29,925 43,943 58,590 73,238 78,438 83,638
</TABLE>
For purposes of calculating benefits under the Plan for all
participants, including the executives named in the summary compensation
table, eligible earnings include salary and incentive compensation payments
(including any deferrals), but do not include matching employer
contributions under the 401(k) Plan. The credited years of service under the
Plan at December 31, 1996, for the executive officers named in the
compensation table were approximately as follows: Mr. Chadwick, 10 years;
Mr. Pruitt, 8 years; Mr. Gillis, 20 years; Mr. Fitzpatrick, 4 years and Mr.
Becker, 2 years.
Supplemental Retirement Benefits
The Company maintains a supplemental retirement plan for those of its
executives (except as otherwise designated by the Board) whose pension under
the Company's pension plan would be subject to pay or benefit limits under
applicable provisions of the Internal Revenue Code. Each of the executives
named in the summary compensation table participates in the Plan. The
supplemental plan restores the full amount of the pension benefits that
would be payable under the pension plan if the benefit formula were applied
without regard to such limitations. The Plan also provides that Mr. Becker,
who joined the Company in 1995 at age 57, will receive a benefit, payable at
age 65, of either $1,000 per month for life if he leaves the Company before
becoming vested in the Company's qualified pension plan, or $2,000 per month
for life if he leaves after becoming vested. The table below shows total
estimated annual benefits under the pension plan, as supplemented by the
supplemental plan, for specified compensation and years of service
categories, assuming retirement at age 65 in 1997.
<TABLE>
<CAPTION>
Assumed Average
Three-Year Years of Service
Annual --------------------------------------------------------------
Compensation 10 15 20 25 30 35
- ------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$150,000...................... $27,345 $ 41,018 $ 54,690 $ 68,363 $ 73,238 $ 78,113
$175,000...................... 32,220 48,330 64,440 80,551 86,238 91,926
$200,000...................... 37,095 55,643 74,190 92,738 99,238 105,738
$225,000...................... 41,970 62,955 83,940 104,926 112,238 119,551
$250,000...................... 46,845 70,268 93,690 117,113 125,238 133,363
$275,000...................... 51,720 77,580 103,440 129,301 138,238 147,176
$300,000...................... 56,595 84,893 113,190 141,488 151,238 160,988
$325,000...................... 61,470 92,205 122,940 153,676 164,238 174,801
$350,000...................... 66,345 99,518 132,690 165,863 177,238 188,613
$375,000...................... 71,220 106,830 142,440 178,051 190,238 202,426
</TABLE>
The supplemental plan also incorporates the terms of various
supplemental retirement agreements between the Company or its subsidiaries
and certain former employees, as well as the terms of a separate agreement
between Mr. Chadwick and the Company. That agreement provides Mr. Chadwick
with an additional supplemental annual retirement benefit for the remainder
of his lifetime following retirement at age 65 (or earlier with the consent
of the Company). The annual benefit under the contract is equal to the
number of years of his employment with the Company (and its predecessor
companies and subsidiaries), multiplied by $5,300, up to a maximum annual
benefit of $79,500. The annual benefit amount accrued by Mr. Chadwick as of
December 31, 1996 was $53,000. At the Company's election, benefits under the
agreement may be paid in equal monthly installments of one-twelfth of the
annual accrued benefit or in less frequent lump sum payments. In the event
of a change in control of the Company and subsequent termination of his
employment, Mr. Chadwick would be entitled to receive in a lump sum a
payment equal to the actuarial value of his accrued annual benefit. The
agreement also provides for benefits in the event Mr. Chadwick becomes
disabled while in the Company's employ.
The Board of Directors believes supplemental retirement benefits are
an appropriate component of the Company's overall strategy for attracting
and maintaining executives of high caliber. Benefits under the supplemental
retirement arrangements referred to above will be paid out of the general
assets of the Company, either directly or through the purchase of annuities
or insurance coverage.
ARTICLE 4
APPOINTMENT OF AUDITORS
The Company has appointed KPMG Peat Marwick LLP, independent public
accountants, as the external auditors for the Company for the year ending
December 31, 1997, and requests ratification of that appointment. KPMG Peat
Marwick LLP has advised the Company that it has no direct or indirect
financial interest in the Company.
The Company's consolidated financial statements for the year ended
December 31, 1996 were audited by KPMG Peat Marwick LLP. Other services
rendered during 1996 by KPMG Peat Marwick LLP included tax return
preparation, tax planning and consultation and services relative to certain
filings with the SEC.
It is expected that representatives of KPMG Peat Marwick LLP will be
present at the Annual Meeting of the Company where they will have the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ARTICLE 4.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the proxy material for the
1998 Annual Meeting, shareholder proposals must be submitted in writing to
the President of the Company not later than December 2, 1997, and must
comply in all respects with applicable rules and regulations of the
Securities and Exchange Commission relating to such inclusion. Any such
proposal will be omitted from or included in the proxy material at the
discretion of the Board of Directors of the Company, in accordance with
applicable rules and regulations.
OTHER MATTERS
As of the date of this proxy statement, management knows of no
business expected to come before the meeting except as set forth above. If
any other matters should properly come before the meeting, it is expected
that proxies solicited hereby will be voted on such matters in accordance
with the recommendations of management.
EXHIBIT A
THE BANKNORTH GROUP, INC.
1997 EQUITY COMPENSATION PLAN
ARTICLE I
NAME AND PURPOSE
1.01 Plan Name. The name of the plan contained herein is the Banknorth
Group, Inc. 1997 Equity Compensation Plan (the "Plan") and the Plan will be
governed in accordance with the following provisions.
1.02 Purpose. The purpose of the Banknorth Group, Inc. 1997 Equity
Compensation Plan is to provide a means whereby Banknorth Group, Inc. (the
"Corporation") may, through the grant of stock options, stock appreciation
rights, restricted stock, restricted stock units, performance shares and
performance share units to directors, officers and certain other key
employees of the Corporation and/or its subsidiaries, attract and retain
persons of high caliber and motivate them to exert their best efforts on
behalf of the Corporation.
The Plan is unfunded and is maintained primarily to provide deferred
compensation for directors and a select group of management or highly
compensated employees, as well as to increase the identification of
directors and management with shareholder interests.
1.03 Plan Not Exclusive. The Plan is not intended to be, and shall not
be deemed to be a substitute for, or preclude continued payment of
directors' fees in cash, or preclude continuance or establishment of any
other deferred compensation plan or arrangement for directors, nor shall the
Plan be deemed to be a substitute for, or preclude continuance or
establishment of, other deferred compensation, incentive compensation,
profit participation or bonus plans of the Corporation or any other plan,
practice or arrangement for the payment of compensation or fringe benefits,
including, without limitation, commissions, prizes, suggestion or special
awards, production or similar bonuses, retirement, profit sharing, group
insurance, stock purchase or stock bonus plans or other bonus plans or
arrangements, that may now or hereafter be in effect for employees generally
or any group or class of employees, and any such plan, practice or
arrangement may be continued or authorized and payment thereunder made
independently of the Plan.
ARTICLE II
ADMINISTRATION
2.01 Administration. The Plan shall be administered by the
Corporation's Board of Directors (the "Board") or a committee designated by
the Board (the "Committee"), and their interpretation of any provisions of
the Plan or any option or right granted under it, and the application of
such provisions to any set of facts, shall be final and binding on all
concerned. If any Committee shall be so designated, awards under this Plan
upon recommendation of the Committee shall be subject to prior approval by
the Board. No member of the Board or Committee shall be liable for any
action or determination made in good faith. Any action or decision by such
Board or Committee, as contemplated by the Plan, may be by a majority of
those directors present and acting, provided that a quorum is present.
Except for purposes of Sections 3.01 and 11.01, any reference in the
Plan to the Board shall be deemed to refer to the Committee if and to the
extent that a committee has been designated by the Board to administer the
Plan.
ARTICLE III
PARTICIPANTS
3.01 Selection of Participants. Persons eligible to participate shall
be chosen by the Board from time to time and shall be limited to directors
of the Corporation and its subsidiaries, including non-employee directors,
and those officers and other key executive employees of the Corporation and
its subsidiaries, either part-time or full-time, who are in positions in
which their decisions, actions and counsel have a significant impact upon
the profitability of the Corporation. In addition to the foregoing eligible
participants, individuals nominated to serve on the Board of Directors of
the Corporation or its subsidiaries with the vesting of such awards subject
to the election or appointment to the Board of such nominee or nominees.
3.02 Recipients of Incentive Stock Options. No option granted under
the Plan which is intended to be an "incentive stock option" as defined in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
shall be granted to (i) a participant who at the time of grant owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Corporation or of its subsidiaries unless the
option so granted meets the requirements of Section 422(A)(c)(6) of the
Code, or (ii) who is not also an employee of the Corporation or any of its
subsidiaries.
3.03 Board Discretion. The number of shares subject to each option,
the option price per share of the shares subject to each option, whether
each option is intended to be an "incentive stock option" or a non-qualified
stock option, and whether stock appreciation rights shall be included in
each option (either concurrently with the grant of the option or at any time
thereafter during the term of the option), the number of shares included in
and the conditions for vesting of, any restricted stock grant or performance
share grant, and whether restricted stock units or performance share units
shall be included in such grants (either concurrently with the grant or at
any time prior to vesting of the restricted stock or performance shares, as
the case may be) shall be determined by the Board in its discretion, not
inconsistently with the other provisions hereof.
ARTICLE IV
SHARES SUBJECT TO PLAN
4.01 Shares Subject To Awards Under the Plan. The stock to be
delivered on exercise of options granted under Articles V and VI of the Plan
and the restricted stock or performance shares to be awarded under Article
VII of the Plan may be either shares of the Corporation's authorized but
unissued Common Stock, or shares of Common Stock reacquired by the
Corporation and held in treasury, as the Board shall determine. Subject to
adjustments as hereinafter provided, the total number of shares of the
Common Stock of the Corporation which may be awarded and issued under
Article V, VI and VII of the Plan shall not exceed in the aggregate 525,000
shares. Awards may be granted in respect of shares as to which prior options
have expired, terminated or been forfeited, in whole or in part, or in
respect of shares allocable to outstanding options, or in respect of
restricted stock or performance shares previously awarded but forfeited, in
whole or in part, due to failure to meet the performance or other
restrictions or conditions to vesting, provided that at no time shall awards
be granted which could cause the aggregate number of shares awarded under
the Plan to exceed the foregoing limitations of this Article IV.
ARTICLE V
STOCK OPTION AWARDS
5.01 Terms of Awards. Options granted under this Plan which are
intended to be incentive stock options shall contain such provisions as the
Board considers necessary or advisable in order that the options may qualify
under Section 422A of the Code. In addition, options granted under the Plan
shall be subject to the following terms and conditions not inconsistent
therewith as the Board shall determine:
(a) Type of Option. Each option agreement shall identify the option
represented thereby as an incentive stock option or a non-qualified
stock option, as the case may be;
(b) Option Price. Subject to Section 3.02 hereof, the option price per
share of stock deliverable upon the exercise of an option shall not be
less than one hundred percent (100%) of the fair market value per
share of the stock on the day the option is granted;
(c) Exercise of Option. Each option shall be made exercisable at such
time or times, whether or not in installments (which shall be
cumulative), as the Board shall determine, provided that the option
period shall not (i) in the case of incentive stock options, commence
earlier than one (1) year after the date of grant of the option; (ii)
in the case of non-qualified options, commence earlier than six (6)
months after the date of granting of the option; and (iii) in the case
of both incentive stock options or non-qualified stock options, end
later than ten (10) years after the date of grant of the option. The
Board may at any time accelerate the time at which all or any part of
the option may be exercised, subject to the terms set forth herein.
Any exercise of an option must be in writing signed by the proper
person and received by the Corporation at its principal office in
Burlington, Vermont, accompanied by the form of option and full
payment for the number of shares in respect of which the option is
exercised. If the purchase price is paid in whole or in part in shares
of Common Stock of the Corporation, the certificates for such shares
shall be accompanied by appropriate instruments of transfer in a form
acceptable to the Corporation. In the event an option is exercised by
the executor or administrator of a deceased optionee, or by the person
or persons to whom the option has been transferred by the optionee's
will or the applicable laws of descent and distribution, or by the
person or persons to whom the option has been transferred pursuant to
subparagraph (i)(B) below, the Corporation shall be under no
obligation to deliver stock thereunder unless and until the
Corporation is satisfied that the person or persons exercising the
option is or are the duly appointed executors or administrators of the
deceased optionee, or the person or persons to whom the option has
been transferred by the optionee's will or by the applicable laws of
descent and distribution, or the person or persons to whom such option
has been transferred pursuant to subparagraph (i)(B) below;
(d) Medium and Time of Payment.
(A) At the time of exercise of an option, payment in full of the
option price shall be made for all shares purchased on such exercise.
Such price may be paid in cash (including a certified check or bank
draft) or in shares of Common Stock of the Corporation (including
shares acquired by the exercise of an option granted under the Plan
whether or not the holding periods specified under Code Section
422(a)1 have been satisfied), or partly in cash and partly in such
shares, at the election of the person exercising the option. If the
price is paid in whole or in part in such shares, such shares shall be
valued at their fair market value at the time of exercise, for the
purpose of determining the extent to which the option price has been
paid in such shares;
(B) Notwithstanding the foregoing, an optionee may elect to pay
for the exercise of a stock option through the following cashless
exercise procedures. The optionee shall notify the Corporate Secretary
in writing of his or her intent to exercise the option. Written
instructions will then be prepared and delivered to the Corporation
and to the optionee's broker indicating the optionee's cashless
election and instructing the Corporation to deliver to the broker the
Common Stock issuable upon exercise. The exercise of the optionee's
stock option will be executed on the same day that the broker is able
to sell the stock. The broker will then withhold from the proceeds of
the sale and deliver to the Corporation an amount, in cash, equal to
the option price. An additional amount representing the optionee's
estimated federal and state tax withholding liabilities may also be
withheld and delivered to the Corporation at the optionee's election;
(e) Number of Shares; Maximum Annual Limit. The option grant shall
state the total number of shares to which it pertains. To the extent
the aggregate fair market value, determined at the time the option is
granted, of the stock for which incentive stock options are
exercisable for the first time by any individual during any calendar
year under the Plan (and under all other plans of the Corporation and
of its subsidiaries) exceeds one hundred thousand dollars ($100,000),
such options shall be treated as options which are not incentive stock
options;
(f) Period of Option. The period of each option shall be fixed by the
Board, but no option shall be exercisable after the expiration of ten
(10) years from the date it is granted;
(g) Fair Market Value. For purposes of this section and subject to the
next sentence, fair market value means, either (i) the closing price
of the Common Stock or (ii) if the Board otherwise affirmatively
determines, the average of the high and low prices of the Common
Stock, on the date on which the option is exercised (as specified on
the option exercise form), as reported on a stock exchange or over-
the-counter market on which the Common Stock is traded. In the event
the optionee elects to tender shares of the Corporation's Common Stock
in part or full payment of the option exercise price and such shares
are sold in the open market by or on behalf of such optionee in
connection with such exercise, the Fair Market Value of such shares
shall be deemed equal to the net proceeds of such sale, to the extent
they are paid over to the Corporation in payment of the exercise
price;
(h) Tax Withholding Rights. An optionee may elect, upon exercise of an
option, to have the Corporation satisfy federal and state income tax
withholding requirements applicable to the exercise, by (i) tendering
shares of Common Stock or (ii) having the Corporation retain from the
Common Stock deliverable to the optionee upon exercise, that number of
shares of Common Stock having a fair market value equal to the
estimated amount of the tax withholding liability;
(i) Transferability of Options.
(A) Except as otherwise provided in subparagraph (i)(B) below,
no option may be transferred by the optionee otherwise than by will or
by the laws of descent and distribution, and during the lifetime of
the optionee, the option shall be exercisable only by the optionee. An
option held by the optionee at the time of death, disability or
retirement, will be subject to the provisions and limitations of
subparagraph (k) below;
(B) In addition to transfers permitted under subparagraph (i)A
above, the Board, in its discretion, may provide that any non-
qualified stock option may be transferred by the optionee during his
lifetime, provided that such transfer is made without consideration
and the transferee is (i) a member of the optionee's family; or (ii) a
trust established for the benefit of the optionee or members of the
optionee's family; or (iii) a charitable trust, corporation or other
entity qualifying as a tax exempt entity under Section 501(c)(3) of
the Internal Revenue Code, as amended. Any transferable option issued
pursuant hereto (i) shall be exercisable only during the period and to
the extent such option would otherwise have been exercisable if
retained by the grantee; (ii) shall not include any award of tandem
stock appreciation rights; (iii) shall contain appropriate
restrictions on the further transfer of the option by the transferee;
and (iv) shall contain such other conditions and restrictions as the
Board may deem advisable;
(j) Termination of Employment or Board Membership. In the event that
an optionee shall cease to be employed by the Corporation, or in the
event that an optionee who is a non-employee director is removed from
the Board of Directors or any subsidiary, in either case other than by
reason of death or disability or retirement, then at any time or times
prior to the close of business on the date of termination such option
may be exercised by the optionee as to all, or any, of the shares
which the optionee was entitled to purchase immediately prior to such
termination of employment, and except as so exercised such option
shall expire at the close of business on the date of termination.
Notwithstanding the foregoing, no option may be exercised at a time
when the option would not be exercisable had the optionee remained an
employee or director, as the case may be;
(k) Death, Disability, or Retirement. If an optionee dies or becomes
permanently disabled at a time when he is entitled to exercise an
option, then at any time or times within twelve (12) months after his
death or disability, such option may be exercised, as to all or any of
the shares which the optionee was entitled to purchase immediately
prior to his death or disability, by him or his executor or
administrator or the person or persons to whom the option is
transferred by will or the applicable laws of descent and
distribution, and except as so exercised such option shall expire at
the end of the period specified above. Notwithstanding the foregoing,
no option may be exercised after the expiration of the option period.
If an optionee retires at a time when he is entitled to exercise
an option, then at any time or times within three (3) months after his
retirement date, such option may be exercised by the optionee, as to
all or any of the shares which the optionee was entitled to purchase
immediately prior to his retirement, and except as so exercised such
option shall expire at the end of the period specified above.
Notwithstanding the foregoing, no option may be exercised after the
expiration of the option period. For purposes of the Plan "retirement"
shall mean (i) in the case of an employee of the Corporation,
termination of employment with the Corporation or subsidiary if such
termination constitutes retirement (including at an early, normal, or
deferred retirement date) as provided for at the time of such
termination under any retirement program then maintained by the
Corporation or a subsidiary; (ii) in the case of directors,
termination of such individual's service on the Board of the
Corporation and any of its subsidiaries, for any reason other than
removal for cause; and (iii) in the case of an individual who is both
an employee and a director, the last to occur of the events specified
in clauses (i) and (ii).
ARTICLE VI
AWARD AND EXERCISE OF STOCK APPRECIATION RIGHTS; LIMITATIONS
6.01 Rights. A stock appreciation right is a right granted to the
holder to receive, pursuant to the terms of the right, an amount payable in
shares of Common Stock or, at the election of the Board, cash or a
combination of cash and shares of Common Stock, in each case, (i) equal to
the appreciation in market value of a stated number of shares of Common
Stock from the date of grant to the date of exercise or (ii) in the case of
rights granted in tandem with or by reference to a stock option, equal to
the increase in the value of the shares covered by the option to which the
stock appreciation right is related, as more particularly set forth below in
this Article VI. The procedures for exercise of stock options (including tax
withholding rights under Section 5.01(h)) and the provisions governing
expiration or cancellation of stock options shall be deemed to apply to any
stock appreciation rights granted under the Plan, to the extent not
inconsistent with this Article VI.
6.02 Grants. Any option granted under the Plan may contain such
provisions relating to stock appreciation rights, not inconsistent with this
Article VI and other provisions of the Plan, as the Board shall determine.
Any option accompanied by a stock appreciation right shall provide for the
surrender of any unexercised stock appreciation right to the extent that the
option which it accompanies, or to which it is related, is exercised.
6.03 Exercisability. A stock appreciation right granted in tandem with
or by reference to a stock option shall be exercisable when the related
option is surrendered, and only to the extent the related option is, at the
time, exercisable. A stock appreciation right not granted in tandem or by
reference to a stock option shall be exercisable in accordance with the
terms of the grant. No stock appreciation right shall be exercisable earlier
than twelve (12) months after the date of grant. All stock appreciation
rights shall be exercisable not more than ten years after the date of grant.
6.04 Exercise. Upon exercise of a right, the grantee shall be paid the
excess of the then fair market value of the number of shares to which the
right relates over the fair market value of such number of shares at the
date of grant of the right or the related stock option, as the case may be.
The Board may in its sole discretion elect, at any time before or after
exercise of any stock appreciation right by the holder, to discharge the
Corporation's obligation in respect thereof (i) by the delivery of shares of
Common Stock, or (ii) by the payment of cash or partially by the payment of
cash and partially by the delivery of shares of Common Stock. The total
value of payments under (ii) above shall equal the aggregate value of the
shares of Common Stock deliverable under (i) above. No fractional shares
will be delivered.
6.05 Window Period. Unless otherwise permitted or required by the
Board at any time, any full or partial exercise by a director or officer of
the Corporation (as defined for this purpose by the applicable regulations
of the Securities and Exchange Commission) of a stock appreciation right to
be satisfied in cash, in full or partial settlement of the right so
exercised, shall be made only during the period beginning on the third
business day following the date of release for publication of quarterly or
annual (as the case may be) summary statements of sales and earnings of the
Corporation and its subsidiaries, and ending on the twelfth business day
following such date.
6.06 Conditions. The Board may, in its discretion, as it deems such to
be in the best interests of the Corporation, impose other conditions and
limitations upon the exercise of a stock appreciation right, and upon the
Corporation's obligations under the Plan in respect of stock appreciation
rights, which conditions may include a condition or limitation that the
stock appreciation right may only be exercised in accordance with further
rules and regulations adopted by the Board from time to time. Such rules and
regulations may govern the right to exercise stock appreciation rights
granted prior to the adoption of amendment of such rules and regulations as
well as stock appreciation rights granted thereafter. Without limiting the
foregoing, the Board may specify that stock appreciation rights may be
exercised by the holder only with the consent of the Board, or may specify
the maximum amount of cash or Common Stock which may be delivered upon
exercise of stock appreciation rights in any year.
ARTICLE VII
AWARDS OF RESTRICTED STOCK, RESTRICTED STOCK UNITS,
PERFORMANCE SHARES AND PERFORMANCE SHARE UNITS
7.01 Definitions.
(a) "Performance Shares." Restricted Stock that is subject to a
Restriction Period under Section 7.01(e) that includes conditions or
restrictions upon vesting based in whole or in part on the performance
of the Corporation or any of its affiliates as measured by earnings,
stock price or any other measures(s) of corporate performance selected
by the Board.
(b) "Performance Share Units." The right to receive payment in cash
pursuant to Section 7.03 upon the expiration of the Restriction Period
established pursuant to Section 7.01(e) applicable to the related
Performance Shares.
(c) "Restricted Stock." Common Stock subject to the Restriction Period
set forth in Section 7.01(e).
(d) "Restricted Stock Unit." The right to receive a payment in cash
pursuant to Section 7.03 upon the expiration of the Restriction Period
set forth in Section 7.01(e) applicable to the related Restricted
Stock.
(e) "Restriction Period." The Restriction Period of each award shall
be five (5) years from the date on which the award is granted. In
addition, the Board may at its discretion establish other restrictions
to operate in lieu of or in addition to the Restriction Period set
forth in this Section 7.01(e).
7.02 Restricted Stock and Performance Share Awards. The Board, in its
sole discretion, may grant awards of Restricted Stock, including Performance
Shares, to persons who are eligible to participate in the Plan pursuant to
Section 3.01.
7.03 Restricted Stock Unit and Performance Share Unit Awards. The
Board, in its sole discretion, may create Restricted Stock Units and
Performance Share Units equal to fifty percent (50%) of the Restricted Stock
Award or the Performance Share Award, as the case may be, granted to
individuals pursuant to Section 7.02.
7.04 Distribution of Common Stock. Upon the expiration of the
Restriction Period and other restrictions, if any, under Section 7.01(e)
applicable to Restricted Stock or Performance Shares (or as soon as
practicable thereafter), the Board shall distribute one (1) share of Common
Stock in exchange for each such share of Restricted Stock or each
Performance Share, as the case may be, registered in the participant's name.
7.05 Distribution of Restricted Stock Unit and Performance Share Unit
Awards. Upon expiration of the Restriction Period or other restrictions
under Section 7.01(e) applicable to such Restricted Stock or Performance
Share Units (or as soon as practicable thereafter), the Board shall
distribute in cash the value of the Units earned. Each such Unit shall be
equal to the value of one (1) share of Common Stock valued on the date the
Restriction Period expires.
7.06 Termination of Employment. In the event that, prior to the
expiration of the Restriction Period or expiration or satisfaction of other
restrictions under Section 7.01(e), a participant shall cease to be employed
by the Corporation or, in the case of a non-employee director, shall cease
to serve as a director, in either case other than by reason of death,
disability or retirement, all unvested Restricted Stock, Performance Shares,
Restricted Stock Units and Performance Share Units awarded to such
participant shall be forfeited by such participant as of the effective date
and time of such termination and shall revert to the Corporation.
7.07 Death, Disability, or Retirement. Upon the participant's death,
retirement or permanent disability, the Board, in its sole discretion, may
determine that the Restriction Period and any other applicable restrictions
under Section 7.01(e) will be deemed to have expired and may distribute one
(1) share of Common Stock to the participant or his beneficiary in exchange
for each share of Restricted Stock and each Performance Share registered in
the participant's name and may distribute the Restricted Stock and
Performance Share Awards to the extent earned if the performance targets or
other conditions established by the Board have been achieved. In the event
the Restriction Period or other applicable restrictions under Section
7.01(e) is not deemed to have expired under this Section 7.07, the
participant's Restricted Stock and Performance Shares (and Restricted Stock
Units and Performance Share Units) shall be forfeited by him and shall
revert to the Corporation. For purposes of the Plan "retirement" shall have
the meaning set forth in Section 5.01(k) of this Plan.
7.08 Beneficiary Designation. A participant may designate a
beneficiary or beneficiaries for purposes of the Plan and may change such
designation from time to time by filing a written designation with the Board
and pursuant to such rules as the Board promulgates.
7.09 Anti-Alienation Provision. During the period prior to
satisfaction of all applicable conditions and restrictions upon vesting
under Section 7.01(e), Restricted Stock and Performance Shares (and
Restricted Stock Units and Performance Share Units) granted to a participant
may not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or change, except as herein
provided or as required by applicable law.
7.10 Rights of Holders of Restricted Stock and Performance Shares.
During the Restriction Period, a participant shall have the right to receive
dividends on Restricted Stock and Performance Shares but shall not have the
right to receive dividends on Restricted Stock Units and Performance Share
Units.
7.11 Restricted Stock and Performance Share Agreement. An eligible
officer or employee must agree in writing to the terms and conditions of any
award of Restricted Stock, Performance Shares, Restricted Stock Units and
Performance Share Units, on a form provided by the Board.
ARTICLE VIII
DELIVERY OF STOCK
8.01 Delivery of Stock. The Corporation shall not be obligated to
deliver any shares of Common Stock or to register any transfer of Common
Stock or of stock options issued pursuant to Article V unless and until, in
the opinion of the Corporation's counsel, all federal and state laws and
regulations which the Corporation may deem applicable have been complied
with, nor, in the event the Common Stock is at the time listed upon any
national securities exchange, unless and until the shares to be delivered
have been listed or authorized to be added to the list upon official notice
of issuance upon such exchange, nor unless and until all other legal matters
in connection with issuance and delivery of the shares, or the transfer of
the shares or options, as the case may be, have been approved by the
Corporation's counsel. Without limiting the generality of the foregoing, the
Corporation may require from the participant or his transferee, as
applicable in the circumstances, such investment representation or
agreement, if any, as counsel for the Corporation may consider necessary in
order to comply with the Securities Act of 1933, as amended, and may require
that such participant or transferee agree to notify the Corporation prior to
any disposition of the shares or stock options, whether by sale, gift, or
otherwise. To the extent a the participant incurs any expenses in connection
with compliance with this section of the Plan, the Corporation may, at its
sole discretion, reimburse the participant for any reasonable expenses so
incurred. The Corporation shall use its best efforts to achieve any
compliance with applicable law and the participant and any transferee of a
participant shall take any action reasonably requested by the Corporation in
such regard.
An optionee pursuant to Articles V and VI shall have the rights of a
shareholder only as to shares actually delivered to the optionee.
8.02 Withholding. Subject to Section 5.01(h) hereof, whenever the
Corporation proposes or is required to issue or transfer shares of Common
Stock under the Plan, the Corporation shall have the right to require the
recipient to remit to the Corporation an amount sufficient to satisfy any
federal, state, and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. No shares of
Common Stock shall be delivered, or cash or other payment made, unless
arrangements satisfactory to the Corporation are made for any federal income
tax or other withholding required.
ARTICLE IX
RIGHTS TO EMPLOYMENT
9.01 No Employment Rights Created. Neither the Plan nor any option or
award granted under the Plan imposes any obligation on the Corporation or
any subsidiary to continue the employment of any participant or any other
relationship between the participant and the Corporation or any subsidiary,
including membership on the Board of Directors, nor interferes in any way
with the right of the Corporation or any subsidiary, subject to applicable
law, to terminate the employment of any of its employees or such other
relationship at any time.
ARTICLE X
ADJUSTMENT UPON CHANGES IN STOCK
10.01 Pro Rata and Other Adjustments. In the event of a stock
dividend, split-up, combination of shares, recapitalization, plan of share
exchange or merger in which the Corporation is the surviving corporation
(other than as provided below), or other similar capital change, or in the
event of a spin-off or other significant distribution of stock or property
by the Corporation to its shareholders, the Board shall make such pro rata
adjustments and other changes, if any, in the number and kind of shares of
stock or securities of the Corporation to be subject to the Plan and to
options and awards then outstanding or to be granted thereunder, the maximum
number of shares or securities which may be issued on the exercise of
options or under awards granted under the Plan, the option price, and other
relevant provisions as it considers equitable and appropriate, and the
Board's determination shall be binding on all persons.
10.02 Change in Control. In the event of a consolidation, merger or
plan of share exchange in which the Corporation is not the surviving
corporation, or in the event of a Business Combination not approved by the
Continuing Directors (both as defined in Article Thirteenth of the
Corporation's Certificate of Incorporation), or in the event of complete
liquidation of the Corporation,
(A) all outstanding options and stock appreciation rights shall
thereupon become immediately exercisable; and
(B) all outstanding awards of Restricted Stock and Performance
Shares and Restricted Stock Units and Performance Share Units shall
thereupon be deemed vested.
In addition, upon the occurrence of an event specified in this Section
10.02, the Board may, in its discretion, accelerate the exercisability or
vesting of awards to any time prior to the effective time of such event, and
include such further provisions and limitations in any agreement entered
into with respect to an option or award as it may deem equitable and in the
best interest of the Corporation.
ARTICLE XI
AMENDMENTS
11.01 Plan Amendments. The Board may at any time suspend or
discontinue granting options and/or awards under the Plan. The Board may at
any time or times amend the Plan or any outstanding option and/or awards for
the purpose of satisfying the requirements of any changes in applicable laws
or regulations or for any other purpose which may at the time be permitted
by law, provided that, except as provided in Section 10.01, no such
amendment shall, without the approval of the shareholders of the
Corporation, increase the maximum number of shares available under the Plan.
No such amendment shall adversely affect the rights of any participant
(without the participant's consent) under any option or award theretofore
granted.
ARTICLE XII
TERMINATION OF THE PLAN
12.01 Term of the Plan. No award shall be granted under the Plan after
10 years following adoption of this Plan. Awards theretofore granted may
extend beyond that date but not beyond 10 years after such award is granted.
ARTICLE XIII
APPROVAL OF STOCKHOLDERS
13.01 Shareholder Approval. Adoption of this Plan shall be subject to
the approval of the shareholders of the Corporation, which approval shall be
secured within one year after the date the Plan is adopted by the Board.
SECRETARY'S CERTIFICATE
The Banknorth Group, Inc. 1997 Equity Compensation Plan was approved
by the Board of Directors of Banknorth Group, Inc. on February 25, 1997 and
by the Shareholders of Banknorth Group, Inc. on ____________________________
______________, 199__.
________________________________________
Thomas M. Dowling
Secretary
EXHIBIT B
1994 DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND SELECTED EXECUTIVES
OF
BANKNORTH GROUP, INC. AND PARTICIPATING AFFILIATES
(July 1, 1997 Amendment and Restatement)
This Deferred Compensation Plan ("Plan") is established for the
benefit of the non-employee members of the Boards of Directors and certain
selected employees of Banknorth Group, Inc. (sometimes hereinafter the
"Corporation") and its subsidiaries that elect to participate, with the
corporation for whom such person performs services hereinafter referred to
as the "Employer." The Plan is as follows:
1. Purpose. The purpose of the Plan is to provide a foundation
for continued growth of the Employer by strengthening its capacity to
attract and retain outstanding directors and selected executives in
continued service.
2. Definitions. As used in this Plan, the following terms have
the following meanings:
(a) "Compensation" shall mean all fees, salary or other
compensation paid by the Employer to a Participant (including
any amount of such compensation which a Participant elects to
offer to defer under this Plan, but not including amounts paid
as expense reimbursement).
(b) "Effective Date" shall mean January 1, 1994, or such
later date as a Participant's Election Form becomes effective.
(c) "Disabled" or "Disability" shall mean the complete
and permanent inability by reason of illness or accident to
perform the duties of the principal occupation at which a
Participant was employed when such disability commenced. All
determinations as to the date and extent of Disability of any
Participant shall be made by the Corporation, upon the basis of
such evidence as the Corporation deems necessary and desirable.
(d) The Employer is a member of the Banknorth Group, Inc.
group of affiliated companies, which includes Banknorth Group,
Inc., First Massachusetts Bank, First Vermont Bank and Trust
Co., Farmington National Bank, Franklin Lamoille Bank, Granite
Savings Bank & Trust Co., The Howard Bank, N.A., North American
Bank Corporation, Woodstock National Bank, The Stratevest Group,
N.A., and Banknorth Mortgage Company and any other corporations
that may hereafter become similarly affiliated therewith.
"Affiliate" shall mean any member of the Banknorth Group, Inc.
group of affiliated companies other than the Employer.
(e) The terms "pay," "paid," "payment," and like usage in
the content of the payment of benefits under this Plan shall
refer to the distribution of common stock of the Corporation
when referring to benefit distributions from the Restricted
Stock Account, as well as to the payment of cash benefits from
the Cash Account.
(f) The words "fair market value," when referring to a
share of common stock of the Corporation, shall mean either (i)
the closing price of one share of common stock of the
Corporation as of the date in question or (ii) if the Board of
Directors of the Corporation otherwise affirmatively determines,
the average of the high and low prices of one share of common
stock of the Corporation on the date in question, as reported on
a stock exchange or over-the-counter market on which such common
stock is traded.
(g) All other terms defined elsewhere in this Plan shall
have the meanings ascribed thereto and such meanings shall apply
throughout this Plan.
3. Participants. Directors of the Employer who are not also
employees of the Employer and executive officers of the Employer
specifically selected by resolution of the Board of Directors of the
Corporation are eligible to participate in the Plan and are referred
to herein as "Participant" when such person has filed an Election Form
which has been accepted by the Employer or the Corporation.
4. Participant's Election.
(a) An election under this Plan may be made only on an
election form supplied by the Employer ("Election Form"), which
Election Form must be fully completed, dated and executed by the
Participant and accepted by the Employer or the Corporation.
The Employer or the Corporation may refuse to accept any
Election Form filed by any person for any reason whatsoever or
for no reason, and election under this Plan shall not be
effective and no person shall be entitled to any benefits under
this Plan unless and until the Employer or the Corporation shall
have accepted the person's Election Form.
(b) Any election under this Plan must be made before the
Effective Date or before the end of any calendar year thereafter
with respect to subsequent calendar years, as the case may be.
Elections made on or after the Effective Date or on or after
January 1 of any subsequent calendar year shall not be accepted
by the Employer for the calendar year in which the election is
made. Notwithstanding the provisions of this Paragraph 4(b),
newly appointed directors and newly eligible executive officers
may also participate in this Plan by completing the Election
Form and submitting it to the Employer before any Compensation
is earned by the director or officer.
(c) A Participant may elect to defer an amount equal to
all or any portion of Compensation for the first year and any
subsequent calendar year.
An Election Form and participation in the Plan shall
continue in effect from calendar year to calendar year unless
replaced by a subsequent Election Form or unless a Participant
indicates in writing his desire to refrain from future
participation in the Plan effective on the next January 1. In
no event shall such notification have the effect of entitling a
Participant in the Plan to receive payment with regard to any
elected deferral at any time earlier than the time at which he
would have received payment under the relevant Election Form.
(d) Any election made under this Plan shall be
irrevocable with respect to the period for which it is made.
There shall be no requirement to pay to any Participant any
deferred compensation until such time as it may be due under
this Plan.
(e) Any election to defer compensation under this Plan
will not reduce benefits payable under any other benefit plan
that the Employer may provide for its directors or officers.
Such benefits will be calculated as if the election had not been
made.
5. Deferred Compensation Accounts. Amounts deferred under this
Plan will be credited to one or two bookkeeping accounts (the Cash
Account and/or the Restricted Stock Account, as hereinafter defined)
for the Participant in accordance with the Participant's election on
an Election Form. The Participant's ultimate deferred compensation
payments shall be based on the aggregate value of the Cash Account and
the aggregate number of Restricted Stock Units accrued in the
Restricted Stock Account determined as hereinafter set forth:
(a) A Participant may elect that all or any part of
amounts deferred be credited to a so-called "Cash Account". All
amounts credited to the Cash Account shall be credited with
earnings at a rate (adjusted annually) equal to one-half percent
(1/2%) above the coupon rate of a one-year U.S. Treasury Bill at
the first auction date of the year or such other comparable rate
established by the Employer. (For example, if the applicable
Treasury bill rate is six percent (6%), the earnings rate
hereunder would be six and one-half percent (6 1/2%) for the
year in question.)
(b) A Participant may elect that all or any part of
amounts deferred be credited to a so-called "Restricted Stock
Account". All amounts credited to the Restricted Stock Account
shall be applied to the crediting of Restricted Stock Units.
The number of Restricted Stock Units credited to a Participant's
Restricted Stock Account shall equal the dollar amount deferred
and credited to such account divided by the fair market value of
one share of common stock of the Corporation as determined on a
quarter end date selected by the Corporation. Fractional
Restricted Stock Units will be used. Each Restricted Stock Unit
shall be deemed to pay dividends as if it were one share of
common stock of the Corporation and any such deemed dividends
will result in the crediting of additional Restricted Stock
Units to the Restricted Stock Account as of the next quarter end
date selected by the Corporation, with the number of Restricted
Stock Units so credited to be calculated in the manner set forth
above for deferrals. Such deferral amounts and deemed
dividends, which are pending the crediting of Restricted Stock
Units, shall not be credited with any earnings. After the
crediting of Restricted Stock Units to the Restricted Stock
Account, subsequent fluctuations in the fair market value of the
common stock of the Corporation shall not effect any change in
the number of such Restricted Stock Units then credited to the
Restricted Stock Account.
(c) In the event of any change in the outstanding shares
of Banknorth Group, Inc. common stock by reason of any stock
dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares or
other similar corporate change, then the Restricted Stock
Account and Units of each Participant and the manner of
calculating earnings thereon shall be adjusted by the
Corporation in a reasonable manner to compensate for the change,
and any such adjustment by the Corporation shall be conclusive
and binding for all purposes of the Plan.
(d) All unpaid balances in a Participant's Cash Account
shall, notwithstanding the commencement of payment of deferred
compensation with respect to the Participant, continue to be
credited with earnings until paid. The balance of the
Restricted Stock Units in the Restricted Stock Account shall
continue to be credited with dividends and be subject to
Paragraph 6(c) above until a payment from such account is made
with respect to such Restricted Stock Units in accordance with
this Plan.
(e) Participants are not permitted to transfer amounts
between the Cash Account and the Restricted Stock Account.
However, if a successor Election Form is properly filed with and
accepted by the Employer, such Election Form may contain revised
instructions as to the proportion of future deferred amounts to
be credited to each of the Cash Account and the Restricted Stock
Account.
(f) Notwithstanding any other provision of the Plan or
any election of any Participant (i) no Restricted Stock Units
shall be credited to the Restricted Stock Account of any
Participant for the six (6) month period preceding the
Participant's anticipated retirement date (or the first date of
deferred compensation payment under any Election Form, if
earlier) and during such six (6) month period any amount that
the Participant elected for crediting to the Restricted Stock
Account and any dividends deemed paid on the Restricted Stock
Units in the Restricted Stock Account shall instead be credited
to the Cash Account and (ii) in addition, all dividends deemed
paid on the Restricted Stock Units in the Restricted Stock
Account that would otherwise have been credited to the
Restricted Stock Account shall be credited to the Cash Account
for the period from and after such date until the date that is
the earlier of:
(A) the date of the Participant's death, or
(B) the later of:
(I) The date of the Participant's retirement or
termination of duties as a director or executive
officer, or
(II) The date that is six (6) months after the
last date (prior to the Participant's retirement or
termination of duties) on which the Participant
purchased any equity security (as defined under Section
16 of the Securities Exchange Act of 1934 or the
regulations thereunder) of Banknorth Group, Inc.,
provided that the crediting of Restricted Stock Units
under the Plan shall be deemed the purchase of such an
equity security.
(g) The amendment to this Plan is effective as of July 1,
1997 and changes the manner in which Restricted Stock Units
(Phantom Stock Units prior to amendment) are paid or distributed
to Participants. Under this Plan prior to amendment, Phantom
Stock Units could be converted to cash and placed in the Cash
Account at the Participant's election at any time commencing
shortly after the Participant ceased service for the Employer.
Benefit payments were made only in cash and from the Cash
Account. Absent instruction from the Participant the Phantom
Stock Units were converted to cash only to the extent necessary
to make benefit payments. Under the Plan as amended, payments
from the Cash Account and distributions from the Restricted
Stock Account are made independently. Distributions from the
Restricted Stock Account are made only in Banknorth Group, Inc.
common stock. Each Participant, including those currently
receiving benefit payments, will be afforded an election period
of not less than ten (10) days from the date of mailing a notice
of election during which the Participant may elect to have the
Participant's Cash Account and Phantom Stock Accounts governed
by the Plan provisions as set forth in this July 1, 1997
Amendment and Restatement. After a Participant's making such an
election, the Participant's participation and benefits will be
governed solely by the Plan as amended and the Participant's
Phantom Stock Account(s) will be converted to a Restricted Stock
Account(s) on July 1, 1997. The conversion will be effected by
dividing the aggregate dollar value of the Participant's Phantom
Stock Account as of July 1, 1997 by the fair market value of one
share of common stock of the Corporation as of such date and
crediting the Restricted Stock Account with a number of
Restricted Stock Units equal to such quotient. The Corporation
may in its discretion (but shall not be required to) afford, to
Participants who do not initially elect to have prior deferrals
governed by this July 1, 1997 Amendment and Restatement,
subsequent opportunities to so elect. Absent such an election,
the Participant's deferrals prior to July 1, 1997 and benefits
payable with respect thereto will be governed under the terms of
the January 1, 1996 Amendment and Restatement of the Plan;
namely, the Participant may elect to have the Phantom Stock
Account converted to cash at the Participant's option commencing
shortly after the Participant ceases service for the Employer,
but the Participant may not receive distributions of Banknorth
Group, Inc. common stock from the Plan. This amendment and
restatement applies to all electing Participants, including
those who are not now deferring compensation under the Plan but
who are receiving benefits under the Plan, and to all deferrals
by all Participants on and after July 1, 1997 whether or not the
Participant makes an election. Notwithstanding Paragraph 4
hereof, because of the mid-year change to the Plan Participants
will be afforded an opportunity prior to July 1, 1997, to revise
their deferral election prospectively for the period commencing
July 1, 1997 through year-end 1997.
6. Benefits.
(a) Subject to the provisions of Paragraph 14 below,
compensation deferred pursuant to the Plan shall be paid to a
Participant, or to his designated Beneficiary in the event of
his death, in the manner and at the time provided for below and
as specified by the Participant in his Election Form, which is
incorporated herein by reference.
(b) Notwithstanding the Participant's election, deferred
compensation shall not become payable upon the Participant's
termination of duties as a director or executive officer of the
Employer or upon the Participant's retirement from duties as a
director or executive officer of the Employer if directly
thereafter the Participant becomes or continues as a director or
an employee of an Affiliate of the Employer. In such event the
Participant's termination of duties or retirement shall refer to
the Employee's service with the successor Affiliate(s).
(c) The Participant may elect to receive payments in a
lump sum or in annual installments for any fixed period of years
not to exceed fifteen (15) years. Payments to Participants from
the Cash Account will be made only in cash; payments to
Participants from the Restricted Stock Account will be made only
in Banknorth Group, Inc. common stock with one share of such
common stock being issued for each Restricted Stock Unit in
question. The amount of each cash annual installment payment
will be determined by dividing the then aggregate value of the
Cash Account by the number of installments remaining to be paid.
The number of shares of Banknorth Group, Inc. common stock to be
distributed will be determined by dividing the then aggregate
number of Restricted Stock Units by the number of installments
remaining to be paid and rounding up to the nearest whole number
of shares (except in the case of the last distribution where a
fractional share may be issued). Lump sum payments shall be
made and installment payments shall commence as soon as
practicable after termination of, or retirement from, duties as
a director or officer, another properly elected payment date,
the Participant's death, or the Participant's Disability, as the
case may be. Because a Participant has the option of choosing
varying payment periods and varying ratios of the Cash Account
to the Restricted Stock Account in different elections, the
Employer may in its discretion, as of the date of an event
triggering the payment of deferred compensation amounts, elect
either to continue to maintain separate accounting with respect
to different elections, or proceed to combine the accounting
with respect to different elections by determining, in any
reasonable fashion, a payout pattern consistent with the effect
of the varying elections; provided, always, that the Cash
Account(s) shall not be merged with the Restricted Stock
Account(s). Absent an election by a Participant, a
Participant's Phantom Stock Account will not be converted to or
merged with a Restricted Stock Account.
(d) If a Participant dies before all sums due have been
paid in full, the balance shall become payable to the
Participant's designated Beneficiary or Beneficiaries in a lump
sum or in installments on the terms of payment and in the order,
as specified by the Participant in his Election Form. If a
Participant is receiving installment payments and has elected
installment payments for the Beneficiary(ies), installment
payments to the Beneficiary(ies) will be a continuation of the
payments being made to the Participant. If the Participant has
designated no Beneficiary or if no Beneficiary survives so as to
receive the first payment under the Plan, the balance shall be
paid in a lump sum to the Participant's estate as soon as
practicable following the Participant's death. Upon the death
of the last surviving Beneficiary (if any Beneficiary has
survived so as to receive any payment under the Plan), any
balance unpaid under the Terms of the Plan will be paid in a
lump sum to such last surviving Beneficiary's estate.
7. Beneficiary Definition. A Participant may designate a
Beneficiary ("Beneficiary") to receive, in the event of the
Participant's death all amounts which may then and thereafter be
payable under the Plan. The Beneficiary shall receive such amounts in
accordance with the Participant's election and the circumstances (see
Paragraph 6). A Participant may change the designation of Beneficiary
at any time or times (without the consent of any prior Beneficiary) by
delivering to the Employer a written indication thereof on a form
provided by the Employer. So long as any Primary Beneficiary is
living no Secondary Beneficiary shall be entitled to any payments
hereunder.
8. Discretionary Payments. Notwithstanding anything herein
contained to the contrary, the Board of Directors of the Employer
shall have the right, in its sole discretion, to accelerate the
payments due under this Plan, after the first payment under the Plan
has become due pursuant to Paragraph 6 hereof, (a) to a Participant
who has become Disabled, or (b) in the event of a financial hardship
affecting the personal or family affairs of any Participant hereunder,
or (c) in the event of a financial hardship affecting the personal or
family affairs of a Beneficiary of a deceased Participant, or (d) in
payment of relatively small amounts, or (e) for any other reason the
Board of Directors deems appropriate.
9. Nontransferability. No right to payment under this Plan
shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same shall be
void. No right to payment shall, in any manner, be liable for or
subject to the debts, contracts, liabilities or torts of the person
entitled thereto. If, at the time when payments are to be made
hereunder, the Participant or Beneficiary is indebted to the Employer
or any Affiliate of the Employer then any payments remaining to be
made hereunder may, at the discretion of the Employer, be reduced by
the amount of such indebtedness. An election by the Employer not to
reduce such payments shall not constitute a waiver of its or its
Affiliate's claim for such indebtedness.
10. Plan Interpretation. The Board of Directors of the
Corporation shall have full power and authority to interpret, construe
and administer this Plan, and the Board's interpretations and
construction thereof, and actions thereunder, shall be binding and
conclusive on all persons for all purposes. None of the Corporation,
the Employer nor any member of the Board of either shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of the Plan unless attributable to
the Corporation's, the Employer's or that Board member's own willful
misconduct or lack of good faith. The Corporation's determination as
to the value of a Restricted Stock Unit as of any particular date
shall be binding and conclusive on all persons for all purposes.
11. Nature of Reserves. The Employer or the Corporation may,
but shall not be required to set aside funds or purchase insurance
contracts or other assets in anticipation of payments to be made under
this Plan. Any such reserves or assets shall be usable by the
Employer or the Corporation as part of its general funds for any legal
purpose whatsoever. Nothing contained in this Plan and no action
taken pursuant to the provisions of this Plan shall create or be
construed to create a trust or escrow of any kind, or a fiduciary
relationship between the Employer (or the Corporation) and any
Participant, any Beneficiary or any other person. To the extent that
any person acquires a right to receive payments from the Employer
under this Plan, such right shall be no greater than the right of any
unsecured general creditor of the Employer.
12. Successors and Assigns. This Plan shall be binding upon
and inure to the benefit of the Employer, its successors and assigns,
and the Participant and his heirs and legal representatives.
13. Applicable Law. This Plan shall be construed in accordance
with and governed by the laws of the State of Vermont.
14. Forfeiture. Notwithstanding anything herein contained to
the contrary, except as specified in this Paragraph 14 no payment of
any then unpaid installments shall be made, and all rights of the
Participant and his or her Beneficiary(ies) under this Plan shall be
forfeited, if (a) the Participant shall engage in any activity or
conduct or shall commit any omission, which in the opinion of the
Board of Directors of the Employer is materially adverse to the best
interests of the Employer, or (b) after the Participant ceases to be
employed by the Employer, he or she shall fail or refuse to provide
advice and counsel to the Employer when reasonably requested to do so.
In such event, the Participant shall be entitled to receive in
installments as provided pursuant to this Plan, but only in the exact
dollar amounts deferred (in cash) without accounting for any earnings
credited to the Cash Account and without credit for any accretions to
or increase or decrease in value in the Restricted Stock Account
(i.e., the aggregate dollar amount deferred by the Participant will be
paid out to the Participant without increase or decrease for any
reason).
15. Alternate Payee. If the Board of Directors of the Employer
shall determine that any person to whom any payment is payable under
this Plan is unable to care for his affairs because of illness or
accident, is a minor, or is otherwise incompetent, any payment due to
such person may be paid to a legally appointed guardian. Any such
payment shall be a complete discharge of the liability of the Employer
to the Participant and any Beneficiary under this Plan.
16. Amendments to the Plan. The Board of Directors of the
Corporation may amend the Plan at any time and from time to time,
without the consent of the Participants or their Beneficiaries,
provided, however, that no amendment shall divest any Participant or
Beneficiary of the credits to his accounts.
17. Termination of the Plan. The Board of Directors of the
Corporation may terminate the Plan at any time. Upon termination of
the Plan, distribution of the credits to a Participant's accounts
shall be made in the manner and at the time heretofore prescribed;
provided that no additional credits shall be made to the accounts of a
Participant following termination of the Plan other than interest or
other accretions thereon credited pursuant to Paragraph 5.
18. Transfer Between Plans. If a Participant hereunder should
become a director or employee of an Affiliate of the Employer, all
obligations from the Employer to the Participant under this Plan may,
in the sole discretion of the Employer and the Affiliate, be assumed
by the Affiliate, and in such event the Employer shall have no further
obligation to the Participant under this Plan and the Affiliate will
bound to provide benefits to the Participant under this Plan in
accordance with the Participant's then relevant election form(s)
accepted by the Employer or the Affiliate, as the case may be. As a
condition to participation in the Plan, the Participant agrees that
any Affiliate that assumes obligations to the Participant under the
Plan shall thereafter have all of the rights that the Employer has or
had under the Plan.
IN WITNESS WHEREOF, the Corporation has caused this Plan as Amended
and Restated to be executed by its duly authorized officer and adopted to be
effective as of the 1st day of July, 1997.
BANKNORTH GROUP, INC.
BY: ____________________________________
Its Duly Authorized Officer
Attest: _______________________________
Secretary
PROXY
BANKNORTH GROUP, INC.
300 Financial Plaza
P.O. Box 5420
Burlington, VT 05401
The undersigned hereby appoints Thomas J. Amidon and Margaret E. Richey, or
either of them, as proxies, with full power of substitution in each, to vote
the common stock of Banknorth Group, Inc. that the undersigned is (are)
entitled to vote at the Annual Meeting of Shareholders to be held at the
Ramada Inn and Conference Center, Williston Road, South Burlington, Vermont,
on Tuesday, May 13, 1997, at 3:00 p.m., and at any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE.
(Continued and to be signed on reverse)
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FOLD AND DETACH HERE
This Proxy, when properly executed, will be voted in the Please mark [x]
manner directed herein by the undersigned shareholder. your votes as
If no direction is made, this Proxy will be voted FOR indicated in
Items 1, 2, 3 and 4. this example
1. ELECTION OF FOUR DIRECTORS:
FOR all nominees TO WITHHOLD
listed at right authority to vote
(except as marked for all nominees
to the contrary) listed at right
[ ] [ ]
To serve until the Annual Meeting in 2000: Richard J. Fleming, Luther F.
Hackett, Richard N. Narkewicz, M.D. and John B. Packard.
(INSTRUCTION: To withhold authority to vote for any individual nominee(s)
while approving the other nominees listed above, write the name(s) of such
nominee(s) in the space provided below.)
_______________________________________________________________________________
_______________________________________________________________________________
2. To adopt the 1997 Equity Compensation Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To adopt the amended and restated 1994 Deferred Compensation Plan for
Directors and Selected Executives
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To ratify the selection of the independent public accounting firm of KPMG
Peat Marwick LLP as the Company's external auditors for 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion, to act upon such other business as may properly come
before the meeting or any adjournments thereof. If any such business is
presented, it is the intention of the proxies to vote the shares represented
hereby in accordance with the recommendations of management.
Please sign exactly as name(s) is (are) printed on this Proxy. When signing
as attorney, executor, administrator, trustee, guardian, or in any other
representative capacity, please so indicate.
_________________________________________________
Signature(s) of Shareholder(s)
_________________________________________________
Signature(s) of Shareholder(s)
Date: _____________________________________, 1997
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FOLD AND DETACH HERE
BANKNORTH GROUP, INC.
Annual Meeting of Stockholders
Tuesday, May 13, 1997
3:00 p.m.
RAMADA INN AND CONFERENCE CENTER
Williston Road
South Burlington, Vermont 05403
