<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
BANKNORTH GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6712 03-0321189
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
300 FINANCIAL PLAZA, P.O. BOX 5420, BURLINGTON, VT 05401-5420
(802) 658-9959
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. WILLIAM H. CHADWICK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BANKNORTH GROUP, INC.
300 FINANCIAL PLAZA, P.O. BOX 5420
BURLINGTON, VT 05401-5420
(802) 658-9959
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S AGENT FOR SERVICE)
---------------
COPIES TO:
DENISE J. DESCHENES STEVEN KAPLAN
PRIMMER & PIPER, P.C. ARNOLD & PORTER
52 SUMMER ST., P.O. BOX 159 THURMAN ARNOLD BUILDING
ST. JOHNSBURY, VT 05819 555 12TH STREET, NW
(802) 748-5061 WASHINGTON, DC 20004-1202
(202) 942-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO BE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
---------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PRICE PER OFFERING REGISTRATION
REGISTERED(1) REGISTERED(2) UNIT(3) PRICE(3) FEE(4)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$1.00 par value.......... 8,500,000 $31.875 $270,937,500 $75,321
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</TABLE>
(1) Also includes associated Banknorth Group, Inc. Preferred Share Purchase
Rights, which Rights are not currently separable from the shares of
Banknorth Common Stock and are not currently exercisable.
(2) Estimated maximum number of shares of Banknorth Common Stock that may be
issued in connection with the proposed Merger to which this Registration
Statement relates, based on the number of shares of Evergreen Common Stock
expected to be outstanding at the Effective Time of the Merger (adjusted
for the Conversion Ratio) and shares of Banknorth Common Stock that will
be issuable upon exercise of outstanding Evergreen Bancorp, Inc. employee
and director stock options.
(3) Pursuant to Rule 457(f)(1) and solely for the purpose of calculating the
registration fee, the proposed maximum offering price is based upon the
average of the high and low sale prices of the common stock, par value
$3.33 1/3 per share, of Evergreen Bancorp, Inc. on the NASDAQ National
Market on November 25, 1998, divided by 0.9, the number of shares of
Banknorth Common Stock to be exchanged for each share of Evergreen Common
Stock in the proposed Merger to which this Registration Statement relates.
(4) In accordance with Rule 457(b), the amount remitted in payment of the
registration fee of $75,321 has been reduced by $48,213, which was
previously paid on September 28, 1998 pursuant to Section 14(g) of the
Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, at
the time of the filing of the preliminary copies of the proxy materials of
Banknorth Group, Inc. and Evergreen Bancorp, Inc.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
[LOGO] Banknorth Group, Inc. /TM/
December 2, 1998
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders of
Banknorth Group, Inc. ("Banknorth") at 10:00 a.m., Eastern Standard Time, on
Thursday, December 31, 1998 at the Sheraton-Burlington Hotel and Conference
Center, 870 Williston Road, South Burlington, Vermont 05403 (the "Special
Meeting").
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Affiliation Agreement and Plan of Reorganization, and a
related Agreement and Plan of Merger, both dated as of July 31, 1998
(together, the "Agreement"), between Banknorth and Evergreen Bancorp, Inc.
("Evergreen"), a Delaware corporation, pursuant to which, among other things,
Evergreen will merge with and into Banknorth (the "Merger"), with Banknorth as
the surviving corporation. If the Agreement is approved and the Merger is
consummated, each issued and outstanding share of Evergreen common stock
(except as otherwise provided in the Agreement), together with associated
preferred share purchase rights, will be converted into 0.9 shares of
Banknorth common stock, together with associated preferred share purchase
rights, subject to possible adjustment under certain circumstances, plus cash
in lieu of any fractional share interest.
Your Board believes that, among other benefits, the Merger will result in a
combined company with expanded opportunities for profitable growth and
enhanced ability to compete successfully in the highly competitive and
evolving financial services industry. THE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
MERGER.
The enclosed Prospectus/Joint Proxy Statement describes in detail the terms
of the proposed Merger and related matters. A copy of the Agreement is
included as Annexes I and II to the enclosed Prospectus/Joint Proxy Statement.
We urge you to read all of these materials carefully.
It is very important that your shares be represented at the Special Meeting.
Approval of the Merger will require the affirmative vote of the holders of a
majority of Banknorth's outstanding common stock. FAILURE TO RETURN A PROPERLY
EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE AGREEMENT. Even if you plan to be present at the
Special Meeting, we urge you to complete, date, sign, and return the proxy
card promptly in the enclosed postage-paid envelope as soon as possible. If
you decide to attend the Special Meeting, you may vote your shares in person
whether or not you have previously submitted a proxy, if you so desire.
Management strongly supports this strategic combination between Banknorth
and Evergreen, and I join with all of the other members of the Board of
Directors in enthusiastically recommending that you vote in favor of the
Merger.
Sincerely,
/s/ William H. Chadwick
William H. Chadwick
President and Chief Executive
Officer
<PAGE>
[LOGO] Banknorth Group, Inc. /TM/
300 FINANCIAL PLAZA
P.O. BOX 5420
BURLINGTON, VT 05401-5420
PHONE: (802) 658-9959
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 31, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Banknorth Group, Inc. ("Banknorth") will be held at 10:00 a.m.,
Eastern Standard Time, on Thursday, December 31, 1998 at the Sheraton-
Burlington Hotel and Conference Center, 870 Williston Road, South Burlington,
Vermont 05403 for the following purpose:
To consider and vote upon a proposal to adopt an Affiliation Agreement and
Plan of Reorganization and a related Agreement and Plan of Merger, both dated
as of July 31, 1998 (together, the "Agreement"), between Banknorth and
Evergreen Bancorp, Inc ("Evergreen"), which provides, among other things, for
(i) the merger of Evergreen with and into Banknorth, with Banknorth as the
surviving corporation; (ii) the conversion of each issued and outstanding share
of common stock of Evergreen outstanding immediately prior to the Merger (other
than certain shares specified in the Agreement), together with associated
preferred share purchase rights, into 0.9 shares of Banknorth common stock,
together with associated preferred share purchase rights, subject to possible
adjustment under certain circumstances, plus cash in lieu of any fractional
share interest; and (iii) the appointment of three directors to the Banknorth
Board of Directors.
The Board of Directors has fixed the close of business on Thursday, November
5, 1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the Special Meeting. Only holders of record at the
close of business on that date will be entitled to notice of and to vote at the
Special Meeting or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF BANKNORTH HAS DETERMINED THE MERGER TO BE FAIR AND
ADVISABLE AND IN THE BEST INTERESTS OF BANKNORTH AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
By Order of the Board of Directors
/s/ Thomas M. Dowling
Thomas M. Dowling
Secretary
Burlington, Vermont
December 2, 1998
----------------
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE AGREEMENT. WE URGE YOU
TO COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE. SHOULD YOU ATTEND THE SPECIAL
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
----------------
<PAGE>
[LOGO]
Evergreen
---------
BANCORP
December 2, 1998
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders of
Evergreen Bancorp, Inc. ("Evergreen") at 10:00 a.m., Eastern Standard Time, on
Thursday, December 31, 1998 at the Queensbury Hotel, 88 Ridge Street, Glens
Falls, New York 12801 (the "Special Meeting").
At the Special Meeting, you will be asked to consider and vote upon approval
of the proposed merger of Evergreen with Banknorth Group, Inc. ("Banknorth"),
a Delaware corporation. In the transaction, Evergreen will be merged into
Banknorth, with Banknorth as the surviving corporation (the "Merger"), and
each issued and outstanding share of Evergreen common stock will be converted
into 0.9 shares of Banknorth common stock, subject to possible adjustment
under certain circumstances, plus cash in lieu of any fractional share
interest. Receipt of Banknorth common stock in the Merger generally would be
tax-free for Evergreen shareholders.
With total consolidated assets of $3.0 billion at September 30, 1998,
Banknorth is the largest independent bank holding company headquartered in
Vermont. Its subsidiary banks currently operate 60 banking offices in Vermont,
New Hampshire and Massachusetts. After the Merger, Evergreen's subsidiary
bank, Evergreen Bank, N.A., will continue its present operations but as a
wholly-owned subsidiary of Banknorth. On November 27, 1998, the last reported
sale price of the Banknorth common stock on the NASDAQ Stock Market was $
32.8125 per share.
Your Board believes that, among other benefits, the Merger will result in a
combined company with expanded opportunities for profitable growth and
enhanced ability to compete successfully in the highly competitive and
evolving financial services industry. THE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
MERGER.
The enclosed Prospectus/Joint Proxy Statement describes in detail the terms
of the proposed Merger and related matters. A copy of the Agreement is
included as Annexes I and II to the enclosed Prospectus/Joint Proxy Statement.
We urge you to read all of these materials carefully.
It is very important that your shares be represented at the Special Meeting.
Approval of the Merger will require the affirmative vote of the holders of a
majority of Evergreen's outstanding common stock. FAILURE TO RETURN A PROPERLY
EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE AGREEMENT. Even if you plan to be present at the
Special Meeting, we urge you to complete, date, sign, and return the proxy
card promptly in the enclosed postage-paid envelope as soon as possible. If
you decide to attend the Special Meeting, you may vote your shares in person
whether or not you have previously submitted a proxy, if you so desire.
Management strongly supports this strategic combination between Evergreen
and Banknorth, and I join with the other members of the Board of Directors in
enthusiastically recommending that you vote in favor of the Merger.
Sincerely,
George W. Dougan
Chairman, President and Chief
Executive Officer
<PAGE>
[LOGO]
Evergreen
---------
BANCORP
237 GLEN STREET
GLENS FALLS, NEW YORK 12801
(518) 792-1151
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 31, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Evergreen Bancorp, Inc. ("Evergreen") will be held at 10:00 a.m.,
Eastern Standard Time, on Thursday, December 31, 1998 at the Queensbury Hotel,
88 Ridge Street, Glens Falls, New York 12801 for the following purpose:
To consider and vote upon a proposal to adopt an Affiliation Agreement and
Plan of Reorganization and a related Agreement and Plan of Merger, both dated
as of July 31, 1998 (together, the "Agreement"), between Banknorth Group, Inc.
("Banknorth") and Evergreen, which provides, among other things, for (i) the
merger of Evergreen with and into Banknorth, with Banknorth as the surviving
corporation, and (ii) the conversion of each share of common stock of Evergreen
issued and outstanding immediately prior to the Merger (other than certain
shares specified in the Agreement), together with associated preferred share
purchase rights, into 0.9 shares of Banknorth common stock, together with
associated preferred share purchase rights, subject to possible adjustment
under certain circumstances, plus cash in lieu of any fractional share
interest.
The Board of Directors has fixed the close of business on Thursday, November
5, 1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the Special Meeting. Only holders of record at the
close of business on that date will be entitled to notice of and to vote at the
Special Meeting or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS OF EVERGREEN HAS DETERMINED THE MERGER TO BE FAIR AND
ADVISABLE AND IN THE BEST INTERESTS OF EVERGREEN AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
By Order of the Board of Directors
Paul A. Cardinal
Secretary
Glens Falls, New York
December 2, 1998
----------------
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE AGREEMENT. WE URGE YOU
TO COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE. SHOULD YOU ATTEND THE SPECIAL
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
----------------
<PAGE>
JOINT PROXY STATEMENT
BANKNORTH GROUP, INC. EVERGREEN BANCORP, INC.
Special Meeting of Special Meeting of
Shareholders Shareholders
to be held on December 31, to be held on December 31,
1998 1998
----------------
BANKNORTH GROUP, INC.
PROSPECTUS
----------------
THIS PROSPECTUS/JOINT PROXY STATEMENT IS BEING FURNISHED IN CONNECTION WITH
THE SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS OF BANKNORTH GROUP, INC.
("BANKNORTH") and the Board of Directors of Evergreen Bancorp, Inc.
("EVERGREEN") to be used at a special meeting of shareholders of Banknorth and
Evergreen, respectively, to be held on Thursday, December 31, 1998 (the
"BANKNORTH SPECIAL MEETING" and the "EVERGREEN SPECIAL MEETING," respectively,
and together the "SPECIAL MEETINGS"). The purpose of the Special Meetings is
to consider and vote upon an Affiliation Agreement and Plan of Reorganization
and a related Agreement and Plan of Merger, both dated as of July 31, 1998,
between Banknorth and Evergreen (together, the "AGREEMENT"), which provides,
among other things, for the merger of Evergreen with and into Banknorth (the
"MERGER"), with Banknorth as the surviving corporation. The Agreement is
attached to this Prospectus/Joint Proxy Statement as Annexes I and II and is
incorporated herein by reference.
As described in this Prospectus/Joint Proxy Statement, upon consummation of
the Merger, each share of common stock of Evergreen, $3.33 1/3 par value per
share, including associated preferred share purchase rights (the "EVERGREEN
RIGHTS") (together, the "EVERGREEN COMMON STOCK"), issued and outstanding
immediately prior to consummation of the Merger (other than any shares held by
Banknorth or Evergreen or their subsidiaries, except shares held by them in a
fiduciary capacity or in satisfaction of a debt previously contracted), by
virtue of the Merger and without any action on the part of the holder thereof,
will be converted into 0.9 shares of Banknorth common stock, $1.00 par value
per share, including associated preferred share purchase rights (the
"BANKNORTH RIGHTS") (together, the "BANKNORTH COMMON STOCK") subject to
possible adjustment under certain circumstances, plus cash in lieu of any
fractional share interest.
This Prospectus/Joint Proxy Statement also constitutes a prospectus of
Banknorth relating to the shares of Banknorth Common Stock issuable to holders
of Evergreen Common Stock upon consummation of the Merger. Based upon
information available as of the date hereof, immediately after the Merger
holders of Evergreen Common Stock are expected to hold approximately 33.5% of
the shares of outstanding common stock of the combined company. For a more
complete description of the Agreement and the Merger, see "THE MERGER."
The last reported sale price of Banknorth Common Stock on the NASDAQ Stock
Market's National Market (the "NASDAQ STOCK MARKET") on July 30, 1998 (the
last trading day preceding public announcement of the proposed Merger) was
$38.25 per share and on November 27, 1998 was $32.8125 per share. The last
reported sale prices of Evergreen Common Stock on the NASDAQ Stock Market on
such dates were $27.75 and $29.00, respectively. Because the share conversion
ratio in the Merger is fixed (except for certain possible adjustments
specified in the Agreement), but the market price of Banknorth Common Stock is
subject to fluctuation, the value of the shares of Banknorth Common Stock that
holders of Evergreen Common Stock will receive in the Merger may increase or
decrease prior to and after the Merger. See "SUMMARY--Price Range of Common
Stock and Dividends."
THIS PROSPECTUS/JOINT PROXY STATEMENT AND FORMS OF PROXY ARE FIRST BEING
MAILED TO SHAREHOLDERS ON OR ABOUT DECEMBER 2, 1998.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF BANKNORTH COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
----------------
THE DATE OF THIS PROSPECTUS/JOINT PROXY STATEMENT IS DECEMBER 2, 1998
<PAGE>
[MAP DEPICTING EVERGREEN BANCORP, INC. AND BANKNORTH GROUP, INC. BANKING
LOCATIONS IN NEW YORK, VERMONT, NEW HAMPSHIRE AND MASSACHUSETTS]
<PAGE>
AVAILABLE INFORMATION
Banknorth has filed with the Securities and Exchange Commission (the
"COMMISSION") a Registration Statement (the "REGISTRATION STATEMENT") on Form
S-4 under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
relating to the securities to be issued in connection with the Merger. For
further information pertaining to the securities of Banknorth to which this
Prospectus/Joint Proxy Statement relates, reference is made to the
Registration Statement, including the exhibits and schedules filed as a part
thereof. As permitted by the rules and regulations of the Commission, certain
information included in the Registration Statement is omitted from this
Prospectus/Joint Proxy Statement. All information contained or incorporated by
reference in this Prospectus/Joint Proxy Statement with respect to Banknorth
has been supplied by Banknorth, and all information contained or incorporated
by reference in this Prospectus/Joint Proxy Statement with respect to
Evergreen has been supplied by Evergreen.
Each of Banknorth and Evergreen is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and
in accordance therewith, each files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other
information filed by Banknorth and Evergreen can be inspected and copied at
the Public Reference Room of the Commission's office at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's Regional Offices located
at: 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained at prescribed rates by writing to the
Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549. Such reports, proxy statements and other information also may be
obtained through the Commission's electronic data gathering, analysis and
retrieval system ("EDGAR") via electronic means, including the worldwide web
site that the Commission maintains at http://www.sec.gov.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/JOINT PROXY
STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANKNORTH OR EVERGREEN. NEITHER
THE DELIVERY OF THIS PROSPECTUS/JOINT PROXY STATEMENT NOR ANY DISTRIBUTION OF
THE SECURITIES TO WHICH THIS PROSPECTUS/JOINT PROXY STATEMENT RELATES SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF BANKNORTH OR EVERGREEN SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS/ JOINT PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR SOLICITATION TO BUY SUCH SECURITIES IN
ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL OR TO
ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
i
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Banknorth (File No. 000-18173) and
Evergreen (File No. 000-10275) with the Commission pursuant to the Exchange
Act are hereby incorporated by reference in this Prospectus/Joint Proxy
Statement:
(1) Banknorth's Annual Report on Form 10-K for the year ended December 31,
1997;
(2) Banknorth's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998;
(3) Banknorth's Current Reports on Form 8-K dated February 24, 1998, July 1,
1998, and July 31, 1998;
(4) the description of the Banknorth Common Stock and of the associated
preferred share purchase rights set forth in registration statements filed by
Banknorth pursuant to Section 12 of the Exchange Act, including any amendment
or report filed for purposes of updating such description;
(5) Evergreen's Annual Report on Form 10-K for the year ended December 31,
1997;
(6) Evergreen's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998;
(7) Evergreen's Current Report on Form 8-K dated July 31, 1998; and
(8) the description of the Evergreen Common Stock and of the associated
preferred share purchase rights set forth in registration statements filed by
Evergreen pursuant to Section 12 of the Exchange Act, including any amendment
or report filed for purposes of updating such description.
All documents and reports filed by Banknorth and Evergreen pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the date of the Special Meetings also are hereby
incorporated herein by reference into this Prospectus/Joint Proxy Statement
and shall be deemed a part hereof from the date of filing of such documents or
reports. Any statement contained herein, in any supplement hereto or in a
document or report incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of the
Registration Statement and this Prospectus/Joint Proxy Statement to the extent
that a statement contained herein, in any supplement hereto or in any
subsequently filed document or report which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the Registration Statement,
this Prospectus/Joint Proxy Statement or any supplement hereto.
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES DOCUMENTS OF BANKNORTH
AND EVERGREEN BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. ALL SUCH DOCUMENTS WITH RESPECT TO BANKNORTH ARE AVAILABLE WITHOUT
CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR ORAL
REQUEST FROM: BANKNORTH GROUP, INC., P.O. BOX 5420, 300 FINANCIAL PLAZA,
BURLINGTON, VERMONT 05401, ATTENTION: THOMAS J. PRUITT, EXECUTIVE VICE
PRESIDENT (TELEPHONE NUMBER (802) 658-9959). ALL SUCH DOCUMENTS WITH RESPECT
TO EVERGREEN ARE AVAILABLE WITHOUT CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH
DOCUMENTS) UPON WRITTEN OR ORAL REQUEST FROM: EVERGREEN BANCORP, INC., 237
GLEN STREET, GLENS FALLS, NEW YORK 12801, ATTENTION: PAUL A. CARDINAL,
SECRETARY (TELEPHONE NUMBER (518) 792-1151). IN ORDER TO ENSURE TIMELY
DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY DECEMBER 23, 1998.
ii
<PAGE>
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS/JOINT PROXY STATEMENT CONTAINS, OR INCORPORATES BY REFERENCE
OTHER DOCUMENTS THAT CONTAIN, FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF BANKNORTH FOLLOWING
CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS RELATING TO: (A) THE
ESTIMATED COST SAVINGS AND ACCRETION TO REPORTED EARNINGS THAT WILL BE
REALIZED FROM THE MERGER; (B) THE ESTIMATED IMPACT OF THE MERGER ON REVENUES;
(C) THE RESTRUCTURING CHARGES EXPECTED TO BE INCURRED IN CONNECTION WITH THE
MERGER; AND (D) THE ESTIMATED FINANCIAL IMPACT ON BANKNORTH OF THE COMPLETION
OF THE BERKSHIRE ACQUISITION (AS DEFINED UNDER THE CAPTION "SUMMARY--PARTIES
TO THE MERGER--BANKNORTH"), INCLUDING THE EFFECT ON BANKNORTH'S FUTURE
DIVIDEND PAYMENT CAPACITY, CAPITAL RATIOS AND EARNINGS.
THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES.
SEE "SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA," "MANAGEMENT
AND OPERATIONS OF BANKNORTH AFTER THE MERGER" AND "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS." FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) ESTIMATED
COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED OR REALIZED WITHIN THE
EXPECTED TIME FRAME; (2) REVENUES FOLLOWING THE MERGER ARE LOWER THAN
EXPECTED; (3) COMPETITIVE PRESSURES ON THE COMBINED COMPANY (INCLUDING
COMPETITIVE PRESSURES RESULTING FROM INCREASING CONSOLIDATION WITHIN THE
BANKING INDUSTRY) INCREASE SIGNIFICANTLY; (4) FAILURE TO COMPLY WITH YEAR 2000
PROGRAMMING ISSUES BY CERTAIN CUSTOMERS OR VENDORS OF CRITICAL SYSTEMS OR
SERVICES; (5) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE
BUSINESSES OF BANKNORTH AND EVERGREEN OR OTHER BANKING OPERATIONS ACQUIRED BY
BANKNORTH ARE GREATER THAN EXPECTED; (6) CHANGES IN THE INTEREST RATE
ENVIRONMENT THAT REDUCE INTEREST MARGINS; (7) DOWNTURN IN LOCAL, REGIONAL, OR
NATIONAL ECONOMIC CONDITIONS; (8) CHANGES IN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES OR IN APPLICABLE LAWS OR REGULATIONS GOVERNING THE BUSINESS IN
WHICH THE COMBINED COMPANY WILL BE ENGAGED; AND (9) OTHER FACTORS ENUMERATED
IN THE ANNUAL REPORTS ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 OF
BANKNORTH AND EVERGREEN (BANKNORTH COMMISSION FILE NO. 000-18173; EVERGREEN
COMMISSION FILE NO. 000-10275). SUCH FORWARD-LOOKING STATEMENTS SPEAK ONLY AS
OF THE DATE ON WHICH THEY ARE MADE, AND BY MAKING FORWARD-LOOKING STATEMENTS
BANKNORTH AND EVERGREEN ASSUME NO DUTY TO UPDATE THEM TO REFLECT NEW, CHANGING
OR UNANTICIPATED EVENTS OR CIRCUMSTANCES. THE INDEPENDENT PUBLIC ACCOUNTANTS
FOR BANKNORTH AND EVERGREEN HAVE NOT COMPILED, EXAMINED OR PERFORMED ANY
PROCEDURES WITH RESPECT TO ANY FORWARD-LOOKING STATEMENTS, NOR HAVE THEY
EXPRESSED ANY OPINION OR ANY FORM OF ASSURANCE ON SUCH INFORMATION OR ITS
ACHIEVABILITY, AND THEY ASSUME NO RESPONSIBILITY FOR, AND DISCLAIM ANY
ASSOCIATION WITH, THE FORWARD-LOOKING STATEMENTS.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. ii
A WARNING ABOUT FORWARD-LOOKING STATEMENTS.................................. iii
SUMMARY..................................................................... 1
General................................................................... 1
Parties to the Merger..................................................... 1
Banknorth............................................................... 1
Evergreen............................................................... 2
The Special Meetings and Vote Required.................................... 2
The Merger................................................................ 3
Recommendations of the Boards of Directors of Banknorth and Evergreen..... 4
Opinions of Financial Advisors............................................ 4
Regulatory Approvals...................................................... 5
Closing Conditions........................................................ 5
Effective Time of the Merger.............................................. 5
Termination............................................................... 5
Material Federal Income Tax Consequences.................................. 6
Accounting Treatment...................................................... 6
Conversion of Evergreen Stock Options and Restricted Stock................ 6
Interests of Certain Persons in the Merger................................ 7
Comparison of Rights of Shareholders...................................... 9
Resale of Banknorth Common Stock.......................................... 9
Stock Option Agreement.................................................... 9
No Appraisal Rights....................................................... 9
Dividend Limitations on Evergreen......................................... 9
Dividend Limitations on Banknorth and the Combined Company................ 10
Price Range of Common Stock and Dividends................................. 11
Market Prices........................................................... 11
Dividends............................................................... 12
COMPARATIVE UNAUDITED PER SHARE DATA........................................ 13
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA................... 14
Banknorth................................................................. 14
Evergreen................................................................. 16
Combined Company.......................................................... 18
THE SPECIAL MEETINGS........................................................ 20
Time and Place............................................................ 20
Matters To Be Considered.................................................. 20
Shares Outstanding and Entitled to Vote; Record Date...................... 20
Banknorth Share Information............................................. 20
Evergreen Share Information............................................. 20
Votes Required............................................................ 21
Voting of Proxies......................................................... 21
Solicitation of Proxies................................................... 22
THE MERGER.................................................................. 22
General................................................................... 22
Background of the Merger.................................................. 23
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Reasons for the Merger; Recommendations of the Boards of
Directors........................................................ 26
Evergreen....................................................... 26
Banknorth....................................................... 28
Opinions of Financial Advisors.................................... 30
Evergreen....................................................... 30
Banknorth....................................................... 35
Certain Estimates of 1998 Operations.............................. 40
Conversion of Evergreen Stock and Exchange of Certificates........ 41
Conversion of Evergreen Stock Options and Restricted Stock........ 42
Stock Options................................................... 42
Restricted Stock................................................ 42
Closing Conditions................................................ 42
Regulatory Approvals.............................................. 43
FRB............................................................. 43
Massachusetts Bank Board........................................ 43
Notice Filings.................................................. 43
Business of Evergreen Pending the Merger.......................... 44
No Solicitation of Other Offers................................... 44
Effective Time of the Merger...................................... 44
Termination and Amendment......................................... 44
Interests of Certain Persons in the Merger........................ 47
Directors....................................................... 47
Employment Agreement and Change of Control Payment.............. 47
Other Change of Control Agreements.............................. 48
Retention Payment............................................... 49
Vesting of Options and Restricted Stock......................... 49
Distribution of Deferred Directors Fee Accounts................. 49
Indemnification and Insurance................................... 49
Other Employee Matters............................................ 50
Resale of Banknorth Common Stock.................................. 50
Material Federal Income Tax Consequences.......................... 51
Accounting Treatment.............................................. 52
Expenses.......................................................... 53
Stock Option Agreement............................................ 53
Voting Agreements................................................. 54
No Appraisal Rights............................................... 54
MANAGEMENT AND OPERATIONS OF BANKNORTH AFTER THE MERGER............. 54
Management........................................................ 54
Operations........................................................ 55
INFORMATION ABOUT BANKNORTH......................................... 56
General........................................................... 56
Management and Additional Information............................. 57
Berkshire Acquisition............................................. 57
Dividend Restrictions and Debt Covenants.......................... 58
Regulatory Limitations.......................................... 58
Debt Covenants.................................................. 59
Capital Securities................................................ 60
Dividend Reinvestment Plan........................................ 60
Year 2000......................................................... 61
INFORMATION ABOUT EVERGREEN......................................... 63
General........................................................... 63
Management and Additional Information............................. 64
Year 2000......................................................... 64
</TABLE>
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REGULATION AND SUPERVISION................................................ 65
General................................................................. 65
Bank Subsidiaries....................................................... 66
Dividend Limitations.................................................... 67
Capital Requirements.................................................... 67
Community Reinvestment Act.............................................. 69
Deposit Insurance Premium Assessments................................... 69
"Source of Strength" Policy............................................. 69
COMPARISON OF RIGHTS OF SHAREHOLDERS...................................... 70
General................................................................. 70
Authorized Capital Stock................................................ 70
Common Stock.......................................................... 70
Preferred Stock....................................................... 70
Amendment of Certificate of Incorporation............................... 71
Election of Directors................................................... 71
Board of Directors...................................................... 71
Removal of Directors.................................................... 71
Authority of Board Committees........................................... 72
Shareholder Nominations and Proposals................................... 72
Special Meetings........................................................ 72
Fair Price Provisions................................................... 72
Consideration of Noneconomic Factors.................................... 73
Shareholder Rights Plans................................................ 73
Limitation of Director Liability........................................ 74
Indemnification of Directors and Officers............................... 74
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............... 75
LEGAL OPINION............................................................. 83
EXPERTS................................................................... 83
SHAREHOLDER PROPOSALS..................................................... 83
Banknorth............................................................... 83
Evergreen............................................................... 83
OTHER MATTERS............................................................. 84
INDEX OF DEFINED TERMS.................................................... 85
Annex I--Affiliation Agreement and Plan of Reorganization................. I-1
Annex II--Agreement and Plan of Merger.................................... II-1
Annex III--Stock Option Agreement......................................... III-1
Annex IV--Fairness Opinion of Keefe, Bruyette & Woods, Inc................ IV-1
Annex V--Fairness Opinion of Sandler O'Neill & Partners, L.P.............. V-1
Annex VI--Index Companies................................................. VI-1
</TABLE>
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An index of Defined Terms is contained on page 85 of this Prospectus/Joint
Proxy Statement.
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Prospectus/Joint Proxy Statement and in the documents incorporated
herein by reference and is not intended to be complete. It is qualified in its
entirety by the more detailed information contained elsewhere in this
Prospectus/Joint Proxy Statement, the accompanying Annexes, and the documents
incorporated herein by reference. Shareholders are urged to read carefully all
such information.
GENERAL
This Prospectus/Joint Proxy Statement, Notice of the Banknorth Special
Meeting to be held on Thursday, December 31, 1998, Notice of the Evergreen
Special Meeting to be held on Thursday, December 31, 1998, and forms of proxy
solicited in connection therewith are first being mailed to holders of
Banknorth Common Stock ("BANKNORTH SHAREHOLDERS") and holders of Evergreen
Common Stock ("EVERGREEN SHAREHOLDERS") on or about December 2, 1998. At the
Special Meetings, holders of Evergreen Common Stock and Banknorth Common Stock
will consider and vote on a proposal to approve the Agreement and the
transactions contemplated thereby, including the Merger. A copy of the
Agreement is attached to this Prospectus/Joint Proxy Statement as Annexes I and
II and is incorporated herein by reference.
PARTIES TO THE MERGER
Banknorth. Banknorth is a Delaware-chartered, multibank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA").
As used in this Prospectus/Joint Proxy Statement, the term "Banknorth" refers
to such corporation and, where the context requires, its subsidiaries.
Banknorth has its headquarters in Burlington, Vermont and, through its
subsidiary banks and operating companies, conducts business at 71 offices
throughout the State of Vermont and in the States of New Hampshire and
Massachusetts. At September 30, 1998, Banknorth had total consolidated assets
of approximately $3.0 billion, deposits of $2.3 billion and shareholders'
equity of $243.7 million. Based on total consolidated assets at September 30,
1998, Banknorth is the largest independent bank holding company headquartered
in the State of Vermont.
Banknorth offers a broad array of commercial and consumer banking services
and products and trust and investment advisory services to commercial,
individual, institutional and municipal customers, through its seven community
banks, its trust and investment subsidiary, its mortgage banking subsidiary,
and its insurance agency subsidiary. Banknorth's five Vermont-based banks
maintain 40 banking offices throughout the State. Its New Hampshire-based bank
operates 6 banking offices in the central and seacoast areas of New Hampshire.
Banknorth's Massachusetts-based bank operates 25 offices throughout central and
western Massachusetts. Banknorth's mortgage banking company originates a full
range of mortgage banking products through the offices of its affiliated banks,
and services a $1.5 billion residential mortgage loan portfolio, approximately
$945.0 million of which is serviced for unaffiliated third parties. Banknorth's
trust and investment management subsidiary offers a variety of personal and
corporate fiduciary services, and currently has a trust and investment asset
portfolio of approximately $3.4 billion, including approximately $1.9 billion
in discretionary trust assets under management. The lending and investment
activities of Banknorth's commercial bank subsidiaries are funded principally
by deposits gathered through their retail branch office network.
Banknorth recently completed an acquisition of certain banking operations in
Berkshire County in western Massachusetts (the "BERKSHIRE ACQUISITION"), which
complements its central Massachusetts market area and extends it to the
southern reach of Evergreen's market in eastern New York State. Acquisitions
have been and
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are expected to continue to be an important component of Banknorth's business
strategy. See "INFORMATION ABOUT BANKNORTH--Berkshire Acquisition."
The principal executive offices of Banknorth are located at 300 Financial
Plaza, Burlington, Vermont 05401 and its telephone number is (802) 658-9959.
Evergreen. Evergreen is a Delaware-chartered, one-bank holding company
registered under the BHCA. As used in this Prospectus/Joint Proxy Statement,
the term "Evergreen" refers to such corporation and, where the context
requires, its subsidiaries.
Evergreen has its headquarters in Glens Falls, New York and operates banking
offices throughout eastern upstate New York. At September 30, 1998, Evergreen
had total consolidated assets of approximately $1.1 billion, deposits of $954.3
million and shareholders' equity of $90.3 million.
Evergreen conducts substantially all of its banking business through its
wholly-owned subsidiary, Evergreen Bank, N.A. ("EVERGREEN BANK"), a national
banking association which operates 28 offices in 8 counties in eastern upstate
New York, throughout an area extending from the Massachusetts border fifty
miles south of Albany, north to the Canadian border. Evergreen Bank serves
commercial, individual, institutional and municipal customers with a wide range
of deposit and loan products. Evergreen Bank also provides trust and investment
services and, as of September 30, 1998, had approximately $528.6 million in
discretionary trust assets under management. Evergreen Bank's lending and
investment activities are funded principally by deposits gathered through its
retail branch office network.
The principal executive offices of Evergreen are located at 237 Glen Street,
Glens Falls, New York 12801 and its telephone number is (518) 792-1151.
THE SPECIAL MEETINGS AND VOTE REQUIRED
The Banknorth Special Meeting will be held at 10:00 a.m., Eastern Standard
Time, on Thursday, December 31, 1998 at the Sheraton-Burlington Hotel and
Conference Center, 870 Williston Road, South Burlington, Vermont 05403, and the
Evergreen Special Meeting will be held at the same time and on the same date at
the Queensbury Hotel, 88 Ridge Street, Glens Falls, New York 12801. Only the
holders of record of outstanding shares of Banknorth Common Stock and Evergreen
Common Stock at the close of business on Thursday, November 5, 1998 (the
"RECORD DATE") are entitled to notice of and to vote at the Banknorth Special
Meeting and the Evergreen Special Meeting, respectively. On the Record Date,
there were 15,656,985 shares of Banknorth Common Stock and 8,741,115 shares of
Evergreen Common Stock outstanding and entitled to be voted at the Banknorth
Special Meeting and the Evergreen Special Meeting, respectively.
At the Special Meetings, shareholders of Banknorth and Evergreen will
consider and vote upon a proposal to approve the Agreement and the transactions
contemplated thereby. The affirmative vote of the holders of a majority of the
outstanding shares of the Banknorth Common Stock and of the Evergreen Common
Stock, voting in person or by proxy, is necessary to approve the Agreement on
behalf of Banknorth and Evergreen, respectively. Because approval of the
Agreement on behalf of each of Banknorth and Evergreen will be based on the
number of shares outstanding, rather than the number of shares voting, the
failure to vote, either in person or by proxy, or the abstention from voting,
by a Banknorth Shareholder or an Evergreen Shareholder will have the same
effect as a vote against the Agreement. Under applicable stock exchange and
NASD rules, brokers who hold shares in street name for customers are prohibited
from voting such customers' shares on nonroutine matters, such as mergers,
unless they receive specific instructions from such customers. Broker nonvotes
resulting from the absence of such instructions also will have the same effect
as votes against approval of the Agreement. SHAREHOLDERS OF BANKNORTH AND
EVERGREEN THEREFORE ARE URGED TO RETURN THEIR PROXY CARDS AT THEIR EARLIEST
CONVENIENCE.
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In connection with the execution of the Agreement, the directors of Evergreen
have entered into an agreement pursuant to which, among other things, such
persons agreed to vote in favor of the Agreement all shares of Evergreen Common
Stock over which they have sole voting power. As of the Record Date, such
shares represented in the aggregate approximately 7.55% of the issued and
outstanding Evergreen Common Stock entitled to vote at the Evergreen Special
Meeting. In addition, as of the Record Date, all directors and executive
officers of Evergreen as a group beneficially owned approximately 724,824
shares of Evergreen Common Stock, excluding shares subject to option, or
approximately 8.29% of the issued and outstanding Evergreen Common Stock
entitled to vote at the Evergreen Special Meeting. It is expected that each
such director and executive officer of Evergreen will vote the shares of
Evergreen Common Stock beneficially owned by him or her for approval of the
Agreement and the transactions contemplated thereby. See "THE MERGER--Voting
Agreements" and "THE SPECIAL MEETINGS--Votes Required."
As of the Record Date, all directors and executive officers of Banknorth as a
group beneficially owned approximately 356,190 shares of Banknorth Common
Stock, excluding shares subject to option, or approximately 2.27% of the issued
and outstanding Banknorth Common Stock entitled to vote at the Banknorth
Special Meeting. It is expected that each such director and executive officer
of Banknorth will vote the shares of Banknorth Common Stock beneficially owned
by him or her for approval of the Agreement and the transactions contemplated
thereby. See "THE SPECIAL MEETINGS--Vote Required."
THE MERGER
In accordance with the terms of and subject to the conditions set forth in
the Agreement, Evergreen will be merged with and into Banknorth, with Banknorth
as the surviving corporation, (sometimes referred to herein as the "COMBINED
COMPANY"). At the effective time of the Merger, each issued and outstanding
share of Evergreen Common Stock (other than any shares held by Banknorth or
Evergreen, but including shares held by them or their subsidiaries in a
fiduciary capacity or acquired in satisfaction of a debt previously
contracted), together with associated preferred share purchase rights, will be
converted into 0.9 shares of Banknorth Common Stock (the "CONVERSION RATIO"),
together with associated preferred share purchase rights, plus cash in lieu of
any fractional share interest. The Conversion Ratio is subject to standard
antidilution adjustments in the event of any stock split, recapitalization or
similar change in the Banknorth Common Stock prior to the effective time of the
Merger.
The Conversion Ratio is also subject to adjustment if Banknorth were to
exercise its adjustment rights in the event that certain termination
provisions, based on the market price of Banknorth's Common Stock, have been
triggered and Evergreen elects to terminate the Agreement. Evergreen's right to
terminate the Agreement pursuant to such provisions would arise if the average
reported last sale price of the Banknorth Common Stock during a specified
period before receipt of the last required regulatory approval of the Merger is
less than $29.46 per share and the Banknorth Common Stock underperforms an
index of financial institution holding company stocks by a specified amount
during the period following announcement of the Merger. However, Evergreen
would not have the right to terminate the Agreement if Banknorth elects to make
a compensating adjustment in the Conversion Ratio that would increase the
number of shares of Banknorth Common Stock that would be received in the Merger
in exchange for each share of Evergreen Common Stock. Although the equity
markets have experienced significant volatility in the months since the
Agreement was executed, and the market price of Banknorth's Common Stock during
such period has on occasion fallen below $29.46, the termination provisions
would not have been triggered since the Banknorth Common Stock has not
underperformed the index of financial institution holding company stocks by the
requisite amount. See "THE MERGER--Termination and Amendment."
Following the Merger, Evergreen Bank will continue to operate its banking
business, as a wholly-owned subsidiary of Banknorth.
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GAIN OR LOSS GENERALLY WILL NOT BE RECOGNIZED BY HOLDERS OF EVERGREEN COMMON
STOCK AS A RESULT OF THE MERGER, EXCEPT TO THE EXTENT OF ANY CASH RECEIVED IN
LIEU OF A FRACTIONAL SHARE INTEREST IN BANKNORTH COMMON STOCK. SEE "THE
MERGER--FEDERAL INCOME TAX CONSEQUENCES."
EVERGREEN SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IF THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD BE
DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL
WHICH WILL BE SENT TO EVERGREEN SHAREHOLDERS BY THE EXCHANGE AGENT PROMPTLY
AFTER THE EFFECTIVE TIME.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF BANKNORTH AND EVERGREEN
The Board of Directors of Banknorth (the "BANKNORTH BOARD") and the Board of
Directors of Evergreen (the "EVERGREEN BOARD") have each determined that the
Merger is advisable and is fair to, and in the best interests of, their
respective corporations and shareholders and have unanimously approved the
Agreement and the transactions contemplated thereby, including the Merger.
ACCORDINGLY, THE BOARDS OF DIRECTORS OF BANKNORTH AND OF EVERGREEN UNANIMOUSLY
RECOMMEND THAT THEIR RESPECTIVE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER.
See "THE MERGER--Reasons for the Merger; Recommendations of the Boards of
Directors."
OPINIONS OF FINANCIAL ADVISORS
Keefe, Bruyette & Woods, Inc. ("KBW"), Evergreen's financial advisor, has
delivered to the Evergreen Board its written opinion, dated July 31, 1998, and
its written opinion dated the date of this Prospectus/Joint Proxy Statement,
each to the effect that, as of the date of such opinions, the Conversion Ratio
is fair, from a financial point of view, to the holders of Evergreen Common
Stock.
Sandler O'Neill & Partners, L.P. ("SANDLER O'NEILL"), Banknorth's financial
advisor, has delivered to the Banknorth Board its written opinion, dated July
31, 1998, and its written opinion dated the date of this Prospectus/Joint Proxy
Statement, each to the effect that, as of the date of such opinions, the
Conversion Ratio is fair, from a financial point of view, to the holders of
Banknorth Common Stock.
If the Merger is consummated, each of KBW and Sandler O'Neill will earn cash
fees, based on the market value of the total consideration paid in the Merger
in exchange for the Evergreen Common Stock. KBW's payment from Evergreen will
be equal to 0.85%, and Sandler O'Neill's payment from Banknorth will be equal
to 0.5%, of the market value of the aggregate consideration paid in the Merger
in exchange for the Evergreen Common Stock. Based on the closing price of
$32.8125 per share of Banknorth Common Stock on November 27, 1998 (the last
practicable trading day preceding the printing of this Prospectus/Joint Proxy
Statement) and on the number of shares of Evergreen Common Stock outstanding on
the Record Date, KBW would earn a fee of $2,194,000 and Sandler O'Neill would
earn a fee of $1,291,000 upon consummation of the Merger. In addition,
Evergreen has paid KBW a fee of $100,000 at the time of the execution of the
Agreement and $100,000 after mailing of this Prospectus/Joint Proxy Statement,
which amounts will be offset against the 0.85% fee, and Banknorth has paid to
Sandler O'Neill a fee of $200,000 in connection with rendering its fairness
opinion.
For information on the procedures followed, assumptions made, matters
considered, and qualifications and limitations on the reviews undertaken by KBW
and Sandler O'Neill, see "THE MERGER--Opinions of Financial Advisors."
Shareholders are urged to read in their entirety the opinions of KBW and
Sandler O'Neill, which are attached as Annexes IV and V, respectively, to this
Prospectus/Joint Proxy Statement.
4
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REGULATORY APPROVALS
Consummation of the Merger is subject to the prior receipt of the approval of
the Board of Governors of the Federal Reserve System (the "FRB") and the
Massachusetts Board of Bank Incorporation (the "MASSACHUSETTS BANK BOARD").
Applications have been filed with such regulatory authorities for the required
approvals and the FRB has approved the Merger. Neither Banknorth nor Evergreen
has any reason to believe that the approval of the Massachusetts Bank Board
will not be forthcoming. Nevertheless, there can be no assurance that such
regulatory approval will be obtained, or as to the timing or conditions upon
which such approval may be granted. Appropriate notification of the proposed
Merger has also been given to the New York State Banking Board and the New York
State Banking Superintendent (together, "NEW YORK BANKING DEPARTMENT") and the
New Hampshire Banking Commissioner. Such filings are notice filings only; no
approval is required. See "THE MERGER--Regulatory Approvals."
CLOSING CONDITIONS
The obligations of Banknorth and Evergreen to consummate the Merger are
subject to satisfaction of a number of conditions, including approval of the
Agreement by the shareholders of Banknorth and Evergreen and the receipt of all
required approvals or consents required for the Merger or waivers thereof by
all applicable federal and state regulatory authorities. See "THE MERGER--
Closing Conditions." Pursuant to the terms of the Agreement, except for
shareholder and regulatory approvals, and certain conditions to consummation of
the Merger that cannot be waived as a matter of law, including the existence of
an effective registration statement relating to the shares of Banknorth Common
Stock to be issued in the Merger, the absence of a government order enjoining
or prohibiting consummation of the Merger and the receipt of all required "blue
sky" permits or other authorizations, all of the conditions to consummation of
the Merger may be waived at any time by the party for whose benefit they were
created, and the Agreement may be amended at any time by written agreement of
the parties, except that no waiver or amendment occurring after approval of the
Agreement by the shareholders of Banknorth or Evergreen shall (1) change the
amount or form of the consideration which Evergreen's shareholders are entitled
to receive in the Merger, (2) change any of the terms of Banknorth's
Certificate of Incorporation, as the surviving corporation, or (3) change any
of the terms or conditions of the Agreement if such change would adversely
affect any shareholder of either Banknorth or Evergreen. If the Merger is not
consummated on or before May 31, 1999, either Banknorth or Evergreen may
terminate the Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective at the date and time specified in the
Certificate of Merger to be filed with the Secretary of State of the State of
Delaware pursuant to the Delaware General Corporation Law, as amended ("DCL")
(the "EFFECTIVE TIME"). The Certificate of Merger will be filed only after the
receipt of all requisite regulatory approvals of the Merger, approval of the
Agreement by the requisite votes of the shareholders of Banknorth and
Evergreen, and the satisfaction or waiver of all other conditions to the Merger
set forth in the Agreement. See "THE MERGER--Effective Time of the Merger."
Although no assurance can be given that the Effective Time will occur on or
before a specified date, Banknorth and Evergreen presently expect that the
Merger will be consummated on or before December 31, 1998, following conclusion
of the Special Meetings.
TERMINATION
The Agreement contains certain price-based termination provisions, the effect
of which requires Evergreen Shareholders to assume, in all events, within
specified limitations, the risk of a specified decline in the market value of
Banknorth's Common Stock, and also to assume the risk of a greater decline in
such market value unless the Banknorth Common Stock underperforms an index of
comparable financial institution holding company stocks, in accordance with a
formula specified in the Agreement. Under these provisions, Evergreen will have
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the right to terminate the Agreement if (i) the average last sale price of the
Banknorth Common Stock over the ten (10) trading day period immediately
preceding the date of receipt of the last required regulatory approval for the
Merger is less than $29.46 per share and (ii) the number obtained by dividing
the average per share last sale price determined under clause (i) by $36.84
(the average closing price of Banknorth Common Stock during the five (5)
trading day period immediately preceding public announcement of the Merger) is
less than the number obtained by subtracting 0.15 from the quotient obtained by
dividing (a) the weighted average closing price of a specified index of
financial institution holding companies during the ten (10) trading day period
immediately preceding the date of receipt of the last required regulatory
approval for the Merger by (b) the weighted average closing price of such index
on July 30, 1998. However, such termination right would not apply if Banknorth
were to elect to increase the Conversion Ratio in accordance with a formula set
forth in the Agreement. See "THE MERGER--Termination and Amendment."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Arnold & Porter, special tax counsel to Evergreen, has delivered its opinion
to Evergreen that, for federal income tax purposes, the Merger will qualify as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE"), provided the Merger is consummated in
accordance with the terms of the Agreement and certain related documentation.
Arnold & Porter has opined further that, for federal income tax purposes: (i)
except for cash received in lieu of fractional share interests, holders of
Evergreen Common Stock who receive Banknorth Common Stock pursuant to the
Merger will not recognize a gain or loss, (ii) the basis of such Banknorth
Common Stock received will equal the basis of the Evergreen Common Stock
surrendered in exchange therefor, reduced by any amount allocable to a
fractional share interest for which cash is received, and (iii) provided that
the surrendered Evergreen Common Stock was held as a capital asset on the date
of the Merger, the holding period of the Banknorth Common Stock received will
include the holding period of the Evergreen Common Stock surrendered. Arnold &
Porter's opinion is based on facts, representations and assumptions that were
provided by Evergreen and Banknorth and that are consistent with the state of
facts that Evergreen and Banknorth believe will exist as of the Effective Time.
In addition, under the Agreement (i) it is a condition precedent to the
obligation of Evergreen to effect the Merger that it receive an updated opinion
from Arnold & Porter, dated as of the Effective Time, as to the foregoing
material federal income tax consequences of the Merger, and (ii) it is a
condition precedent to the obligation of Banknorth to effect the Merger that it
receive an opinion of its tax advisor, KPMG Peak Marwick LLP, dated as of the
Effective Time, as to the material federal income tax consequences of the
Merger. See "THE MERGER--Material Federal Income Tax Consequences."
EACH EVERGREEN SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
CONCERNING THE FEDERAL AND ANY FOREIGN, STATE AND LOCAL INCOME TAX AND OTHER
TAX CONSEQUENCES OF THE MERGER APPLICABLE TO SUCH SHAREHOLDER.
ACCOUNTING TREATMENT
It is intended that the Merger qualify as a pooling of interests for
accounting and financial reporting purposes. It is a condition to the
obligations of Banknorth and Evergreen to consummate the Merger that the
independent public accountants of Banknorth and Evergreen issue a letter to the
parties dated as of the Effective Time to the effect that they are not aware of
any reason that would preclude the Merger from being accounted for as a pooling
of interests under generally accepted accounting principles. See "THE MERGER--
Accounting Treatment."
CONVERSION OF EVERGREEN STOCK OPTIONS AND RESTRICTED STOCK
At the Effective Time (i) all employee and director options to purchase
Evergreen Common Stock granted under the Evergreen Amended and Restated 1995
Stock Incentive Plan or its predecessor plans (together, the
6
<PAGE>
"EVERGREEN EMPLOYEES' OPTION PLAN") or under the Evergreen 1995 Directors'
Stock Option Plan (the "EVERGREEN DIRECTORS' OPTION PLAN") (all such plans
collectively, the "EVERGREEN OPTION PLANS") outstanding on the date of the
Agreement, whether or not then vested ("EVERGREEN OPTIONS") will, at the
Effective Time, be converted into options to purchase shares of Banknorth
Common Stock in accordance with the provisions of the Agreement, and (ii) all
outstanding unvested Evergreen Options will become fully vested in accordance
with the terms of the Evergreen Option Plans. Appropriate adjustment will be
made to the number of shares to which the Evergreen Options relate and to the
option exercise price, to reflect the Conversion Ratio. In addition, all
unvested awards of shares of Evergreen restricted stock awarded under the
Evergreen Employees' Option Plan ("EVERGREEN RESTRICTED STOCK") will become
fully vested at the Effective Time in accordance with the terms of such Plan
and will be converted into shares of Banknorth Common Stock, adjusted to
reflect the Conversion Ratio. See "THE MERGER--Conversion of Evergreen Stock
Options and Restricted Stock."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Under existing employment arrangements, Mr. Dougan and certain other
executive officers of Evergreen will be entitled to certain payments and
benefits as a result of the Merger. The amounts disclosed below for change of
control payments and various noncash benefits and accrued supplemental
retirement benefits, with respect to Mr. Dougan and the other executive
officers of Evergreen whose employment will be terminated in connection with
the Merger, have been calculated assuming consummation of the Merger in 1998.
Should the Merger be consummated in 1999, such amounts would change and could
be higher, although precise calculations of the benefit limitations under
applicable tax laws and contractual provisions would not be possible until the
close of the 1998 fiscal year.
At the Effective Time, Mr. George W. Dougan, the Chairman, President and
Chief Executive Officer of Evergreen, will receive a lump sum change of control
payment in cash, or a combination of cash and other benefits, up to a total of
approximately $1.3 million under his existing employment contract with
Evergreen, which will be terminated as of the Effective Time. In accordance
with that employment agreement, the maximum aggregate amount of the cash
payment and other benefits to which Mr. Dougan is entitled reflects a reduction
from the contractual amount to which he would otherwise be entitled upon a
change of control, in order to avoid payment of compensation to him as a result
of the Merger which would be considered an "excess parachute payment" under
Section 280G of the Code. Mr. Dougan will be entitled to select noncash change
of control benefits in lieu of cash, but such benefits will reduce the amount
of the cash portion of his change of control payment. The noncash benefits
which Mr. Dougan is entitled to select and their respective approximate
amounts, calculated in accordance with applicable regulations under Section
280G of the Code, include: (i) accelerated vesting of unvested stock options
and restricted stock, $3,200; (ii) continued participation, for 36 months
following the Merger, in various employee benefit plans, $71,000; and (iii)
continued life and health benefits for 36 months following the Merger, $11,600.
It is expected that Mr. Dougan will take all, or substantially all, of his
change of control payment in cash and will waive receipt of substantially all
noncash benefits.
In addition, Banknorth has agreed to honor the terms of Mr. Dougan's
Supplemental Retirement Benefit Plan ("SERP") with Evergreen. Under the terms
of that agreement, Mr. Dougan will vest in his SERP on March 7, 1999. The
accumulated benefit obligation under Mr. Dougan's SERP at the time of vesting
will be approximately $1.8 million.
The Agreement provides that, at the Effective Time, Mr. Dougan will be
appointed as a director of Banknorth to the class whose term expires in 2001.
The Agreement also provides that Mr. Dougan will join the executive management
of Banknorth, with the title of Vice Chairman of the Banknorth Board ("VICE
CHAIRMAN"). Mr. Dougan will enter into a three year employment contract with
Banknorth which will provide for, among other things, a minimum salary of
$225,000 per year and certain supplemental benefits, including life and health
insurance and participation in Banknorth's short-term bonus plan. Mr. Dougan
will also enter into a Change of Control Agreement with Banknorth.
7
<PAGE>
Banknorth has agreed to honor the existing change of control agreements with
executive officers of Evergreen and to assume the terms of Evergreen's Employee
Severance Plan for employees terminated within one year of the Merger.
Terminated Evergreen employees who have a change of control agreement may elect
to be covered by the Evergreen Severance Plan in lieu of (but not in addition
to) such agreement. Banknorth estimates that payments under the change of
control agreements with Evergreen executive officers whose employment will be
terminated as a result of the Merger (4 individuals, excluding Mr. Dougan),
will total approximately $1.7 million. In accordance with the various change of
control agreements, the estimated amount of such change of control payment
reflects a reduction to the extent necessary to avoid characterization of any
portion of such payment or benefit as "excess parachute payments" under section
280G of the Code. Five (5) executive officers of Evergreen (other than Mr.
Dougan) participate in the SERP. The accumulated SERP obligation at the
Effective Time to such executive officers will be approximately $1.3 million.
Banknorth has agreed to pay to Daniel J. Burke, who has been appointed
President and Chief Executive Officer of Evergreen Bank to replace Mr. Dougan,
a lump sum in cash of $235,000, as consideration for his remaining in the
employ of the Combined Company for a minimum period of one year following the
Effective Time. The retention payment becomes payable on the first anniversary
of the Merger, provided Mr. Burke is still in the employ of the Combined
Company at that time.
All unvested stock options and restricted stock awards held by the directors,
officers, and employees of Evergreen (including Messrs. Dougan and Burke and
the two additional directors of Evergreen who will become Directors of
Banknorth at the Effective Time) are expected to become fully vested as of the
Effective Time, in accordance with the terms of the respective Evergreen Option
Plans. Such stock options will be converted into stock options to purchase
Banknorth Common Stock and the holders of the restricted stock awards will
receive fully vested shares of Banknorth Common Stock, in each case,
appropriately adjusted to reflect the Conversion Ratio. As of the Record Date,
Mr. Dougan had unvested options for 20,000 shares of Evergreen Common Stock and
the remaining 7 executive officers had unvested options for an aggregate of
42,000 shares. The average exercise price of such options is $21.063 per share
and all such options would have vested, even without acceleration, on January
13, 1999. Unvested options for an aggregate of 19,200 shares have been granted
to Evergreen Directors other than Mr. Dougan. Such options have an average
exercise price of $26.75 and would have vested, absent acceleration, on May 7,
1999. In addition, Mr. Dougan and one other Evergreen executive officer have
3,332 shares and 2,000 shares, respectively, of unvested restricted stock which
will vest automatically at the Effective Time. Such shares would have vested on
March 1, 1999, absent acceleration due to the Merger.
Amounts accrued under the Evergreen Bancorp, Inc. Plan for the Payment and
Deferral of Directors Fees to the account of participating Evergreen directors
(other than directors who continue as directors of Banknorth or Evergreen Bank
and whose plan balances are transferred to the Banknorth Deferred Compensation
Plan for Directors and Selected Executives) will be payable at the Effective
Time in accordance with preexisting payment elections, in a lump sum or in
installments, beginning in the month following the Effective Time. All such
amounts represent previously earned, but deferred compensation, plus applicable
earnings on the deferrals. Distributions will be in the form of cash or, in the
case of participants who have elected deferrals in the form of Evergreen Common
Stock, shares of Banknorth Common Stock (adjusted to reflect the Conversion
Ratio), in accordance with the participants' preexisting elections under such
plan.
Banknorth has agreed to honor the indemnification provisions for Evergreen's
officers and directors set forth in the Certificate of Incorporation (or
charter or other organizational documents) and Bylaws of Evergreen and its
subsidiaries, and to provide liability insurance to such officers and directors
for a period of six years after the Effective Time.
For further details regarding the foregoing, see "THE MERGER--Interests of
Certain Persons in the Merger."
8
<PAGE>
COMPARISON OF RIGHTS OF SHAREHOLDERS
Both Banknorth and Evergreen are Delaware corporations, subject to the
provisions of the DCL. The rights of Evergreen Shareholders are governed by the
DCL and by Evergreen's Certificate of Incorporation and Bylaws. At the
Effective Time of the Merger, Evergreen Shareholders will become shareholders
of Banknorth and their rights as shareholders of Banknorth will be governed by
Banknorth's Certificate of Incorporation and Bylaws and the DCL. The rights of
shareholders of Banknorth differ in certain respects from the rights of
shareholders of Evergreen under the respective corporations' Certificates of
Incorporation and Bylaws. For example, (i) election of Banknorth's directors is
by majority vote, while election of Evergreen's directors is by plurality vote;
(ii) the By-laws provide different time periods for furnishing advance notice
of shareholder proposals and nominations (generally between 90 and 120 days
prior to the Banknorth annual meeting and 60 days prior to the Evergreen annual
meeting); and (iii) the so-called "fair price provisions" differ in certain
respects, including the percentage of shareholdings that would trigger
application of the provisions to a shareholder (10% in the case of Banknorth,
and 5% in the case of Evergreen), and the percentage vote required to approve a
transaction involving such a shareholder. See "COMPARISON OF RIGHTS OF
SHAREHOLDERS."
RESALE OF BANKNORTH COMMON STOCK
The shares of Banknorth Common Stock to be issued in connection with the
Merger will be freely tradeable by the holders of such shares, except for those
shares held by persons who may be deemed to be "affiliates" of Banknorth or
Evergreen under applicable federal securities laws. In addition, "affiliates"
of Banknorth and Evergreen will be subject to certain restrictions on resale of
Banknorth Common Stock in order to ensure that the Merger will be accounted for
as a pooling of interests under generally accepted accounting principles. See
"THE MERGER--Resale of Banknorth Common Stock."
STOCK OPTION AGREEMENT
As an inducement and a condition to Banknorth's entering into the Agreement,
Banknorth and Evergreen have entered into a Stock Option Agreement, dated as of
July 31, 1998 (the "OPTION AGREEMENT"), pursuant to which Evergreen granted to
Banknorth an option (the "OPTION"), upon the occurrence of certain events (none
of which has occurred as of the date hereof to the knowledge of Banknorth and
Evergreen), to purchase 19.9% of the shares of Evergreen Common Stock issued
and outstanding immediately prior to exercise of the Option, at a price of
$27.75 per share, subject to adjustment in certain circumstances and
termination within certain periods. These events generally relate to a
competing transaction involving a merger, business combination, or other
acquisition of Evergreen Common Stock or assets. The Option Agreement is
intended to increase the likelihood that the Merger will be consummated in
accordance with the terms of the Agreement and may have the effect of
discouraging competing offers to the Merger. A copy of the Option Agreement is
included as Annex III to this Prospectus/Joint Proxy Statement, to which
reference is made for the complete terms thereof. See "THE MERGER--Stock Option
Agreement."
NO APPRAISAL RIGHTS
Because the Banknorth Common Stock and the Evergreen Common Stock are traded
on the NASDAQ Stock Market, neither Evergreen Shareholders nor Banknorth
Shareholders who dissent from the Merger will have any appraisal rights under
the DCL.
DIVIDEND LIMITATIONS ON EVERGREEN
The holders of Evergreen Common Stock are entitled to receive dividends when
and if declared by the Evergreen Board out of funds legally available therefor.
The primary source of funds for Evergreen's dividends is dividends from
Evergreen's sole banking subsidiary, the payment of which is regulated under
applicable federal banking laws. See "REGULATION AND SUPERVISION."
9
<PAGE>
In addition, the Agreement prohibits Evergreen from declaring, setting aside,
or paying any dividend or other distribution on its capital stock prior to the
Effective Time, except that Evergreen may pay regular quarterly dividends on
the Evergreen Common Stock at a rate not in excess of its dividend rate
preceding execution of the Agreement.
DIVIDEND LIMITATIONS ON BANKNORTH AND THE COMBINED COMPANY
The holders of Banknorth Common Stock are entitled to receive dividends when
and if declared by the Banknorth Board out of funds legally available therefor.
The primary source of funds for Banknorth's dividends is dividends from
Banknorth's banking subsidiaries, investment income, and debt service on
certain intercompany loans made by Banknorth to its subsidiaries. Subsidiary
dividends, investment income, and interest payments on intercompany loans are
also the primary source of funds for Banknorth's debt service obligations under
its two credit agreements with certain lenders and under its 30-year
Corporation-Obligated Mandatorily Redeemable Capital Securities (the "CAPITAL
SECURITIES"). Banknorth's credit agreements with lenders contain various debt
covenants, including limitations on Banknorth's ability to pay dividends on its
capital stock, based on a rolling, cumulative earnings formula, which takes
current earnings into account. See "INFORMATION ABOUT BANKNORTH--Dividend
Restrictions and Debt Covenants" and "--Capital Securities."
Payment of dividends to Banknorth by its banking subsidiaries is regulated
under applicable state and federal laws. See "REGULATION AND SUPERVISION--
Dividend Limitations." Banknorth has paid, or proposes to pay, certain special
dividends in excess of ordinary regulatory limitations in connection with (i) a
previous acquisition, (ii) the redeployment of accumulated capital of certain
existing Banknorth subsidiaries to First Massachusetts Bank, N.A. in connection
with completion of the Berkshire Acquisition, and (iii) the proposed
redeployment of accumulated capital of Evergreen Bank at or about the Effective
Time in order to pay one-time Merger-related expenses and to facilitate
transfer of the trust business of Evergreen Bank to Banknorth's trust and
investment management subsidiary, The Stratevest Group, N.A. ("STRATEVEST").
Because payment of these dividends has or will reduce the dividend paying
capacity of Banknorth's subsidiary banks, payment of dividends to Banknorth
Shareholders in the future, and Banknorth's ability to service its debt and to
meet its financing obligations in connection with the Capital Securities
financing, will be dependent on the generation of sufficient future earnings by
the Combined Company. Banknorth has met all its debt service requirements under
the Capital Securities financing and under its credit agreements. Although no
assurance can be given as to future results, Banknorth believes that
anticipated earnings from the Combined Company will provide sufficient funding
sources to meet all debt service requirements and to maintain dividend payments
at historical Banknorth levels. See "SUMMARY--Price Range of Common Stock and
Dividends" and "MANAGEMENT AND OPERATIONS OF BANKNORTH AFTER THE MERGER--
Operations."
10
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Market Prices. The Banknorth Common Stock is quoted on the NASDAQ Stock
Market (formerly known as the NASDAQ National Market System) under the trading
symbol "BKNG." As of November 5, 1998, the Banknorth Common Stock was held by
approximately 3,266 shareholders of record. The Evergreen Common Stock is
quoted on the NASDAQ Stock Market under the trading symbol "EVGN." As of
November 5, 1998, the Evergreen Common Stock was held by approximately 1,643
shareholders of record.
The following table sets forth, for the periods indicated, the range of high
and low sale prices per share of Banknorth Common Stock and Evergreen Common
Stock, as quoted on the NASDAQ Stock Market. Stock price data on the NASDAQ
Stock Market reflect interdealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
BANKNORTH EVERGREEN
SALE PRICES(1) SALE PRICES(2)
--------------- ---------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
1998
First Quarter................................. $ 37.38 $ 27.63 $ 24.75 $ 20.75
Second Quarter................................ 39.13 33.38 33.50 23.13
Third Quarter................................. 42.75 27.00 30.25 23.25
Fourth Quarter (through November 27, 1998).... 34.25 23.50 30.50 19.88
1997
First Quarter................................. $ 23.13 $ 20.00 $ 17.13 $ 14.75
Second Quarter................................ 23.13 20.25 17.00 14.25
Third Quarter................................. 28.38 22.69 20.63 16.63
Fourth Quarter................................ 33.50 26.00 25.25 18.25
1996
First Quarter................................. $ 19.25 $ 16.25 $ 11.56 $ 10.38
Second Quarter................................ 18.13 16.25 13.13 10.63
Third Quarter................................. 18.75 15.75 15.00 12.13
Fourth Quarter................................ 20.75 17.25 16.50 14.00
</TABLE>
- --------
(1) Adjusted to reflect a 2-for-1 stock split, effected in the form of a 100%
stock dividend, declared in February 1998.
(2) Adjusted to reflect a 2-for-1 stock split, effected in the form of a 100%
stock dividend, declared in August 1996.
Set forth below is information regarding the closing price per share of
Banknorth Common Stock and Evergreen Common Stock on (i) July 30, 1998, the
last trading day preceding public announcement of the Agreement, and (ii)
November 27, 1998, the last practicable trading day prior to the printing of
this Prospectus/Joint Proxy Statement. The historical prices are as reported on
the NASDAQ Stock Market.
HISTORICAL MARKET
VALUE PER SHARE
<TABLE>
<CAPTION>
EQUIVALENT MARKET VALUE
DATE BANKNORTH EVERGREEN PER SHARE OF EVERGREEN(1)
- ---- --------- --------- -------------------------
<S> <C> <C> <C>
July 30, 1998..................... $ 38.25 $27.75 $ 34.425
November 27, 1998................. $32.8125 $29.00 $29.5312
</TABLE>
- --------
(1) Equivalent market value per share of Evergreen Common Stock represents the
historical market value per share of Banknorth Common Stock multiplied by
the Conversion Ratio.
11
<PAGE>
It is expected that the market price of Banknorth Common Stock will fluctuate
between the date of this Prospectus/Joint Proxy Statement and the date on which
the Merger is consummated and thereafter. Because the number of shares of
Banknorth Common Stock to be received by Evergreen Shareholders in the Merger
is fixed (subject to possible increase in certain circumstances) and because
the market price of Banknorth Common Stock is subject to fluctuation, the value
of the shares of Banknorth Common Stock that Evergreen Shareholders will
receive in the Merger may increase or decrease prior to the Merger and
thereafter. No assurance can be given concerning the market price of Banknorth
Common Stock before, at or after the Effective Time. SHAREHOLDERS ARE ADVISED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR BANKNORTH COMMON STOCK AND EVERGREEN
COMMON STOCK.
Dividends. The following table sets forth dividends declared per share of
Banknorth Common Stock and Evergreen Common Stock, respectively, for the
periods indicated. The ability of Banknorth or Evergreen to pay dividends to
its respective shareholders is subject to certain regulatory limitations,
restrictions and, in the case of Banknorth, certain contractual restrictions.
See "REGULATION AND SUPERVISION" and "INFORMATION ABOUT BANKNORTH--Dividend
Restrictions and Debt Covenants."
<TABLE>
<CAPTION>
BANKNORTH EVERGREEN
DIVIDENDS(1) DIVIDENDS(2)
------------ ------------
<S> <C> <C>
1998
First Quarter....................................... $ 0.16 $0.15
Second Quarter...................................... 0.16 0.15
Third Quarter....................................... 0.16 0.15
1997
First Quarter....................................... $0.145 $0.13
Second Quarter...................................... 0.145 0.13
Third Quarter....................................... 0.145 0.13
Fourth Quarter...................................... 0.145 0.15
1996
First Quarter....................................... $0.125 $0.10
Second Quarter...................................... 0.125 0.10
Third Quarter....................................... 0.125 0.10
Fourth Quarter...................................... 0.125 0.13
</TABLE>
- --------
(1) Adjusted to reflect a 2-for-1 stock split, effected in the form of a 100%
stock dividend, declared in February 1998.
(2) Adjusted to reflect a 2-for-1 stock split, effected in the form of a 100%
stock dividend, declared in August 1996.
The Combined Company will pay dividends at a rate to be determined by its
Board of Directors and no assurance can be given that the dividend policy of
the Combined Company will continue that of either Banknorth or Evergreen. The
declaration and payment of dividends by the Combined Company will depend upon
business conditions, operating results, capital and reserve requirements and
the consideration by the Board of Directors of other relevant factors. It is
anticipated that the initial dividend rate following the Effective Time will be
equal to the current quarterly dividend rate of Banknorth ($0.16 per share).
After adjustment to give effect to the Conversion Ratio, that quarterly
dividend rate equates to approximately $0.144 per share of Evergreen Common
Stock. See "COMPARATIVE UNAUDITED PER SHARE DATA."
12
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table presents at the dates and for the periods indicated (i)
historical consolidated per share data for Banknorth and Evergreen, (ii)
unaudited pro forma per share data for the Combined Company and (iii)
equivalent unaudited pro forma per share data for Evergreen. The Combined
Company unaudited pro forma data represents the effect of the Merger on a share
of Banknorth Common Stock. The Evergreen pro forma equivalent data represents
the Combined Company pro forma data before rounding, multiplied by the
Conversion Ratio, and thereby reflects the effect of the Merger on a share of
Evergreen Common Stock. The information presented is based upon the historical
consolidated financial statements of Banknorth and Evergreen included in and
incorporated by reference in this Prospectus/Joint Proxy Statement. See
"SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA and UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- -----------------------
COMBINED EVERGREEN
BANKNORTH EVERGREEN COMPANY EQUIVALENT (1)
--------- --------- -------- --------------
<S> <C> <C> <C> <C>
PER COMMON SHARE
BASIC EARNINGS(2)
For the nine months ended September
30, 1998.......................... $ 1.58 $ 1.02 $ 1.43 $ 1.29
Year-Ended:
December 31, 1997................ 1.95 1.26 1.76 1.58
December 31, 1996................ 1.66 1.12 1.51 1.36
December 31, 1995................ 1.65 0.89 1.40 1.26
DILUTED EARNINGS(2)
For the nine months ended
September 30, 1998.............. $ 1.56 $ 1.00 $ 1.40 $ 1.26
Year-Ended:
December 31, 1997................ 1.93 1.24 1.74 1.57
December 31, 1996................ 1.64 1.11 1.50 1.35
December 31, 1995................ 1.64 0.88 1.39 1.25
CASH DIVIDEND DECLARED(3)
For the nine months ended
September 30, 1998.............. $ 0.48 $ 0.45 $ 0.48 $ 0.43
Year-Ended:
December 31, 1997................ 0.58 0.54 0.58 0.52
December 31, 1996................ 0.50 0.43 0.50 0.45
December 31, 1995................ 0.46 0.23 0.46 0.41
BOOK VALUE(4)(6)
As of:
September 30, 1998............... $15.99 $10.36 $13.78 $12.40
December 31, 1997................ 14.83 9.91 13.53 12.18
TANGIBLE BOOK VALUE(5)
As of:
September 30, 1998............... $14.22 $10.35 $12.61 $11.35
December 31, 1997................ 12.84 9.89 12.21 10.99
</TABLE>
- --------
(1) Evergreen's pro forma equivalent amounts are computed by multiplying the
pro forma Combined Company amounts, after rounding, by the Conversion Ratio
of 0.9.
(2) Historical basic and diluted earnings per common share are based on
weighted average basic and diluted shares of the respective companies. The
pro forma information presented does not reflect anticipated merger and
integration costs, nor does it reflect potential expense reductions or
revenue enhancements resulting from the Merger. See "MANAGEMENT AND
OPERATIONS OF BANKNORTH GROUP AFTER THE MERGER--Operations."
(3) The Combined Company will pay dividends at a rate to be determined by its
Board of Directors, but is anticipated that the initial dividend rate will
be equal to the current dividend rate of Banknorth. Accordingly, pro forma
cash dividends represent the historical cash dividends declared on
Banknorth common stock. See "SUMMARY--Price Range of Common Stock and
Dividends."
(4) Book Value per common share is based on period-end Common Shareholders'
Equity.
(5) Tangible book value per share is based on period-end Common Shareholders'
Equity less goodwill.
(6) The common shareholders equity used in the calculation of book value of the
combined company was $318.2 million and $318.1 million as of September 30,
1998 and December 31, 1997, respectively. The number of common shares
outstanding used in the calculation of book value of the Combined Company
was 23.1 million and 23.5 million as of September 30, 1998 and December 31,
1997.
13
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following tables present selected historical and pro forma combined
financial information for Banknorth, Evergreen and the Combined Company which
has been derived from consolidated financial statements of Banknorth and
Evergreen through September 30, 1998. This summary should be read in connection
with the consolidated financial statements, including the respective notes
thereto, and other financial information included in documents incorporated
herein by reference.
The data in the following financial tables does not reflect possible
adjustments for expenses related to the Merger, or any potential expense
reductions or revenue enhancements resulting from the Merger. Accordingly, the
unaudited selected pro forma condensed combined financial data of the Combined
Company as of the Effective Time and thereafter may be materially different
from that reflected in the pro forma information below. See "UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" and "MANAGEMENT AND OPERATIONS
OF BANKNORTH AFTER THE MERGER--Operations."
BANKNORTH
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------
1998 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Interest income......... $170,502 $218,506 $190,008 $152,624 $124,403 $113,178
Interest expense........ 80,624 99,324 81,140 67,980 49,599 44,670
-------- -------- -------- -------- -------- --------
Net interest income.... 89,878 119,182 108,868 84,644 74,804 68,508
Provision for loan
losses................. 5,525 7,662 5,600 4,375 3,210 4,700
-------- -------- -------- -------- -------- --------
Net interest income
after provision for
loan losses........... 84,353 111,520 103,268 80,269 71,594 63,808
-------- -------- -------- -------- -------- --------
Other operating income:
Income from trust and
investment management
fees.................. 6,906 8,636 7,835 7,426 7,227 7,455
Service charges on
deposit accounts...... 6,521 8,026 6,558 5,081 4,917 5,128
Card product income.... 1,453 3,145 3,029 2,789 2,835 2,751
Loan servicing income.. 1,011 2,514 2,752 2,701 2,509 2,040
Gain on sale of
mortgage servicing
rights................ 386 921 93 -- 664 --
Net loan transactions.. 2,345 1,215 1,629 568 1,214 3,408
Net securities
transactions.......... (243) 258 31 (409) (2,234) 1,110
All other.............. 6,273 6,611 3,376 2,754 2,839 2,865
-------- -------- -------- -------- -------- --------
Total other operating
income................ 24,652 31,326 25,303 20,910 19,971 24,757
Other operating
expenses:
Compensation & employee
benefits.............. 35,625 46,854 44,095 34,805 32,632 32,925
Net occupancy,
equipment & software
expense............... 11,001 15,042 13,854 11,006 10,752 10,008
Data processing........ 3,663 4,972 4,584 4,629 5,027 4,840
FDIC deposit insurance
and other regulatory
...................... 623 795 461 2,062 3,415 3,634
OREO and repossession.. 465 964 471 520 1,723 4,606
Amortization of
goodwill.............. 3,917 5,223 4,652 632 136 5
Capital securities..... 2,367 2,104 -- -- -- --
All other.............. 16,222 21,611 23,083 16,935 16,243 15,851
-------- -------- -------- -------- -------- --------
Total other operating
expenses.............. 73,883 97,565 91,200 70,859 69,928 71,869
-------- -------- -------- -------- -------- --------
Income before income tax
expense................ 35,122 45,281 37,371 30,590 21,637 16,696
Income tax expense ..... 10,805 14,792 11,981 8,217 5,734 5,235
-------- -------- -------- -------- -------- --------
Income before cumulative
effect of changes in
accounting............. 24,317 30,489 25,390 22,373 15,903 11,461
Cumulative effect of
changes in accounting.. -- -- -- -- 138 (3,500)
-------- -------- -------- -------- -------- --------
Net income.............. $ 24,317 $ 30,489 $ 25,390 $ 22,373 $ 16,041 $ 7,961
======== ======== ======== ======== ======== ========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
Loans................... $ 1,978,891 $ 1,916,097 $ 1,730,720 $ 1,329,188 $ 1,187,773 $ 1,091,851
Loans held for sale..... 35,444 16,481 14,834 12,985 15,432 24,161
Securities available for
sale .................. 719,754 648,782 444,717 147,796 221,828 337,523
Investment securities... 17,767 28,774 42,493 274,688 176,980 23,491
Money market
investments............ 13,494 7,410 14,503 9,718 11,419 9,873
----------- ----------- ----------- ----------- ----------- -----------
Total earning assets... 2,765,350 2,617,544 2,247,267 1,774,375 1,613,432 1,486,899
Other assets............ 190,047 155,263 158,140 101,025 100,382 107,289
----------- ----------- ----------- ----------- ----------- -----------
Total assets........... $ 2,955,397 $ 2,772,807 $ 2,405,407 $ 1,875,400 $ 1,713,814 $ 1,594,188
=========== =========== =========== =========== =========== ===========
Non interest-bearing
deposits............... $ 310,948 $ 288,322 $ 264,938 $ 194,580 $ 185,676 $ 178,734
Interest-bearing
deposits............... 1,918,427 1,820,727 1,724,068 1,259,298 1,121,073 1,099,550
----------- ----------- ----------- ----------- ----------- -----------
Total deposits......... 2,229,375 2,109,049 1,989,006 1,453,878 1,306,749 1,278,284
Short-term borrowed
funds.................. 404,171 382,168 159,672 164,010 145,616 130,176
Long-term debt.......... 34,698 21,294 43,951 94,107 113,364 41,312
Other liabilities....... 25,981 22,502 21,499 17,455 17,077 16,107
Corporation-obligated
mandatorily redeemable
capital securities ... 30,000 20,137 -- -- -- --
Shareholders' equity.... 231,172 217,657 191,279 145,950 131,008 128,309
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities,
corporation-obligated
mandatorily redeemable
capital securities and
shareholders' equity.. $ 2,955,397 $ 2,772,807 $ 2,405,407 $ 1,875,400 $ 1,713,814 $ 1,594,188
=========== =========== =========== =========== =========== ===========
CREDIT QUALITY
INFORMATION:
Loans charged off, net
of recoveries.......... $ 1,813 $ 5,461 $ 5,825 $ 3,717 $ 4,744 $ 5,436
Non-performing assets
(period end) .......... 18,112 16,265 19,889 15,140 19,964 32,460
SHARE AND PER SHARE
DATA:
Basic wtd. avg. number
of shares outstanding.. 15,375,452 15,610,254 15,320,424 13,545,892 13,561,222 13,579,760
Basic earnings per share
(Basic EPS)............ $ 1.58 $ 1.95 $ 1.66 $ 1.65 $ 1.18 $ 0.59
Diluted wtd. avg. number
of shares outstanding.. 15,625,019 15,833,538 15,469,382 13,636,228 13,605,520 13,616,256
Diluted earnings per
share (Diluted EPS).... $ 1.56 $ 1.93 $ 1.64 $ 1.64 $ 1.18 $ 0.58
Tangible book value..... 14.22 12.84 10.90 11.12 9.27 9.73
KEY RATIOS:
Return on average assets
Before cumulative
effect on accounting
change................ 1.10% 1.10% 1.06% 1.19% 0.93% 0.72%
Net income............. 1.10 1.10 1.06 1.19 0.94 0.50
Return on average
shareholder's equity
Before cumulative
effect of accounting
change................ 14.06 14.01 13.27 15.33 12.14 8.93
Net income............. 14.06 14.01 13.27 15.33 12.24 6.20
Net interest margin
(fully tax
equivalent)............ 4.39 4.57 4.86 4.79 4.65 4.65
Efficiency ratio........ 59.73 62.06 62.11 65.11 69.76 72.88
As a % of risk-adjusted
assets (period end):
Total capital.......... 12.04 11.83 10.35 12.48 11.86 12.95
Tier 1 capital......... 10.79 10.63 9.11 11.22 10.61 11.70
As a % of quarterly
average total assets:
Tier 1 capital
(regulatory
leverage)............. 8.06 7.97 6.91 8.05 7.41 7.96
Tangible shareholders'
equity, to tangible
assets (period end).... 7.36 6.88 6.65 7.96 6.77 7.86
</TABLE>
- --------
Note: All share and per share data has been restated for the effect of the 2-
for-1 stock split, effected in the form of a 100% stock dividend, declared in
February, 1998.
15
<PAGE>
EVERGREEN
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------
1998 1997 1996 1995 1994 1993
----------------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Interest income......... $ 59,703 $ 76,476 $ 70,533 $ 67,171 $ 60,987 $ 62,612
Interest expense........ 27,988 34,085 29,349 27,572 21,683 24,532
---------- -------- -------- -------- -------- --------
Net interest income.... 31,715 42,391 41,184 39,599 39,304 38,080
Provision for loan
losses................. 1,485 1,710 1,440 1,800 2,211 15,377
---------- -------- -------- -------- -------- --------
Net interest income
after provision for
loan losses........... 30,230 40,681 39,744 37,799 37,093 22,703
---------- -------- -------- -------- -------- --------
Other operating income:
Income from trust and
investment management
fees.................. 2,141 2,587 2,382 2,213 2,390 2,285
Service charges on
deposit accounts...... 2,276 2,897 2,812 2,791 2,767 3,056
Card product income.... -- -- -- -- 662 1,254
Loan servicing income.. 197 63 87 105 115 110
Net loan transactions.. 107 21 -- 1 (20) 163
Net securities
transactions.......... 236 9 (6) (137) (93) 76
All other.............. 1,022 1,454 1,112 1,251 1,695 1,162
---------- -------- -------- -------- -------- --------
Total other operating
income................ 5,979 7,031 6,387 6,224 7,516 8,106
Other operating
expenses:
Compensation & employee
benefits.............. 12,367 16,141 16,041 15,809 15,132 14,023
Net occupancy,
equipment & software
expense............... 3,164 4,357 3,865 3,869 3,700 3,999
Data processing........ 1,854 2,381 2,421 2,092 2,092 1,955
FDIC deposit insurance
and other regulatory.. 223 289 189 1,245 2,161 2,224
OREO and repossession.. 52 27 (86) 781 869 2,286
Amortization of
goodwill.............. 47 63 63 63 63 63
All other.............. 5,432 7,659 7,650 8,741 9,511 10,810
---------- -------- -------- -------- -------- --------
Total other operating
expenses.............. 23,139 30,917 30,143 32,600 33,528 35,360
---------- -------- -------- -------- -------- --------
Income (loss) before
income tax expense
(benefit).............. 13,070 16,795 15,988 11,423 11,081 (4,551)
Income tax expense
(benefit).............. 4,105 5,468 5,675 3,043 3,816 (1,225)
---------- -------- -------- -------- -------- --------
Net income (loss)....... $ 8,965 $ 11,327 $ 10,313 $ 8,380 $ 7,265 $ (3,326)
========== ======== ======== ======== ======== ========
AVERAGE BALANCES:
Loans................... $ 678,608 $660,228 $629,110 $579,116 $580,478 $603,356
Securities available for
sale................... 289,605 210,892 174,673 164,176 170,102 --
Investment securities
held to maturity....... 22,648 32,735 21,474 33,052 30,644 208,968
Money market
investments............ 14,158 22,994 15,248 23,237 7,840 8,726
---------- -------- -------- -------- -------- --------
Total earning assets... 1,005,019 926,849 840,505 799,581 789,064 821,050
Other assets............ 45,928 46,599 48,867 50,296 49,172 50,368
---------- -------- -------- -------- -------- --------
Total assets........... $1,050,947 $973,448 $889,372 $849,877 $838,236 $871,418
========== ======== ======== ======== ======== ========
Non interest-bearing
deposits............... $ 97,382 $ 93,689 $ 94,120 $ 92,976 $ 96,835 $ 99,269
Interest-bearing
deposits............... 811,642 746,285 672,354 646,278 643,341 676,090
---------- -------- -------- -------- -------- --------
Total deposits......... 909,024 839,974 766,474 739,254 740,176 775,359
Short-term borrowed
funds.................. 10,706 6,073 3,536 8,220 5,855 7,998
Long-term debt.......... 25,419 25,845 23,255 12,970 11,029 8,897
Other liabilities....... 18,283 15,114 12,122 10,446 8,941 8,425
Shareholders' equity.... 87,515 86,442 83,985 78,987 72,235 70,739
---------- -------- -------- -------- -------- --------
Total liabilities and
shareholders' equity.. $1,050,947 $973,448 $889,372 $849,877 $838,236 $871,418
========== ======== ======== ======== ======== ========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------------
1998 1997 1996 1995 1994 1993
----------------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CREDIT QUALITY
INFORMATION:
Loans charged off, net
of recoveries.......... $2,003 $1,272 $1,162 $8,437 $ 2,213 $ 9,980
Non-performing assets
(period end)........... 7,583 7,010 7,033 9,772 29,922 40,504
SHARE AND PER SHARE
DATA:
Basic wtd. avg. number
of shares outstanding.. 8,809,000 8,995,000 9,229,000 9,430,000 9,456,000 9,393,000
Basic earnings (loss)
per share (Basic EPS).. $ 1.02 $ 1.26 $ 1.12 $ 0.89 $ 0.77 $ (0.35)
Diluted wtd. avg. number
of shares outstanding.. 8,983,000 9,122,000 9,324,000 9,490,000 9,496,000 9,424,000
Diluted earnings (loss)
per share (Diluted
EPS)................... $ 1.00 $ 1.24 $ 1.11 $ 0.88 $ 0.77 $ (0.35)
Tangible book value..... 10.35 9.89 9.34 8.82 7.71 7.36
KEY RATIOS:
Return on average
assets................. 1.14% 1.16% 1.16% 0.99% 0.87% (0.38)%
Return on average
shareholders' equity... 13.70 13.10 12.28 10.61 10.06 (4.70)
Net interest margin
(fully tax
equivalent)............ 4.28 4.63 4.98 5.07 5.14 4.81
Efficiency ratio (1).... 60.77 61.49 61.59 66.15 67.51 70.46
As a % of risk-adjusted
assets (period end):
Total capital.......... 14.79 14.80 14.90 15.20 14.80 13.30
Tier 1 capital......... 13.53 13.50 13.70 14.00 13.50 12.00
As a % of quarterly
average total assets:
Tier 1 capital
(regulatory
leverage)............. 8.05 8.60 9.20 9.50 9.20 8.40
Tangible shareholders'
equity, to tangible
assets (period end).... 8.17 8.72 9.17 9.50 8.79 8.36
</TABLE>
- --------
Note: All share and per share data has been restated for the effect of the 2-
for-1 stock split, effected in the form of a 100% stock dividend, declared in
August, 1996.
(1) Total other operating expense, excluding OREO/repossession expense,
goodwill amortization, and other non-recurring expenses, as a percentage of
net interest income, and total other operating income, excluding securities
gains/losses and non-recurring items. All amounts are on a fully taxable
equivalent basis.
17
<PAGE>
PRO FORMA COMBINED
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME:
Interest income......... $ 230,205 $ 294,982 $ 260,541 $ 219,795 $ 185,390 $ 175,790
Interest expense........ 108,612 133,409 110,489 95,552 71,282 69,202
---------- ---------- ---------- ---------- ---------- ----------
Net interest income.... 121,593 161,573 150,052 124,243 114,108 106,588
Provision for loan
losses................. 7,010 9,372 7,040 6,175 5,421 20,077
---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses........... 114,583 152,201 143,012 118,068 108,687 86,511
---------- ---------- ---------- ---------- ---------- ----------
Other operating income:
Income from trust and
investment management
fees.................. 9,047 11,223 10,217 9,639 9,617 9,740
Service charges on
deposit accounts...... 8,797 10,923 9,370 7,872 7,684 8,184
Card product income.... 1,453 3,145 3,029 2,789 3,497 4,005
Loan servicing income.. 1,208 2,577 2,839 2,806 2,624 2,150
Gain on sale of
mortgage servicing
rights................ 386 921 93 -- 664 --
Net loan transactions.. 2,452 1,236 1,629 569 1,194 3,571
Net securities
transactions.......... (7) 267 25 (546) (2,327) 1,186
All other.............. 7,295 8,065 4,488 4,005 4,534 4,027
---------- ---------- ---------- ---------- ---------- ----------
Total other operating
income................ 30,631 38,357 31,690 27,134 27,487 32,863
Other operating
expenses:
Compensation & employee
benefits.............. 47,992 62,995 60,136 50,614 47,764 46,948
Net occupancy,
equipment & software
expense............... 14,165 19,399 17,719 14,875 14,452 14,007
Data processing........ 5,517 7,353 7,005 6,721 7,119 6,795
FDIC deposit insurance
and other regulatory.. 846 1,084 650 3,307 5,576 5,858
OREO and repossession.. 517 991 385 1,301 2,592 6,892
Amortization of
goodwill.............. 3,964 5,286 4,715 695 199 68
Capital securities..... 2,367 2,104 -- -- -- --
All other.............. 21,654 29,270 30,733 25,676 25,754 26,661
---------- ---------- ---------- ---------- ---------- ----------
Total other operating
expenses.............. 97,022 128,482 121,343 103,189 103,456 107,229
---------- ---------- ---------- ---------- ---------- ----------
Income before income tax
expense................ 48,192 62,076 53,359 42,013 32,718 12,145
Income tax expense...... 14,910 20,260 17,656 11,260 9,550 4,010
---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of changes in
accounting............. 33,282 41,816 35,703 30,753 23,168 8,135
Cumulative effect of
changes in accounting.. -- -- -- -- 138 (3,500)
---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 33,282 $ 41,816 $ 35,703 $ 30,753 $ 23,306 $ 4,635
========== ========== ========== ========== ========== ==========
AVERAGE BALANCES:
Loans................... $2,657,499 $2,576,325 $2,359,830 $1,908,304 $1,768,251 $1,695,207
Loans held for sale..... 35,444 16,481 14,834 12,985 15,432 24,161
Securities available for
sale................... 1,009,359 859,674 619,390 311,972 391,930 337,523
Investment securities
held to maturity....... 40,415 61,509 63,967 307,740 207,624 232,459
Money market
investments............ 27,652 30,404 29,751 32,955 19,259 18,599
---------- ---------- ---------- ---------- ---------- ----------
Total earning assets... 3,770,369 3,544,393 3,087,772 2,573,956 2,402,496 2,307,949
Other assets............ 235,975 201,862 207,007 151,321 149,554 157,657
---------- ---------- ---------- ---------- ---------- ----------
Total assets........... $4,006,344 $3,746,255 $3,294,779 $2,725,277 $2,552,050 $2,465,606
========== ========== ========== ========== ========== ==========
Non interest-bearing
deposits............... $ 408,330 $ 382,011 $ 359,058 $ 287,556 $ 282,511 $ 278,003
Interest-bearing
deposits............... 2,730,069 2,567,012 2,396,422 1,905,576 1,764,414 1,775,640
---------- ---------- ---------- ---------- ---------- ----------
Total deposits......... 3,138,399 2,949,023 2,755,480 2,193,132 2,046,925 2,053,643
Short-term borrowed
funds.................. 414,877 388,241 163,208 172,230 151,471 138,174
Long-term debt.......... 60,117 47,139 67,206 107,077 124,393 50,209
Other liabilities 44,264 37,616 33,621 27,901 26,018 24,532
Corporation-obligated
mandatorily redeemable
capital securities..... 30,000 20,137 -- -- -- --
Shareholders' equity.... 318,687 304,099 275,264 224,937 203,243 199,048
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities,
corporation-obligated
mandatorily redeemable
capital securities and
shareholders' equity.. $4,006,344 $3,746,255 $3,294,779 $2,725,277 $2,552,050 $2,465,606
========== ========== ========== ========== ========== ==========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CREDIT QUALITY
INFORMATION:
Loans charged off, net
of recoveries.......... $ 3,816 $ 6,733 $ 6,987 $ 12,154 $ 6,957 $15,416
Non-performing assets
(period end)........... 25,695 23,275 26,922 24,912 49,886 72,964
SHARE AND PER SHARE
DATA:
Basic wtd. avg. number
of shares outstanding.. 23,303,552 23,705,754 23,626,524 22,032,892 22,071,622 22,033,460
Basic earnings per share
(Basic EPS)............ $ 1.43 $ 1.76 $ 1.51 $ 1.40 $ 1.06 $ 0.21
Diluted wtd. avg. number
of shares outstanding.. 23,709,719 24,043,338 23,860,982 22,177,228 22,151,920 22,097,856
Diluted earnings per
share (Diluted EPS).... $ 1.40 $ 1.74 $ 1.50 $ 1.39 $ 1.05 $ 0.21
Tangible book value..... 12.61 12.21 10.72 10.62 9.00 9.11
KEY RATIOS:
Return on average assets
Before cumulative
effect of accounting
change................ 1.11% 1.12% 1.08% 1.13% 0.91% 0.33%
Net income............. 1.11 1.12 1.08 1.13 0.91 0.19
Return on average
shareholders' equity
Before cumulative
effect of accounting
change................ 13.96 13.75 12.97 13.67 11.40 4.09
Net income............. 13.96 13.75 12.97 13.67 11.47 2.33
Net interest margin
(fully tax
equivalent)............ 4.36 4.59 4.89 4.88 4.81 4.70
Efficiency ratio........ 59.99 61.91 61.97 65.43 68.44 71.36
As a % of risk-adjusted
assets (period end)
Total capital.......... 12.68 12.51 11.48 13.31 12.75 13.06
Tier 1 capital......... 11.42 11.30 10.24 12.05 11.49 11.80
As a % of quarterly
average total assets:
Tier 1 capital
(regulatory
leverage)............. 8.06 8.17 7.55 8.51 7.72 8.03
Tangible shareholders'
equity, to tangible
assets (period end).... 7.19 7.36 7.32 8.44 7.39 8.02
</TABLE>
19
<PAGE>
THE SPECIAL MEETINGS
TIME AND PLACE
The Banknorth Special Meeting will be held at 10:00 a.m., Eastern Standard
Time, on Thursday, December 31, 1998 at the Sheraton-Burlington Hotel and
Conference Center, 870 Williston Road, South Burlington, Vermont 05403. The
Evergreen Special Meeting will be held at 10:00 a.m., Eastern Standard Time,
on Thursday, December 31, 1998, at the Queensbury Hotel, 88 Ridge Street,
Glens Falls, New York 12801.
MATTERS TO BE CONSIDERED
At the Special Meetings, Banknorth Shareholders and Evergreen Shareholders
will consider and vote upon a proposal to approve the Agreement and the
transactions contemplated thereby, including the Merger. Shareholders of
Banknorth and Evergreen may also be asked to vote upon a proposal to adjourn
or postpone their respective Special Meetings, in order to allow additional
time, if necessary, to solicit votes in favor of the Agreement.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
Banknorth Share Information. The close of business on Thursday, November 5,
1998 has been fixed by the Banknorth Board as the Record Date for the
determination of holders of Banknorth Common Stock entitled to notice of and
to vote at the Banknorth Special Meeting and any adjournment or adjournments
thereof. At the close of business on the Record Date, there were 15,656,985
shares of Banknorth Common Stock outstanding and entitled to vote, held by
approximately 3,266 shareholders of record. Each issued and outstanding share
of Banknorth Common Stock entitles the holder thereof to one vote at the
Banknorth Special Meeting on all matters properly presented to the meeting.
As of the Record Date, all directors and executive officers of Banknorth as
a group beneficially owned approximately 356,190 shares of Banknorth Common
Stock, excluding shares subject to option, or approximately 2.27% of the
Banknorth issued and outstanding Common Stock entitled to vote at the
Banknorth Special Meeting. It is expected that each such director and
executive officer will vote the shares of Banknorth Common Stock beneficially
owned by him or her for approval of the Agreement and the transactions
contemplated thereby.
As of the Record Date, Banknorth's trust and investment management
subsidiary, Stratevest, held as fiduciary approximately 289,320 shares of
Banknorth Common Stock (or 1.85%) over which it has sole voting and investment
power and approximately 759,828 shares (or 4.85%) as to which it has shared
voting or investment power or seeks voting instructions from beneficial
owners, donors, beneficiaries, co-trustees or co-executors. In cases in which
it does not have sole voting control under the governing instrument,
Stratevest will vote shares of Banknorth'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 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. Stratevest will make a determination
with respect to the manner in which such shares will be voted following
receipt of this Prospectus/Joint Proxy Statement.
Evergreen Share Information. The close of business on Thursday, November 5,
1998 has been fixed by the Evergreen Board as the Record Date for the
determination of holders of Evergreen Common Stock entitled to notice of and
to vote at the Evergreen Special Meeting and any adjournment or adjournments
thereof. At the close of business on the Record Date, there were 8,741,115
shares of Evergreen Common Stock outstanding and entitled to vote, held by
approximately 1,643 shareholders of record. Each issued and outstanding share
of Evergreen Common Stock entitles the holder thereof to one vote at the
Evergreen Special Meeting on all matters properly presented to the meeting.
As of the Record Date, all directors and executive officers of Evergreen as
a group beneficially owned approximately 724,824 shares of Evergreen Common
Stock, excluding shares subject to option, or approximately 8.29% of the
issued and outstanding Evergreen Common Stock entitled to vote at the
Evergreen Special Meeting. It is expected that each such director and
executive officer will vote the shares of Evergreen Common Stock beneficially
owned by him or her for approval of the Agreement and the transactions
contemplated thereby.
20
<PAGE>
As of the Record Date, Evergreen Bank's Trust Department held as fiduciary
approximately 602,278 shares of Evergreen Common Stock (or 6.89%) over which
it has sole voting and investment power and approximately 393,502 shares (or
4.50%) as to which it has shared voting or investment power or seeks voting
instructions from beneficial owners, donors, beneficiaries, co-trustees or co-
executors. Evergreen Bank's Trust Department will vote the shares of Evergreen
Common Stock over which it exercises sole or shared voting authority in
accordance with the terms of the respective governing documents, applicable
law and the Trust Department's fiduciary policies. The Trust Department will
make a determination with respect to the manner in which such shares will be
voted following receipt of this Prospectus/Joint Proxy Statement. In addition,
as of the Record Date, Evergreen Bank held as trustee of the Evergreen
Employee Stock Ownership Plan (the "EVERGREEN ESOP") 68,038 (or 0.78%) shares
of Evergreen Common Stock not yet allocated to the account of plan
participants. Such unallocated shares will be voted by Evergreen Bank as
trustee at the Evergreen Special Meeting in the same proportion as the shares
allocated to the account of Evergreen ESOP Plan participants for which voting
instructions have been received.
VOTES REQUIRED
A majority of the issued and outstanding shares of Banknorth Common Stock or
Evergreen Common Stock, as the case may be, must be present in person or by
proxy to constitute a quorum for any action at the respective Special
Meetings. The affirmative vote of the holders of a majority of the issued and
outstanding shares of Banknorth Common Stock and Evergreen Common Stock,
voting in person or by proxy, is necessary to approve the Agreement on behalf
of Banknorth and Evergreen, respectively.
Under applicable stock exchange and NASD rules, the proposal to adopt the
Agreement is considered a "non-discretionary item" on which brokerage firms
may not vote on behalf of their clients unless such clients have furnished
voting instructions. Abstentions and broker "non-votes" (if any) at the
Special Meetings will be considered in determining the presence of a quorum,
but will not be counted as a vote cast for the Agreement. Because the proposal
to adopt the Agreement is required to be approved by the respective holders of
a majority of the issued and outstanding shares of each of the Banknorth
Common Stock and the Evergreen Common Stock, abstentions and broker "non-
votes" (if any) will have the same effect as a vote against the Agreement at
the Special Meetings.
In connection with execution of the Agreement, each of the directors of
Evergreen has entered into an agreement with Banknorth pursuant to which,
among other things, such persons agreed to vote in favor of the Agreement all
shares of Evergreen Common Stock beneficially owned by them as to which they
hold sole voting power. As of the Record Date, such shares represented in the
aggregate approximately 7.55% of the outstanding shares of Evergreen Common
Stock. See "THE MERGER--Voting Agreements."
VOTING OF PROXIES
Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
Banknorth Common Stock and Evergreen Common Stock is accompanied by a form of
proxy for use at the Banknorth Special Meeting or the Evergreen Special
Meeting, as the case may be. Any shareholder executing a proxy may revoke it
at any time before it is voted by (i) filing a written notice of revocation
with the Secretary of Banknorth (in the case of a Banknorth Shareholder) or
the Secretary of Evergreen (in the case of a Evergreen Shareholder) at the
address of Banknorth or Evergreen set forth on its respective Notice of
Special Meeting of Shareholders; (ii) executing and delivering a later dated
proxy; or (iii) attending the Banknorth Special Meeting or the Evergreen
Special Meeting, as applicable, and giving notice of such revocation in
person. Attendance at the Special Meeting will not alone constitute revocation
of a proxy.
Each proxy card returned to Banknorth or Evergreen (and not revoked) will be
voted as directed on the proxy card. If no instructions are indicated on a
properly executed proxy card, the proxy will be voted FOR approval of the
Agreement. The Boards of Directors of Banknorth and of Evergreen are not aware
of any other matters that may be presented for action at the Special Meetings.
If other matters do properly come before either of such Special Meetings, the
shares represented by the proxy will be voted by the persons named as proxies
in
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their discretion. However, no proxy voted against the Merger will be voted in
favor of any adjournment or postponement of either of the Special Meetings for
the purpose of granting to management additional time to solicit votes in
favor of the Merger.
EVERGREEN SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IF THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD BE
DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL
WHICH WILL BE SENT TO EVERGREEN SHAREHOLDERS BY THE EXCHANGE AGENT PROMPTLY
AFTER THE EFFECTIVE TIME.
SOLICITATION OF PROXIES
Banknorth and Evergreen have agreed to share equally the cost of printing
and mailing this Prospectus/Joint Proxy Statement to their respective
shareholders. In addition to solicitation by mail, the directors, officers and
employees of Banknorth and Evergreen and their respective subsidiaries may
solicit proxies by telephone, telegram or in person without compensation other
than reimbursement for their actual expenses. Arrangements also will be made
with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of proxy materials to the beneficial owners of stock held of record
by such persons. Banknorth or Evergreen, as the case may be, will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
Each of Banknorth and Evergreen has retained D.F. King & Co., a professional
proxy solicitation firm, to assist it in the solicitation of proxies. The fee
payable to such firm in connection with the Merger is $6,000 for Banknorth and
$4,000 Evergreen, plus in each case reimbursement for reasonable out-of-pocket
expenses.
THE MERGER
THE FOLLOWING INFORMATION DISCLOSES ALL MATERIAL TERMS OF THE MERGER.
HOWEVER, IT DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS
PROSPECTUS/JOINT PROXY STATEMENT AT ANNEXES I AND II AND WHICH IS INCORPORATED
BY REFERENCE HEREIN. ALL SHAREHOLDERS OF BANKNORTH AND EVERGREEN ARE URGED TO
READ THE AGREEMENT CAREFULLY.
GENERAL
In accordance with the terms of and subject to the conditions set forth in
the Agreement, Evergreen will be merged with and into Banknorth, with
Banknorth as the surviving corporation in the Merger. The Agreement provides
that at the Effective Time each issued and outstanding share of Evergreen
Common Stock, other than any shares held by Banknorth or Evergreen or their
subsidiaries (except for those shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted), together with associated
Evergreen Rights, will by virtue of the Merger and without any action on the
part of the holder thereof, be converted into 0.9 shares of Banknorth Common
Stock, together with associated Banknorth Rights, subject to possible
adjustment under certain circumstances, as discussed below, plus cash in lieu
of any fractional share interest.
In the event Banknorth changes the number of shares of Banknorth Common
Stock issued and outstanding prior to the Effective Time as a result of a
stock split, reverse stock split, stock dividend, recapitalization,
reorganization, reclassification, or similar transaction with respect to the
outstanding Banknorth Common Stock, the Conversion Ratio will be
proportionately adjusted. In addition, the Conversion Ratio may be increased
at the election of Banknorth in certain circumstances in which a decline in
the market price of Banknorth Common Stock, both in absolute terms and
relative to a specified index of bank stocks, would otherwise entitle
Evergreen to terminate the Agreement. See "THE MERGER--Termination and
Amendment."
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The Boards of Directors of Banknorth and Evergreen have each unanimously
approved the Agreement and the transactions contemplated thereby and believe
that the Merger is advisable and is fair to, and in the best interests of,
their respective corporations and shareholders. ACCORDINGLY, THE BOARD OF
DIRECTORS OF EACH OF BANKNORTH AND EVERGREEN UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
BACKGROUND OF THE MERGER
Historically, Evergreen has conducted its business operations in Glens
Falls, where it is headquartered, and in neighboring areas of upstate New
York. In recent years, in considering its long-term prospects, Evergreen
recognized serious constraints imposed by the business conditions in its local
markets and by other limitations on expansion, including a lack of
opportunities to grow through the acquisition of smaller institutions. Among
other things, these constraints limited Evergreen's ability to obtain
desirable rates of return on its relatively high level of capital. Evergreen
also recognized the likely costs of continued consolidation in the industry,
including higher technology and other costs that would have to be incurred for
Evergreen to continue to operate efficiently. Under these circumstances, the
Evergreen Board investigated other strategic options and concluded that a
strategic alliance with a compatible financial institution could be in the
best interest of Evergreen's Shareholders and other constituencies, assuming
that appropriate terms, including price, could be satisfactorily resolved.
Among other things, such an affiliation could provide increased efficiencies
and cost savings and increased shareholder value.
During 1997 and early 1998, Evergreen engaged in exploratory discussions
with a number of financial institutions concerning a potential affiliation. In
April 1998, Evergreen entered into preliminary discussions concerning an
affiliation with another bank holding company (the "BANK HOLDING COMPANY") and
thereafter Evergreen and the Bank Holding Company conducted mutual due
diligence. The transaction proposed by the Bank Holding Company was a merger
in which Evergreen Shareholders would receive common stock of the Bank Holding
Company in exchange for their Evergreen Common Stock. At the conclusion of its
due diligence, the Bank Holding Company terminated its discussions with
Evergreen. Shortly after this termination, Evergreen briefly discussed
affiliation proposals with two other financial institutions, one of which had
earlier expressed interest in Evergreen.
As part of its overall strategy, and in order to be able to assure that it
would be in the best position to negotiate the terms of any potential
affiliation, Evergreen adopted a Shareholder Rights Agreement as of April 17,
1998 (the "EVERGREEN RIGHTS AGREEMENT").
In June of this year, Banknorth identified Evergreen as an attractive
strategic acquisition candidate due to its compatible community banking
philosophy, the proximity of its geographic markets to those of Banknorth and
the demographic and economic similarity of those markets. Management of
Banknorth performed certain internal modeling of Evergreen as a merger
candidate which included certain general information about Evergreen furnished
by KBW with the permission of Evergreen's Chairman, President and Chief
Executive Officer, George Dougan. This modeling included (i) an analysis of
Evergreen's historical earnings performance and balance sheet trends,
including trends in nonperforming assets, (ii) creation of an earnings
forecast for Evergreen, based on historical data and published Wall Street
estimates, (iii) an analysis of a possible acquisition transaction based on
the forecasted growth rate under pooling of interests and purchase accounting
treatment and under various combinations of cash and stock consideration,
including an analysis of estimated accretion/dilution of earnings per share,
book value per share and tangible book value per share and (iv) an estimate of
one-time acquisition-related charges and of recurring general and
administrative expense reductions. Banknorth retained Sandler O'Neill to open
discussions with KBW regarding a possible merger with Evergreen. At that time,
KBW indicated to Sandler O'Neill that, based on other recent expressions of
interest made to Evergreen, Evergreen would have to receive a price of at
least $33.00 per share, which represented in the view of the Evergreen Board
an appropriate premium of approximately 20% over the then current market price
of the Evergreen Common Stock. Management of Banknorth performed an analysis
of a possible merger at that level and concluded, based on the relative share
prices of the two companies, that a transaction at that price was not
advisable. Management
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informed the Banknorth Board at its June 23, 1998 meeting of the results of
its June, 1998 modeling. The Banknorth Board concurred with management's
assessment that a merger with Evergreen was not advisable at that time.
Discussions with Evergreen were then terminated.
Subsequent to termination of the discussions in late June, a number of
events occurred which resulted in appreciation of Banknorth's stock price.
These events included Banknorth being named to Standard & Poor's Small Cap 600
Index, public announcement of Banknorth's Berkshire Acquisition, and
Banknorth's press release relating to its second quarter results of
operations. Following these events, Banknorth's stock price increased to
approximately $36.00 and held at that level. In mid-July, Banknorth's
President and Chief Executive Officer, William Chadwick, contacted Mr. Dougan
by telephone to discuss reopening merger discussions. Banknorth management
also requested that Sandler O'Neill contact KBW about reopening merger
discussions in light of the increase in Banknorth's stock price. On July 17,
1998, Banknorth sent to Evergreen a nonbinding letter of interest documenting
the basic outlines for a proposed merger.
At approximately the same time in July as Banknorth was renewing its
approach to Evergreen, Evergreen also received a preliminary, nonbinding
expression of interest from another financial institution (the "OTHER
FINANCIAL INSTITUTION"). Aided by Evergreen's financial advisor, KBW,
Evergreen's management reviewed the initial proposals of both Banknorth and
the Other Financial Institution. Banknorth's proposal took the form of a stock
for stock exchange, with Evergreen Shareholders receiving a fixed number of
shares of Banknorth Common Stock for each share of Evergreen Common Stock. The
Banknorth proposal contemplated the merger of Evergreen into Banknorth and the
continued existence of Evergreen Bank as a separate subsidiary. It also
contemplated that Mr. Dougan would become Vice Chairman of Banknorth and two
other current Evergreen directors also would serve on Banknorth's Board.
The Other Financial Institution's proposal also was a stock for stock
exchange. The Other Financial Institution's proposal letter set forth a dollar
price per share of Evergreen Common Stock, but, unlike Banknorth's proposal,
it did not specifically state whether a fixed price or fixed exchange ratio
was contemplated. KBW confirmed in subsequent discussions with the Other
Financial Institution that the Other Financial Institution intended to use the
dollar price in the proposal letter to determine a fixed exchange ratio at the
time a definitive agreement was executed. This was consistent with KBW's
determination that all of the Other Financial Institution's stock transactions
since 1992, including two recent comparable transactions, were done with fixed
exchange ratios. In any event, the dollar price in the Other Financial
Institution's proposal letter was substantially similar to the dollar value of
Banknorth's proposal at all times prior to the execution of the Agreement. In
fact, based upon the closing price of Banknorth Common Stock on the day before
the Evergreen Board finally approved the Merger, the dollar value of
Banknorth's proposal actually was slightly higher than the dollar amount set
forth in the Other Financial Institution's proposal letter.
The Other Financial Institution's proposal also contemplated that Evergreen
would be merged into the Other Financial Institution and that Evergreen Bank
would be merged into a commercial banking institution subsidiary of the Other
Financial Institution. The Other Financial Institution's proposal did not
provide for any of the current directors of Evergreen to serve on the Other
Financial Institution's Board of Directors after consummation of the
transaction. Because of Evergreen's decision to pursue an alliance with
Banknorth, the economic and other terms of the Other Financial Institution's
initial proposal were never developed further.
On July 24, 1998 the Shareholder Value Committee of Evergreen's Board of
Directors, comprising Mr. Dougan and seven outside directors, met to review
the two proposals. KBW presented an analysis of the two proposals from various
perspectives. KBW's presentation modeled Banknorth's proposal as a fixed
exchange ratio offer and the Other Financial Institution's proposal as a fixed
price offer because KBW believed that doing so would provide a useful
framework for analyzing the terms of each proposal. The Evergreen Shareholder
Value Committee reviewed these and other aspects of the two proposals,
including the different businesses and philosophies of the two companies.
Among other factors, the Evergreen Shareholder Value Committee considered the
fact that, on a post-transaction basis, the former Evergreen would represent a
more significant portion of Banknorth than of the Other Financial Institution
and that the Banknorth proposal potentially would
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preserve a greater portion of the franchise value of Evergreen Bank by
preserving it as a separate institution. The Evergreen Shareholder Value
Committee also considered the implications of combining with a commercial
banking operation, in the case of Banknorth, versus a more thrift-oriented
business, in the case of the Other Financial Institution. The committee also
considered that the Banknorth proposal contemplated having current Evergreen
directors serve on the Banknorth Board after consummation of the transaction,
while the Other Financial Institution's proposal did not provide for board
representation. Based on its review, the Shareholder Value Committee concluded
that Banknorth's offer was more beneficial to the Evergreen Shareholders and
directed management to continue discussions with Banknorth. Thereafter,
management of Banknorth and Evergreen signed a confidentiality agreement and
began reviewing the terms of the proposed transaction and commenced due
diligence.
The full Board of Directors of Evergreen met on July 28, 1998. At this
meeting, KBW reviewed Banknorth's proposal, as developed and clarified through
discussions between the parties and the review of the proposed Agreement
presented by Banknorth. For comparative purposes, certain aspects of the Other
Financial Institution's preliminary proposal were considered, even though this
proposal had not been pursued since the Evergreen Shareholder Value Committee
meeting. KBW reviewed the economic implications of Banknorth's proposed
Conversion Ratio of 0.9 shares of Banknorth Common Stock for each share of
Evergreen Common Stock. Based on the then current one-week average closing
price of the Banknorth Common Stock ($37.20 per share), that Conversion Ratio
represented approximately 3.44 times Evergreen's June 30, 1998 tangible book
value, and approximately 25.33 times Evergreen's trailing twelve months'
earnings per share. These multiples compared favorably with those for recent
comparable transactions analyzed by KBW, which had an average multiple of deal
price to tangible book value of 3.25 times and an average multiple of deal
price to trailing twelve months' earnings per share of 24.36 times. The
Evergreen Board also considered the fact that, under the Banknorth proposal,
Evergreen Bank would remain as a separate entity, preserving the bank's local
identity and requiring a smaller reduction in the bank's workforce than would
a merger in which the bank's separate existence would terminate. The Evergreen
Board also considered that, under the Banknorth proposal, Mr. Dougan would
become a Director of Banknorth and would become part of Banknorth's management
team, serving as Banknorth's Vice Chairman. In addition, two other current
Evergreen Directors would become Banknorth Directors. The Evergreen Board
considered the management and Board arrangements to be in the best interests
of Evergreen Shareholders as continuing shareholders of Banknorth. KBW also
reviewed the price offered by Banknorth as a multiple of Evergreen's book
value and earnings and compared it to prices in other transactions and the
initial expression of interest by the Other Financial Institution. KBW also
reviewed other terms relating to the combined operations of Evergreen and each
of Banknorth and the Other Financial Institution, including capital levels and
operating strategies of the combined companies. The Evergreen Board also
considered in general the terms of the proposed Agreement. After extensive
discussion, the Evergreen Board concluded that it was in the best interests of
Evergreen and its shareholders and other constituencies to merge with
Banknorth and instructed management and its representatives to continue due
diligence and negotiate the final terms of the proposed Agreement.
Also on July 28, 1998, the full Board of Directors of Banknorth held its
regular July meeting at which it considered the proposed terms of a merger
with Evergreen. At this meeting, Sandler O'Neill reviewed the proposed
financial terms of the Merger, including the effect on Banknorth's book value
and earnings per share of a transaction at the proposed conversion ratio of
0.9 to 0.91, to be determined based upon the average of the closing price of
Banknorth Common Stock for the five days preceding the signing of the Merger
Agreement. Sandler O'Neill orally expressed its opinion to the Banknorth Board
that the proposed conversion ratio was fair to the Banknorth Shareholders from
a financial point of view. The Banknorth Board also considered the
nonfinancial terms of the proposed merger, including the continued involvement
of Evergreen's Chairman, President and Chief Executive Officer, George Dougan,
in the management of the Combined Company, and analyzed the proposed merger
from the standpoint of Banknorth's overall strategic goals. At the meeting
Banknorth's legal advisors outlined the terms of the proposed merger documents
and the Banknorth Board discussed with Banknorth's accountants issues relating
to the accounting treatment for the Merger. The Banknorth Board took no formal
action at the conclusion of its extensive discussions, pending receipt of a
formal response from Evergreen to the outstanding proposal.
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On July 31, 1998, the Evergreen Board met again to discuss the terms of the
Agreement and the Option Agreement and to review the financial terms of the
Merger, including the Conversion Ratio of 0.9 shares and the intention that
the Merger qualify as both a tax-free reorganization and a pooling-of-
interests transaction. Based on the then current one-week average closing
price of the Banknorth Common Stock ($37.06 per share), that Conversion Ratio
represented approximately 3.43 times Evergreen's June 30, 1998 tangible book
value, and approximately 25.24 times Evergreen's trailing twelve months'
earnings per share. These multiples compared favorably with those for recent
comparable transactions analyzed by KBW, which had an average multiple of deal
price to tangible book value of 3.25 times and an average multiple of deal
price to trailing twelve months' earnings per share of 24.36 times. KBW
expressed its opinion to the Evergreen Board that the Conversion Ratio was
fair, from a financial point of view, to the Evergreen Shareholders. The
Evergreen Board also considered the compatible operating philosophies of
Banknorth and Evergreen. In addition, the Evergreen Board considered the
potential advantages of preserving Evergreen Bank's separate local identity
and the extent to which these advantages would be strengthened by adding Mr.
Dougan and two other existing Evergreen directors to the Banknorth Board,
thereby preserving their experience and insights regarding Evergreen Bank's
business and markets, and reflecting the confidence that the Evergreen Board
had in its ability to continue to steward shareholder interests. After further
discussion, the Evergreen Board determined that the Merger was in the best
interests of Evergreen and its shareholders and other constituencies and
unanimously approved and authorized the execution and delivery of the
Agreement and the Option Agreement. The Evergreen Board also voted to rescind
the Evergreen Common Stock buyback program then in effect.
On July 31, 1998, the Banknorth Board held a special meeting to vote
formally on the proposed merger with Evergreen, on the terms previously
reviewed at the July 28 meeting and a conversion ratio of 0.9. Sandler O'Neill
and Banknorth's legal and accounting advisors participated in this meeting.
Sandler O'Neill again expressed its oral opinion to the Banknorth Board, later
confirmed in writing, that the Conversion Ratio was fair, from a financial
point of view, to the Banknorth Shareholders. After further discussion, the
Banknorth Board determined that the Merger was in the best interests of
Banknorth and its shareholders and other constituencies and unanimously
approved and authorized the execution and delivery of the Agreement. The
Banknorth Board also voted to rescind the Banknorth Common Stock buyback
program then in effect.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Evergreen. THE EVERGREEN BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, EVERGREEN AND ITS SHAREHOLDERS. THE EVERGREEN BOARD
UNANIMOUSLY RECOMMENDS THAT EVERGREEN SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE MERGER.
In reaching its decision to approve the Agreement and the transactions
contemplated thereby, the Board consulted with Evergreen management, as well
as Evergreen's financial and legal advisors, and considered a number of
factors, including those listed below. The following discussion of the
information and factors considered by the Evergreen Board is not intended to
be exhaustive but includes all material factors considered by the Evergreen
Board.
(i) The respective business, operations, asset quality, financial
condition, earnings, strategic business plans, competitive positions and
stock price performance of Banknorth and Evergreen (see "INFORMATION ABOUT
BANKNORTH," "INFORMATION ABOUT EVERGREEN" and "SUMMARY--Price Range Of
Common Stock and Dividends");
(ii) the similar community banking cultures and business philosophies of
the two companies, particularly with respect to customer satisfaction,
efficiency and credit quality and serving the banking needs of small
cities, towns and semi-rural communities, and the companies' compatible
management teams;
(iii) the projected market capitalization and market position of the
Combined Company, the diversification of the companies' asset and deposit
bases, and the ability of the Combined Company to compete more effectively
in upstate New York and Northern New England (see "UNAUDITED PRO FORMA
COMBINED CONSOLIDATED FINANCIAL STATEMENTS");
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(iv) the pro forma financial effects of the proposed transactions,
including the cost savings (resulting from back office efficiencies,
reductions in force, consolidations and other cost savings) of
approximately $7.9 million in 1999 and approximately $11.8 million in 2000
and an increase in Banknorth earnings per share of approximately 4.2%
($0.11 per share) in 2000 anticipated to result from the Merger and the
effects of the Merger on the risk-based and leverage capital ratios of the
Combined Company and its subsidiary banks (see "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS" and "MANAGEMENT AND OPERATIONS OF
BANKNORTH AFTER THE MERGER--Operations");
(v) the likely impact of the proposed Merger on the employees and
customers of Evergreen and its subsidiaries, on the communities in which
Evergreen presently conducts its business, and on Evergreen's other
constituencies, including the potential advantages of maintaining Evergreen
Bank's independence and preserving its identity in the community;
(vi) the current and prospective economic, regulatory and competitive
climate facing independent community banking organizations, including the
consolidation currently underway in the banking industry and competition
from larger institutions and from nonbank providers of financial services;
(vii) the structure of the contemplated transaction, together with the
Conversion Ratio in the Merger from a number of valuation perspectives, as
presented by KBW, and the current market value of the Merger to Evergreen's
Shareholders. The Evergreen Board considered that, based on the closing
prices of the Evergreen Common Stock and the Banknorth Common Stock on the
last trading day preceding its approval of the proposed Merger (July 30,
1998), the Conversion Ratio represented a market value premium at such time
of $6.675 per share, or approximately 24%. The Evergreen Board also
considered that, based on the then current one-week average closing price
of the Banknorth Common Stock ($37.06 per share), the Conversion Ratio,
which represented approximately 3.43 times Evergreen's June 30, 1998
tangible book value, and approximately 25.24 times Evergreen's trailing
twelve months' earnings, compared favorably with comparable transactions
analyzed by KBW, which had an average multiple of deal price to tangible
book value of 3.25 times and an average multiple of deal price to trailing
twelve months' earnings per share of 24.36 times. (see "--Opinions of
Financial Advisors--Evergreen");
(viii) the July 31, 1998 opinion of KBW that the Conversion Ratio is fair
to Evergreen's shareholders from a financial point of view (see "--Opinions
of Financial Advisors--Evergreen");
(ix) the terms of the Agreement, including the proposed board
representation and management structure of the Combined Company, and the
termination provisions applicable in the event of a significant decline in
the price of Banknorth Common Stock relative to a market index prior to the
consummation of the Merger (see "--Termination and Amendment" and
"MANAGEMENT AND OPERATIONS OF BANKNORTH AFTER THE MERGER--Management");
(x) the terms of the Option Agreement (see "--Stock Option Agreement");
(xi) the regulatory and shareholder approvals required for the
consummation of the Merger (see "--Regulatory Approvals");
(xii) the treatment of the Merger as a pooling of interests for financial
accounting purposes and as a tax-free reorganization for federal income tax
purposes (see "--Material Federal Income Tax Consequences" and "--
Accounting Treatment"); and
(xiii) the one-time charges totaling approximately $21.0 million on a
pretax basis, and approximately $15.8 million on an aftertax basis, that
the Combined Company is expected to incur in connection with the Merger and
the impact of these charges on the Combined Company's earnings (see
"MANAGEMENT AND OPERATIONS OF BANKNORTH AFTER THE MERGER--Operations").
In reaching its determination to approve and recommend the Merger, the
Evergreen Board did not assign relative or specific weights to the foregoing
factors, and individual directors may have given differing weights to
different factors. To the extent the Evergreen Board considered financial
projections in its deliberations on the Merger, it relied on projections and
information developed by KBW based on 1998 internal forecasts of Evergreen and
Banknorth, on consensus earnings estimates for Banknorth tabulated by
Institutional Brokers Estimate System ("IBES"), on earnings estimates for
Evergreen published by the KBW Research Department
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and on general industry trend analyses derived from published sources.
Throughout its deliberations, the Evergreen Board received the advice of
special counsel. After deliberating with respect to the Merger and the other
matters contemplated by the Agreement, considering, among other things, the
matters discussed above and the opinion of KBW referred to above, the
Evergreen Board, by a unanimous vote, approved and adopted the Agreement, the
Option Agreement and the transactions contemplated thereby, as being in the
best interests of Evergreen and its shareholders. The Evergreen Board is
unanimous in its recommendation that holders of Evergreen Common Stock vote
FOR approval and adoption of the Merger.
For information regarding certain interests of directors and executive
officers of Evergreen in the Merger, see "MANAGEMENT AND OPERATIONS OF
BANKNORTH AFTER THE MERGER--Management" and "--Interests of Certain Persons in
the Merger."
Banknorth. Historically, Banknorth's acquisition strategy has consisted of
identifying financial institutions with similar business philosophies that
operate in similar markets, including those geographically within, or
contiguous to, its existing markets. From a financial perspective, Banknorth
seeks acquisitions that will be accretive to earnings per share and result in
no more than limited and acceptable initial book value per share dilution.
Banknorth expects acquisitions to provide accretion to prospective earnings
per share over an acceptable period of time after the acquisition, to recover
any initial dilution and to provide required rates of return commensurate with
the performance of its other subsidiaries. Acquisitions are also evaluated in
terms of asset quality, interest rate risk, core deposit base stability,
potential operating efficiencies, and management abilities.
In the view of Banknorth's Board, the Merger meets Banknorth's strategic
objectives and will significantly enhance Banknorth's franchise value over the
long term. In analyzing the proposed Merger, the Banknorth Board analyzed the
proposed transaction in light of Banknorth's overall strategic goals and, in
consultation with its legal, financial and accounting advisors, also
considered a number of other factors, including those listed below. The
following discussion of the information and factors considered by the
Banknorth Board is not intended to be exhaustive but includes all material
factors considered by the Banknorth Board.
(i) the respective business, operations, asset quality, financial condition,
earnings, strategic business plans, competitive positions and stock price
performance of Banknorth and Evergreen (see "INFORMATION ABOUT BANKNORTH,"
"INFORMATION ABOUT EVERGREEN" and "SUMMARY--Price Range of Common Stock and
Dividends");
(ii) the similar community banking cultures and business philosophies of the
two companies, particularly with respect to customer satisfaction, efficiency
and credit quality, and the companies' compatible management teams and the
integration of their operations;
(iii) the projected market capitalization and market position of the
Combined Company, including improved liquidity and trading volume of its
common stock, the diversification of Banknorth's asset and deposit bases, and
the ability of the Combined Company to compete more effectively in a four-
state market area;
(iv) the pro forma financial effects of the Merger, including anticipated
annual pretax expense reductions of $9.0 million, resulting primarily from
back office efficiencies, consolidations and operating synergies, and
estimated 1999 earnings accretion of approximately $.06 per share, or 2.84%,
based on mean estimates for Banknorth of $2.19 per share, published by IBES.
The Banknorth Board analyzed the estimated financial impact of the proposed
Merger without assigning any dollar value to possible revenue enhancements.
However, the Board did consider that opportunities might exist for enhancing
revenues for the Combined Company. Examples include expanded indirect
automobile and retail installment sales financing and leasing operations,
expanded mortgage banking activity, including origination and servicing
operations, and additional fee-based product offerings, such as cash
management services and enhanced trust and investment management services. The
Banknorth Board also considered that the expansion of its overall customer
base would present opportunities for cross-marketing of products and services
(see "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" and
"MANAGEMENT AND OPERATION OF BANKNORTH AFTER THE MERGER--Operations");
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(v) the expectation that the Merger would enhance Banknorth's ratio of
tangible capital to assets, on a pro forma basis as of June 30, 1998, taking
into account the effect of the pending Berkshire Acquisition, from an
estimated 5.79% to 6.40%;
(vi) the ability of Banknorth through a fixed Conversion Ratio to fix the
number of shares to be issued in the Merger, and thus more easily estimate the
relative amount of per share dilution;
(vii) the anticipated treatment of the Merger as a pooling of interests for
financial accounting purposes and as a tax-free reorganization for federal
income tax purposes (see "--Material Federal Income Tax Consequences" and "--
Accounting Treatment");
(viii) the one-time charges totaling approximately $21.0 million on a pretax
basis, and approximately $15.8 million on an aftertax basis, that the Combined
Company is expected to incur in connection with the Merger and the impact of
these charges on the Combined Company's earnings (see "MANAGEMENT AND
OPERATIONS OF BANKNORTH AFTER THE MERGER--Operations");
(ix) the likely impact of the Merger on the current employees and customers
of Banknorth and its subsidiaries and on the communities served;
(x) the current and prospective economic, regulatory, technological and
competitive climate facing independent community banking organizations,
including the increasing consolidation in the banking industry, competition
from larger institutions and from nonbank providers of financial services, and
challenges in maintaining and developing competitive service and product
delivery systems due to rapid advances in information technologies;
(xi) the fact that the southern portion of Evergreen's strong banking
franchise is contiguous to Banknorth's western Massachusetts banking
franchise, which will be further expanded upon completion of the pending
Berkshire Acquisition, and the increased geographic risk diversification
resulting from expansion into a contiguous state;
(xii) the enhanced ability of the Combined Company to compete against larger
competitors, including an enhanced systemwide capacity to service larger
credits;
(xiii) the financial presentations of senior management and Sandler O'Neill
and the opinion of Sandler O'Neill as to the fairness of the Conversion Ratio,
from a financial point of view, to the Banknorth Shareholders (see "--Opinion
of Financial Advisors--Banknorth");
(xiv) the integration risk associated with conversion of Evergreen's data
processing and information systems to those of Banknorth, including risks
associated with implementation and integration of the companies' Year 2000
compliance programs;
(xv) the likelihood that Evergreen's customer base will provide Banknorth
with significant cross-selling opportunities, including opportunities for
expansion of its trust and investment management business, its dealer services
operations, credit card business and its nondeposit investment product
program;
(xvi) the nonfinancial terms of the Agreement, including the proposed Board
composition and management structure of the Combined Company and the continued
involvement with the Combined Company following the Merger, on the part of Mr.
Dougan (see "MANAGEMENT AND OPERATIONS OF BANKNORTH AFTER THE MERGER--
Management");
(xvii) the terms of the Option Agreement (see "--Stock Option Agreement");
(xviii) the likelihood of receipt of required regulatory and shareholder
approvals (see "--Regulatory Approvals"); and
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<PAGE>
(xix) the similarities of the economic and demographic characteristics of
market areas of Banknorth and Evergreen.
In approving the Merger, the Banknorth Board did not specifically identify
any one factor or group of factors as being more significant than any other in
the decision-making process, although individual directors may have given one
or more factors more weight than others. To the extent the Banknorth Board
considered financial projections in its deliberations on the Merger, it relied
on projections and information developed by Sandler O'Neill based on 1998
budget forecasts of Evergreen and Banknorth and on consensus earnings
estimates tabulated by IBES. For periods after 1999, Sandler O'Neill assumed
an annual growth rate of 5% on earning assets.
BASED ON THE FOREGOING, AND THE OPINION OF SANDLER O'NEILL REFERRED TO
ABOVE, THE BANKNORTH BOARD UNANIMOUSLY RECOMMENDS THAT BANKNORTH SHAREHOLDERS
VOTE FOR THE MERGER.
OPINIONS OF FINANCIAL ADVISORS
Evergreen. On April 8, 1998, Evergreen engaged KBW to act as its financial
advisor in connection with the possible business combination of Evergreen and
another Bank Holding Company. Pursuant to the terms of its engagement, KBW
agreed to assist Evergreen in analyzing, structuring, negotiating and
effecting such a transaction. Evergreen selected KBW because KBW is a
nationally recognized investment banking firm with substantial experience in
such transactions and is familiar with Evergreen and its business. As part of
its investment banking business, KBW is continually engaged in the valuation
of businesses and their securities in connection with mergers and
acquisitions. KBW remained engaged after termination of discussions with the
Bank Holding Company and advised Evergreen with respect to discussions with
Banknorth and the Other Financial Institution. See "--Background of the
Merger."
As part of its engagement, representatives of KBW attended the meeting of
the Evergreen Board held on July 31, 1998 at which the Evergreen Board
considered and approved the Agreement. At the July 31, 1998 meeting, KBW
rendered an oral opinion (subsequently confirmed in writing) that, as of such
date, the Conversion Ratio was fair to the holders of shares of Evergreen
Common Stock from a financial point of view. Such opinion was reconfirmed in
writing as of the date of this Prospectus/Joint Proxy Statement.
The full text of KBW's updated written opinion dated as of the date of this
Prospectus/Joint Proxy Statement is attached as Annex IV to this
Prospectus/Joint Proxy Statement and is incorporated herein by reference. The
description of the opinion set forth herein is qualified in its entirety by
reference to Annex IV. Evergreen Shareholders are urged to read KBW's opinion
in its entirety for a description of the procedures followed, assumptions
made, matters considered, and qualifications and limitations on the review
undertaken by KBW in connection therewith.
KBW'S OPINION IS DIRECTED TO THE EVERGREEN BOARD AND ADDRESSES ONLY THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONVERSION RATIO TO THE
EVERGREEN SHAREHOLDERS. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION
TO PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
EVERGREEN SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE EVERGREEN
SPECIAL MEETING WITH RESPECT TO THE MERGER OR ANY OTHER MATTER RELATED
THERETO.
KBW has informed Evergreen that in arriving at its written opinion, KBW,
among other things: (1) reviewed Evergreen's Annual Reports on Form 10-K and
related audited financial information for the three fiscal years ended
December 31, 1997 and Evergreen's quarterly report on Form 10-Q and related
unaudited financial information for the quarterly period ended March 31, 1998;
(2) reviewed Banknorth's Annual Reports on Form 10-K and related audited
financial information for the three fiscal years ended December 31, 1997 and
Banknorth's quarterly report on Form 10-Q and related unaudited financial
information for the quarterly period
30
<PAGE>
ended March 31, 1998; (3) reviewed certain limited financial information,
including 1998 financial forecasts, relating to the respective businesses,
earnings, assets and prospects of Evergreen and Banknorth furnished to KBW by
senior management of Evergreen and Banknorth as well as projected cost savings
and related expenses expected to result from the Merger (the "EXPECTED
SAVINGS") furnished to it by senior management of Evergreen and Banknorth; (4)
conducted certain limited discussions with members of senior management of
Evergreen and Banknorth concerning the respective businesses, financial
condition, earnings, assets, liabilities, operations, regulatory condition,
1998 financial forecasts, contingencies and prospects of Evergreen and
Banknorth and their respective views as to the future financial performance of
Evergreen, Banknorth, and the Combined Company, as the case may be, following
the Merger; (5) reviewed the historical market prices and trading activity for
Evergreen Common Stock and Banknorth Common Stock and compared them with that
of certain publicly traded companies which KBW deemed to be relevant; (6)
compared the respective results of operations of Evergreen and Banknorth with
those of certain companies which KBW deemed to be relevant; (7) compared the
proposed financial terms of the Merger contemplated by the Agreement with the
financial terms of certain other mergers and acquisitions which KBW deemed to
be relevant; (8) reviewed the amount and timing of the Expected Savings
following the Merger as prepared, and discussed with it, by senior management
of Banknorth; (9) considered, based upon information provided by Banknorth's
senior management, the pro forma impact of the Merger on the earnings and book
value per share, consolidated capitalization and certain balance sheet and
profitability ratios of Banknorth; (10) reviewed the Agreement; and (11)
reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as KBW deemed
necessary.
In preparing its opinion, KBW, with Evergreen's consent, assumed and relied
on the accuracy and completeness of all financial and other information
supplied or otherwise made available to it by Evergreen and Banknorth,
including that contemplated in the numbered items above, and KBW has not
assumed responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of Evergreen or Banknorth or any of
their subsidiaries, nor has it been furnished any such evaluation or
appraisal. KBW is not an expert in the evaluation of allowances for loan
losses, and, with Evergreen's consent, it has not made an independent
evaluation of the adequacy of the allowance for loan losses of Evergreen or
Banknorth, nor has it reviewed any individual credit files relating to
Evergreen or Banknorth, and, with Evergreen's consent, it assumed that the
respective aggregate allowances for loan losses for both Evergreen and
Banknorth are adequate to provide for losses inherent in the loan portfolios.
In addition, it has not conducted any physical inspection of the properties or
facilities of Evergreen or Banknorth.
With Evergreen's consent, KBW also assumed and relied upon the senior
management of Evergreen and Banknorth as to the reasonableness and
achievability of the 1998 financial forecasts (and the assumptions and bases
therefor) provided to, and discussed with, KBW. In that regard, KBW has
assumed with Evergreen's consent that such forecasts, including without
limitation, financial forecasts, evaluations of contingencies, Expected
Savings and operating synergies resulting from the Merger and projections
regarding underperforming and nonperforming assets, net charge-offs, adequacy
of reserves, future economic conditions and results of operations reflect the
best currently available estimates and judgments of the senior management of
Evergreen and Banknorth and/or the Combined Company, as the case may be. KBW's
opinion is predicated on the Merger receiving the tax and accounting treatment
contemplated in the Agreement. KBW's opinion was necessarily based on
economic, market and other conditions as in effect on, and the information
made available to it as of, the date of its opinion.
KBW's opinion was rendered without regard to the necessity for, or level of,
any restrictions, obligations, undertakings or divestitures which may be
imposed or required in the course of obtaining regulatory approval for the
Merger.
In connection with rendering its opinion dated July 31, 1998, KBW performed
a variety of financial analyses, consisting of those summarized below. The
summary set forth below does not purport to be a complete description of the
analyses performed by KBW in this regard, although it describes all material
analyses performed by KBW. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
31
<PAGE>
circumstances and, therefore, such an opinion is not readily susceptible to a
partial analysis or summary description. Accordingly, notwithstanding the
separate factors summarized below, KBW believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
considered by it, without considering all analyses and factors, or attempting
to ascribe relative weights to some or all such analyses and factors, could
create an incomplete view of the evaluation process underlying KBW's opinion.
In performing its analyses, KBW made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Banknorth, Evergreen and KBW.
The analyses performed by KBW are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
KBW's analysis of the fairness to the shareholders of Evergreen of the
Conversion Ratio and were provided to the Evergreen Board in connection with
the delivery of KBW's opinion. KBW gave the various analyses described below
approximately similar weight and did not draw any specific conclusions from or
with regard to any one method of analysis. With respect to the comparison of
selected companies analysis and the analysis of selected merger transactions
summarized below, no company utilized as a comparison is identical to
Evergreen or Banknorth. Accordingly, an analysis of comparable companies and
comparable business combinations is not mathematical; rather it involves
complex considerations and judgments concerning the differences in financial
and operating characteristics of the companies and other factors that could
affect the public trading values or announced merger transaction values, as
the case may be, of the companies concerned. The analyses do not purport to be
appraisals or to reflect the process at which Evergreen and Banknorth might
actually be sold or the prices at which any securities may trade at the
present time or at any time in the future. In addition, as described above,
KBW's opinion is just one of many factors taken into consideration by the
Evergreen Board.
THE EARNINGS PROJECTIONS FOR EVERGREEN AND BANKNORTH RELIED UPON BY KBW IN
ITS ANALYSES WERE PREPARED BY KBW AND REVIEWED WITH MANAGEMENT AND WERE BASED
UPON THE 1998 ADJUSTED BUDGET FORECASTS OF EVERGREEN AND BANKNORTH PROVIDED TO
KBW BY EVERGREEN AND BANKNORTH, ON PUBLISHED IBES CONSENSUS EARNINGS ESTIMATES
FOR 1998 AND 1999 FOR BANKNORTH AND ON KBW RESEARCH DEPARTMENT ESTIMATES FOR
EVERGREEN. FOR PERIODS AFTER 1999 KBW ASSUMED AN ANNUAL GROWTH RATE ON EARNING
ASSETS FOR BANKNORTH OF 5% AND AN ANNUAL GROWTH RATE ON NET INCOME OF 10% FOR
EVERGREEN. The 1998 adjusted budget projections furnished to KBW and used by
it in certain of its analyses were prepared by the senior management of
Evergreen and Banknorth. Evergreen and Banknorth do not publicly disclose
internal management projections of the type provided to KBW in connection with
its review of the Merger, and as a result, such projections were not prepared
with a view towards public disclosure. Those projections were based on
numerous variables and assumptions which are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions, and accordingly, actual results could vary significantly from
those set forth in such projections. See "--Certain Estimates of 1998
Operations."
The following is a summary of the material analyses presented by KBW to the
Evergreen Board on July 31, 1998 (the "KBW REPORT") in connection with its
July 31, 1998 opinion.
Summary of Proposal. KBW calculated multiples which were based on the
assumed per share purchase price of $34.43 (derived by multiplying the
Conversion Ratio of 0.9 by $38.25, the last reported sale price for the
Banknorth Common Stock before the public announcement of the execution of the
Agreement). Evergreen's June 30, 1998 stated book value was $9.98, stated
tangible book value was $9.96, 1998 and 1999 earnings per share estimates
(provided KBW Research Department) were $1.35 and $1.48, respectively, and its
trailing 12 months (July 1, 1997 to June 30, 1998) earnings per share
normalized for nonrecurring charges was $1.32. Based on this data, the price
to stated book value multiple was 3.45x, the price to stated tangible book
value multiple was 3.46x, the price to the 1998 and 1999 earnings estimates
per share was 25.50 and 23.26x, respectively, and the multiple of price to the
trailing 12 months earnings was 26.06x. For purposes of KBW's analyses, data
on earnings per share are based on diluted earnings per share.
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<PAGE>
Analysis of Selected Merger Transactions. KBW reviewed certain financial
data related to comparable nationwide acquisitions of bank holding companies
announced between July 1, 1997 and July 31, 1998 with announced deal values
from $200 million to $1 billion. The transactions included in the comparable
transactions group were: First Commonwealth Financial/Southwest National,
First American/Pioneer Bancshares, Old Kent Financial/First Evergreen, Star
Banc/Trans Financial, Union Planters/AMBANC, Cullen/Frost Bankers/Overton
Bancshares, Mercantile Bancorp/Firstbank of Illinois, First Midwest
Bancorp/Heritage Financial Services, Mercantile Bancorp/CBT Corp., National
City/Fort Wayne National, Union Planters/Peoples First, M&T Bank
Corp./ONBANCorp, CNB Bancshares/Pinnacle Financial, United Bankshares/George
Mason Bankshares, Fulton Financial/Keystone Heritage, Union Planters/Capital
Bancorp and Wachovia Corp./First United Bancorp. The results of KBW's review
are set forth in the following table.
<TABLE>
<CAPTION>
COMPARABLE GROUP COMPARABLE GROUP
TRANSACTION MULTIPLE AVERAGE MEDIAN
-------------------- ---------------- ----------------
<S> <C> <C> <C>
Deal Price/1998 Earnings
per Share.............. 25.50x 21.40x 21.47x
Deal Price/Trailing
Twelve Months Earnings
per Share.............. 26.06x 24.36x 24.73x
Deal Price/Book Value... 345% 305% 291%
Deal Price/Tangible Book
Value.................. 346% 325% 311%
Deal Price/Total
Assets................. 29.03% 27.64% 27.79%
Core Deposit Premium.... 28.14% 27.06% 27.34%
</TABLE>
No company or transaction used as a comparison in the above analysis is
identical to Evergreen, Banknorth or the Merger. Accordingly, an analysis of
the results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the
public trading value of the companies to which they are being compared.
Selected Peer Group Analyses. KBW compared the financial performance and
market performance of Evergreen and Banknorth based on various financial
measures of earnings performance, operating efficiency, capital adequacy and
asset quality and various measures of market performance, including
market/book values, price to earnings and dividend yields to those of a group
of comparable Northeastern bank holding companies. For purposes of such
analysis, the financial information used by KBW was as of and for the quarter
ended June 30, 1998. Capital ratios, book value multiples and tangible book
value multiples were pro forma for recent acquisitions including Banknorth's
pending Berkshire Acquisition announced on July 1, 1998. Stock price
information was as of July 30, 1998. The companies in the peer group were
Peoples Heritage Financial Group, Inc., UST Corporation, Chittenden
Corporation, Community Bank System, Inc., Premier National Bancorp and NBT
Bancorp, Inc. The results of these comparisons are set forth in the following
table.
<TABLE>
<CAPTION>
PEER GROUP PEER GROUP
BANKNORTH EVERGREEN AVERAGE MEDIAN
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Return on Average Assets............ 1.12% 1.11% 1.25% 1.27%
Return on Average Equity............ 14.52% 13.56% 14.80% 13.90%
Net Interest Margin................. 4.36% 4.23% 4.62% 4.52%
Efficiency Ratio.................... 58.21% 62.39% 58.01% 58.03%
Equity/Assets....................... 7.09% 8.21% 8.52% 8.80%
Tangible Equity/Tangible Assets..... 4.75% 8.20% 7.33% 7.82%
Loan Loss Reserves/Nonperforming
Loans.............................. 194% 270% 277% 232%
Net Charge Offs/Average Loans....... 0.15% 0.17% 0.27% 0.32%
Nonperforming Assets/Loans + Other
Real Estate Owned.................. 0.77% 0.81% 0.80% 0.85%
Stock Price/Book Value.............. 2.41x 2.78x 2.39x 2.21x
Stock Price/Tangible Book Value..... 3.84x 2.79x 2.88x 2.93x
Stock Price/1998 Earnings per
Share.............................. 19.13x 20.56x 15.68x 15.53x
Stock Price/1999 Earnings per
Share.............................. 17.00x 18.75x 14.36x 13.95x
Dividend Yield...................... 1.67% 2.16% 2.63% 2.52%
</TABLE>
For purposes of the above calculations, all earnings estimates are based upon
the published estimates of KBW's equity research department.
33
<PAGE>
Contribution Analysis. KBW analyzed the relative contribution of each of
Evergreen and Banknorth to the pro forma balance sheet and income statement
items of the Combined Company, including assets, common equity, net loans,
deposits and estimated 1999 and 2000 net income. KBW compared the relative
contribution of such balance sheet and income statement items with the
estimated pro forma ownership of 34% for Evergreen based on a Conversion Ratio
of 0.9. The contribution showed that Evergreen would contribute approximately
25% of the combined assets, 27% of the combined common equity, 25% of the
combined net loans, 27% of the combined deposits, 28% of the combined
estimated 1999 net income and 28% of the combined estimated 2000 net income.
Evergreen's pro forma ownership represented premiums of 39% to assets
contributed, 25% to equity contributed, 37% to net loans contributed, 28% to
deposits contributed, 23% to 1999 net income contributed and 20% to 2000 net
income contributed.
Financial Impact Analysis. KBW performed pro forma merger analysis that
combined projected income statement and balance sheet information. Assumptions
regarding the accounting treatment, acquisition adjustments and cost savings
were used to calculate the financial impact that the Merger would have on
certain projected financial results of Banknorth. This analysis indicated that
the Merger is expected to be neutral to estimated earnings per share in 1999
and be accretive thereafter; and is expected to increase estimated return on
equity, fully diluted tangible book value and the leverage ratio, and decrease
fully diluted book value. This analysis was based on analyst and the
respective managements' estimates of Evergreen and Banknorth's 1998 earnings
per share and on Banknorth management's estimates of expected cost savings and
a nonrecurring merger and restructuring charge to be realized or incurred by
Banknorth in connection with the Merger. These projections were discussed with
the management of each of Banknorth and Evergreen. The actual results achieved
by Banknorth following the Merger will vary from the projected results, and
the variations may be material.
Discounted Cash Flow Analysis. KBW estimated the present value of the future
cash flows that would accrue to a holder of a share of Evergreen Common Stock
assuming the shareholder held the stock through the year 2002 and then sold it
at the end of year 2002. This stand-alone analysis was based on several
assumptions, including earnings per share of $1.35 in 1998, $1.48 in 1999 and
an 8% earnings per share growth rate thereafter. The current 44% dividend
payout ratio was assumed for Evergreen through the year 2002. A terminal value
was calculated for 2002 by multiplying Evergreen's projected 2002 earnings by
a price/earnings multiple of 20x trailing earnings. The terminal valuation and
the estimated dividends were discounted at a rate of 12%, producing a present
value of $23.66. KBW also presented a table showing the foregoing analysis
with a range of EPS growth rates from 5% to 12% and a range of price-to-
earnings multiples of 17x to 22x, resulting in a range of present values for a
share of Evergreen Common Stock of $18.95 to $28.56. These values were
determined by adding (i) the present value of the estimated future dividend
stream that Evergreen could generate over the period beginning January 1998
and ending in December 2002, and (ii) the present value of the "terminal
value" of the Evergreen Common Stock.
KBW repeated the stand-alone analysis for a scenario of continued Evergreen
independence with a sale at the end of 2002 at a multiple to that year's
earnings equivalent to the average price to trailing 12 months earnings
multiple from the Comparable Transactions Analysis. A terminal multiple of
24.73x was used for this purpose. Other assumptions from the stand-alone
analysis were held constant, producing a present value of $28.71. KBW also
presented a table showing the foregoing analysis with a range of earnings per
share growth rates from 5% to 12% and a range of price-to-earnings multiples
of 18x to 26x, resulting in a range of present values for a share of Evergreen
Common Stock of $19.94 to $33.31.
KBW also estimated the present value of future cash flows that would accrue
to a holder of a share of Banknorth Common Stock pro forma for the Merger,
assuming the shareholder held the stock through the year 2002 and then sold it
for a multiple to that year's earnings equivalent to the average price to
trailing 12 months earnings multiple from the Comparable Transactions
Analysis. A terminal multiple of 24.73x was used for this purpose. This
analysis was based on several assumptions, including pro forma earnings per
share estimates of $2.00 in 1998, $2.25 in 1999 and an earnings growth rate of
10% thereafter. A 32% dividend payout ratio was assumed for Banknorth pro
forma through the year 2002. The terminal valuation and the estimated
dividends
34
<PAGE>
were discounted at a rate of 12%. This analysis was then applied to a current
Evergreen Shareholder who receives 0.9 shares of Banknorth Common Stock in the
Merger. The result of this analysis was a present value of $40.83 for each
share of Evergreen Common Stock. KBW also presented a table showing the
Evergreen equivalent analysis with a range of earnings per share growth rates
from 4% to 12% and a range of price-to-earnings multiples of 20x to 27x,
resulting in a range of present values for the Evergreen Common Stock of
$28.53 to $46.68.
KBW stated that the discounted cash flow analysis is a widely used valuation
methodology but noted that it relies on numerous assumptions, including asset
and earnings growth rates, dividend payout rates, terminal values and discount
rates. The analysis did not purport to be indicative of the actual values or
expected values of Evergreen Common Stock.
In connection with its opinion dated as of the date of this Prospectus/Joint
Proxy Statement, KBW performed procedures to update, as necessary, certain of
the analyses described above and reviewed the assumptions on which such
analyses described above were based and the factors considered in connection
therewith. KBW did not perform any analyses in addition to those described
above in updating its July 31, 1998 opinion.
KBW has been retained by the Evergreen Board as an independent contractor to
act as financial adviser to Evergreen with respect to the Merger. KBW, as part
of its investment banking business, is continually engaged in the valuation of
banking businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies, KBW has experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of its business as a
broker-dealer, KBW may, from time to time, purchase securities from, and sell
securities to, Evergreen and Banknorth and as a market maker in securities KBW
may from time to time have a long or short position in, and buy or sell, debt
or equity securities of Evergreen and Banknorth for KBW's own account and for
the accounts of its customers.
Evergreen and KBW entered into a letter agreement dated April 8, 1998
relating to the services to be provided by KBW in connection with possible
business combinations (including the Merger) involving Evergreen. Evergreen
has agreed to pay KBW at the time of closing a cash fee equal to 0.85% of the
market value of the aggregate consideration offered in the Merger in exchange
for the outstanding shares of Common Stock of the Combined Company in the
Merger. Based on the closing price of $32.8125 per share of Banknorth Common
Stock on November 27, 1998 (the last practicable trading day preceding the
printing of this Prospectus/Joint Proxy Statement) and on the number of shares
of Evergreen Common Stock outstanding on the Record Date, KBW would earn a
transaction fee of $2,194,000. Evergreen has already paid KBW $100,000
following signing of the Agreement and $100,000 upon mailing of this
Prospectus/Joint Proxy Statement, which amounts will be offset against the
0.85% fee. Pursuant to the KBW engagement agreement, Evergreen also agreed to
reimburse KBW for reasonable out-of-pocket expenses and disbursements incurred
in connection with its retention and to indemnify against certain liabilities,
including liabilities under the federal securities laws.
Banknorth. Pursuant to an engagement letter dated as of July 17, 1998 (the
"SANDLER O'NEILL AGREEMENT"), Banknorth retained Sandler O'Neill as an
independent financial advisor in connection with Banknorth's consideration of
a possible business combination with Evergreen. Sandler O'Neill is a
nationally recognized investment banking firm whose principal business
specialty is banks and savings institutions. In the ordinary course of its
investment banking business, Sandler O'Neill is regularly engaged in the
valuation of such businesses and their securities in connection with mergers
and acquisitions and other corporate transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to Banknorth in connection with the Merger. In
connection therewith, the Banknorth Board requested Sandler O'Neill to render
its opinion as to the fairness of the Conversion Ratio to the shareholders of
Banknorth from a financial point of view. On July 28, 1998, Sandler O'Neill
delivered to the Banknorth Board its oral opinion that, as of such date, the
proposed conversion ratio was fair to the holders of shares of Banknorth
Common Stock
35
<PAGE>
from a financial point of view. On July 31, 1998, based on the terms and
analysis previously reviewed at the July 28th meeting and a final Conversion
Ratio of 0.9, Sandler O'Neill orally confirmed to the Banknorth Board,
subsequently confirmed in writing, that the Conversion Ratio was fair to the
holders of Banknorth Common Stock from a financial point of view. Sandler
O'Neill has also delivered to the Banknorth Board a written opinion dated the
date of this Prospectus/Joint Proxy Statement (the "SANDLER O'NEILL FAIRNESS
OPINION") which is substantially identical to the July 31, 1998 opinion. THE
FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION, WHICH SETS FORTH THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS
AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH RENDERING SUCH
OPINION, IS ATTACHED AS ANNEX V TO THIS PROSPECTUS/JOINT PROXY STATEMENT AND
IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH
HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX V. BANKNORTH
SHAREHOLDERS ARE URGED TO READ THE SANDLER O'NEILL FAIRNESS OPINION IN ITS
ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE BANKNORTH BOARD FOR
ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE CONVERSION RATIO TO BANKNORTH SHAREHOLDERS. IT DOES NOT
ADDRESS THE UNDERLYING BUSINESS DECISION OF BANKNORTH TO ENGAGE IN THE MERGER
OR ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY BANKNORTH SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
BANKNORTH SPECIAL MEETING WITH RESPECT TO THE MERGER OR ANY OTHER MATTER
RELATED THERETO.
In connection with rendering its July 28, 1998 and July 31, 1998 opinions,
Sandler O'Neill performed a variety of financial analyses. The following is a
summary of the material analyses performed by Sandler O'Neill, but does not
purport to be a complete description of all the analyses underlying Sandler
O'Neill's opinion. The analyses performed by Sandler O'Neill were prepared
solely as part of Sandler O'Neill's analysis of the fairness of the Conversion
Ratio, from a financial point of view, to the Banknorth Shareholders and were
provided to the Banknorth Board in connection with the delivery of Sandler
O'Neill's opinion. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to a partial
analysis or summary description. Sandler O'Neill believes that its analyses
must be considered as a whole and that selecting portions of such analyses and
the factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and processes underlying its
opinion. In performing its analyses, Sandler O'Neill made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of Banknorth, Evergreen and Sandler O'Neill. Any estimates contained
in Sandler O'Neill's analyses are not necessarily indicative of future results
or values, which may be significantly more or less favorable than such
estimates. Estimates of the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Because such estimates are inherently subject
to uncertainty, neither Banknorth nor Sandler O'Neill assumes responsibility
for their accuracy.
THE EARNINGS PROJECTIONS FOR BANKNORTH AND EVERGREEN RELIED UPON BY SANDLER
O'NEILL IN ITS ANALYSES WERE PREPARED BY SANDLER O'NEILL AND REVIEWED WITH
MANAGEMENT AND WERE BASED UPON THE 1998 ADJUSTED BUDGET FORECASTS OF BANKNORTH
AND EVERGREEN PROVIDED TO SANDLER O'NEILL BY BANKNORTH AND EVERGREEN AND ON
PUBLISHED IBES CONSENSUS EARNINGS ESTIMATES FOR 1999 FOR BANKNORTH AND
EVERGREEN. FOR PERIODS AFTER 1999, SANDLER O'NEILL ASSUMED AN ANNUAL GROWTH
RATE ON EARNING ASSETS OF 5%. The 1998 adjusted budget projections furnished
to Sandler O'Neill were prepared by the senior managements of Banknorth and
Evergreen for internal purposes only and not with a view towards public
disclosure. Those projections were based on numerous variables and assumptions
which are inherently uncertain and accordingly, actual results could vary
materially from those set forth in such projections. See "--Certain Estimates
of 1998 Operations."
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of Banknorth Common Stock
through July 27, 1998 of $36.38 and a conversion ratio of 0.9,
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<PAGE>
Sandler O'Neill calculated an implied transaction value per share of Evergreen
Common Stock of $33.10. Based upon such implied transaction value and
Evergreen's June 30, 1998 financial information, Sandler O'Neill calculated
the price to tangible book value and price to last twelve months' normalized
earnings. This analysis yielded a price to tangible book value multiple of
3.32x and a price to last twelve months' earnings multiple of 25.1x.
Stock Trading History. Sandler O'Neill reviewed the history of the reported
trading prices and volume of Evergreen Common Stock, and the relationship
between the movements in the prices of Evergreen Common Stock to movements in
certain stock indices, including the Standard & Poor's 500 Index, the NASDAQ
Bank Index and a selected composite group of publicly traded commercial banks.
During the one-year period ended July 24, 1998, Evergreen Common Stock
outperformed each of the indices to which it was compared.
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
Evergreen and two groups of commercial banks. The first group consisted of
Evergreen and the following thirteen publicly traded regional commercial banks
(the "REGIONAL GROUP"): Merchants New York Bancorp, Harleysville National
Corp., Sandy Spring Bancorp Inc., F&M Bancorp, Sun Bancorp Inc., Mason-Dixon
Bancshares Inc., U.S.B. Holding Co., Omega Financial Corp., Prime Bancorp
Inc., FCNB Corp., Sterling Bancorp, Patriot Bank Corp, and Sterling Financial
Corp. Sandler O'Neill also compared Evergreen to a group of twelve publicly
traded commercial banks which had a return on average equity (based on last
twelve months' earnings) of greater than 16% and a price to tangible book
value of greater than 260% (the "HIGHLY VALUED GROUP"). The Highly Valued
Group included the following institutions: Hamilton Bancorp Inc., Independent
Bank Corp., Mississippi Valley Bancshares, CVB Financial Corp., Greater Bay
Bancorp, Sterling Bancshares Inc., Prime Bancshares Inc., U.S.B. Holding Co.,
Cape Cod Bank & Trust Co., Lakeland Financial Corp., Mid-State Bancshares and
Premier Bancshares Inc. The results of these comparisons, which are based on
June 30, 1998 financial information for Evergreen and on median data for the
Regional Group and the Highly Valued Group as of and for the twelve months
ended March 31, 1998, are set forth in the following table.
<TABLE>
<CAPTION>
HIGHLY VALUED
EVERGREEN REGIONAL GROUP GROUP
---------- -------------- -------------
<S> <C> <C> <C>
Total Assets......................... $1,067,196 $1,042,253 $1,116,629
Annual Growth Rate of Total Assets... 8.65% 14.95% 22.23%
Tangible Equity/Total Assets......... 8.20% 7.89% 7.27%
Intangible Assets/Total Equity....... .19% 1.49% 1.03%
Net Loans/Total Assets............... 63.29% 56.29% 57.97%
Cash & Securities/Total Assets....... 33.34% 38.02% 37.92%
Gross Loans/Total Deposits........... 74.37% 76.45% 70.95%
Total Borrowings/Total Assets........ 3.37% 14.08% 6.05%
Nonperforming Assets/Total Assets.... .64% .37% .38%
Loan Loss Reserve/Nonperforming
Loans............................... 256% 269% 270%
Loan Loss Reserve/Gross Loans........ 1.81% 1.42% 1.60%
Net Interest Margin.................. 4.48% 4.29% 4.39%
Loan Loss Provision/Average Assets... .18% .15% .19%
Non-interest Income/Average Assets... .73% .72% 1.04%
Non-interest Expense/Average Assets.. 3.02% 2.82% 3.12%
Efficiency Ratio..................... 61.53% 60.85% 57.48%
Return on Average Assets............. 1.16% 1.19% 1.28%
Return on Average Equity............. 13.68% 13.41% 18.06%
Price/Tangible Book Value per Share.. 272% 281% 358%
Price/Earnings per Share............. 21x 22.1x 20.3x
Market Capitalization/Assets......... 24.21% 24.25% 25.12%
Dividend Yield....................... 2.09% 1.91% .92%
Dividend Payout Ratio................ 43.75% 38.21% 24.22%
</TABLE>
37
<PAGE>
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed 124
transactions announced from January 1, 1998 to July 28, 1998 involving
publicly traded commercial banks nationwide as acquired institutions with
transaction values greater than $15 million ("NATIONWIDE TRANSACTIONS"), 17
transactions announced from January 1, 1997 to July 28, 1998 involving public
commercial banks in New York and the New England Region (Connecticut, Maine,
Massachusetts, New Hampshire, Rhode Island and Vermont) as acquired
institutions with transaction values greater than $100 million and less than
$1.1 billion ("REGIONAL TRANSACTIONS"), and 2 specific transactions recently
announced in geographic proximity to Evergreen ("COMPARABLE TRANSACTIONS").
Sandler O'Neill reviewed the ratios of transaction values to last four
quarters' earnings, transaction value to book value, transaction value to
tangible book value, tangible book premium to core deposits, transaction value
to total deposits and transaction value to total assets and computed high,
low, mean, and median ratios and premiums for the respective groups of
transactions. These multiples were applied to Evergreen's financial
information as of and for the twelve months ended June 30, 1998. Based upon
the median multiples for Nationwide Transactions, Sandler O'Neill derived an
imputed range of values per share of Evergreen Common Stock of $29.89 to
$35.72. Based upon the median multiples for Regional Transactions, Sandler
O'Neill derived an imputed range of values per share of Evergreen Common Stock
of $24.99 to $30.36. Based upon the median multiples for Comparable
Transactions, Sandler O'Neill derived an imputed range of values per share of
Evergreen Common Stock of $28.47 to $36.56. As calculated by Sandler O'Neill,
the implied transaction value per share of Evergreen Common Stock in the
Merger was $33.10.
No company involved in the transactions included in the above analysis is
identical to Banknorth or Evergreen and no transaction included in the above
analysis is identical to the Merger. Accordingly, an analysis of the results
of the foregoing analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the
public trading value of Banknorth and Evergreen and the companies to which
they are being compared.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill also
performed an analysis which estimated the future stream of aftertax dividend
flows of Evergreen through the year 2002 under various circumstances, assuming
Evergreen performed in accordance with the earnings projections prepared by
Sandler O'Neill and certain variations thereof. To approximate the terminal
value of Evergreen Common Stock at December 31, 2002, Sandler O'Neill applied
price to earnings multiples ranging from 15x to 24x and applied multiples of
tangible book value ranging from 140% to 320%. The dividend income streams and
terminal values were then discounted to present values using different
discount rates (ranging from 9% to 14%) chosen to reflect different
assumptions regarding required rates of return of holders or prospective
buyers of Evergreen Common Stock. This analysis, assuming the current dividend
payout ratio and projected earnings forecasts, indicated an imputed range of
values per share of Evergreen Common Stock of between $17.81 and $32.74 when
applying the price to earnings multiples, and an imputed range of values per
share of Evergreen Common Stock of between $13.29 and $32.93 when applying
multiples of tangible book value. As calculated by Sandler O'Neill, the
implied transaction value per share of Evergreen Common Stock in the Merger
was $33.10. In connection with its analysis, Sandler O'Neill used sensitivity
analyses to consider the effects changes in the underlying assumptions
(including variations with respect to the growth rate of assets, net interest
spread, noninterest income, noninterest expenses and dividend payout ratio)
would have on the resulting present value and discussed these effects with the
Banknorth Board. Sandler O'Neill noted that the discounted dividend stream and
terminal value analysis is a widely used valuation methodology, but the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, and the results thereof are not necessarily indicative of
actual values or actual future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the Merger, based upon a conversion ratio of between 0.90 and
0.91, Banknorth's and Evergreen's current and projected income statements and
balance sheets, and assumptions regarding the economic environment, accounting
and tax treatment of the Merger, charges associated with the Merger, operating
efficiencies and other adjustments discussed with the senior managements of
Banknorth and Evergreen. This analysis indicated that the Merger
38
<PAGE>
would be accretive to Banknorth's earnings per share in 1999 and for all
periods analyzed thereafter, and minimally dilutive to tangible book value per
share of Banknorth Common Stock for all periods analyzed. The actual results
achieved by Banknorth may vary from projected results and the variations may
be material.
Contribution Analysis. Sandler O'Neill reviewed the relative contributions
to, among other things, total assets, total net loans, total deposits, total
borrowings, total tangible equity and last twelve months' ("LTM") net income
to be made by Banknorth and Evergreen to the combined institution based on
data at and for the twelve months ended June 30, 1998. This analysis indicated
that Evergreen's implied contribution was 25.2% of total assets, 23.7% of
total net loans, 26.6% of total deposits, 9.7% of total borrowings, 37.4% of
total tangible equity and 28.1% of LTM net income. Based upon a conversion
ratio of 0.9 to 0.91, holders of the Evergreen Common Stock would own
approximately 34.8% to 35.1% of the outstanding shares of the combined
institution.
In connection with rendering its July 28, 1998 and July 31, 1998 opinions,
Sandler O'Neill reviewed, among other things: (i) the Agreement and exhibits
thereto; (ii) the Stock Option Agreement; (iii) certain publicly available
financial statements of Banknorth and other historical financial information
provided by Banknorth that Sandler O'Neill deemed relevant; (iv) certain
publicly available financial statements of Evergreen and other historical
financial information provided by Evergreen that Sandler O'Neill deemed
relevant; (v) the 1998 adjusted budget forecast of Banknorth prepared by and
reviewed with management of Banknorth and the views of senior management of
Banknorth regarding Banknorth's past and current business, operations, results
thereof, financial condition and future prospects; (vi) the 1998 adjusted
budget forecast of Evergreen prepared by and reviewed with management of
Evergreen and the views of senior management of Evergreen regarding
Evergreen's past and current business, operations, results thereof, financial
condition and future prospects; (vii) the pro forma impact of the Merger on
Banknorth; (viii) the publicly reported historical price and trading activity
for Banknorth's and Evergreen's Common Stock, including a comparison of
certain financial and stock market information for Banknorth and Evergreen
with similar publicly available information for certain other companies the
securities of which are publicly traded; (ix) the financial terms of recent
business combinations in the banking industry, to the extent publicly
available; (x) the current market environment generally and the banking
environment in particular; and (xi) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as
Sandler O'Neill considered relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its July 28, 1998 and July 31, 1998 opinions by performing procedures
to update certain of such analyses and by reviewing the assumptions upon which
such analyses were based and the factors considered in connection therewith.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all
the financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities (contingent
or otherwise) of Banknorth or Evergreen or any of their respective
subsidiaries, or the collectibility of any such assets, nor was it furnished
with any such evaluations or appraisals. Sandler O'Neill is not an expert in
the evaluation of allowances for loan losses and it has not made an
independent evaluation of the adequacy of the allowance for loan losses of
Banknorth or Evergreen, nor has it reviewed any individual credit files
relating to Banknorth or Evergreen. With Banknorth's consent, Sandler O'Neill
has assumed that the respective aggregate allowances for loan losses for both
Banknorth and Evergreen are adequate to cover such losses and will be adequate
on a pro forma basis for the combined entity. In addition, Sandler O'Neill has
not conducted any physical inspection of the properties or facilities of
Banknorth or Evergreen. With respect to the 1998 adjusted budget projections
provided by and reviewed with each company's management, Sandler O'Neill
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of
the respective future financial performances of Banknorth and Evergreen and
that such performances will be achieved. Sandler O'Neill expressed no opinion
as to such financial projections or the assumptions on which they were based.
39
<PAGE>
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its
analysis, that all of the representations and warranties contained in the
Agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the
Agreement are not waived. Sandler O'Neill also assumed, with Banknorth's
consent, that there has been no material change in Banknorth's and Evergreen's
assets, financial condition, results of operations, business, or prospects
since the date of the last publicly filed financial statements available to
them, that Banknorth and Evergreen will remain as going concerns for all
periods relevant to its analyses and that the Merger will be accounted for as
a pooling of interests and will qualify as a tax-free reorganization for
federal income tax purposes.
Under the Sandler O'Neill Agreement, Banknorth will pay Sandler O'Neill a
transaction fee in connection with the Merger, a substantial portion of which
is contingent upon the consummation of the Merger. Under the terms of the
Sandler O'Neill Agreement, Banknorth will pay Sandler O'Neill a transaction
fee equal to 0.5% of the aggregate purchase price paid in the transaction.
Based on the closing price of $32.8125 per share of Banknorth Common Stock on
November 27, 1998 (the last practicable trading day preceding printing of this
Prospectus/Joint Proxy Statement) and on the number of shares of Evergreen
Common Stock outstanding on the Record Date, Banknorth would pay Sandler
O'Neill a transaction fee of approximately $1,291,000, of which approximately
$375,000 has been paid and the balance will be paid when the Merger is
consummated. Sandler O'Neill has also received a fee of $200,000 for rendering
its fairness opinion. Banknorth has also agreed to reimburse Sandler O'Neill
for its reasonable out-of-pocket expenses incurred in connection with its
engagement and to indemnify Sandler O'Neill and its affiliates and their
respective partners, directors, officers, employees, agents and controlling
persons against certain expenses and liabilities, including liabilities under
securities laws.
Sandler O'Neill has in the past provided and may in the future provide other
financial advisory services to Banknorth and has received and will receive
compensation for such services. In the ordinary course of its business as a
broker-dealer, Sandler O'Neill may purchase securities from and sell
securities to Banknorth and Evergreen. Sandler O'Neill may also actively trade
the debt or equity securities of Banknorth and Evergreen for its own account
and for the accounts of customers and, accordingly, may at any time hold a
long or short position in such securities.
CERTAIN ESTIMATES OF 1998 OPERATIONS
In connection with the evaluation of the proposed Merger, Banknorth and
Evergreen provided to Sandler O'Neill and KBW, respectively, certain 1998
estimates of possible future performance. These estimates were based on
assumptions which such managements believed to be reasonable at the time. Such
estimates are provided in the following tables:
<TABLE>
<CAPTION>
PRO FORMA 1998
BANKNORTH ESTIMATES (1)
-------------------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C>
Total Assets............ $3,217,228
Tangible Equity......... 189,800
Net Income.............. 31,071
Diluted Earnings Per
Share.................. 1.98
Leverage Capital Ratio.. 5.92%
</TABLE>
- --------
(1) Includes the estimated impact of the Berkshire Acquisition, which closed
in November, 1998.
<TABLE>
<CAPTION>
1998 EVERGREEN ESTIMATES
------------------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
<S> <C>
Net Income............... $12,150
Diluted Earnings Per
Share................... 1.35
</TABLE>
40
<PAGE>
THE ABOVE ESTIMATES FOR BANKNORTH AND EVERGREEN (COLLECTIVELY, THE
"ESTIMATES") WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE
WITH PUBLISHED GUIDELINES ESTABLISHED BY THE COMMISSION OR THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS. BECAUSE THE
ESTIMATES ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES BEYOND EACH COMPANY'S CONTROL, THERE CAN BE NO
ASSURANCE THAT THE ESTIMATES WILL BE REALIZED; ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE ESTIMATED. SEE "A WARNING ABOUT FORWARD-LOOKING STATEMENTS."
CONVERSION OF EVERGREEN STOCK AND EXCHANGE OF CERTIFICATES
At the Effective Time, each holder of a certificate or certificates
theretofore evidencing issued and outstanding shares of Evergreen Common Stock
(the "EVERGREEN CERTIFICATES"), will automatically be entitled to receive in
exchange for the Evergreen Certificates a certificate or certificates
representing the number of full shares of Banknorth Common Stock into which
the shares of Evergreen Common Stock shall have been converted in the Merger
(the "BANKNORTH CERTIFICATES"). As promptly as practicable after the Effective
Time, the exchange agent appointed by Banknorth (the "EXCHANGE AGENT") will
mail to each Evergreen Shareholder of record immediately prior to the
Effective Time, a form of letter of transmittal advising such holder of the
terms of the exchange effected by the Merger and of the procedure for
surrendering to the Exchange Agent the Evergreen Certificates in exchange for
a Banknorth Certificate or Certificates. Upon surrender to the Exchange Agent
of one or more Evergreen Certificates, together with a properly completed and
executed letter of transmittal, the Exchange Agent will mail to the holder
thereof after the Effective Time a Banknorth Certificate or Certificates
representing the number of full shares of Banknorth Common Stock into which
the aggregate number of shares of Evergreen Common Stock previously
represented by such Evergreen Certificate or Certificates surrendered shall
have been converted in the Merger. Evergreen Certificates surrendered for
exchange by any affiliate of Evergreen (as defined in the Agreement) will not
be exchanged for Banknorth Certificates until Banknorth has received a letter
agreement from such person containing appropriate terms to ensure compliance
with applicable securities laws and with requirements for the Merger to
qualify as a pooling of interests under generally accepted accounting
principles. Banknorth will be entitled, after the Effective Time, to treat
Evergreen Certificates as evidencing ownership of the number of full shares of
Banknorth Common Stock into which the shares of Evergreen Common Stock
represented by such certificates shall have been converted in the Merger,
notwithstanding the failure of the holder to surrender such Evergreen
Certificates. The letter of transmittal will specify that delivery of
Evergreen Certificates will be deemed to be effected, and risk of loss and
title to such Certificates will pass, only upon actual delivery of the
Evergreen Certificates to the Exchange Agent.
As to any Evergreen Certificate that has been lost, stolen or destroyed, the
Evergreen Shareholder must furnish an appropriate affidavit, and if required
by Banknorth, must post an indemnity bond in such amount as Banknorth may
reasonably direct before any Banknorth Certificate will be issued in respect
of the Evergreen Common Stock represented by such Evergreen Certificate.
No dividends declared on the Banknorth Common Stock issued in the Merger
will be remitted to the holder of such shares until such person properly
surrenders his or her Evergreen Certificate(s) in exchange for Banknorth
Certificate(s) evidencing shares of Banknorth Common Stock, at which time such
dividends will be remitted to such person, without interest.
No fractional shares of Banknorth Common Stock will be issued in the Merger
to holders of Evergreen Common Stock. Each holder of Evergreen Common Stock
who otherwise would have been entitled to a fraction of a share of Banknorth
Common Stock by virtue of the Conversion Ratio will receive in lieu thereof,
at the time of surrender of his or her Evergreen Certificate(s), an amount of
cash (without interest) determined by multiplying the fractional share
interest to which such holder would otherwise be entitled by the average of
the last closing sale prices of Banknorth Common Stock as reported on the
NASDAQ Stock Market for the ten (10) consecutive trading days immediately
preceding the Effective Time. For purposes of determining whether, and
41
<PAGE>
in what amounts, an Evergreen Shareholder is entitled to payment for a
fractional share, Evergreen Common Stock held of record by such shareholder
and represented by two or more Evergreen Certificates will be aggregated.
CONVERSION OF EVERGREEN STOCK OPTIONS AND RESTRICTED STOCK
Stock Options. At the Effective Time, each Evergreen Option which is then
outstanding, whether or not then exercisable, will cease to represent a right
to acquire shares of Evergreen Common Stock and will be converted
automatically into an option to purchase shares of Banknorth Common Stock. In
the Merger, Banknorth will assume each outstanding Evergreen Option, in
accordance with the terms of the Evergreen Employees' Option Plan or the
Evergreen Directors' Option Plan, as the case may be, and the related stock
option agreement evidencing such Evergreen Option, except that from and after
the Effective Time, (i) each Evergreen Option assumed by Banknorth may be
exercised solely for shares of Banknorth Common Stock, (ii) the number of
shares of Banknorth Common Stock subject to such Evergreen Option will be
equal to the number of shares of Evergreen Common Stock subject to such
Evergreen Option immediately prior to the Effective Time, multiplied by the
Conversion Ratio, rounded down to the nearest whole share, (iii) the per share
exercise price under each such Evergreen Option will be adjusted by dividing
the per share exercise price under such Evergreen Option by the Conversion
Ratio, rounded up to the nearest cent, and (iv) the duration and other terms
of such stock option will be unchanged, except that all references to
Evergreen will be deemed to be references to Banknorth.
In accordance with the respective terms of the Evergreen Employees' Option
Plan and the Evergreen Directors' Option Plan, all outstanding unvested
Evergreen Options are expected to vest in full at the Effective Time. There is
an aggregate of 513,672 Evergreen Options outstanding on the Record Date,
issued on various dates and at varying exercise prices. Of such number,
approximately 93,350 options are unvested and are expected to vest in full at
the Effective Time.
Banknorth also has agreed to register the shares of Banknorth Common Stock
issuable upon exercise of the converted Evergreen Options under the Securities
Act.
Restricted Stock. At the Effective Time, each unvested share of Evergreen
Restricted Stock is expected to become fully vested in accordance with the
terms of the Evergreen Employees' Option Plan and will be converted into
shares of Banknorth Common Stock in accordance with the Conversion Ratio.
There are 5,332 unvested shares of Evergreen Restricted Stock granted in 1996
under the Evergreen Incentive Plan to Mr. Dougan and one other Evergreen
executive officer which are expected to vest at the Effective Time, unless
forfeited prior to such date. In general, forfeiture of such shares will occur
only if the grantee's employment with Evergreen is terminated (other than by
virtue of the Merger or other change of control) prior to vesting.
CLOSING CONDITIONS
The Agreement provides that consummation of the Merger is subject to the
satisfaction of certain conditions, or the waiver of such conditions by the
party entitled to performance, at or before the Effective Time. Each of the
parties' obligations under the Agreement is subject to the following
conditions, among others: (i) receipt of the requisite shareholder approvals
solicited hereby; (ii) receipt of all regulatory approvals required to
consummate the Merger and the expiration of all notice periods and waiting
periods with respect thereto, provided, however, that no required approval or
consent shall have included any condition or requirement that, individually or
in the aggregate, would so materially reduce the economic or business benefits
of the transactions contemplated by the Agreement to Banknorth such that, had
such condition or requirement been known, Banknorth, in its reasonable
judgment, would not have entered into the Agreement; (iii) neither Banknorth
nor Evergreen shall be subject to any court order or other legal restraint
preventing the Merger; (iv) the Registration Statement shall have become
effective under the Securities Act and shall not be subject to a stop order or
threatened stop order, and Banknorth shall have received all permits,
authorizations or exemptions necessary under all state securities laws to
issue the Banknorth Common Stock in connection with the Merger; (v) the
42
<PAGE>
independent public accountants of each of Banknorth and Evergreen shall have
issued a letter dated as of the Effective Time to the effect that they are not
aware of any reason that would preclude the Merger from being accounted for as
a pooling of interests; and (vi) each of Banknorth and Evergreen shall have
received an opinion of its respective tax advisors to the effect that the
Merger qualifies as a reorganization within the meaning of Section 368(a) of
the Code and with respect to certain other related federal income tax
considerations (see "THE MERGER--Material Federal Income Tax Consequences").
In addition to the mutual conditions set forth above, Banknorth's
obligations under the Agreement are conditioned upon, among other things, (i)
the absence of any material adverse change in Evergreen's business, assets,
financial condition or results of operations; (ii) the accuracy of Evergreen's
representations and warranties in the Agreement; (iii) the performance of
Evergreen's covenants and obligations in the Agreement; and (iv) receipt of
all permits, consents, waivers and approvals necessary for Evergreen to
consummate the Merger. Any of the foregoing conditions may be waived by
Banknorth in its discretion.
In addition to the mutual conditions set forth above, Evergreen's
obligations under the Agreement are conditioned upon, among other things, (i)
the absence of any material adverse change in Banknorth's business, assets,
financial condition or results of operations; (ii) the accuracy of Banknorth's
representations and warranties in the Agreement; (iii) the performance of all
Banknorth covenants and obligations in the Agreement; and (iv) receipt of all
permits, consents, waivers and approvals from all nongovernmental and
nonregulatory third parties which are necessary for Banknorth to consummate
the Merger. Any of the foregoing conditions may be waived by Evergreen in its
discretion.
REGULATORY APPROVALS
Consummation of the Merger is subject to prior receipt of all required
approvals and consents or waivers thereof by all applicable federal and state
regulatory authorities. In order to consummate the Merger, Banknorth must
obtain the prior approval, consent or waiver, as applicable, of the FRB and
the Massachusetts Bank Board, and must make notice filings with the New York
Banking Department and the New Hampshire Banking Commissioner.
FRB. The Merger is subject to the prior approval of the FRB under the BHCA
and FRB Regulation Y. Such approval has been obtained and does not impose any
burdensome conditions or requirements on Banknorth.
Massachusetts Bank Board. The Merger is subject to the prior approval of the
Massachusetts Bank Board under applicable provisions of Massachusetts banking
laws, which require that a bank holding company which owns or controls a
Massachusetts-based bank must obtain the Massachusetts Bank Board's approval
to acquire ownership or control of another bank, wherever located. Banknorth
is subject to this requirement by virtue of its ownership and control of First
Massachusetts Bank, N.A., based in Worcester, Massachusetts. Massachusetts law
requires that the Massachusetts Bank Board find, among other things, that the
Merger would not unreasonably affect competition among banking institutions
and that it would promote public convenience and advantage.
An application was filed with the Massachusetts Bank Board for the required
approval of the Merger. Although neither Banknorth nor Evergreen is aware of
any basis for disapproving the Merger, there can be no assurance that the
approval will be received on a timely basis or that such approval will not
impose conditions or requirements which, individually or in the aggregate,
would so materially reduce the economic or business benefits of the
transactions contemplated by the Agreement to Banknorth as to make
consummation of the Merger inadvisable. The absence of any such materially
burdensome condition or requirement is a condition to Banknorth's obligation
to consummate the Merger.
Notice Filings. In accordance with, respectively, applicable provisions of
New York banking laws and Banknorth's Interstate Banking Agreement with the
New Hampshire Bank Commissioner (executed in connection with Banknorth's
acquisition of control of Farmington National Bank, based in Farmington, New
Hampshire) Banknorth has filed a notification of its proposed acquisition of
Evergreen with the New York
43
<PAGE>
Banking Department and the New Hampshire Bank Commissioner. Such filings were
notice filings only, and the affirmative consent or approval of such state
banking regulators is not required under the applicable state laws.
BUSINESS OF EVERGREEN PENDING THE MERGER
The agreement contains certain covenants of the parties regarding the
conduct of their respective businesses pending consummation of the Merger.
During such period Evergreen and its subsidiaries generally are required to
conduct their respective businesses in the ordinary course consistent with
past practices. In addition, Evergreen shall not, and shall not permit any of
its subsidiaries to, among other things: (i) declare or pay any dividends on
or make any other distributions in respect to the Evergreen Common Stock,
except for regular quarterly cash dividends at a rate not in excess of
Evergreen's current dividend rate; (ii) adopt or amend (other than amendments
required by applicable law or amendments that reduce amounts payable by it or
its subsidiaries) in any material respect any Evergreen employee benefit or
compensation plan, contract or arrangement; or (iii) take other actions
specified in the Agreement. Reference is made to the text of the Agreement,
attached as Annexes I and II to this Prospectus/Joint Proxy Statement, for a
more detailed description of the parties covenants regarding the conduct of
their respective businesses.
NO SOLICITATION OF OTHER OFFERS
The Agreement provides that neither Evergreen nor any of its subsidiaries
will directly or indirectly, encourage, solicit, initiate or participate in
any discussions or negotiations with, or, subject to the fiduciary obligations
of Evergreen's Board (as determined in good faith in consultation with outside
counsel), provide any information to any person or entity (other than
Banknorth and its affiliates or representatives) concerning any merger, tender
offer, sale of substantial assets, sale of shares of capital stock or debt
securities or similar transaction involving Evergreen or any of its
subsidiaries. However, in the discharge of the fiduciary obligations of the
Evergreen Board, Evergreen may participate in discussions with respect to any
such transaction, so long as Evergreen did not solicit or initiate such
discussions. In addition, Evergreen and the Evergreen Board are not prohibited
from taking and disclosing to the Evergreen Shareholders a position with
respect to a tender offer by a third party or from making such disclosure to
Evergreen Shareholders which, in the judgment of the Evergreen Board
(determined in good faith in consultation with outside counsel) may be
required under applicable law. Evergreen is obligated to immediately
communicate to Banknorth the terms of any proposal, discussion, negotiation or
inquiry relating to an acquisition or change of control transaction and the
identity of the party making such proposal or inquiry.
EFFECTIVE TIME OF THE MERGER
The Effective Time of the Merger shall be the date and time specified in the
Certificate of Merger filed with the Secretary of State of the State of
Delaware pursuant to Section 251 of the DCL. A Certificate of Merger will be
filed only after the receipt of all requisite regulatory and other approvals
of the Merger, approval of the Agreement by the requisite votes of the
shareholders of Banknorth and Evergreen and the satisfaction or waiver of all
other conditions to the Merger set forth in the Agreement.
A closing (the "CLOSING") shall take place immediately prior to the
Effective Time on the first business day following the satisfaction or waiver
(to the extent permitted) of all the conditions to consummation of the Merger
specified in the Agreement, or on such other date as the parties may mutually
agree upon.
Although no assurance can be given that the Effective Time will occur on or
before a specified date, Banknorth and Evergreen presently expect that the
Merger will be consummated on December 31, 1998, following conclusion of the
Special Meetings.
TERMINATION AND AMENDMENT
The Agreement may be terminated (i) by mutual consent of the parties; (ii)
by either party if the other party is in material breach of any representation
or warranty in the Agreement or the Option Agreement, which breach
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has not been cured within forty-five days after notice from the terminating
party; (iii) by either party if certain required regulatory approvals or
consents are not obtained; (iv) by either party if either Banknorth's or
Evergreen's shareholders do not approve the Agreement; (v) by either party if
the Merger is not consummated on or before May 31, 1999, or such later date as
the parties may agree upon in writing; (vi) by either party if any of the
conditions precedent to the obligations of such party to consummate the Merger
cannot be timely satisfied or fulfilled, by the date specified in Section
8.01(b) of the Agreement; and (vii) by Evergreen upon the execution of a
definitive agreement relating to an alternative business combination or change
in control proposal provided that (a) Evergreen shall have complied with its
contractual obligations to Banknorth not to solicit competing offers, (b) the
Evergreen Board shall have determined, after having received the advice of
outside legal counsel and financial advisors, that such action is necessary
for the Evergreen Board to act in a manner consistent with its fiduciary
duties under applicable law and (c) concurrent with its notification of
termination, Evergreen shall have made an irrevocable and unconditional offer
to Banknorth in writing to repurchase the Seller Option at any time, within 30
days following the date of such offer, at a specified price.
The Agreement also contains certain price-based termination provisions, the
effect of which requires Evergreen Shareholders to assume, in all events,
within specified limitations, the risk of a decline of up to 20% in the market
value of Banknorth's Common Stock, and also to assume the risk of a greater
decline in such market value unless the Banknorth Common Stock underperforms
an index of comparable financial institution holding company stocks, by an
amount determined in accordance with a formula specified in the Agreement.
Under these provisions, Evergreen would have the right (but not the
obligation) to terminate the Agreement if both the following conditions are
satisfied (a "TERMINATION EVENT"): (i) the average per share closing sale
price of Banknorth Common Stock as reported on the NASDAQ Stock Market over
the ten (10) consecutive trading day period immediately preceding the date on
which the last required regulatory approval is received, without regard to any
applicable waiting period (the "DETERMINATION PERIOD") (the "CLOSING PRICE")
is less than $29.46; and (ii) (a) the number obtained by dividing the Closing
Price by $36.84 is less than (b) the number (sometimes referred to herein as
the "TERMINATION FACTOR") obtained by subtracting (A) 0.15 from (B) the
quotient obtained by dividing the Final Index Price (as defined below) by the
Initial Index Price (as defined below).
For purposes of the Agreement: (i) "FINAL INDEX PRICE" means the Weighted
Average of the average of the closing prices of the Index Companies (as
defined below) as reported on the NYSE, NASDAQ or AMEX for the Determination
Period; (ii) "INITIAL INDEX PRICE" means the Weighted Average of the closing
prices of the Index Companies as reported on the NYSE, NASDAQ or AMEX on the
trading day immediately preceding execution of the Agreement (July 30, 1998);
and (iii) "WEIGHTED AVERAGE" means the average determined by giving the
average of the closing prices for each of the Index Companies a specified
weight.
The Index Companies ("INDEX COMPANIES") comprise 22 publicly traded
financial institution holding companies. These companies were selected by
Banknorth and Evergreen, with the assistance of their respective financial
advisers, because they were deemed to comprise a peer group of institutions,
although none of such companies is identical to Banknorth in size, location,
financial condition and operations. The Index Companies and the respective
weights assigned to their stock prices are listed on Annex VI to this
Prospectus/Joint Proxy Statement.
If Evergreen were to elect to terminate the Agreement following the
occurrence of a Termination Event, Banknorth could, in its discretion, during
the ten (10) business day period commencing with receipt of Evergreen's
termination notice, exercise its right to override such termination by
increasing the Conversion Ratio to equal the lesser of (i) $29.46 divided by
the Closing Price or (ii) the Conversion Ratio divided by the Termination
Factor.
The operation of the conditions permitting Evergreen to terminate the
Agreement following the occurrence of a Termination Event reflects the
parties' agreement that (i) the Evergreen Shareholders would assume the risk
of a decline in value of the Banknorth Common Stock, equal to up to a 20%
decline from $36.84, which is the
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five (5) trading day average Banknorth closing stock price preceding execution
of the Agreement (the "STARTING PRICE"), under any circumstances and (ii) the
Evergreen Shareholders would assume the risk of a more significant decline in
value of the Banknorth Common Stock during the period since execution of the
Agreement if that decline does not exceed by the required amount the overall
decline in the weighted average price of the common stocks of the Index
Companies during such period, determined under the formula specified above.
The rationale underlying this provision is that declines in value of the
Banknorth Common Stock which follow closely declines in the value of an index
of comparable publicly traded financial institution holding company stocks are
indicative of a broad-based change in market and economic conditions affecting
the banking industry generally rather than factors specifically attributable
to the intrinsic value of the Banknorth Common Stock.
Whether a Termination Event will occur will not be known until the date that
the Closing Price can be determined. If such date were the date of the
Prospectus/Joint Proxy Statement, no such right of termination would exist
based on the prevailing market price of Banknorth's Common Stock. The
Evergreen Board has made no decision as to whether it would exercise its
termination right in the event of a Termination Event, and the Banknorth Board
has made no decision as to whether it would exercise its correlative right to
increase the Conversion Ratio. In making its determination of whether to
terminate the Agreement following the occurrence of a Termination Event, the
Evergreen Board would take into account, consistent with its fiduciary duties,
all relevant facts and circumstances that exist at such time, including,
without limitation, information concerning the business, financial condition,
results of operations, and prospects of Banknorth (including the recent
performance of Banknorth Common Stock, the historical financial data of
Banknorth, customary statistical measurements of Banknorth's financial
performance, and future prospects for Banknorth Common Stock following the
Merger), and the advice of its financial advisors and legal counsel. If the
Evergreen Board were to elect to terminate the Agreement following the
occurrence of a Termination Event, Banknorth would then determine whether to
proceed with the Merger at the higher Conversion Ratio, as provided under the
Agreement. In making this determination, Banknorth would consult with its
financial advisors and legal counsel and would consider, among other factors,
the projected effect of the Merger at the higher Conversion Ratio on
Banknorth's pro forma earnings per share and whether Banknorth's assessment of
Evergreen's earning potential as part of Banknorth justified the issuance of
an increased number of Banknorth shares. If Banknorth were to decline to
adjust the Conversion Ratio, Evergreen could, in its discretion, elect to
proceed without the adjustment. BANKNORTH IS UNDER NO OBLIGATION TO ADJUST THE
CONVERSION RATIO.
Approval of the Agreement by the Evergreen Shareholders and the Banknorth
Shareholders at their respective Special Meetings will confer on the Evergreen
Board and the Banknorth Board, respectively, the power, consistent with the
fiduciary duties of such Boards, to elect to consummate the Merger
notwithstanding the occurrence of a Termination Event (in the case of the
Evergreen Board) or to elect to increase the Conversion Ratio should Evergreen
exercise its termination right (in the case of the Banknorth Board) without
any further action by, or resolicitation of the votes of, the Evergreen
Shareholders or Banknorth Shareholders, as the case may be.
The operation and effect of the provisions of the Agreement dealing with a
decline in the market price of the Banknorth Common Stock may be illustrated
by the following three scenarios (all scenarios assume that the 0.9 Conversion
Ratio has not previously been adjusted pursuant to the antidilution provisions
of the Agreement):
(1) One scenario is that the Closing Price is below the Starting Price of
$36.84 but is not less than $29.46 (a decline in the Starting Price of 20% or
less). Under such circumstances Evergreen would be obligated to consummate the
Merger at the stated Conversion Ratio, regardless of the change in the
Weighted Average closing price of the common stocks of the Index Companies
(assuming all other conditions to Evergreen's obligations were satisfied or
waived).
(2) A second scenario is that the Closing Price declines to less than $29.46
but does not decline from the Starting Price by more than the Termination
Factor. Under such circumstances Evergreen would be obligated to consummate
the Merger at the stated Conversion Ratio (assuming all other conditions to
Evergreen's obligations were satisfied or waived).
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(3) A third scenario is that the Closing Price declines to less than $29.46
and the decline from the Starting Price exceeds the Termination Factor. Under
such circumstances, Evergreen would have the right but not the obligation to
terminate the Agreement and, if Evergreen elected to terminate, Banknorth
would have the right, but not the obligation, to elect to increase the
Conversion Ratio to the lesser of (i) a number (rounded to the nearest
thousandth) obtained by dividing $29.46 by the Closing Price and (ii) a number
(rounded to the nearest thousandth) obtained by dividing the Conversion Ratio
by the Termination Factor. If Banknorth were to so elect, Evergreen would be
obligated to consummate the Merger (assuming all other conditions to
Evergreen's obligations were satisfied or waived).
In the event of termination, the Agreement shall become null and void,
except that certain provisions thereof relating to expenses and
confidentiality shall survive any such termination and any such termination
shall not relieve any breaching party from liability for any willful breach of
any covenant, undertaking, representation or warranty giving rise to such
termination.
To the extent permitted under applicable law, the Agreement may be amended
or supplemented at any time by written agreement of the parties whether before
or after the approval of the shareholders of Banknorth or Evergreen, provided
that after any such approval the Agreement may not be amended or supplemented
in a manner which (1) alters or changes the amount or kind of shares,
securities, cash, property and/or rights to be received on conversion of the
Evergreen Common Stock; (2) alters or changes any term of Banknorth's
Certificate of Incorporation as the surviving entity; or (3) alters or changes
any of the terms and conditions of the Agreement if such alteration or change
would adversely affect the holder of any class or series thereof.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Evergreen may be deemed to have
interests in the Merger in addition to their interests as shareholders
generally. The Evergreen Board was aware of these factors and considered them,
among other matters, in approving the Agreement and the transactions
contemplated thereby.
Under existing employment arrangements, Mr. Dougan and certain other
executive officers of Evergreen will be entitled to certain payments and
benefits as a result of the Merger. The amounts disclosed below for change of
control payments, Section 280G amounts for various noncash benefits and
accrued supplemental retirement benefits, with respect to Mr. Dougan and the
other executive officers of Evergreen whose employment will be terminated in
connection with the Merger, have been calculated assuming consummation of the
Merger in 1998. Should the Merger be consummated in 1999, such amounts would
change and could be higher, although precise calculations of the benefit
limitations under Section 280G would not be possible until the close of the
1998 fiscal year.
Directors. Pursuant to the Agreement, Banknorth agreed that at the Effective
Time (i) the Banknorth Board will be expanded to include three persons who are
serving as directors of Evergreen immediately prior to the Effective Time
(including George W. Dougan, Chairman, President and Chief Executive Officer
of Evergreen) who have been designated by Evergreen and who are otherwise
acceptable to Banknorth and (ii) Mr. Dougan will be appointed Vice Chairman.
See "MANAGEMENT AND OPERATIONS OF BANKNORTH AFTER THE MERGER--Management."
Employment Arrangements and Change of Control Payment to Mr. Dougan. As of
the Effective Time, Mr. Dougan's existing employment agreement with Evergreen
will be terminated in accordance with its terms and Mr. Dougan will enter into
a new employment agreement with Banknorth. Under the terms of that agreement,
Mr. Dougan will be employed for a three-year term as a member of executive
management, with the title of Vice Chairman. Mr. Dougan will focus primarily
on strategic planning, merger and acquisition opportunities and cultivation of
new business. He will have a base salary of $225,000 per year and will be
entitled to participate in Banknorth's short-term incentive compensation plan
and in regular employee benefit plans upon the same terms as other senior
executives of Banknorth. Mr. Dougan's employment agreement with Banknorth also
contains a two-year covenant not to compete and confidentiality provisions.
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Mr. Dougan will also enter into a Change of Control Agreement with Banknorth
which will provide for a lump sum payment to him, in the event of a
termination of his employment (including a voluntary termination in some
circumstances, such as due to a material reduction in duties) within two years
following a change in control of Banknorth. In such event, the payment would
be equal to two times Mr. Dougan's base salary and average annual cash bonus
paid under Banknorth's short-term incentive compensation plan for the three
calendar years preceding the year of termination. Payments and benefits to
which Mr. Dougan would otherwise be entitled under the agreement upon a change
of control of Banknorth are limited to the extent such payments and benefits
would constitute "excess parachute payments" as defined in Section 280G(b)(1)
of the Code.
Mr. Dougan's existing employment agreement with Evergreen, which will be
terminated as of the Effective Time, provides for, among other things, a lump
sum payment equal to the present value of three times Mr. Dougan's base salary
and his average annual bonus paid over the two calendar year period preceding
the year of termination, in the event his employment is terminated within two
years following a change of control of Evergreen. Under the terms of the
agreement, any payments or benefits to which Mr. Dougan is entitled as a
result of a change in control of Evergreen will be modified or reduced to the
extent such payments or benefits would be considered "excess parachute
payments" as defined in Section 280G(b)(1) of the Code. The Merger will
constitute a change of control within the meaning of Mr. Dougan's existing
agreement and termination of Mr. Dougan's positions with Evergreen and
Evergreen Bank, as well as assumption of reduced duties as Banknorth's Vice
Chairman, will constitute termination under such agreement, entitling Mr.
Dougan to receive, at the Effective Time, a lump sum change of control payment
in cash, or a combination of cash and other benefits up to a total of
approximately $1.3 million. In accordance with that employment agreement, the
maximum aggregate amount of the cash payment and other benefits to which Mr.
Dougan is entitled reflects a reduction from the contractual amount to which
he would otherwise be entitled upon a change of control, in order to avoid
payment of compensation to him as a result of the Merger which would be
considered an "excess parachute payment" under Section 280G of the Code. Mr.
Dougan will be entitled to select noncash change of control benefits in lieu
of cash, but such benefits will reduce the amount of the cash portion of his
change of control payment. The noncash benefits which Mr. Dougan is entitled
to select and their respective approximate amounts, calculated in accordance
with applicable regulations under Section 280G of the Code, include: (i)
accelerated vesting of unvested stock options and restricted stock, $3,200;
(ii) continued participation, for 36 months following the Merger, in various
employee benefit plans, $71,000; and (iii) continued life and health benefits
for 36 months following the Merger, $11,600. It is expected that Mr. Dougan
will take all, or substantially all, of his change of control payment in cash
and will waive receipt of substantially all noncash benefits.
In addition, Banknorth has agreed to honor the terms of Mr. Dougan's SERP
with Evergreen. The plan provides a fixed supplemental retirement benefit at
retirement at age 65, following vesting, equal to 50% of eligible
compensation, based on the highest 36 consecutive month average base salary
and cash bonus during the 60 month period preceding retirement. SERP benefits
are reduced by the amount of the benefits payable under Evergreen's qualified
retirement plan. Under the terms of the SERP, Mr. Dougan will vest in his SERP
benefit on March 7, 1999. The accumulated benefit obligation under
Mr. Dougan's SERP at the time of vesting will be approximately $1.8 million.
Other Change of Control Agreements. Banknorth has agreed to honor various
change of control agreements which have been entered into by Evergreen with
its seven (7) executive officers (in addition to Mr. Dougan), including four
(4) executive officers whose employment will be terminated as a result of the
Merger. Under these agreements, Evergreen is required to make a lump sum cash
payment to the named employee if, within two years of the occurrence of a
change in control of Evergreen (which is defined in a manner that would
include the Merger), the employee's employment is terminated (including
voluntary termination in some circumstances such as due to a material
reduction in duties). The amount of the cash payment is based on a specified
multiple of the executive's annual base salary plus the average amount of
annual bonus payments for the two calendar year period preceding termination.
The specified multiple under the various change in control agreements ranges
from 0.5 to 2. Under these agreements, terminated employees are also entitled
to receive certain health and life insurance benefits during the applicable
continuation period stated in their change of control agreement. The
agreements limit the payments and benefits to which the executives would
otherwise be
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entitled upon a change of control of Evergreen to the extent such payments and
benefits would constitute "excess parachute payments" as defined in Section
280G(b)(1) of the Code. Banknorth estimates that change of control payments to
executive officers of Evergreen whose employment will be terminated as a
result of the Merger (4 individuals, other than Mr. Dougan) will total
approximately $1.7 million.
Under the terms of the SERP, all benefits become immediately vested upon a
change of control of Evergreen. Of the five (5) executive officers (in
addition to Mr. Dougan) who participate in the SERP, all but two (2) are
already vested. The amount attributable to accelerated vesting for those two
individuals, calculated in accordance with applicable regulations under
Section 280G of the Code, is approximately $70,000. The accumulated benefit
obligation under the SERP for all participants (other than Mr. Dougan) at the
Effective Time will be approximately $1.3 million.
Retention Payment. Banknorth has agreed to pay to Daniel J. Burke, who has
been appointed President and Chief Executive Officer of Evergreen Bank to
replace Mr. Dougan, a lump sum in cash of $235,000, as consideration for his
remaining in the employ of the Combined Company for a minimum period of one
year following the Effective Time. The retention payment becomes payable on
the first anniversary of the Merger, provided Mr. Burke is still in the employ
of the Combined Company at that time.
Vesting of Options and Restricted Stock. As noted above under the caption
"--Conversion of Evergreen Stock Options and Restricted Stock," all
outstanding unvested awards of Evergreen Options and Evergreen Restricted
Stock (including awards to Mr. Dougan and other executive officers of
Evergreen) will become fully vested at the Effective Time in accordance with
the terms of the Evergreen Option Plans. As of the Record Date, Mr. Dougan had
unvested options for 20,000 shares of Evergreen Common Stock and the remaining
7 executive officers have unvested options for an aggregate of 42,000 shares.
The average exercise price for all of these options is $21.063 per share and
all such options would have vested, even without acceleration, on January 13,
1999. Unvested options for an aggregate of 19,200 shares have been granted to
Evergreen Directors other than Mr. Dougan. Such options have an average
exercise price of $26.75 and would have vested, absent acceleration, on May 7,
1999. In addition, Mr. Dougan and one other Evergreen executive officer have
3,332 shares and 2,000 shares, respectively, of unvested restricted stock
which will vest automatically at the Effective Time. Such shares would have
vested on March 1, 1999, absent acceleration due to the Merger.
Distribution of Deferred Directors Fee Accounts. Under the terms of the
Evergreen Bancorp, Inc. Plan for the Payment and Deferral of Directors Fees,
amounts accrued to the account of participating Evergreen directors will
become payable upon a change in control of Evergreen. The Merger will
constitute a change of control within the meaning of such plan. Accordingly,
amounts accrued under the plan to the account of participating Evergreen
directors (other than directors who continue as directors of Banknorth or
Evergreen Bank and whose plan balances are transferred to the Banknorth
Deferred Compensation Plan for Directors and Selected Executives) will be
payable at the Effective Time in accordance with preexisting payment elections
in a lump sum or in installments beginning in the month following the
Effective Time. All such amounts represent previously earned, but deferred,
compensation plus applicable earnings on the deferrals. Distributions will be
in the form of cash or, in the case of participants who have elected deferrals
in the form of Evergreen Common Stock, shares of Banknorth Common Stock
(adjusted to reflect the Conversion Ratio), in accordance with the
participants' preexisting elections under such plan.
Indemnification and Insurance. Pursuant to the Agreement, Banknorth has
agreed to maintain Evergreen's and its subsidiaries' existing directors and
officers' liability insurance coverage for persons who are covered by such
insurance, for a period of six (6) years after the Effective Time and on terms
no less favorable than those in effect on the date of the Agreement. Banknorth
has the right to substitute policies providing at least comparable coverage
and containing such terms and conditions no less favorable than those in
effect on the date of the Agreement. Pursuant to the Agreement, Banknorth also
agreed to honor all rights to indemnification and all limitations of liability
existing in favor of the indemnified parties as provided in the Certificates
of Incorporation, Bylaws or similar governing instruments of Evergreen and its
subsidiaries as in effect as of the Effective Time with respect to matters
occurring prior to the Effective Time.
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Other than as set forth above, no director or executive officer of Evergreen
has any direct or indirect material interest in the Merger, except insofar as
ownership of Evergreen Common Stock and Evergreen Options might be deemed such
an interest.
OTHER EMPLOYEE MATTERS
Banknorth has agreed to take all reasonable action, to the extent reasonably
practicable prior to the Effective Time, so that employees of Evergreen and
its subsidiaries will be entitled to participate in the Banknorth employee
benefit plans of general applicability to the same extent as similarly
situated Banknorth employees. For purposes of determining eligibility to
participate and vesting of benefits and for certain other purposes (but not
for purposes of benefit accrual) under the Banknorth employee benefit plans,
Banknorth will recognize years of service with Evergreen, any Evergreen
subsidiary or any predecessor entity as such service is recognized by and
reflected on the records of Evergreen and the Evergreen employee benefit
plans. Banknorth will provide employees of Evergreen and Evergreen
subsidiaries with full credit for copayments, deductible amounts and out-of-
pocket maximums under any Evergreen employee benefit plan paid by such
employees prior to the Effective Time and will not apply any preexisting
condition, waiting period or other similar limitations to such employees,
except to the extent that any of the same is applicable to Banknorth
employees.
All employees of Evergreen or its subsidiaries as of the Effective Time will
become employees of Banknorth as of the Effective Time, provided that
Banknorth will have no obligation to continue the employment of any such
person and nothing contained in the Agreement is intended to give any
Evergreen employee a right to continuing employment with Banknorth after the
Effective Time. An Evergreen employee (other than an employee who is a party
to an employment agreement or a change-in-control agreement and who has
elected to receive termination benefits under such agreement) who is
involuntarily terminated other than for cause during the one-year period
following the Effective Time will be entitled to receive severance payments in
accordance with, and to the extent provided in, the Evergreen employee
severance plan, which Banknorth has agreed to assume. Thereafter, terminated
employees of Evergreen will be entitled to severance benefits in accordance
with the terms of Banknorth's employee severance plan. Banknorth has also
agreed that it will add, as an early retirement benefit, five years of service
and five years of age for purposes of benefit calculation under the Evergreen
Employees' Retirement Plan for any Evergreen employee who is at least 50 years
of age and has at least 20 years of service with Evergreen (or its
predecessors), and who elects to take early retirement within a specified
notification period.
RESALE OF BANKNORTH COMMON STOCK
The Banknorth Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any
Evergreen Shareholder who may be deemed to be an affiliate of Banknorth for
purposes of Rule 144 promulgated under the Securities Act ("RULE 144") or who
may be deemed an affiliate of Evergreen for purposes of Rule 145 promulgated
under the Securities Act ("RULE 145") (each an "AFFILIATE"). Affiliates will
include persons (generally executive officers, directors and 10% or more
shareholders) who control, are controlled by or are under common control with
(i) Banknorth or Evergreen at the time of the Evergreen Special Meeting or
(ii) Banknorth at or after the Effective Time.
Rules 144 and 145 will restrict the sale of Banknorth Common Stock received
in the Merger by Affiliates and certain of their family members and related
interests. Generally speaking, during the year following the Effective Time,
those persons who are Affiliates of Evergreen at the time of the Evergreen
Special Meeting (provided they are not Affiliates of Banknorth at or following
the Effective Time) may publicly resell any Banknorth Common Stock received by
them in the Merger, subject to certain limitations as to, among other things,
the amount of Banknorth Common Stock sold by them in any three-month period
and as to the manner of sale. After such one-year period, such Affiliates may
resell their Banknorth Common Stock received in the Merger without such
restrictions so long as there is adequate current public information with
respect to Banknorth as required by Rule 144. Persons who are Affiliates of
Banknorth after the Effective Time may publicly resell the Banknorth Common
Stock received by them in the Merger, subject to similar limitations and to
certain filing requirements specified in Rule 144.
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The ability of Affiliates to resell shares of Banknorth Common Stock
received in the Merger under Rule 144 or 145 as summarized herein generally
will be subject to Banknorth's having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates also
would be permitted to resell Banknorth Common Stock received in the Merger
pursuant to an effective registration statement under the Securities Act or
another available exemption from the Securities Act registration requirements.
The Registration Statement and this Prospectus/Joint Proxy Statement do not
cover any resales of Banknorth Common Stock received by persons who may be
deemed to be Affiliates of Banknorth or Evergreen in the Merger and Banknorth
has not contractually undertaken to register any such shares for resale.
Commission guidelines regarding qualifying for the pooling-of-interests
method of accounting also limit sales of shares of the acquiring and acquired
company by affiliates of either company in a business combination, such as a
merger. Commission guidelines indicate further that the pooling-of-interests
method of accounting generally will not be challenged on the basis of sales by
affiliates of the acquiring or acquired company if they do not dispose of any
of the shares of the corporation they own, or shares of a corporation they
receive in connection with a merger, during the period beginning 30 days
before the merger and ending when financial results covering at least 30 days
of post-merger operations of the Combined Company have been published.
Each of Banknorth and Evergreen has agreed in the Agreement to use its
reasonable best efforts to cause each person who may be deemed to be an
Affiliate (for purposes of Rule 145 and for purposes of qualifying the Merger
for pooling of interests accounting treatment) of such party to deliver to
Banknorth a letter agreement intended to preserve the ability to treat the
Merger as a pooling of interests and, in the case of Affiliates of Evergreen,
to ensure compliance with the Securities Act.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the Merger to shareholders of Evergreen. The federal income tax laws are
complex and the tax consequences of the Merger may vary depending upon each
shareholder's individual circumstances or tax status. Moreover, some
shareholders such as foreign persons, financial institutions, tax-exempt
organizations, insurance companies, persons who acquired shares of Evergreen
Common Stock pursuant to the exercise of employee stock options or rights or
otherwise as compensation, and persons who acquired Evergreen Common Stock as
part of a hedge, straddle or conversion transaction, may be subject to special
rules. THEREFORE, EACH EVERGREEN SHAREHOLDER IS URGED TO CONSULT A TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE
MERGER IN LIGHT OF THE PARTICULAR CIRCUMSTANCES OF SUCH SHAREHOLDER.
Arnold & Porter, counsel to Evergreen, has rendered an opinion to Evergreen
regarding the material federal income tax consequences of the Merger, which
opinion is described below. That opinion is based on laws, regulations,
rulings and judicial decisions as they now exist. These authorities are all
subject to change and such change may be made with retroactive effect. Arnold
& Porter cannot give any assurance that, after any such change, its opinion
would not be different, and does not undertake any responsibility to update or
supplement its opinion. Moreover, Arnold & Porter's opinion does not address
the consequences of the Merger under state, local, foreign or other tax laws,
to the extent such laws may apply. Arnold & Porter's opinion is not binding on
the Internal Revenue Service (the "SERVICE") and would not prevent the Service
from challenging the U.S. federal income tax treatment of the Merger.
Evergreen and Banknorth have provided Arnold & Porter with the facts,
representations and assumptions on which Arnold & Porter has relied in
rendering its opinion, which information is consistent with the state of facts
that Evergreen and Banknorth believe will be existing as of the Effective
Time. On the basis of such facts, representations and assumptions, Arnold &
Porter has opined that for federal income tax purposes: (i) the Merger, when
consummated in accordance with the terms of the Agreement and certain related
documentation, will constitute a reorganization within the meaning of Section
368(a) of the Code; (ii) no gain or loss will be recognized by shareholders of
Evergreen upon the exchange of their Evergreen Common Stock solely for shares
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of Banknorth Common Stock pursuant to the Merger (except as described below
with respect to any cash received in lieu of fractional share interests in
Banknorth Common Stock); (iii) the aggregate adjusted tax basis of the
Banknorth Common Stock received by an Evergreen Shareholder who exchanges all
of the shareholder's Evergreen Common Stock solely for Banknorth Common Stock
in the Merger will be the same as the aggregate adjusted tax basis of the
Evergreen Common Stock surrendered in exchange therefor in the Merger, reduced
by any amount allocable to a fractional share interest for which cash is
received; and (iv) the holding period of the shares of Banknorth Common Stock
received in exchange for Evergreen Common Stock will include the period during
which the Evergreen Shareholder held the Evergreen Common Stock surrendered in
the exchange, provided that the surrendered Evergreen Common Stock was held by
such shareholder as a capital asset at the Effective Time.
For federal income tax purposes, cash received by a holder of Evergreen
Common Stock in lieu of a fractional share interest in Banknorth Common Stock
will be treated as received in exchange for such fractional share interest,
and gain or loss will be recognized for federal income tax purposes measured
by the difference between the amount of cash received and the portion of the
basis of the share of Evergreen Common Stock allocable to such fractional
share interest. Such gain or loss should be long-term capital gain or loss if
the shares of Evergreen Common Stock surrendered by the holder are held as a
capital asset and have been held for more than one year at the Effective Time.
If however, the cash received has the effect of the distribution of a dividend
with respect to a holder, part or all of the cash received may be treated as a
dividend.
It is a condition precedent to the obligation of Evergreen to effect the
Merger that Evergreen receive an opinion from Arnold & Porter, dated as of the
Effective Time, with respect to the foregoing federal income tax consequences
of the Merger. It is also a condition precedent to the obligation of Banknorth
to effect the Merger that Banknorth receive an opinion from its tax advisor,
KPMG Peat Marwick LLP, dated as of the Effective Time, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code and addressing other substantial federal income tax effects of the
Merger as Banknorth may reasonably request. Each of such opinions will be
based upon facts existing at the Effective Time, and in rendering such
opinions counsel will require and rely upon facts, representations and
assumptions that will be provided by Banknorth, Evergreen and possibly others.
ACCOUNTING TREATMENT
It is expected that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles, and it is a
condition to the parties' obligation to consummate the Merger that each of
Banknorth and Evergreen receive a letter, dated the Effective Time, from their
respective independent public accountants to the effect that the Merger
qualifies for such accounting treatment. Under the pooling-of-interests method
of accounting, the historical basis of the assets and liabilities of Banknorth
and Evergreen will be combined and carried forward at their previously
recorded amounts, and revenue and expenses of Banknorth and Evergreen will be
combined at their historically recorded amounts. See "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS." In addition, balance sheets, income
statements and other financial statements of Banknorth issued after
consummation of the Merger would be restated retroactively to reflect the
combined financial position and results of operations of Banknorth and
Evergreen as if the Merger had taken place prior to the periods covered by
such financial statements.
The unaudited pro forma condensed combined financial information contained
in this Prospectus/Joint Proxy Statement has been prepared using the pooling-
of-interests accounting method to account for the Merger. See "SELECTED
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA" and "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA." Banknorth and Evergreen have agreed that
they will not take, cause or to the best of their respective abilities, permit
to be taken or caused, any action that would adversely affect the
qualification of the Merger for pooling of interests accounting treatment. In
order to help ensure that the Merger qualifies for pooling of interests
accounting treatment, each person who may be deemed an affiliate of Evergreen
or Banknorth has executed an agreement restricting dispositions of Evergreen
Common Stock and Banknorth Common Stock during a specified period. See "THE
MERGER--Resale of Banknorth Common Stock."
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Both Banknorth and Evergreen instituted common stock repurchase programs in
1997 and 1996, respectively, which were formally rescinded on July 31, 1998,
upon execution of the Agreement. Shares of Banknorth Common Stock and
Evergreen Common Stock repurchased by the respective companies within two
years prior to the Merger announcement are deemed under applicable accounting
rules to be "tainted" and would prevent pooling-of-interests accounting
treatment for the Merger to the extent that such "tainted" shares, together
with any fractional shares settled in cash, exceed 10% of the total number of
shares to be issued in the Merger. "Tainted" shares may be "cured" through the
reissuance prior to the Merger of an equivalent number of shares. Since the
date of termination of the Evergreen repurchase program, Evergreen has
repurchased 1,242 shares of Evergreen Common Stock in order to satisfy its
contractual obligations under the Evergreen Plan for Payment and Deferral of
Directors' Fees. No additional repurchases will be made pursuant to such Plan
prior to consummation of the Merger, and the open market purchase feature of
such Plan will be terminated at that time. As of the date of this
Prospectus/Joint Proxy Statement, the number of tainted treasury shares,
together with the estimated number of fractional shares to be settled in cash,
do not exceed 10% of the total number of shares of Banknorth Common Stock to
be issued in the Merger. All repurchases of Evergreen Common Stock made since
July 31, 1998 pursuant to the Evergreen Plan for Payment and Deferral of
Directors' Fees have been taken into account in determining the number of
tainted shares required to be cured for purposes of pooling of interests
accounting treatment.
EXPENSES
The Agreement provides that Banknorth and Evergreen will each bear and pay
its own costs and expenses incurred in connection with the transactions
contemplated by the Agreement, whether or not the Merger is consummated,
including fees and expenses of its own financial consultants, accountants and
counsel, except that expenses of printing and mailing the Prospectus/Joint
Proxy Statement will be shared equally by Banknorth and Evergreen.
STOCK OPTION AGREEMENT
As an inducement and a condition to Banknorth's entering into the Agreement,
Evergreen granted the Option to Banknorth in accordance with the Option
Agreement. Upon the occurrence of certain events (none of which has occurred
as of the date hereof to the knowledge of Banknorth and Evergreen), Banknorth
would have the right to purchase from Evergreen 19.9% of the shares of
Evergreen Common Stock issued and outstanding immediately prior to the
exercise of the Option, at a price of $27.75 per share, subject to adjustment
in certain circumstances and termination within certain periods. Assuming
exercise of the Option in full, the shares issued to Banknorth upon such
exercise would represent approximately 16.6% of the issued and outstanding
Evergreen Common Stock immediately following such exercise.
Provided Banknorth is not in willful breach of any of its covenants or
agreements contained in the Agreement under circumstances that would entitle
Evergreen to terminate the Agreement, Banknorth may exercise the Option, in
whole or in part, at any time and from time to time, if, but only if, both an
Initial Triggering Event and a Subsequent Triggering Event occur prior to the
occurrence of an Exercise Termination Event (as defined in the Option
Agreement). The definitions referred to in this discussion of the Option are
incorporated herein by reference to the copy of the Option Agreement included
as Annex III to this Prospectus/Joint Proxy Statement.
The Option Agreement provides that, subject to limitations set forth
therein, the holder of the Option may demand that Evergreen promptly prepare,
file and keep current a registration statement under the Securities Act
covering the Option shares and use its reasonable efforts to cause such
registration statement to become effective and remain current in order to
permit the disposition of the Option shares by such holder.
Under the Option Agreement, at any time after the first occurrence of a
Repurchase Event (as defined in the Option Agreement) and prior to an Exercise
Termination Event, Banknorth may request Evergreen to repurchase the Option
and any Option shares purchased pursuant thereto at an aggregate price equal
to the greater of (1) $7,500,000 and (2) the amount by which (A) the
Market/Offer Price (as defined in the Option Agreement) exceeds (B) the Option
Price, multiplied by the number of shares for which the Option may be then
exercised,
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plus, to the extent not previously reimbursed, Banknorth's reasonable out-of-
pocket expenses incurred in connection with the transactions contemplated by,
and the enforcement of Banknorth's rights under, the Merger Agreement,
including without limitation, legal, accounting and investment banking fees.
The obligation of Evergreen to repurchase the Option and any Option shares
under the Option Agreement will not terminate upon the occurrence of an
Exercise Termination Event unless no Subsequent Triggering Event shall have
occurred prior to the occurrence of an Exercise Termination Event.
The Option Agreement also provides that in no event will Banknorth's Total
Profit (as defined in the Option Agreement) exceed $15,000,000 and, if it
otherwise would exceed such amount, Banknorth, at its sole election, shall
either (i) reduce the number of shares of Evergreen Common Stock subject to
the Option, (ii) deliver to Evergreen for cancellation Option shares
previously purchased by Banknorth, (iii) pay cash to Evergreen or (iv) any
combination thereof, so that Banknorth's actually realized Total Profit shall
not exceed $15,000,000 after taking into account the foregoing actions. The
Option Agreement also provides that the Option may not be exercised for a
number of shares as would, as of the date of exercise, result in a Notional
Total Profit (as defined in the Option Agreement) of more than $15,000,000,
provided that this provision will not restrict any exercise of the Option
otherwise permitted on any subsequent date.
Notwithstanding the terms of the Option Agreement, acquisition by Banknorth
of more than 5% of the outstanding Evergreen Common Stock would require the
prior approval of the FRB under the BHCA.
The Option Agreement is intended to increase the likelihood that the Merger
will be consummated in accordance with the terms of the Agreement by making it
more difficult and more expensive for a third party to acquire control of
Evergreen. It may, therefore, have the effect of discouraging competing offers
to the Merger.
A copy of the Option Agreement is included as Annex III to this
Prospectus/Joint Proxy Statement and the foregoing discussion is qualified in
its entirety by reference to the complete text of such agreement.
VOTING AGREEMENTS
In connection with the execution of the Agreement, the directors of
Evergreen entered into a letter of agreement with Banknorth pursuant to which
such persons agreed to vote all shares of Evergreen Common Stock beneficially
owned by them and as to which they have sole voting power, in favor of the
Merger at the Evergreen Special Meeting.
NO APPRAISAL RIGHTS
In accordance with Section 262 of the DCL, appraisal rights are not
available to dissenting shareholders of any class of shares that, at the
record date for determining shareholders entitled to vote on a plan of merger
or consolidation, was listed on a national securities exchange or designated
as a NASDAQ Stock Market security. Because the Banknorth Common Stock and the
Evergreen Common Stock are listed on the NASDAQ Stock Market, neither the
Banknorth Shareholders nor the Evergreen Shareholders will have dissenters'
rights of appraisal in connection with the Merger.
MANAGEMENT AND OPERATIONS OF BANKNORTH
AFTER THE MERGER
MANAGEMENT
In accordance with the Agreement, at the Effective Time the Board of
Directors of Banknorth will be expanded to include three persons serving as
directors of Evergreen immediately prior to the Effective Time (including
George W. Dougan, the Chairman, President and Chief Executive Officer of
Evergreen) designated by Evergreen and who are otherwise acceptable to
Banknorth. Pursuant to that provision, Evergreen has designated, and Banknorth
has approved, Robert F. Flacke and Anthony J. Mashuta to serve as directors of
Banknorth following the Merger. The three Evergreen directors will be
allocated among the three classes of Banknorth's directors, as follows: Mr.
Dougan--term expiring in 2001; Mr. Flacke--term expiring in 2000; and Mr.
Mashuta--term expiring in 1999. The directors of Evergreen not appointed to
the Banknorth Board will
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continue to serve as directors of Evergreen Bank, along with such additional
persons (if any) designated by Banknorth. At the Effective Time, Mr. Dougan
will be appointed to Banknorth's executive management, with the title of Vice
Chairman. At or prior to such time, Mr. Dougan will also resign from his
position as President and Chief Executive Officer of Evergreen Bank. The
Evergreen Board has, with the concurrence of Banknorth, selected Daniel J.
Burke to serve as the new president of Evergreen Bank. Mr. Burke previously
served as Evergreen's Executive Vice President--Retail Banking. Mr. Burke will
serve on the Banknorth Presidents' Council, along with the presidents of
Banknorth's other banking subsidiaries.
The following table sets forth certain information about each director of
Evergreen who will become a director of Banknorth upon consummation of the
Merger.
<TABLE>
<CAPTION>
PERCENTAGE OF
POSITION WITH EVERGREEN DIRECTOR OF SHARES OF EVERGREEN
AND PRINCIPAL OCCUPATION EVERGREEN COMMON STOCK
NAME AND AGE DURING THE PAST FIVE YEARS SINCE BENEFICIALLY OWNED(1)
------------ -------------------------- ----------- ---------------------
<C> <S> <C> <C>
George W. Dougan, 58.... Chairman of the Board 1994 200,037
since May 19, 1994; and 2.29%
President and Chief
Executive Officer of
Evergreen since March 7,
1994; previously
Chairman of the Board,
Bank of Boston, Florida
Division, from 1992 to
1994; and Senior Vice
President, Bank of
Boston from 1988 to 1992
Robert F. Flacke, 65.... President of Fort 1980 15,379
William Henry *
Corporation, a hotel
operation, since 1960
Anthony J. Mashuta, 41.. President, Cool Insuring 1995 12,624
Agency, Inc., insurance *
services, since 1992;
Senior Vice President,
from 1986 to 1992
</TABLE>
- --------
* Less than 1%
(1) As of November 5, 1998. Included in the shares listed as beneficially
owned are the following shares which the persons listed have the right to
acquire within sixty days pursuant to stock options (i) under the
Evergreen Directors Stock Option Plan--Mr. Flacke (4,000) and Mr. Mashuta
(4,000); (ii) under the Evergreen Employee Option Plan--Mr. Dougan
(140,000).
Additional information about the foregoing persons and about Evergreen's
other directors and executive officers is contained in Evergreen's Annual
Report on Form 10-K for the year ended December 31, 1997 which is incorporated
by reference in this Prospectus/Joint Proxy Statement. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
OPERATIONS
Following the Merger, Evergreen Bank will continue to operate as a community
bank, with its own local Board of Directors and management, but as a
subsidiary of Banknorth. In keeping with its community banking approach,
Banknorth will provide a full array of support services to Evergreen Bank to
enhance its ability to serve the needs of its customers for deposit, loan and
investment products. Among the support services Banknorth will provide are
finance, data processing, human resources, marketing, compliance, deposit and
loan operations, treasury management and other asset/liability and risk
management functions.
Banknorth expects to achieve certain cost savings and operating synergies
subsequent to the Merger, which are expected to be derived primarily from
reductions in personnel and the integration of certain facilities and back
office operations. In addition, because Evergreen will be merged with and into
Banknorth, the costs associated with Evergreen operating as a publicly held
entity also will be eliminated. The aggregate annual pretax expense reductions
are estimated to total approximately $9.0 million. Because of the
uncertainties inherent in merging two financial institutions, changes in the
regulatory environment and changes in economic conditions, no assurances can
be given that any particular level of cost savings will be realized, that any
such cost savings will be realized over the time period currently anticipated
or that such cost savings will not be offset to some degree by increases in
other expenses, including expenses related to integrating the two companies.
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Based upon the projected pretax expense reductions expected to be realized
subsequent to consummation of the Merger, Banknorth believes that the Merger
will be accretive to diluted earnings per share in 1999 by approximately $.06
per share, or 2.84%, based on the average consensus Wall Street estimates for
1999 (made prior to announcement of the proposed Merger).
The foregoing estimates do not include the possible effect of any revenue
enhancements following the Merger. Based on its previous experience in
acquiring banking operations, Banknorth believes that opportunities may exist
for increasing the amount of Evergreen's small business and other commercial
lending, as well as its consumer lending, including expansion of Evergreen's
credit card business and indirect lending business and introduction of
consumer leasing products. Banknorth also anticipates that other revenue
enhancements may be obtained by offering additional fee-based products to
Evergreen's customer base, including cash management services, additional
investment management and trust services and annuity and mutual fund products.
In addition, it is expected that Evergreen's strong capital position will
present leveraging opportunities to increase earning assets. Realization of
any additional revenues will depend upon a number of factors, including, but
not limited to, competition, the economic environment, and regulatory
requirements, which are all beyond the control of Banknorth.
Although management of Banknorth has performed substantial financial
analysis of the proposed Merger, identification of all the expense reductions
and potential earnings enhancements associated with the Merger has not been
completed. Moreover, no assurances can be given that expense reductions or any
revenue enhancements will be realized at any given time in the future. The
projected cost savings which are expected to be realized subsequent to
consummation of the Merger do not reflect the one-time costs of approximately
$21.0 million on a pretax basis, and approximately $15.8 million on an
aftertax basis, for Merger-related transaction and integration costs, which
will be incurred upon consummation of the Merger. The one-time costs consist
primarily of costs related to employee terminations, change-in-control
contracts and severance obligations, conversion and integration expenses, exit
costs associated with contract terminations, professional fees, and other
expenses required to be accrued in accordance with generally accepted
accounting principles, less estimated tax benefits. In evaluating the expense
reductions, savings and other potential benefits of the Merger, the Banknorth
Board considered the amount of the one-time merger charges, which are
necessary to realize future annual savings resulting from consolidation of
support functions and economies of scale. Although there may be additional
costs related to the integration of certain operations which are not expected
to be incurred until 1999, these additional costs are not expected to be
material. An example of such costs include the conversion of Evergreen's trust
business to Banknorth's trust system in 1999. See "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS" and "A WARNING ABOUT FORWARD-LOOKING
STATEMENTS."
INFORMATION ABOUT BANKNORTH
GENERAL
Banknorth is a Delaware-chartered, multibank holding company registered
under the BHCA, which was formed in 1989 as the result of the merger of two
Vermont-based bank holding companies.
Banknorth conducts business from its headquarters in Burlington, Vermont and
operates 71 banking offices throughout the State of Vermont and in the States
of New Hampshire and Massachusetts. At September 30, 1998, Banknorth had total
consolidated assets of approximately $3.0 billion, deposits of $2.3 billion
and shareholders' equity of $243.7 million. Based on total consolidated assets
at September 30, 1998, Banknorth is the largest independent bank holding
company headquartered in the State of Vermont. As of such date, Banknorth and
its subsidiaries employed approximately 1,014 persons on a full-time
equivalent basis and ranked as one of Vermont's largest employers.
Banknorth offers a broad array of commercial and consumer banking and
fiduciary services and products to commercial, retail, institutional and
municipal customers, through its seven community banks, its trust and
investment management subsidiary, its mortgage banking subsidiary and its
insurance agency subsidiary.
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Banknorth's five Vermont-based banks (The Howard Bank, N.A., First Vermont
Bank and Trust Company, Franklin Lamoille Bank, Granite Savings Bank and Trust
Company and Woodstock National Bank) maintain 40 banking offices throughout
the State. Banknorth recently announced the proposed merger of its smallest
Vermont-based bank (Woodstock National Bank) into one of Banknorth's larger
Vermont-based banks (First Vermont Bank and Trust Company) but no banking
offices will be closed as a result of that merger. Banknorth's New Hampshire-
based bank (Farmington National Bank) operates 6 banking offices in the
central and seacoast areas of New Hampshire. Banknorth's Massachusetts-based
bank (First Massachusetts Bank, N.A.) operates 25 offices throughout central
and western Massachusetts. Banknorth's mortgage banking company (Banknorth
Mortgage Company, Inc.) originates a full range of mortgage banking products
through the offices of its affiliated banks, and services a $1.5 billion
residential mortgage loan portfolio, approximately $945.0 million of which is
serviced for unaffiliated third parties. Banknorth's trust and investment
management subsidiary (Stratevest) offers a variety of personal and corporate
fiduciary services, and currently has a trust and investment asset portfolio
of over $3.4 billion, including approximately $1.9 billion in discretionary
trust assets under management. Banknorth also offers its customers a range of
non-FDIC insured investment products such as annuities, mutual funds and
securities, through its insurance agency subsidiary (Northgroup Investment and
Insurance Services, Inc.), in conjunction with a third-party registered
broker-dealer. The lending and investment activities of Banknorth's commercial
bank subsidiaries are funded principally by deposits gathered through their
retail branch office network.
As discussed below under "Berkshire Acquisition," on November 13, 1998
Banknorth completed the acquisition of BankBoston, N.A.'s Berkshire County,
Massachusetts banking operations. Banknorth's previous acquisitions include
the purchase in 1996 of 13 branch offices from Shawmut Bank, N.A. (and the
related formation of First Massachusetts Bank, N.A., based in Worcester,
Massachusetts) and the acquisition in 1994 of Farmington National Bank and its
New Hampshire holding company (North American Bank Corporation) in a cash
share exchange transaction. Acquisitions have been, and are expected to
continue to be, an important component of Banknorth's business strategy.
Banknorth's network of community banks is committed to providing superior,
efficient and personalized service to customers in chosen market areas. To
that end, operating efficiencies are achieved through the centralization of
all major support functions at the parent company level. Banknorth's community
banking management structure allows each bank's local management team and
board of directors to focus on its customers and market area and to set its
loan and deposit prices in light of local competition and other market
factors. Consistent with that community banking philosophy, Banknorth intends
to continue to operate Evergreen Bank following the Merger as a separate
subsidiary, with its own local board of directors and management, and with
Banknorth providing various support services.
The principal executive offices of Banknorth are located at 300 Financial
Plaza, Burlington, Vermont 05401 and its telephone number is (802) 658-9959.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the directors, executive officers, director
and executive compensation, various benefit plans (including stock option
plans), voting securities and the principal holders thereof, certain
relationships and related transactions and other related matters as to
Banknorth is incorporated by reference or set forth in Banknorth's Annual
Report on Form 10-K for the year ended December 31, 1997, which is
incorporated by reference in this Prospectus/Joint Proxy Statement.
Shareholders of Banknorth or Evergreen who desire copies of such documents may
contact Banknorth at its address or telephone number indicated under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
BERKSHIRE ACQUISITION
On November 13, 1998 Banknorth completed its acquisition of BankBoston,
N.A.'s Berkshire County, Massachusetts banking operations, consisting of ten
full-service branches, one limited service branch and nine
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remote ATM locations, as well as private banking relationships associated with
the branches. In connection with the Berkshire Acquisition, Banknorth paid to
BankBoston, N.A. a fixed premium of $52.5 million. As of November 13, 1998,
deposits at the Berkshire branches were approximately $291.5 million,
including accrued interest. Banknorth also purchased in the transaction
commercial loans associated with the branches with a net book balance as of
November 13, 1998 of approximately $73.6 million and a portfolio of consumer
loans originated at the branches with a net book balance as of November 13,
1998 of approximately $35.8 million. The Berkshire Acquisition (other than the
private banking relationships) was made through First Massachusetts Bank,
N.A., headquartered in Worcester, Massachusetts, and has extended that bank's
central Massachusetts territory westward to the border of New York State and
contiguous to the southern reach of Evergreen's New York market area. The
private banking relationships associated with the Berkshire branches, which,
as of November 13, 1998, represented approximately $1.0 billion of trust and
investment assets under management, including approximately $750 million in
discretionary trust assets under management, were acquired by Banknorth's
trust and investment management subsidiary, Stratevest, headquartered in
Burlington, Vermont.
Bankworth will account for the Berkshire Acquisition under the purchase
method for accounting and financial reporting purposes and will record
approximately $54.2 million of goodwill in connection with the transaction.
DIVIDEND RESTRICTIONS AND DEBT COVENANTS
Regulatory Limitations. Dividends paid by its subsidiaries are the primary
source of funds available to Banknorth for payment of dividends to its
shareholders, for meeting its debt service requirements, for expense related
to the Capital Securities, and for other working capital needs. As described
below under "Capital Securities," Banknorth also derives income from its
subsidiary banks through the payment of interest on certain intercompany
loans. Various laws and regulations restrict the ability of banks to pay
dividends to their shareholders. Payment of dividends by Vermont-chartered
banks is subject to applicable state and federal laws. Payment of dividends by
national banks is subject to applicable federal law. National banks must
obtain the approval of the Office of the Comptroller of the Currency ("OCC")
for the payment of dividends if the total of all dividends declared in any
calendar year would exceed the total of the bank's net profits, as defined by
applicable regulations, for that year, combined with its retained net profits
for the preceding two years. Furthermore, a national bank may not pay a
dividend in an amount greater than its undivided profits then on hand after
deducting its losses and bad debts, as defined by applicable regulations.
At or about the Effective Time, Banknorth intends to redeploy up to $24.0
million in accumulated capital at Evergreen Bank for the primary purpose of
paying one-time Merger-related expenses. The redeployment would be
accomplished through a special dividend from Evergreen Bank to Banknorth. A
portion of such dividend may also be contributed by Banknorth to the capital
of Stratevest, Banknorth's trust and investment subsidiary, to facilitate its
purchase of Evergreen Bank's trust business. Evergreen Bank is requesting
regulatory approval for payment of the special dividend to the extent it
exceeds applicable regulatory limitations for ordinary dividends. Banknorth
anticipates that Evergreen Bank will remain "well capitalized" for regulatory
capital purposes following payment of the special dividend.
Banknorth also recently redeployed accumulated capital at certain of its
subsidiary banks to support the Berkshire Acquisition. Such redeployment of
capital was effected through payment of a special dividend of approximately
$21.5 million to Banknorth by certain of its subsidiary banks, followed by a
contribution of such funds to the capital of First Massachusetts Bank, N.A. ,
along with approximately $4.5 million of cash resources held at the parent
company level. Banknorth's subsidiary banks received regulatory approval for
payment of such special dividends to the extent that they exceeded applicable
regulatory limitations for ordinary dividends. Following the capital
redeployment and consummation of the Berkshire Acquisition, each of
Banknorth's subsidiary banks remained "well capitalized" for regulatory
capital purposes, except for First Massachusetts Bank, N.A., which is deemed
"adequately capitalized" due to reduction in its Total Capital Ratio below
10%. See "REGULATION AND SUPERVISION--Capital Requirements."
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Banknorth previously redeployed accumulated capital of $45.6 million from
certain of its subsidiaries through special dividends paid in February 1996 in
order to capitalize First Massachusetts Bank, N.A. at the time of its
formation and acquisition of 13 branch offices from Shawmut Bank, N.A. Because
those special dividends exceeded applicable regulatory limitations, Banknorth
obtained approval from the applicable banking agencies for the payment of that
portion of the dividend which exceeded such regulatory limitations.
Payment of the 1996 special dividends has required certain of Banknorth's
subsidiary banks to obtain prior approval for payment of regular quarterly
dividends, notwithstanding the generation of sufficient current earnings. All
such approval requests have been granted without further condition. It is
expected that payment of the special dividends required for payment of one-
time Merger-related expenses and transfer of the Evergreen Bank trust business
to Stratevest, together with payment of the special dividend for completion of
the Berkshire Acquisition, will significantly restrict the dividend paying
capacity of Banknorth's subsidiary banks under applicable regulatory formulas.
Accordingly, payment of dividends to Banknorth in the future by certain of its
subsidiary banks will require regulatory approval under applicable regulatory
formulas, and generation by such subsidiaries of sufficient future earnings.
As of September 30, 1998, Banknorth's banking subsidiaries were able to
declare dividends to Banknorth for the remainder of 1998, without regulatory
approval, of approximately $11.5 million ($3.1 million, after taking into
account the special dividend paid in connection with the Berkshire
Acquisition) plus an additional amount equal to net profits (as defined in
applicable regulations) for the remainder of 1998 through the date of any such
dividend declarations, less any required transfer to surplus.
Debt Covenants. In connection with funding of the acquisition in 1994 of
Farmington National Bank and its New Hampshire holding company, North American
Bank Corporation, Banknorth entered into a credit agreement with certain
lenders. That credit agreement was renegotiated in 1996 on more favorable
terms, including interest rate. At the same time Banknorth entered into a
separate credit agreement with the same lenders, to provide a working capital
line of credit. As of September 30, 1998, the total outstanding principal
balance under the term credit agreement was approximately $8.5 million and no
amounts were outstanding under the line of credit agreement. The credit
agreements contain various covenants relating to the conduct of Banknorth's
business, including covenants requiring the regular submission of financial
data about Banknorth, covenants requiring Banknorth and its subsidiaries to
comply with regulatory capital guidelines and to maintain each of the
subsidiary banks as a "well capitalized" or "adequately capitalized" financial
institution, and covenants restricting the ability of Banknorth and its
subsidiary banks to incur additional indebtedness, covenants restricting the
ability of Banknorth and the subsidiary banks to make certain types of
investments and acquisitions, including the acquisition of the assets or
voting control of another entity if the total assets acquired exceed 1.5% of
Banknorth's tangible equity capital, and covenants restricting the sale of all
or a substantial portion of its or its subsidiary banks' assets and
restricting Banknorth's ability to merge with another party if Banknorth is
not the surviving entity. The credit agreements also require Banknorth to
maintain a ratio of nonperforming assets to total equity capital of not
greater than .40 to 1.0, a ratio of funded debt to total equity capital of
less than .25 to 1.0 and a ratio of return on average assets of not less than
.25%. In addition, the credit agreements limit the payment of dividends by
Banknorth based on a rolling, cumulative earnings formula, which takes current
earnings into account. At Banknorth's request the lenders have modified
certain of the loan covenants, including the covenant on payment of dividends,
in order to better accommodate Banknorth's growth resulting from the Berkshire
Acquisition and the Merger. Under the modified dividend covenant, Banknorth
may not declare or pay dividends on its capital stock, or redeem, repurchase
or otherwise acquire or retire any of its capital stock during the period from
September 30, 1996 to the date of calculation in an amount in excess of the
sum of (a) $9,500,000 plus (b) 40% of Banknorth's consolidated net income with
certain adjustments, for such period, computed on a cumulative basis for such
period. For purposes of calculating dividend capacity under this provision
following the Merger, Banknorth will include the net income of Evergreen
during the period from September 30, 1996 to the Merger, reduced by the amount
of cash dividends paid by Evergreen during such period, but without reduction
for any repurchases or redemptions of Evergreen Common Stock during such
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period or for one-time Merger-related expenses of up to $21 million on a
pretax basis (approximately $15.8 million after-tax). On a pro forma basis as
of September 30, 1998, the Combined Company would have authority to pay up to
$2.0 million in dividends under this provision.
Banknorth's primary source of funds to pay principal and interest under its
credit agreements is current dividends from its subsidiary banks. Accordingly,
Banknorth's ability to service the debt under this credit agreement is
primarily dependent upon the continued ability of its subsidiaries to pay
dividends in an amount sufficient to service such debt. Banknorth intends to
use subsidiary bank dividends first to service such debt. Accordingly, the
obligation to pay principal and interest under this credit agreement, as well
as the debt covenants described above, could adversely impact Banknorth's
ability to pay dividends on the Banknorth Common Stock or to carry on its
business operations, including making additional investments or acquisitions
that might be beneficial to Banknorth.
Banknorth has received the consent of its lenders to consummate the Merger
and does not anticipate that such transaction will require any further waivers
or consents.
CAPITAL SECURITIES
On May 1, 1997, Banknorth established Banknorth Capital Trust I (the
"TRUST"), a Delaware statutory business trust. The Trust exists for the
exclusive purposes of (i) issuing and selling the 30-year Capital Securities
in the aggregate amount of $30.0 million at an annual distribution rate of
10.52%, (ii) using the proceeds from the sale of the Capital Securities to
acquire a like amount of 10.52% junior subordinated debentures issued by
Banknorth (the "BANKNORTH DEBENTURES") and (iii) engaging in only those other
activities necessary, advisable or incidental thereto. The Banknorth
Debentures are the sole asset of the Trust and, accordingly, payments under
the Banknorth Debentures are the Trust's sole source of revenue. All of the
common securities of the Trust are owned by Banknorth. Banknorth has used the
net proceeds from the sale of the Capital Securities for general corporate
purposes, including support of its subsidiary's banking operations through
loans to certain of its subsidiaries. The Capital Securities, with associated
expense that is tax deductible, qualify as Tier I Capital under applicable
regulatory definitions. Banknorth's primary sources of funds to pay interest
on the Banknorth Debentures are current dividends from its subsidiaries and
interest income on the loans to its subsidiary banks. The terms of the Capital
Securities financing contain certain contingent dividend restrictions which
could restrict Banknorth's ability to pay dividends in certain circumstances.
In particular, the terms of the Capital Securities financing would prevent
Banknorth from paying dividends on the Banknorth Common Stock in the event of
(i) a default under certain obligations under the terms of the Capital
Securities financing, including failure to pay principal and interest on the
Banknorth Debentures when due, (ii) the election by Banknorth to exercise its
right to temporarily suspend interest payments on the Banknorth Debentures, or
(iii) the failure of Banknorth to honor the terms of its guaranty of the
Capital Securities issued by the Trust. Banknorth is not now, nor has it ever
been, in default under the terms of the Capital Securities financing, nor does
Banknorth have any present intention to suspend interest payments on the
Banknorth Debentures.
DIVIDEND REINVESTMENT PLAN
Banknorth maintains a dividend reinvestment and stock purchase plan that
provides, for those shareholders who elect to participate, that dividends on
Banknorth Common Stock will be used to purchase shares in the open market at
the then-current market price of Banknorth Common Stock on a quarterly basis.
The plan also permits participants to invest in additional shares of Banknorth
Common Stock through optional cash payments, within certain dollar
limitations, at the then-current market price of such stock at the time of
purchase. The plan is administered by an unaffiliated third party agent, which
purchases shares of Banknorth Common Stock on the open market to meet the
requirements of the plan. It is anticipated that Banknorth will continue its
dividend reinvestment and stock purchase plan and that Evergreen Shareholders
who receive shares of Banknorth Common Stock in the Merger will have the right
to participate in the plan.
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YEAR 2000
Historically, some computer software and hardware and firmware systems, and
equipment or machinery with embedded processors or processing instructions
(sometimes referred to as "embedded processors"), were written to recognize
and process dates with the year written with two digits. For dates on or after
January 1, 2000 (when four digits will be necessary to identify dates
accurately), or for periods beginning before, and ending on or after, January
1, 2000, such software, hardware and firmware systems and embedded processors
may not be able to recognize or process properly dates or information
including dates or time periods. Among other things, this may cause computers
to produce incorrect information, to shut down, to cause other systems or
equipment to shut down or malfunction, or to malfunction in other ways, and
may cause equipment or machinery with embedded processors to malfunction or to
shut down. This is often referred to as, among other things, the "Year 2000
problem."
In order to assure to the extent possible that the Year 2000 problem does
not impair their ability to do business or subject them to liability,
companies are advised to determine whether and to what extent their
information technology or physical resources may be affected by Year 2000
problems, to repair, replace or retire the affected systems or assets, and to
test the new systems or assets to assure that they will not be affected by the
Year 2000 problem (which is often spoken of as being "Year 2000 compliant").
Some new hardware, software or equipment, and some revisions or upgrades of
hardware, software or equipment, may have so-called "bugs" or may prove to be
incompatible with existing or other new or upgraded systems or components. As
a result, the testing of the changed components, and of systems and subsystems
as a whole, is critical and experience has shown that the process is time-
consuming.
In order to protect the integrity of the banking system, the FRB and other
federal banking regulatory agencies (collectively known as the "Federal
Financial Institutions Examination Council," or "FFIEC") have issued
guidelines to financial institutions for addressing the Year 2000 problem and
set milestones that financial institutions are expected to meet in becoming
Year 2000 compliant and testing to assure compliance. In broad outline, those
guidelines provide that (i) by September 30, 1997, financial institutions
should have identified, assessed and begun remediation of mission critical
systems; (ii) by June 30, 1998, institutions should be continuing remediation
of mission critical systems and have completed development of testing
strategies and plans; (iii) by September 1, 1998, institutions should be
continuing system remediation and should have begun testing of internal
mission critical systems; (iv) by December 31, 1998, institutions should have
substantially completed testing of internal mission critical systems; (v) by
March 31, 1999, institutions relying on service providers should have
substantially completed system testing and all institutions should have begun
external testing with third parties (such as other financial institutions,
business partners and payment system providers); and (vi) by June 30, 1999,
institutions should have completed testing of mission critical systems and
substantially completed all implementation of those systems.
Banknorth's Year 2000 remediation and compliance program (the "YEAR 2000
PROJECT") is managed by a Project Group consisting of representatives from
more than 25 business units and functional departments within Banknorth and
its subsidiaries. The Project is directed by a Banknorth Vice President who
directly reports on the Project to Banknorth's Executive Vice President--Chief
Information Officer. The Project is overseen by the Banknorth Board and the
board of directors of each subsidiary.
Banknorth has completed a preliminary assessment of all its computer
software, hardware and firmware systems, and equipment and machinery with
embedded processors (including vaults and other security systems, elevators
and HVAC systems). Banknorth believes that it has identified all components,
systems, equipment and databases that might not be able to function properly
as a result of the Year 2000 problem and has formulated a plan to replace,
upgrade or revise affected software, to upgrade or replace affected hardware
and equipment, and to remediate affected data and databases. Banknorth
anticipates that all those replacements, upgrades and revisions will be
substantially completed by December 31, 1998. Banknorth began compliance
testing of components and systems in July, 1998 and expects to have
substantially completed that compliance testing by the end of 1998, although
testing will continue on an ongoing and industry-wide basis thereafter.
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Substantially all of Banknorth's mission critical systems are outsourced or
are purchased software packages. As a result, much of the remediation and
testing process is dependent on the accuracy of work performed by, and the
Year 2000 compliance of software, hardware, firmware and equipment provided
by, vendors. Banknorth has initiated discussions with its vendors and
monitored their Year 2000 compliance programs and the compliance of their
products or services with required standards. Where possible, Banknorth is
also considering and, where appropriate is arranging, alternate service or
software providers in cases where it appears that vendors may not timely
provide adequate solutions.
The economic cost of the Year 2000 Project includes not just direct
incremental amounts expended by Banknorth for repairing, upgrading or
replacing hardware, software and facilities, but also the use of internal
resources devoted to the Year 2000 Project that would otherwise have been
devoted to other business opportunities. It is difficult to quantify the
economic cost of internal resources of the Project. However, Banknorth
estimates that over the life of this Project, between 1996 and 2000, it will
utilize approximately $5.5 million to $7.5 million of internal resources on
this effort. These are internal resources that would have been utilized for
other business opportunities and do not necessarily represent additional
operating expenditures or costs. As of September 30, 1998, approximately $3.3
million of these amounts have been expended. Further, Banknorth will make
direct incremental expenditures for the Year 2000 Project of approximately
$3.5 million over this five-year period. Although many of these hardware and
equipment expenditures would have been made even absent the Year 2000 problem
as part of normal operations, they are included in the above estimates as the
timing of these purchases and upgrades was accelerated due to the Year 2000
Project. As of September 30, 1998, approximately $500,000 of the direct
incremental expenditures have been made.
Banknorth has commenced a customer awareness program to inform its customers
(both depositors and borrowers) of the Year 2000 problem, Banknorth's
responses to the problem, and the potential impact of the problem on the
customers and their business. Banknorth and its subsidiaries have had
awareness sessions with their customers and are taking into account customers'
Year 2000 compliance in evaluating and rating loans. Banknorth Group, Inc. is
aware that if borrowers suffer losses or illiquidity because of their own Year
2000 problems (or the Year 2000 problems of others with whom they do business
or on whom they are dependent) Banknorth's subsidiary banks may suffer credit
losses or experience illiquidity. The standard loan documentation of
Banknorth's subsidiary banks has been revised to include representations that
the borrower is Year 2000 compliant and to give the bank the right to examine
the borrower's systems and procedures in order to determine Year 2000
compliance.
Banknorth believes that the key risk factors associated with the Year 2000
are those it cannot directly control, primarily the readiness of key supplier
and service providers, the readiness of the public infrastructure, and, as
noted above, the readiness of its credit customers. However, Banknorth and its
subsidiaries have developed contingency plans and strategies and so-called
"work arounds" for each noncompliant system and the possible failure of
systems and resources that have been tested as compliant. The contingency
plans vary with the affected systems. Among other things, Banknorth has
designated certain of its local banks as "key branches" and installed
generators at those locations, so that the Banknorth banks can continue
banking operations even if there are electrical outages because local
utilities are not Year 2000 compliant. Banknorth is also arranging to have
temporary help available so that, in the event of the failure of a mission
critical system, the functions affected by the system failure can be performed
manually.
The determination of the effect of Banknorth's own noncompliance with Year
2000 requirements or the noncompliance of its vendors or customers is complex
and depends on numerous variables and unknowns. Without remediation, the
failure of critical software systems at any of the Banknorth banks or at other
banks could impair the ability of the banks to do business, the failure of
large or numerous borrowers timely to pay their loans could impair the capital
of one or more banks, and the failure of embedded processors would adversely
affect the physical security of the banks. However, Banknorth believes that,
as a result of its remediation and testing efforts and its contingency plans,
that worst case scenario is not likely.
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Banknorth has created a working group separate from the Year 2000 Project
group to deal with the implementation of the Merger and the integration of the
Evergreen and Banknorth information technology systems. As a result, it is
expected that the Merger will not affect the timely completion of the Year
2000 Project. In addition, since the Banknorth systems will be implemented in
the Combined Company, the Merger should not affect the ability of the systems
of the Combined Company timely to be Year 2000 compliant.
INFORMATION ABOUT EVERGREEN
GENERAL
Evergreen is a Delaware-chartered, one-bank holding company registered under
the BHCA, which was organized in 1980 and formerly known as "First Glen
Bancorp." Evergreen adopted its current name in 1986.
Evergreen conducts business from its headquarters in Glens Falls, New York
and operates banking offices throughout eastern New York State. At September
30, 1998, Evergreen had total assets of approximately $1.1 billion, deposits
of $954.3 million and shareholders' equity of $90.3 million. As of such date,
Evergreen and its subsidiaries employed approximately 383 persons, on a full-
time equivalent basis.
Evergreen conducts substantially all of its banking business through its
wholly owned subsidiary, Evergreen Bank, a national banking association, which
was initially organized in 1853 as a New York state-chartered bank and
converted to national bank status in 1865 under the name "First National Bank
of Glens Falls." Evergreen Bank adopted its current name in 1986. Evergreen
does not conduct any nonbanking operations, except for trust activities
through Evergreen Bank.
Evergreen Bank operates 28 banking offices in 8 counties in eastern New York
State, throughout an area extending from the Massachusetts border fifty miles
south of Albany, north to the Canadian border. Its primary market areas are
Clinton, Warren and Washington Counties, where it held, as of June 30, 1998
(based on deposit data published by Sheshunoff Information Services)
approximately 17%, 33% and 44% respectively, of the total commercial banking
deposits in such counties. Evergreen Bank operates as a typical community
bank, serving commercial, individual, institutional and municipal customers
with a wide range of deposit and loan products. Evergreen Bank also provides
trust and investment management services and, as of September 30, 1998, had
approximately $529.6 million in discretionary trust assets under management.
Evergreen's product offerings include time and savings deposit accounts,
business, agricultural, real estate, home improvement, automobile and other
personal loans, home equity lines of credit, safe deposit box facilities,
letters of credit, wire transfer facilities and personal computer banking
facilities. Evergreen Bank also engages in various finance functions for
municipalities and other governmental entities, and has a strong municipal
deposit base which comprises a larger proportion of total deposits than most
banks in its peer group. Evergreen Bank's lending and investment activities
are funded principally by deposits gathered through its retail branch network.
Substantially all of Evergreen's residential mortgage portfolio is held by
Evergreen Realty Funding Corp. ("EVERGREEN REALTY"), a real estate investment
trust and wholly owned subsidiary of Evergreen Bank. Evergreen Realty was
formed in 1996, in order to provide improved capital alternatives and to
provide certain tax efficiencies under New York law. As of September 30, 1998,
Evergreen Realty held approximately $244.3 million in outstanding principal
amount of mortgage loans, all of which are serviced by Evergreen Bank. All of
Evergreen Realty's common stock is owned by Evergreen Bank. Evergreen Realty
has outstanding 1,873 shares of 12% Series A Preferred Stock having a stated
value of $500 per share. Eighty percent (80%) of such preferred stock is held
by Evergreen Bank, with the remainder held by current or former Evergreen Bank
employees. Such preferred stock will not be converted, nor will the terms of
such stock be changed, in connection with, or as a result of, the Merger.
The principal executive offices of Evergreen are located at 237 Glen Street,
Glens Falls, New York 12801 and its telephone number is (518) 792-1151.
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MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the directors, executive officers, director
and executive compensation, various benefit plans (including the Evergreen
Stock Option Plan), voting securities and the principal holders thereof,
certain relationships and related transactions and other related matters as to
Evergreen is incorporated by reference or set forth in the Evergreen Annual
Report on Form 10-K for the year ended December 31, 1997, which is
incorporated by reference into this Prospectus/Joint Proxy Statement.
Shareholders of Evergreen or Banknorth who desire copies of such documents may
contact Evergreen at its address or telephone number indicated under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
YEAR 2000
In 1997, Evergreen's senior management began with a comprehensive project to
identify its readiness, and that of vendors and banking customers, for
continued computer processing after January 1, 2000. Evergreen's Project Team
comprises personnel throughout the banking organization to assure compliance
within each area of the organization. Evergreen's principal banking regulator,
the OCC, in conjunction with other federal banking regulators, has established
a process for supervised financial institutions to deal with issues
surrounding the Year 2000 problem, which Evergreen has followed. Those phases
are: Awareness, Assessment, Renovation, Validation and Implementation.
Through third quarter ended September 30, 1998, Evergreen has identified all
mission critical systems to assure continued processing of all activities
within the organization. Each of these systems has either passed Year 2000
testing, or will be tested before March 31, 1999. All equipment with embedded
chips has been identified, listed, and has been Year 2000 tested. These
include items from elevators to time clocks, to fax machines, to timers.
Electronic interfaces have been identified and tested to the extent possible
at this juncture.
Through the third quarter ended September 30, 1998, Evergreen had
substantially completed the Awareness, Assessment and Renovation phases
recommended by the OCC. Validation and Implementation have been completed or
will be completed by March 31, 1999, for many of Evergreen's mission critical
systems, with the notable exception of Evergreen's core processing systems
managed by a third party provider, Alltel Information Systems, Inc.
("ALLTEL"). In connection with the planned merger with Banknorth, Evergreen
has validated the new core processing system but has withheld the final
implementation of a Year 2000 compliant system with Alltel because, if the
merger with Banknorth is consummated on schedule, Evergreen would convert to
the Alltel systems utilized by Banknorth. Banknorth has established and is
implementing a Year 2000 Project to address the Year 2000 risks to Banknorth
and the Combined Company, including evaluation and testing of Alltel's systems
for Year 2000 compliance. Banknorth's testing of the Alltel systems is
expected to be substantially complete by year end 1998, and no significant Y2K
problems with such systems have been identified to date. See "INFORMATION
ABOUT BANKNORTH--Year 2000."
Evergreen has substantially completed all phases for its non-information
technology systems, and believes that its readiness is complete.
As to contingency plans for its mission critical information technology
systems, Evergreen has entered into written agreements with Alltel and other
of its third party providers to complete the Implementation phase of
conversion by April 15, 1999, if for any reason the merger is not consummated.
Evergreen has reviewed its contingency plans with the OCC.
The risk to Evergreen is the failure, malfunction or shut-down of software
or equipment on the first business day in the Year 2000. As with other
financial institutions, Evergreen is highly dependent on information
technology for the conduct of its general banking business. Some computer
software, hardware, equipment with embedded processes; including core
processing systems may be unable to process transactions due to date limits
within their software. In addition, Evergreen is subject to the risk that its
commercial loan customers may sustain interruptions in their operations due to
Year 2000 problems, and ultimately be unable to repay their indebtedness to
Evergreen as scheduled.
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Certain of the risk factors associated with Year 2000 are not under the
control of Evergreen. The readiness of key suppliers, vendors, service
providers, the Federal Reserve infrastructure, customer and liquidity funding
sources, and its credit customers all have risk factors of various degrees.
Those borrowers and depositors with material relationships have been
identified, and although there is no single customer that would have a
material impact on Evergreen's operating results or financial condition, an
exceptional accumulation of customers with unexpected Year 2000 problems could
have a material adverse impact on Evergreen. For this reason, Evergreen has
contacted all substantial borrowing and deposit customers to determine whether
these business customers of Evergreen are expected to be Year 2000 compliant
or that any potential interruption to their business would not significantly
affect their ability to repay their indebtedness on schedule. Evergreen has
established internal procedures to review the loans or deposit relationships
for possible adverse implications. Through the third quarter ended September
30, 1998, Evergreen's internal commercial loan review has indicated that all
significant customers have a Year 2000 plan that is in the process of being
implemented.
Evergreen expects the identification of all mission critical systems and
their testing, review and upgrades, if necessary, coupled with extensive
surveys of its commercial loan customers, to reduce the risk to Evergreen of
the Year 2000 problem. Further, Evergreen believes that its substantial
capital and liquidity positions will enable it to sustain some impact from
Year 2000 if significant problems are incurred by Evergreen's commercial loan
customers.
Evergreen has expended funds in fiscal year 1998 and would expect to do so
again in the fiscal 1999 to repair, upgrade or replace its software, hardware
or other embedded processors deemed not ready for Year 2000. The expenditures
through September 30, 1998, the most recently completed fiscal period, total
approximately $600,000. If Evergreen does not consummate the merger with
Banknorth for any reason, additional expenditures in the fourth quarter of
1998 and fiscal 1999 would total approximately $400,000, primarily to complete
the conversion of its core processing system with Alltel. These amounts have
been and will be included in the operating and capital budgets of Evergreen.
The costs and the timetable in which Evergreen plans to complete its Year 2000
readiness activities are based on management's best estimates, which were
derived using numerous assumptions of future events, including the continued
availability of certain resources, third party readiness plans and other
factors. Evergreen can make no guarantee that these estimates will be
achieved, and actual results could differ from such plans.
Evergreen has established business resumption plans for each of its mission
critical systems. These plans provide assurance of continued operation of any
one system or systems should they fail in the Year 2000. The business
resumption plans, or workarounds, for systems that fail on the first business
day or thereafter in the Year 2000 will provide continued support for mission
critical systems.
REGULATION AND SUPERVISION
GENERAL
As registered bank holding companies, Banknorth and Evergreen are subject to
regulation and examination by the FRB. Certain of the bank subsidiaries of
Banknorth and the sole bank subsidiary of Evergreen are organized as national
banking associations, which are subject to regulation, supervision and
examination by the OCC. In addition, certain of the bank subsidiaries of
Banknorth are organized as state-chartered, FDIC-insured, non-Federal Reserve
member banks, which are subject to regulation, supervision and examination by
the applicable state banking regulators and the FDIC. The following discussion
summarizes certain aspects of applicable banking laws and regulations.
The activities of Banknorth and Evergreen and those of companies which each
controls or in which either holds more than 5% of the voting stock are limited
to banking, managing or controlling banks, furnishing services to or
performing services for their subsidiaries or any other activity which the FRB
determines to be so
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closely related to banking or managing or controlling banks as to be a proper
incident thereto. In making such determinations, the FRB is required to
consider whether the performance of such activities by a bank holding company
or its subsidiaries can reasonably be expected to produce benefits to the
public such as greater convenience, increased competition or gains in
efficiency that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or
unsound banking practices. Generally, bank holding companies, such as
Banknorth and Evergreen, are required to obtain prior approval of the FRB to
engage in any new activity or to acquire more than 5% of any class of voting
stock of any company.
Bank holding companies are also required to obtain the prior approval of the
FRB before acquiring more than 5% of any class of voting stock of any bank
which is not already majority-owned by the bank holding company. With the
passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "INTERSTATE BANKING AND BRANCHING ACT"), bank holding companies
became able to acquire banks based outside their home states beginning
September 29, 1995, without regard to the permissibility of such acquisitions
under state law, but subject to any state requirement that the bank be
organized and have been operating for a minimum period of time, not to exceed
five years, and the requirement that the bank holding company control no more
than 10% of the total amount of insured deposits nationwide and no more than
30% of insured deposits in that state (or such lesser or greater amount set by
state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, thereby creating interstate branches. This provision,
which was effective June 1, 1997, allowed each state, prior to the effective
date, the opportunity to "opt out" of this provision, thereby prohibiting
interstate branching within that state. None of the states in which the
banking subsidiaries of Banknorth and Evergreen are located have "opted out"
of interstate branching. In addition, under the Interstate Banking and
Branching Act, a bank is now able to open new branches in a state in which it
does not already have banking operations if such state enacts a law permitting
such de novo branching. None of the four states in which Banknorth and
Evergreen currently operate (Massachusetts, New Hampshire, New York and
Vermont) has adopted legislation permitting de novo interstate branching, but
all of such states except New Hampshire permit the acquisition of existing
branches by an out-of-state bank or bank holding company. Banknorth regularly
evaluates merger and acquisition opportunities, and it anticipates that it
will continue to evaluate such opportunities in light of this legislation.
Bank holding companies and their affiliates are subject to certain
restrictions under the Federal Reserve Act regarding, among other things,
extensions of credit, transfers of assets, and purchases of services among
affiliated parties. Further, under the Federal Reserve Act and FRB
regulations, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with extensions of
credit or furnishing of property or services to third parties.
Proposals to change the laws and regulations governing the banking industry
are frequently introduced in Congress, in state legislatures and before the
various bank regulatory agencies. A significant financial modernization bill
(H.R. 10) was introduced during the last session of Congress but failed to
pass. While it is likely that a financial modernization bill will be
introduced when Congress reconvenes next year, the terms of any such
legislative proposals or their likelihood or timing of passage, and if
enacted, the impact they might have on Banknorth, Evergreen, or their
subsidiaries, cannot be predicted with any certainty.
BANK SUBSIDIARIES
Evergreen's sole commercial bank subsidiary, four of Banknorth's seven
commercial bank subsidiaries, and Banknorth's trust and investment management
subsidiary are organized as national banks regulated and supervised by the
OCC. Three of Banknorth's subsidiary banks are organized as Vermont-chartered,
nonmember commercial banks, which are regulated and supervised under
applicable federal and state laws by the FDIC and the Vermont Commissioner.
The various laws and regulations administered by the OCC, the FDIC and the
Vermont Commissioner affect the corporate practices of the subsidiary banks,
such as payment of dividends, incurring of debt and acquisition of financial
institutions and other companies, and affect their business practices, such as
payment of interest on deposits, the charging of interest on loans, the types
of business conducted and
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the location of offices. There are no regulatory orders resulting from
regulatory examinations of any of the subsidiary banks of Banknorth or
Evergreen.
DIVIDEND LIMITATIONS
The ability of Banknorth and of Evergreen to pay dividends to their
shareholders is largely dependent on the ability of their respective
subsidiaries to pay dividends to them. Payment of dividends by Vermont-
chartered banks is subject to applicable state and federal laws; payment of
dividends by national banks is subject to applicable federal law. National
banks must obtain the approval of the OCC for the payment of dividends if the
total of all dividends declared in any calendar year would exceed the total of
the bank's net profits (as defined by applicable law) for that year, combined
with its retained net profits for the preceding two years. Furthermore, a
national bank may not pay a dividend in an amount greater than its undivided
profits then on hand after deducting its losses and bad debts, as defined by
applicable law.
In addition, the FRB, the OCC, the FDIC and the Vermont Commissioner are
authorized under applicable federal and state law to determine under certain
circumstances that the payment of dividends would be an unsafe or unsound
practice and to prohibit payment of such dividends. The payment of dividends
that deplete a bank's or bank holding company's capital base, or render it
illiquid, could be deemed to constitute such an unsafe or unsound practice.
The FRB, the FDIC, and the OCC have each indicated that banking organizations
should generally pay dividends only out of current operating earnings.
Certain information about the dividend paying capacity of the bank
subsidiaries of Banknorth under applicable banking laws is set forth under the
caption "INFORMATION ABOUT BANKNORTH--Dividend Restrictions."
CAPITAL REQUIREMENTS
The FRB, the FDIC, and the OCC have issued substantially similar risk-based
and leverage capital guidelines for United States banking organizations. In
addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels, whether
because of its financial condition or actual or anticipated growth. The FRB's
risk-based capital guidelines define a two-tier capital framework and specify
three relevant capital ratios: Tier 1 Capital Ratio, a Total Capital Ratio and
a "Leverage Ratio." "Tier 1 Capital" consists of common and qualifying
preferred shareholders' equity, less certain intangibles and other
adjustments. "Tier 2 Capital" consists of subordinated and other qualifying
debt, and the allowance for credit losses up to 1.25% of risk-weighted assets.
The sum of Tier 1 Capital and Tier 2 Capital, less investments in
unconsolidated subsidiaries, represents qualifying "Total Capital," at least
50% of which must consist of Tier 1 Capital. Risk-based capital ratios are
calculated by dividing Tier 1 Capital and Total Capital by risk-weighted
assets. Assets and off-balance sheet exposures are assigned to one of four
categories or risk weights, based primarily on relative credit risk. The
minimum Tier 1 Capital Ratio is 4% and the minimum Total Capital Ratio is 8%.
The Leverage Ratio is determined by dividing Tier 1 Capital by adjusted
average total assets. Although the stated minimum Leverage Ratio is 3%, most
banking organizations are required to maintain Leverage Ratios of at least 1
to 2 percentage points above 3%.
FRB policy provides that banking organizations generally, and, in
particular, those that are experiencing internal growth or actively making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels, without significant
reliance on intangible assets. Furthermore, the capital guidelines indicate
that the FRB will continue to consider a "Tangible Tier 1 Leverage Ratio" in
evaluating proposals for expansion or new activities. The Tangible Tier 1
Leverage Ratio is calculated by dividing a banking organization's Tier 1
Capital less all intangible assets by its total consolidated quarterly average
assets less all intangible assets.
The FRB's capital adequacy guidelines generally provide that bank holding
companies with a ratio of intangible assets to tangible Tier 1 Capital in
excess of 25% will be subject to close scrutiny for certain purposes,
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including the FRB's evaluation of acquisition proposals. At September 30,
1998, Banknorth's ratio of intangible assets to tangible Tier 1 Capital was
13.7%. On a pro forma basis as of September 30, 1998, after giving effect to
both the Berkshire Acquisition and the Merger with Evergreen (which has no
significant recorded intangible assets), Banknorth's ratio of intangible
assets to tangible Tier 1 Capital would be 32.2%. Although no assurance can be
given as to Banknorth's future results of operations or financial performance,
it is expected that such ratio will decline thereafter as goodwill is
amortized and tangible capital is increased through earnings in future
periods. The FRB considered the effect of the Berkshire Acquisition on
Banknorth in evaluating the Merger and has not imposed any special capital
adequacy conditions on Banknorth in connection with its approval of the
Merger.
Banking agencies have also adopted final regulations which mandate that
regulators take into consideration concentrations of credit risk and risks
from nontraditional activities, as well as an institution's ability to manage
those risks, when determining the adequacy of an institution's capital. That
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have adopted final regulations
requiring regulators to consider interest rate risk (when the interest rate
sensitivity of an institution's assets does not match the sensitivity of its
liabilities or its off-balance sheet position) in the determination of a
bank's capital adequacy. Concurrently, banking agencies have proposed a
methodology for evaluating interest rate risk. After gaining experience with
the proposed measurement process, those banking agencies intend to propose
further regulations to establish an explicitly risk-based capital charge for
interest rate risk.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and requires the respective federal banking agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines
could also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became undercapitalized
or the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires
the various federal banking agencies to prescribe certain noncapital standards
for safety and soundness related generally to operations and management, asset
quality and executive compensation, and permits regulatory action against a
financial institution that does not meet such standards.
The various federal banking agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA,
using the Total Capital, Tier 1 Capital Ratio and the Leverage Ratio as the
relevant capital measures. Such regulations establish various degrees of
corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least
10% and a leverage ratio of at least 5% and not be subject to a capital
directive order. An "adequately capitalized" institution must have a Tier 1
capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases.
As of September 30, 1998, Banknorth, Evergreen and each of their respective
commercial bank subsidiaries were deemed "well capitalized" under applicable
regulatory guidelines. As of such date, the regulatory capital ratios of
Evergreen and Banknorth were as follows:
<TABLE>
<CAPTION>
BANKNORTH EVERGREEN
--------- ---------
<S> <C> <C>
Total Capital Ratio......................................... 12.04% 14.79%
Tier 1 Capital Ratio........................................ 10.79% 13.53%
Leverage Ratio.............................................. 8.06% 8.05%
</TABLE>
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Following completion of the Berkshire Acquisition on November 13 but prior
to consummation of the Merger, based on September 30, 1998 estimates,
Banknorth's Tier 1 Capital Ratio and its Leverage Ratio continue to exceed
"well capitalized" levels, but its Total Capital Ratio has temporarily fallen
to 9.03%, below the 10% level required of "well capitalized" institutions.
However, based on the respective capital accounts and balance sheet
composition of Banknorth and Evergreen, it is expected that, assuming
completion of the Merger and giving effect to the Berkshire Acquisition, the
Combined Company would have capital ratios, on a pro forma basis as of
September 30, 1998, in excess of "well capitalized" levels. In addition, on a
pro forma basis as of September 30, 1998 after giving effect to the Berkshire
Acquisition, Banknorth's Massachusetts-based subsidiary, First Massachusetts
Bank, N.A., continues to exceed the "well capitalized" benchmarks for its Tier
1 Capital Ratio and its Leverage Ratio, but its Total Capital Ratio has
temporarily fallen to 8.13%, below the 10% level required for an institution
to be deemed "well capitalized." Although no assurance can be given due to the
number of variables that affect financial performance and operations (many of
which are outside Banknorth's control), Banknorth expects that First
Massachusetts Bank, N.A.'s Leverage Ratio will be restored to the 10% level
required for "well capitalized" institutions within approximately fifteen (15)
months following completion of the Berkshire Acquisition.
The capital ratios of Banknorth, Evergreen and their respective subsidiaries
are subject to change prior to the Effective Time due to a number of factors,
including the performance of Banknorth and Evergreen between September 30,
1998 and the Effective Time.
COMMUNITY REINVESTMENT ACT
The subsidiary banks of Banknorth and Evergreen are subject to the federal
Community Reinvestment Act ("CRA"), which requires banks to demonstrate their
commitment to serving the credit needs of low and moderate income residents of
their communities. Each of the subsidiary banks participates in a variety of
direct and indirect lending programs and other investments for the benefit of
the low and moderate income residents of their respective communities. Each of
the subsidiary banks of Banknorth and Evergreen received a rating of
"Outstanding" or "Satisfactory" at its last CRA examination conducted by its
federal banking regulatory, except for First Massachusetts Bank, N.A., which
was chartered in 1996 and is scheduled for its first CRA compliance
examination in the fourth quarter of 1999.
DEPOSIT INSURANCE PREMIUM ASSESSMENTS
Under applicable federal laws and regulations, deposit insurance premium
assessments to the Bank Insurance Fund ("BIF") and the Savings Association
Insurance Fund ("SAIF") are based on a supervisory risk rating system, with
the most favorably rated institutions payment no premiums. The deposits of
each of the subsidiary banks of Banknorth and Evergreen are insured under the
BIF. As "well capitalized" institutions, each such subsidiary bank is
presently in the most favorable deposit insurance assessment category, and
pays no deposit premium assessment. Following the Merger and completion of the
Berkshire Acquisition, it is anticipated that the premium assessment rates of
the Combined Company's banking subsidiaries will remain unchanged, except for
the assessment rate of First Massachusetts Bank, N.A., which will temporarily
fall into the "adequately capitalized" deposit premium assessment category.
Payment of deposit premiums will not have a material impact on First
Massachusetts Bank, N.A., Banknorth or the Combined Company.
"SOURCE OF STRENGTH" POLICY
According to FRB policy, bank holding companies are expected to act as a
source of financial strength to each subsidiary bank and to commit resources
to support each such subsidiary. This support may be required at times when a
bank holding company may not have the resources to provide such support.
Similarly, under the cross-guarantee provisions of the Federal Deposit
Insurance Act, in the event of a loss suffered or anticipated by the FDIC--
either as a result of a banking subsidiary or related to FDIC assistance
provided to a subsidiary in danger of default--the other banking subsidiaries
of such bank holding company may be assessed for the FDIC's loss, subject to
certain exceptions.
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COMPARISON OF RIGHTS OF SHAREHOLDERS
GENERAL
Both Banknorth and Evergreen are Delaware corporations, and the holders of
voting common stock of the respective corporations are subject to the same
privileges and restrictions under the DCL as will be the shareholders of the
Combined Company following the Merger. However, there are certain differences
in corporate governance procedures for Evergreen and Banknorth under their
respective Certificates of Incorporation and Bylaws. Because Banknorth will be
the surviving corporate entity in the Merger, the rights of Evergreen
Shareholders will, from and after the Effective Time, be governed by
Banknorth's Certificate of Incorporation and Bylaws and by the DCL.
The following paragraphs briefly summarize material differences that will
exist between the rights of shareholders of Evergreen and Banknorth (including
the Combined Company). The description does not purport to be a complete
statement of all the differences between the rights of shareholders of
Evergreen and Banknorth, and the identification of certain differences is not
meant to indicate that other differences do not exist. The following summary
is qualified in its entirety by reference to the DCL and to the text of
Banknorth's and Evergreen's respective Certificates of Incorporation and
Bylaws. A copy of such Certificates of Incorporation and Bylaws may be
obtained by contacting Evergreen or Banknorth, as the case may be, at the
address or telephone number shown under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
AUTHORIZED CAPITAL STOCK
Common Stock. Under its Certificate of Incorporation, Banknorth is
authorized to issue 70,000,000 shares of Banknorth Common Stock, par value
$1.00 per share, 15,656,985 shares of which were issued and outstanding as of
November 5, 1998. Evergreen is authorized under its Certificate of
Incorporation to issue 20,000,000 shares of Evergreen Common Stock, par value
$3.33 1/3 per share, 8,741,115 shares of which were issued and outstanding as
of November 5, 1998. Both Banknorth's and Evergreen's respective Boards of
Directors may, subject to applicable law and rules of the NASD, authorize the
issuance of additional Common Stock at such times, for such purposes and for
such consideration as they may deem advisable without further shareholder
approval.
Based on (i) the number of shares of Banknorth Common Stock and Evergreen
Common Stock outstanding as of November 5, 1998, (ii) the number of shares of
Evergreen Common Stock and Banknorth Common Stock to be reissued to cure
tainted treasury shares to ensure pooling of interests accounting treatment
for the Merger, and (iii) the number of shares of such Common Stock reserved
for issuance under employee benefit plans which will be maintained by the
Combined Company after the Merger (all as adjusted to reflect the Conversion
Ratio, in the case of Evergreen Common Stock), at the Effective Time there
will be approximately 23,551,000 shares of Banknorth Common Stock outstanding
and approximately 2,300,000 shares of Banknorth Common Stock reserved for
issuance following the Merger under Banknorth's employee benefit plans.
Preferred Stock. Banknorth is authorized to issue, without further
shareholder approval, up to 500,000 shares of preferred stock, par value $0.01
per share, issuable in one or more series, none of which is issued and
outstanding as of the date hereof. Evergreen is authorized to issue 500,000
shares of preferred stock, par value $10.00 per share, issuable in one or more
series, none of which is issued and outstanding as of the date hereof. The
Board of Directors of each of Banknorth and Evergreen may, subject to
applicable law and rules of the NASD, authorize the issuance of preferred
stock at such times, for such purposes and for such consideration as they may
deem advisable without further shareholder approval. Under the terms of the
respective Certificates of Incorporation of Banknorth and Evergreen the Board
of Directors has authority at any time to divide any or all of the authorized
but unissued shares of preferred stock into one or more series and to
determine the designations, number of shares, relative rights, preferences and
limitations of any such series.
Because of the broad discretion vested in the Boards of Directors of
Banknorth and Evergreen with respect to the issuance of Common Stock and the
creation and issuance of series preferred stock without shareholder
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approval, the respective Boards of Directors could adversely affect the voting
power of holders of Common Stock or preferred stock and could discourage any
attempt to gain control of Evergreen or Banknorth, as the case may be, through
dilutive stock issuances or through the issuance of preferred stock with
certain voting, conversion and/or redemption rights.
Both Banknorth and Evergreen have adopted Rights Plans which, upon the
occurrence of certain events, could result in a dilutive issuance of preferred
and/or Common Stock. See "--Shareholder Rights Plans."
AMENDMENT OF CERTIFICATE OF INCORPORATION
Banknorth's Certificate of Incorporation provides that the Certificate of
Incorporation may be amended or repealed at any regular or special meeting of
shareholders by the affirmative vote of the holders of a majority of Banknorth
Common Stock, unless a greater vote is required by law or otherwise required
in the Certificate of Incorporation. However, certain provisions of
Banknorth's Certificate of Incorporation, including those relating to the
number and classification of the Board of Directors and to certain
antitakeover protections, may not be repealed or amended unless (i) (a)
approved by the affirmative vote of holders of 80% of the outstanding voting
stock and (b) if there is then in existence an "Interested Shareholder" (as
defined below under the caption "--Fair Price Provisions"), the vote approving
any such amendment includes the affirmative vote of at least two thirds of the
outstanding shares of Banknorth Common Stock held by shareholders other than
the Interested Shareholder; or (ii) the amendment has been approved by at
least a majority of the Directors not affiliated with such Interested
Shareholder (as defined below under "Fair Price Provisions").
Evergreen's Certificate of Incorporation can be amended, altered, changed or
repealed, provided that any such amendment, alteration, change or repeal is
approved first by a majority vote of the outstanding Evergreen Common Stock.
Amending certain provisions of Evergreen's Certificate of Incorporation,
including those relating to the number, classification and removal of
directors and to certain antitakeover protections involving certain business
combinations, requires the approval of 80% of the outstanding Evergreen Common
Stock.
ELECTION OF DIRECTORS
The Bylaws of Banknorth provide for election of the directors by the
affirmative vote of at least a majority of the shares represented in person or
by proxy at a meeting of shareholders. The Bylaws of Evergreen provide for the
election of directors by plurality vote.
BOARD OF DIRECTORS
The Certificate of Incorporation of Banknorth provides that the Board of
Directors shall consist of no more than 20 directors. The Certificate of
Incorporation of Evergreen provides that the Board of Directors shall consist
of not less than 5 nor more than 25 directors. The Bylaws of Banknorth and
Evergreen provide that the exact number of directors within the permissible
range will be established by the Board of Directors from time to time. In
addition, the respective Certificates of Incorporation of Banknorth and
Evergreen provide for division of the Board into 3 classes having staggered
terms of office.
REMOVAL OF DIRECTORS
Banknorth's Certificate of Incorporation provides that a director may be
removed from office only for cause and only by the affirmative vote of the
holders of at least a majority of the outstanding voting stock. If there is at
the time of such vote a holder of 10% or more of Banknorth's outstanding
voting stock, the removal vote must also include the affirmative vote of at
least a majority of the outstanding shares held by shareholders other than the
10% holder. The Certificate of Incorporation of Evergreen provides that a
director may be removed for cause at a special meeting of shareholders called
expressly for that purpose, by the affirmative vote of the holders of a
majority of shares entitled to vote in the election of directors. Cause is
defined in the Evergreen Bylaws as (1) conviction of a felony by a court of
competent jurisdiction, which conviction is no longer subject to direct appeal
or (2) adjudication by a court of competent jurisdiction as to liability for
negligence or misconduct in the
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performance of the director's duty to Evergreen in a matter of substantial
importance to Evergreen, which adjudication is no longer subject to direct
appeal. The Certificate of Incorporation of Evergreen also provides for
removal of a director without cause at a special meeting of shareholders
called expressly for that purpose, but only with the affirmative vote of
holders of at least 80% of the shares entitled to vote in the election of
directors. Directors of Banknorth may not be removed without cause.
AUTHORITY OF BOARD COMMITTEES
The Bylaws of Banknorth provide that a committee of the Board of Directors
may be appointed by vote of a majority of the directors present and voting at
a meeting of the Board at which a quorum is present. The Bylaws of Evergreen
provide that a committee of the Board of Directors may be appointed by the
affirmative vote of a majority of the directors then in office.
The Bylaws of Banknorth permit matters to be delegated to committees of the
Board, to the maximum extent permitted under 1996 amendments to Section 141(c)
of the DCL, including delegation of the power to designate rights and
preferences of series preferred stock. Under the Evergreen Bylaws, certain
matters may not be delegated to committees of the Board, including designation
of rights and preferences of series preferred shares.
SHAREHOLDER NOMINATIONS AND PROPOSALS
Banknorth's Bylaws provide that nominations by shareholders for election as
a director must be made in writing and delivered or mailed to the Clerk of
Banknorth not later than (i) 90 days prior to the anniversary date of the
immediately preceding annual meeting (but not earlier than 120 days prior to
such meeting), and (ii) with respect to an election to be held at a special
meeting of shareholders for the election of directors, the close of business
on the tenth day following the date on which notice of such meeting is first
given to shareholders. The notice must set forth (i) the name and address of
the shareholder who intends to make the nomination or proposal; (ii) the class
and number of shares of Banknorth stock held by the shareholder; (iii) a
description of all arrangements or understandings between the shareholder and
each nominee (if any) and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
shareholder; (iv) such other information regarding each nominee (if any)
proposed by such shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Commission; (v) the consent
of each nominee (if any) to serve as a director of Banknorth if so elected;
and (vi) in the case of proposals other than nominations, any material
interest of the shareholder in such business. If a shareholder fails to
observe the advance notification requirements, management of Banknorth may
exclude the shareholder nomination or proposal from consideration at the
shareholders' meeting, or may vote against such nominee or proposal pursuant
to discretionary authority granted in any proxies solicited by management for
such meeting.
Evergreen has in its Bylaws a substantially similar advance notice
provision, except that the notice of shareholder nomination or proposal must
be furnished at least 60 days prior to an annual meeting, or within 15 days
after the date of any notice of a special meeting.
SPECIAL MEETINGS
Under the Bylaws of both Banknorth and Evergreen, shareholders are not
authorized to call a special meeting. Banknorth's Bylaws provide that a
special meeting of the Banknorth Shareholders may be called at any time by the
Board of Directors or the President. Evergreen's Bylaws provide that a special
meeting of shareholders may be called at any time by the Board of Directors,
or by the Chairman of the Board, or by the President.
FAIR PRICE PROVISIONS
Banknorth's Certificate of Incorporation contains a fair price provision
which requires that certain business combination transactions involving a 10%
or more shareholder (or such shareholder's affiliates or associates)
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(each an "INTERESTED SHAREHOLDER") be authorized by the affirmative vote of
not less than 80% of the outstanding shares of Banknorth's voting stock, which
vote must include the affirmative vote of the holders of not less than two-
thirds of the outstanding shares of Banknorth's voting stock held by
shareholders other than the Interested Shareholder. However, these voting
requirements are not applicable in transactions in which: (i) the cash or fair
market value of the consideration to be received by holders of the common
stock in such transaction satisfies specified fairness criteria; or (ii) the
transaction is approved by at least a majority of the Directors not affiliated
with such Interested Shareholder. Evergreen's Certificate of Incorporation
contains a similar provision except that (i) the 80% vote requirement does not
contain any additional percentage approval requirement; (ii) the percentage of
shareholdings which triggers the provisions is set at 5%, rather than 10%; and
(iii) the supermajority vote may be overridden by the vote of at least 80% of
all of the directors then in office (whether or not affiliated with the 5% or
more shareholder).
Neither Banknorth nor Evergreen is aware of any shareholder which would be
considered an Interested Shareholder under the foregoing provisions.
CONSIDERATION OF NONECONOMIC FACTORS
Banknorth's Certificate of Incorporation provides that, in evaluating any
offer of another person to (i) purchase or exchange any securities or property
for any outstanding equity securities of Banknorth, (ii) merge or consolidate
Banknorth with another entity, or (iii) purchase or otherwise acquire all of
substantially all of the properties and assets of Banknorth, the Board of
Directors, in exercising its judgment in determining what is in the best
interests of Banknorth and its shareholders, shall give due consideration not
only to the price or other consideration being offered but also to all other
relevant factors, including without limitation, the financial and managerial
resources and future prospects of the other party and the possible effects on
the business of Banknorth and its subsidiaries and on the depositors, loan and
other customers, employees and the communities served by Banknorth and its
subsidiaries. In evaluating the Merger, the Banknorth Board considered the
foregoing factors, among others. See "THE MERGER--Reasons for the Merger;
Recommendations of the Board of Directors--Banknorth."
There is no comparable provision in Evergreen's Certificate of
Incorporation.
SHAREHOLDER RIGHTS PLANS
On November 27, 1990, Banknorth adopted a Rights Plan (the "BANKNORTH RIGHTS
PLAN") and declared a distribution of one Banknorth Right for each outstanding
share of Banknorth Common Stock to shareholders of record at the close of
business on December 7, 1990. Upon the occurrence of certain events, none of
which has occurred as of the date hereof, and subject to the terms and
conditions of the Banknorth Rights Plan, the Banknorth Rights may become
exercisable for shares of Banknorth preferred stock and/or Common Stock at a
substantial discount. The description and terms of the Banknorth Rights are
set forth in the Banknorth Rights Agreement, a copy of which was filed as an
Exhibit to Banknorth's Registration Statement on Form 8-A dated November 30,
1990, as amended on Form 8-A/A, dated September 4, 1998, which is incorporated
by reference herein. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
The Banknorth Rights have certain antitakeover effects. The Banknorth Rights
will cause substantial dilution to a person or group that attempts to acquire
Banknorth in a manner which causes the Banknorth Rights to be exercisable for
shares of Banknorth preferred and/or Common Stock on a discounted basis. The
Banknorth Rights, however, should not affect any prospective offeror willing
to make an offer at a fair price and otherwise in the best interests of
Banknorth and its shareholders as determined by the Banknorth Board. The
Banknorth Rights should not interfere with any merger or other business
combination approved by the Banknorth Board because the Banknorth Board may,
at its option, redeem all, but not less than all, of the then-outstanding
Banknorth Rights at the redemption price set forth in the Banknorth Rights
Agreement.
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On April 17, 1998, the Evergreen Board adopted the Evergreen Rights
Agreement and declared a distribution of one Evergreen Right for each
outstanding share of Evergreen Common Stock to shareholders of record at the
close of business on May 11, 1998. The Evergreen Rights operate in a manner
substantially similar to, and have substantially similar antitakeover effects
as, the Banknorth Rights. The description and terms of the Evergreen Rights
are set forth in the Evergreen Rights Agreement, a copy of which was filed as
an Exhibit to Evergreen's Registration Statement on Form 8-A dated May 7,
1998, which is incorporated by reference herein. See "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
In connection with the proposed Merger, Evergreen amended the Evergreen
Rights Agreement on July 31, 1998, so that the execution of the Agreement and
the Option Agreement and the consummation of the transactions contemplated
thereby do not, and will not, result in the grant of any Evergreen Rights to
any person under the Evergreen Rights Agreement or enable or require the
Evergreen Rights to be exercised, distributed or triggered. The Evergreen
Rights Agreement and the Evergreen Rights will terminate upon consummation of
the Merger
LIMITATION OF DIRECTOR LIABILITY
Both Banknorth's and Evergreen's respective Certificates of Incorporation
provide that no director shall be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (i) any breach of the director's duty of loyalty to the
corporation or its shareholders, (ii) acts or omissions which are not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) liability under Section 174 of the DCL (relating to unlawful
redemptions, dividends and other corporate distributions), or (iv) any
transaction from which the director derived an improper personal benefit.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of Banknorth and Evergreen provide for the indemnification of
directors and officers to the fullest extent permitted under the DCL and
contain substantially similar provisions which (i) set forth procedures for
submitting a claim for indemnification, (ii) establish indemnification as a
contractual right, (iii) require the corporation to advance expenses incurred
by a director or officer in defending a proceeding, (iv) require a director or
officer seeking advancement of expenses to deliver an undertaking to the
corporation to repay all amounts so advanced if such person is not entitled to
be indemnified, and (v) allow a person seeking indemnification to sue the
corporation to recover any amount which remains unpaid by the company within a
specified time period (30 days in the case of Banknorth and 60 days in the
case of Evergreen) after making an indemnification claim. In addition, the
Bylaws of both Banknorth and Evergreen permit indemnification of employees and
agents of Banknorth and Evergreen, respectively.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
present the condensed financial position of Banknorth and Evergreen as of
September 30, 1998, assuming that the Merger had occurred as of September 30,
1998, after giving effect to certain pro forma adjustments described in the
accompanying notes. The following unaudited pro forma condensed combined
statements of income for the nine months ended September 30, 1998 and years
ended December 31, 1997, 1996, and 1995 present the combined historical
results of operations of Banknorth and Evergreen as if the Merger had been
consummated as of the first day of the period presented. Pro forma earnings
per common share and weighted average common shares outstanding are based on
the Conversion Ratio. Both Banknorth's and Evergreen's fiscal years end
December, 31. The Berkshire Acquisition is not reflected in the unaudited pro
forma condensed combined financial statements since it does not meet the
definition of a significant business combination. The unaudited pro forma
condensed combined balance sheet at September 30, 1998 reflects estimated non
recurring charges of $21.0 million ($15.8 million after tax) that will be
incurred related to transition costs (investment banking, legal, accounting
and printing), severance and other employee termination costs, data processing
arrangements and facilities and other costs incidental to the merger. An
estimate of these costs is included in note 3 to the unaudited pro forma
condensed combined financial statements.
The unaudited pro forma condensed combined financial statements were
prepared giving effect to the Merger on the pooling-of-interests accounting
method. Under this method of accounting, the recorded assets, liabilities,
shareholders' equity, income, and expense of Banknorth and Evergreen are
combined and reflected at their historical amounts, except as noted in the
accompanying notes. All adjustments necessary to arrive at a fair presentation
of the combined financial condition and results of operations of Banknorth and
Evergreen in the opinion of the managements of the respective companies, have
been included and are of a normal recurring nature.
The Combined Company expects to achieve certain Merger benefits in the form
of operating expense reductions and revenue enhancements. The unaudited pro
forma condensed combined statements of income, which do not reflect any direct
merger costs (see note 3 to unaudited pro forma condensed combined financial
statements) or potential operating expense reductions or revenue enhancements
that are expected to result from the Merger, may not be indicative of the
results of future operations. No assurance can be given with respect to
ultimate level of operating expense reductions or revenue enhancements.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with, and are qualified in their entirety by, the
historical consolidated financial statements and notes thereto of Banknorth
and Evergreen, which are incorporated by reference herein. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION." The unaudited
pro forma condensed combined financial statements are presented for
informational purposes only. These statements are not necessarily indicative
of the combined financial position and results of operations that would have
occurred if the Merger had been consummated on September 30, 1998 or at the
beginning of the periods or that may be attained in the future.
75
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1998
---------------------------------------------------------
BANKNORTH
PRO FORMA EVERGREEN COMBINED
BANKNORTH EVERGREEN ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ------------------
(DOLLARS IN THOUSANDS)
ASSETS
<S> <C> <C> <C> <C>
Cash and due from
banks................. $ 80,107 $ 27,031 $ -- $ 107,138
Money market
investments........... 100 17,600 -- 17,700
---------- ---------- -------- ----------
Cash and cash
equivalents........... 80,207 44,631 -- 124,838
---------- ---------- -------- ----------
Securities available
for sale, at fair
value................. 739,057 339,637 -- 1,078,694
Loans held for sale.... 33,314 -- -- 33,314
Investment securities
held to maturity (fair
value of Banknorth
investment securities
held to maturity
$11,477 and fair value
of Evergreen
investment securities
held to maturity
$14,229).............. 11,081 13,308 -- 24,389
Loans.................. 1,993,477 681,089 -- 2,674,566
Less: allowance for
loan losses........... 29,433 12,313 -- 41,746
---------- ---------- -------- ----------
Net loans.............. 1,964,044 668,776 -- 2,632,820
---------- ---------- -------- ----------
Accrued interest
receivable............ 15,431 9,226 -- 24,657
Premises, equipment and
software, net......... 28,111 16,315 -- 44,426
Other real estate owned
and repossessed
assets................ 800 2,147 -- 2,947
Goodwill............... 27,002 153 -- 27,155
Capitalized mortgage
servicing rights...... 4,871 141 -- 5,012
Bank-owned life
insurance............. 41,737 -- -- 41,737
Other assets........... 24,273 8,630 5,200 (3) 38,103
---------- ---------- -------- ----------
Total assets........... $2,969,928 $1,102,964 $ 5,200 $4,078,092
---------- ---------- -------- ----------
LIABILITIES,
CORPORATION-OBLIGATED
MANDATORILY REDEEMABLE
CAPITAL SECURITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing... $ 338,210 $ 103,317 $ -- $ 441,527
NOW accounts & money
market savings........ 1,009,431 250,472 -- 1,259,903
Regular savings........ 173,464 127,021 -- 300,485
Time deposits $100
thousand and greater.. 96,669 141,532 -- 238,201
Time deposits under
$100 thousand......... 665,492 331,981 -- 997,473
---------- ---------- -------- ----------
Total deposits......... 2,283,266 954,323 -- 3,237,589
---------- ---------- -------- ----------
Short-term borrowed
funds:
Federal funds
purchased............. 22,400 -- -- 22,400
Securities sold under
agreements to
repurchase............ 169,303 8,291 -- 177,594
Borrowings from U.S.
Treasury.............. 14,646 4,111 -- 18,757
Borrowings from Federal
Home Loan Bank........ 131,000 -- -- 131,000
---------- ---------- -------- ----------
Total short-term
borrowed funds........ 337,349 12,402 -- 349,751
---------- ---------- -------- ----------
Long-term debt:
Federal Home Loan Bank
term notes............ 40,081 25,324 -- 65,405
Bank term loan......... 8,450 -- -- 8,450
---------- ---------- -------- ----------
Total long-term debt... 48,531 25,324 -- 73,855
---------- ---------- -------- ----------
Accrued interest
payable............... 4,491 3,398 -- 7,889
Other liabilities...... 22,554 17,237 21,000 (3) 60,791
---------- ---------- -------- ----------
Total liabilities...... 2,696,191 1,012,684 21,000 3,729,875
---------- ---------- -------- ----------
Corporation-obligated
mandatorily redeemable
capital securities 30,000 -- -- 30,000
Shareholders' equity:
Preferred stock........ -- -- -- --
Common stock........... 15,653 32,113 (24,273)(6) 23,493
Surplus................ 83,718 7,619 9,935 (6) 101,272
Retained earnings...... 149,892 64,046 (15,800)(3) 198,138
Unamortized employee
restricted stock...... (1,093) -- -- (1,093)
Accumulated other
comprehensive income.. 8,728 1,303 -- 10,031
Common stock subscribed
by ESOP............... -- (463) -- (463)
Common stock in
treasury, at cost..... (13,161) (14,338) 14,338 (6) (13,161)
---------- ---------- -------- ----------
Total shareholders'
equity................ 243,737 90,280 (15,800) 318,217
---------- ---------- -------- ----------
Total liabilities,
corporation-obligated
mandatorily redeemable
capital securities and
shareholders' equity.. $2,969,928 $1,102,964 $ 5,200 $4,078,092
========== ========== ======== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
76
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
---------------------------------------------------
BANKNORTH
PRO FORMA EVERGREEN COMBINED
BANKNORTH EVERGREEN ADJUSTMENTS PRO FORMA
--------- --------- ----------- ------------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on
loans..................... $134,627 $44,079 $ -- $178,706
Interest on money market
investments............... 563 588 -- 1,151
Interest on securities
available for sale........ 34,360 13,830 -- 48,190
Interest on investment
securities held to
maturity.................. 952 1,206 -- 2,158
-------- ------- ----- --------
Total interest income...... 170,502 59,703 -- 230,205
INTEREST EXPENSE:
Deposits................... 62,998 26,380 -- 89,378
Short-term borrowed funds.. 15,985 378 -- 16,363
Long-term debt............. 1,641 1,230 -- 2,871
-------- ------- ----- --------
Total interest expense..... 80,624 27,988 -- 108,612
-------- ------- ----- --------
NET INTEREST INCOME......... 89,878 31,715 -- 121,593
Less: provision for loan
losses.................... 5,525 1,485 -- 7,010
-------- ------- ----- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES.. 84,353 30,230 -- 114,583
-------- ------- ----- --------
OTHER OPERATING INCOME:
Income from trust and
investment management
fees...................... 6,906 2,141 -- 9,047
Service charges on deposit
accounts.................. 6,521 2,276 -- 8,797
Card product income........ 1,453 -- -- 1,453
Loan servicing income...... 1,011 197 -- 1,208
Gain on sale of servicing
rights.................... 386 -- -- 386
Net loan transactions...... 2,345 107 -- 2,452
Net securities
transactions.............. (243) 236 -- (7)
Bank owned life insurance.. 1,660 -- -- 1,660
Other income............... 4,613 1,022 -- 5,635
-------- ------- ----- --------
Total other operating
income.................... 24,652 5,979 -- 30,631
OTHER OPERATING EXPENSES:
Compensation............... 29,035 9,387 -- 38,422
Employee benefits.......... 6,590 2,980 -- 9,570
Net occupancy.............. 5,722 1,584 -- 7,306
Equipment and software..... 5,279 1,580 -- 6,859
Data processing............ 3,663 1,854 -- 5,517
FDIC deposit insurance and
other regulatory.......... 623 223 -- 846
Other real estate owned and
repossession.............. 465 52 -- 517
Legal and professional..... 3,270 498 -- 3,768
Printing and supplies...... 1,508 678 -- 2,186
Advertising and marketing.. 2,080 907 -- 2,987
Communications............. 1,785 406 -- 2,191
Amortization of goodwill... 3,917 47 -- 3,964
Capital securities......... 2,367 -- -- 2,367
Other expenses............. 7,579 2,943 -- 10,522
-------- ------- ----- --------
Total other operating
expenses.................. 73,883 23,139 -- 97,022
-------- ------- ----- --------
Income before income tax
expense.................... 35,122 13,070 -- 48,192
Income tax expense.......... 10,805 4,105 -- 14,910
-------- ------- ----- --------
NET INCOME.................. $ 24,317 $ 8,965 $ -- $ 33,282
======== ======= ===== ========
BASIC EARNINGS PER SHARE.... $ 1.58 $ 1.02 $ 1.43
======== ======= ========
BASIC WTD. AVG. NUMBER OF
SHARES OUTSTANDING......... 15,375 8,809 23,303
======== ======= ========
DILUTED EARNINGS PER SHARE.. $ 1.56 $ 1.00 $ 1.40
======== ======= ========
DILUTED WTD. AVG. NUMBER OF
SHARES OUTSTANDING......... 15,625 8,983 23,710
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
77
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
---------------------------------------------------------------------
BANKNORTH
PRO FORMA EVERGREEN COMBINED
BANKNORTH EVERGREEN ADJUSTMENTS PRO FORMA
--------------- -------------- ------------- --------------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on
loans................. $ 174,947 $ 58,692 $ -- $ 233,639
Interest on money
market investments.... 418 1,262 -- 1,680
Interest on securities
available for sale.... 41,103 14,113 -- 55,216
Interest on investment
securities held to
maturity.............. 2,038 2,409 -- 4,447
--------------- -------------- ----------- ---------------
Total interest income.. 218,506 76,476 -- 294,982
INTEREST EXPENSE:
Deposits............... 77,433 32,126 -- 109,559
Short-term borrowed
funds................. 20,477 307 -- 20,784
Long-term debt......... 1,414 1,652 -- 3,066
--------------- -------------- ----------- ---------------
Total interest
expense............... 99,324 34,085 -- 133,409
--------------- -------------- ----------- ---------------
NET INTEREST INCOME..... 119,182 42,391 -- 161,573
Less: provision for
loan losses........... 7,662 1,710 -- 9,372
--------------- -------------- ----------- ---------------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES............ 111,520 40,681 -- 152,201
--------------- -------------- ----------- ---------------
OTHER OPERATING INCOME:
Income from trust and
investment management
fees.................. 8,636 2,587 -- 11,223
Service charges on
deposit accounts...... 8,026 2,897 -- 10,923
Card product income.... 3,145 -- -- 3,145
Loan servicing income.. 2,514 63 -- 2,577
Net loan transactions.. 1,215 21 -- 1,236
Net securities
transactions.......... 258 9 -- 267
Other income........... 7,532 1,454 -- 8,986
--------------- -------------- ----------- ---------------
Total other operating
income................ 31,326 7,031 -- 38,357
OTHER OPERATING
EXPENSES:
Compensation........... 38,445 11,910 -- 50,355
Employee benefits...... 8,409 4,231 -- 12,640
Net occupancy.......... 7,880 2,356 -- 10,236
Equipment and
software.............. 7,162 2,001 -- 9,163
Data processing........ 4,972 2,381 -- 7,353
FDIC deposit insurance
and other regulatory.. 795 289 -- 1,084
Other real estate owned
and repossession...... 964 27 -- 991
Legal and
professional.......... 3,433 967 -- 4,400
Printing and supplies.. 2,273 864 -- 3,137
Advertising and
marketing............. 2,404 1,109 -- 3,513
Communications......... 2,420 486 -- 2,906
Amortization of
goodwill.............. 5,223 63 -- 5,286
Capital securities..... 2,104 -- -- 2,104
Other expenses......... 11,081 4,233 -- 15,314
--------------- -------------- ----------- ---------------
Total other operating
expenses.............. 97,565 30,917 -- 128,482
--------------- -------------- ----------- ---------------
Income before income tax
expense................ 45,281 16,795 -- 62,076
Income tax expense...... 14,792 5,468 -- 20,260
--------------- -------------- ----------- ---------------
NET INCOME.............. $ 30,489 $ 11,327 $ -- $ 41,816
=============== ============== =========== ===============
BASIC EARNINGS PER
SHARE.................. $ 1.95 $ 1.26 $ 1.76
=============== ============== ===============
BASIC WTD. AVG. NUMBER
OF SHARES OUTSTANDING.. 15,610 8,995 23,706
=============== ============== ===============
DILUTED EARNINGS PER
SHARE.................. $ 1.93 $ 1.24 $ 1.74
=============== ============== ===============
DILUTED WTD. AVG. NUMBER
OF SHARES OUTSTANDING.. 15,834 9,122 24,043
=============== ============== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
78
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
--------------------------------------------------
BANKNORTH
PRO FORMA EVERGREEN COMBINED
BANKNORTH EVERGREEN ADJUSTMENTS PRO FORMA
--------- --------- ----------- ------------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on
loans.................... $158,734 $56,794 $ -- $215,528
Interest on money market
investments.............. 806 816 -- 1,622
Interest on securities
available for sale....... 27,460 11,336 -- 38,796
Interest on investment
securities held to
maturity................. 3,008 1,587 -- 4,595
-------- ------- ----- --------
Total interest income... 190,008 70,533 -- 260,541
INTEREST EXPENSE:
Deposits.................. 70,618 27,564 -- 98,182
Short-term borrowed
funds.................... 7,913 181 -- 8,094
Long-term debt............ 2,609 1,604 -- 4,213
-------- ------- ----- --------
Total interest expense.. 81,140 29,349 -- 110,489
-------- ------- ----- --------
NET INTEREST INCOME......... 108,868 41,184 -- 150,052
Less: provision for loan
losses................... 5,600 1,440 -- 7,040
-------- ------- ----- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES.. 103,268 39,744 -- 143,012
-------- ------- ----- --------
OTHER OPERATING INCOME:
Income from trust and
investment management
fees..................... 7,835 2,382 -- 10,217
Service charges on deposit
accounts................. 6,558 2,812 -- 9,370
Card product income....... 3,029 -- -- 3,029
Loan servicing income..... 2,752 87 -- 2,839
Net loan transactions..... 1,629 -- -- 1,629
Net securities
transactions............. 31 (6) -- 25
Other income.............. 3,469 1,112 -- 4,581
-------- ------- ----- --------
Total other operating
income................. 25,303 6,387 -- 31,690
OTHER OPERATING EXPENSES:
Compensation.............. 35,823 11,615 -- 47,438
Employee benefits......... 8,272 4,426 -- 12,698
Net occupancy............. 7,193 2,009 -- 9,202
Equipment and software.... 6,661 1,856 -- 8,517
Data processing........... 4,584 2,421 -- 7,005
FDIC deposit insurance and
other regulatory......... 461 189 -- 650
Other real estate owned
and repossession......... 471 (86) -- 385
Legal and professional.... 3,589 927 -- 4,516
Printing and supplies..... 3,246 819 -- 4,065
Advertising and
marketing................ 2,748 1,133 -- 3,881
Communications............ 2,354 440 -- 2,794
Amortization of goodwill.. 4,652 63 -- 4,715
Other expenses............ 11,146 4,331 -- 15,477
-------- ------- ----- --------
Total other operating
expenses............... 91,200 30,143 -- 121,343
-------- ------- ----- --------
Income before income tax
expense.................... 37,371 15,988 -- 53,359
Income tax expense.......... 11,981 5,675 -- 17,656
-------- ------- ----- --------
NET INCOME.................. $ 25,390 $10,313 $ -- $ 35,703
======== ======= ===== ========
BASIC EARNINGS PER SHARE.... $ 1.66 $ 1.12 $ 1.51
======== ======= ========
BASIC WTD. AVG. NUMBER OF
SHARES OUTSTANDING......... 15,320 9,229 23,627
======== ======= ========
DILUTED EARNINGS PER SHARE.. $ 1.64 $ 1.11 $ 1.50
======== ======= ========
DILUTED WTD. AVG. NUMBER OF
SHARES OUTSTANDING......... 15,469 9,324 23,861
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
79
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------
BANKNORTH
PRO FORMA EVERGREEN COMBINED
BANKNORTH EVERGREEN ADJUSTMENTS PRO FORMA
--------------- -------------- ------------- --------------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on
loans................. $ 125,408 $ 52,971 $ -- $ 178,379
Interest on money
market investments.... 562 1,378 -- 1,940
Interest on securities
available for sale.... 9,255 10,521 -- 19,776
Interest on investment
securities held to
maturity.............. 17,399 2,301 -- 19,700
--------------- -------------- ----------- ---------------
Total interest income.. 152,624 67,171 -- 219,795
INTEREST EXPENSE:
Deposits............... 53,089 26,166 -- 79,255
Short-term borrowed
funds................. 9,017 532 -- 9,549
Long-term debt......... 5,874 874 -- 6,748
--------------- -------------- ----------- ---------------
Total interest
expense............... 67,980 27,572 -- 95,552
--------------- -------------- ----------- ---------------
NET INTEREST INCOME..... 84,644 39,599 -- 124,243
Less: provision for
loan losses........... 4,375 1,800 -- 6,175
--------------- -------------- ----------- ---------------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES............ 80,269 37,799 -- 118,068
--------------- -------------- ----------- ---------------
OTHER OPERATING INCOME:
Income from trust and
investment management
fees.................. 7,426 2,213 -- 9,639
Service charges on
deposit accounts...... 5,081 2,791 -- 7,872
Card product income.... 2,789 -- -- 2,789
Loan servicing income.. 2,701 105 -- 2,806
Net loan transactions.. 568 1 -- 569
Net securities
transactions.......... (409) (137) -- (546)
Other income........... 2,754 1,251 -- 4,005
--------------- -------------- ----------- ---------------
Total other operating
income................ 20,910 6,224 -- 27,134
OTHER OPERATING
EXPENSES:
Compensation........... 28,316 12,169 -- 40,485
Employee benefits...... 6,489 3,640 -- 10,129
Net occupancy.......... 5,487 2,017 -- 7,504
Equipment and
software.............. 5,519 1,852 -- 7,371
Data processing........ 4,629 2,092 -- 6,721
FDIC deposit insurance
and other regulatory.. 2,062 1,245 -- 3,307
Other real estate owned
and repossession...... 520 781 -- 1,301
Legal and
professional.......... 2,723 1,479 -- 4,202
Printing and supplies.. 1,915 1,038 -- 2,953
Advertising and
marketing............. 2,029 1,063 -- 3,092
Communications......... 1,497 443 -- 1,940
Amortization of
goodwill.............. 632 63 -- 695
Other expenses......... 8,771 4,718 -- 13,489
--------------- -------------- ----------- ---------------
Total other operating
expenses.............. 70,589 32,600 -- 103,189
--------------- -------------- ----------- ---------------
Income before income tax
expense................ 30,590 11,423 -- 42,013
Income tax expense...... 8,217 3,043 -- 11,260
--------------- -------------- ----------- ---------------
NET INCOME.............. $ 22,373 $ 8,380 $ -- $ 30,753
=============== ============== =========== ===============
BASIC EARNINGS PER
SHARE.................. $ 1.65 $ 0.89 $ 1.40
=============== ============== ===============
BASIC WTD. AVG. NUMBER
OF SHARES OUTSTANDING.. 13,546 9,430 22,033
=============== ============== ===============
DILUTED EARNINGS PER
SHARE.................. $ 1.64 $ 0.88 $ 1.39
=============== ============== ===============
DILUTED WTD. AVG. NUMBER
OF SHARES OUTSTANDING.. 13,636 9,490 22,177
=============== ============== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
80
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(1) The accompanying unaudited pro forma condensed combined financial
statements were prepared assuming that the Merger had been consummated as
of September 30, 1998 relative to the unaudited pro forma condensed
combined balance sheet and as of the first day of the respective periods
presented relative to the unaudited pro forma condensed combined
statements of income. The unaudited pro forma condensed combined financial
statements were prepared giving effect to the Merger on the pooling-of-
interests accounting method.
(2) Pro forma earnings per common share (EPS) have been calculated based on
the applicable weighted average number of shares of Banknorth Common Stock
used in the Banknorth earnings per share (EPS) calculations plus
additional shares of Banknorth Common Stock assumed to be issued in the
Merger in exchange for outstanding Evergreen Common Stock based on the
Conversion Ratio of 0.9.
To the extent cash is paid to Evergreen Shareholders in lieu of fractional
shares, pro forma combined common shares outstanding and common
shareholders' equity would be reduced. The respective managements expect
that cash will be paid to Evergreen Shareholders in lieu of issuing
fractional shares for an immaterial number of Evergreen shares and,
accordingly, such shares have not been excluded from the pro forma data.
(3) The unaudited pro forma condensed combined balance sheet at September 30,
1998 reflects anticipated merger and integration costs, which are
presently estimated to total approximately $21.0 million before taxes and
$15.8 million after taxes. Anticipated merger and integration cost
estimates are not included in the unaudited pro forma condensed combined
statements of income for any of the periods presented. The following table
provides details of the estimated range of merger and integration costs by
type:
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
TYPE OF COST PRE-TAX RANGE AFTER TAX RANGE
------------ ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Transaction costs, including
investment banking, legal,
accounting and printing.......... $ 5,500 - $ 6,000 $ 5,500 - $ 6,000
Costs to Combine Operations:
. Severance and other employee
termination costs............... 6,800 - 7,500 4,650 - 5,125
. Data processing arrangements and
facilities...................... 5,500 - 6,000 3,475 - 3,800
. Other costs incidental to the
Merger.......................... 2,000 - 2,500 1,300 - 1,625
------- ------- ------- -------
Total........................... $19,800 - $22,000 $14,925 - $16,550
======= ======= ======= =======
</TABLE>
The entry to record the anticipated merger and integration costs on the
unaudited pro forma condensed combined balance sheet is:
<TABLE>
<S> <C> <C>
Current tax receivable............................... $ 5,200,000
Retained earnings.................................... $15,800,000
Other liabilities.................................. $21,000,000
</TABLE>
The pro forma financial statements do not reflect potential expense
reductions or revenue enhancements expected to be realized subsequent to
consummation of the Merger.
(4) Pro forma entry to retire treasury stock held by Evergreen (approximately
923,019 shares having a par value of $3.33 1/3 per share):
<TABLE>
<S> <C> <C>
Common Stock......................................... $ 3,077,000
Surplus.............................................. 11,261,000
Treasury stock..................................... $14,338,000
</TABLE>
81
<PAGE>
(5) Pro forma entry to issue 0.9 shares of Banknorth Common Stock in exchange
for each share of Evergreen Common Stock. The par value of Banknorth
Common Stock to be issued as of September 30, 1998, is determined as
follows:
<TABLE>
<S> <C>
Banknorth Group, Inc. common shares............................ 15,653,296
Evergreen Bancorp, Inc. common shares issued, after retirement
of treasury stock (8,710,947 common shares times Conversion
Ratio of 0.9)................................................. 7,839,852
-----------
Combined pro forma total common shares issued.................. 23,493,148
Par value per common share..................................... $ 1.00
-----------
Combined pro forma total par value............................. $23,493,000
</TABLE>
Actual par value of common stock at September 30, 1998:
<TABLE>
<S> <C> <C>
Banknorth Group, Inc................................ $15,653,000
Evergreen Bancorp, Inc. (after retirement of
treasury shares, see
note 4)............................................ 29,036,000 $44,689,000
----------- -----------
Required decrease in par value...................... $21,196,000
===========
Entry to record decrease in par value:
Common stock........................................ $21,196,000
Surplus........................................... $21,196,000
</TABLE>
(6) Summary of the pro forma entries in notes (4) and (5) above:
<TABLE>
<S> <C> <C>
Common Stock......................................... $24,273,000
Surplus............................................ $ 9,935,000
Treasury stock..................................... $14,338,000
</TABLE>
(7) Authorized, issued and outstanding share information is as follows at
September 30, 1998.
<TABLE>
<CAPTION>
BANKNORTH/EVERGREEN
BANKNORTH EVERGREEN PRO FORMA COMBINED
Preferred ----------- ---------- -------------------
<S> <C> <C> <C>
Authorized................... 500,000 -- 500,000
Issued and Outstanding....... -- -- --
Common
Par value.................... $1.00 $3.33 1/3 $1.00
Authorized................... 70,000,000 20,000,000 70,000,000
Issued....................... 15,653,296 8,710,947 23,493,148(A) (B)
Outstanding.................. 15,246,296 8,710,947 23,086,148(B)
</TABLE>
(A) Does not include Evergreen shares held in Treasury, which will be
retired upon consummation of the Merger.
(B) Does not include the effect of any reissuance of Banknorth treasury
stock subsequent to September 30, 1998. See also note 8.
(8) In order to meet the requirements for the pooling-of-interests accounting
method, approximately 56,280 Banknorth and/or Evergreen treasury shares
have been reissued since September 30, 1998 in connection with the
exercise of employee stock options. The unaudited pro forma condensed
combined financial statements do not reflect the effect of the reissuance
of these treasury shares.
82
<PAGE>
LEGAL OPINION
Certain legal matters relating to the issuance of the shares of Banknorth
Common Stock offered hereby will be passed upon by Primmer & Piper, P.C.,
counsel to Banknorth.
EXPERTS
The audited consolidated financial statements of Banknorth as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, incorporated by reference herein, have been incorporated by
reference herein from Banknorth's Annual Report on Form 10-K for the year
ended December 31, 1997 in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP refers to a change in method of accounting for
mortgage servicing rights effective January 1, 1996.
The audited consolidated financial statements of Evergreen as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, incorporated by reference herein, have been incorporated
herein by reference from Evergreen's Annual Report on Form 10-K for the year
ended December 31, 1997, in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
Representatives of the independent public accountants of Banknorth and
Evergreen are expected to be present at the respective Special Meetings. In
such case, such representatives will have the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS
Banknorth. Shareholders of Banknorth (or the Combined Company) who wish to
include in the Company's 1999 annual meeting proxy statement any proposals for
consideration at the 1999 Annual Meeting of the Shareholders of Banknorth (or
the Combined Company) are hereby advised that any such proposals must be
received by the Secretary of Banknorth (or the Combined Company) no later than
the close of business on November 29, 1998 in order to be considered for
inclusion.
Under the Banknorth Advance Notice Bylaw, a shareholder of Banknorth (or the
Combined Company) must furnish timely written notice to the Banknorth
Corporate Secretary if such shareholder intends to present any nominations for
director or proposals for consideration of other business at such Annual
Meeting. In order to be timely for presentation at the Banknorth 1999 Annual
Meeting, appropriate notice containing the information specified in the
Banknorth Advance Notice Bylaw must have been received by the Banknorth
Corporate Secretary on or before February 11, 1999, but no earlier than
January 12, 1998. Failure to provide the required notice will permit
management of Banknorth to exclude such nomination or other proposal from
consideration at the meeting, or to vote against such nominee or proposal
pursuant to the discretionary authority granted in the proxies for such
meeting, as management may deem appropriate.
Evergreen. Evergreen will hold a 1999 Annual Meeting of Evergreen
Shareholders only if the Merger is not consummated before the time of such
meeting. If such a meeting is held, any proposals of Evergreen Shareholders
intended to be included in the proxy materials for the 1999 Evergreen Annual
Meeting must have been received by the Secretary of Evergreen no later than
December 4, 1998 in order to be considered for inclusion.
If the 1999 Evergreen Annual Meeting of Shareholders is held, under the
Evergreen Advance Notice Bylaw, a holder of Evergreen Common Stock must
furnish timely notice to the Evergreen Corporate Secretary if such
83
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shareholder intends to present any nominations for director or proposals for
consideration of other business at such Annual Meeting. In order to be timely
for presentation at the Evergreen 1999 Annual Meeting (if held), appropriate
notice containing the information specified in the Evergreen Advance Notice
Bylaw must be furnished on or before March 8, 1999. Failure to provide the
required notice will permit management of Evergreen to exclude such nomination
or other proposal from consideration at the meeting, or to vote against such
nominee or proposal pursuant to the discretionary authority granted in the
proxies for such meeting, as management may deem appropriate. See "COMPARISON
OF RIGHTS OF SHAREHOLDERS--Shareholder Nominations and Proposals."
OTHER MATTERS
As of the date of this Prospectus/Joint Proxy Statement, the Banknorth Board
and the Evergreen Board know of no matters that will be presented for
consideration at the Special Meetings other than as described in this
Prospectus/Joint Proxy Statement. If any other matters shall properly come
before either Special Meeting or any adjournments or postponements thereof and
be voted upon, the enclosed proxies will be deemed to confer discretionary
authority on the individuals named as proxies therein to vote the shares
represented by such proxies as to any such matters. The persons named as
proxies intend to vote or not to vote in accordance with the recommendation of
the respective managements of Banknorth and Evergreen.
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Affiliate................................................................ 50
Agreement................................................................ cover*
Alltel................................................................... 64
Bank Holding Company..................................................... 23
Banknorth................................................................ cover*
Banknorth Board.......................................................... 4
Banknorth Certificates................................................... 41
Banknorth Common Stock................................................... cover*
Banknorth Debentures..................................................... 60
Banknorth Rights......................................................... cover*
Banknorth Rights Plan.................................................... 73
Banknorth Shareholders................................................... 1
Banknorth Special Meeting................................................ cover*
Berkshire Acquisition.................................................... 1
BHCA..................................................................... 1
BIF...................................................................... 69
Capital Securities....................................................... 10
Closing.................................................................. 44
Closing Price............................................................ 45
Code..................................................................... 6
Combined Company......................................................... 3
Commission............................................................... (i)
Comparable Transactions.................................................. 38
Conversion Ratio......................................................... 3
CRA...................................................................... 69
DCL...................................................................... 5
Determination Period..................................................... 45
EDGAR.................................................................... (i)
Effective Time........................................................... 5
Evergreen................................................................ cover*
Evergreen Bank........................................................... 2
Evergreen Board.......................................................... 4
Evergreen Certificates................................................... 41
Evergreen Common Stock................................................... cover*
Evergreen Directors' Option Plan......................................... 7
Evergreen Employees' Option Plan......................................... 7
Evergreen ESOP........................................................... 21
Evergreen Option Plans................................................... 7
Evergreen Options........................................................ 7
Evergreen Realty......................................................... 63
Evergreen Restricted Stock............................................... 7
Evergreen Rights......................................................... cover*
Evergreen Rights Agreement............................................... 23
Evergreen Shareholders................................................... 1
Evergreen Special Meeting................................................ cover*
Exchange Act............................................................. (i)
Exchange Agent........................................................... 41
Expected Savings......................................................... 31
FDICIA................................................................... 68
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
FRB...................................................................... 5
Final Index Price........................................................ 45
Highly Valued Group...................................................... 37
IBES..................................................................... 27
Index Companies.......................................................... 45
Initial Index Price...................................................... 45
Interested Shareholder................................................... 73
Interstate Banking & Branching Act....................................... 66
KBW...................................................................... 4
KBW Report............................................................... 32
LTM...................................................................... 39
Massachusetts Bank Board................................................. 5
Merger................................................................... cover*
NASDAQ Stock Market...................................................... cover*
Nationwide Transactions.................................................. 38
New York Banking Department.............................................. 5
OCC...................................................................... 58
Option................................................................... 9
Option Agreement......................................................... 9
Other Financial Institution.............................................. 24
Record Date.............................................................. 2
Regional Group........................................................... 37
Regional Transactions.................................................... 38
Registration Statement................................................... (i)
Rule 144................................................................. 50
Rule 145................................................................. 50
SAIF..................................................................... 69
Sandler O'Neill.......................................................... 4
Sandler O'Neill Agreement................................................ 35
Sandler O'Neill Fairness Opinion......................................... 36
Securities Act........................................................... (i)
SERP..................................................................... 7
Service.................................................................. 51
Special Meetings......................................................... cover*
Starting Price........................................................... 46
Stratevest............................................................... 10
Termination Event........................................................ 45
Termination Factor....................................................... 45
Trust.................................................................... 60
Vice Chairman............................................................ 7
Weighted Average......................................................... 45
Year 2000 Project........................................................ 61
</TABLE>
- --------
* "Cover" denotes the Prospectus/Joint Proxy Statement cover page immediately
preceding page (i).
86
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ANNEX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AFFILIATION AGREEMENT AND
PLAN OF REORGANIZATION
DATED AS OF JULY 31, 1998
BETWEEN
BANKNORTH GROUP, INC.
AND
EVERGREEN BANCORP, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I--DEFINITIONS...................................................... 1
ARTICLE II--THE MERGER...................................................... 5
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE BUYER.................... 5
3.01 Corporate Organization............................................... 5
3.02 Capitalization....................................................... 6
3.03 Authority; No Violation.............................................. 7
3.04 Consents and Approvals............................................... 7
3.05 Financial Statements................................................. 8
3.06 Absence of Undisclosed Liabilities................................... 8
3.07 Broker's Fees........................................................ 8
3.08 Absence of Certain Changes or Events................................. 8
3.09 Legal Proceedings.................................................... 9
3.10 Reports.............................................................. 9
3.11 Buyer Common Stock................................................... 9
3.12 Ownership of Seller Common Stock..................................... 9
3.13 Taxes and Tax Returns................................................ 9
3.14 Employees............................................................ 10
3.15 Agreements with Banking Authorities.................................. 10
3.16 Compliance with Applicable Law....................................... 11
3.17 Year 2000 Compliance................................................. 11
3.18 Environmental Matters................................................ 11
3.19 Regulatory Capital................................................... 12
3.20 CRA Rating........................................................... 12
3.21 Buyer Information.................................................... 12
3.22 Disclosure........................................................... 13
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF THE SELLER.................... 13
4.01 Corporate Organization............................................... 13
4.02 Capitalization....................................................... 13
4.03 Authority; No Violation.............................................. 14
4.04 Consents and Approvals............................................... 15
4.05 Financial Statements................................................. 15
4.06 Absence of Undisclosed Liabilities................................... 16
4.07 Broker's Fees........................................................ 16
4.08 Absence of Certain Changes or Events................................. 16
4.09 Legal Proceedings.................................................... 16
4.10 Taxes and Tax Returns................................................ 16
4.11 Employees............................................................ 17
4.12 Agreements with Banking Authorities.................................. 18
4.13 Material Agreements.................................................. 18
4.14 Ownership of Property................................................ 18
4.15 Reports.............................................................. 19
4.16 Compliance with Applicable Law....................................... 19
4.17 Year 2000 Compliance................................................. 19
4.18 Environmental Matters................................................ 20
4.19 Ownership of Buyer Common Stock...................................... 21
4.20 Insurance............................................................ 21
4.21 Labor................................................................ 21
</TABLE>
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<TABLE>
<S> <C>
4.22 Material
Interests of
Certain Persons.. 21
4.23 Absence of
Registration
Obligations...... 21
4.24 Loans........ 21
4.25 Regulatory
Capital.......... 22
4.26 CRA Rating... 22
4.27 Seller
Information...... 22
4.28 Disclosure... 22
ARTICLE V--COVENANTS
OF THE PARTIES..... 22
5.01 Conduct of
the Business of
Seller........... 22
5.02 Access to
Properties and
Records;
Confidentiality.. 25
5.03 No
Solicitation..... 25
5.04 Regulatory
Matters;
Consents......... 26
5.05 Approval of
Stockholders..... 27
5.06 Agreements of
Affiliates;
Publication of
Combined
Financial
Results.......... 27
5.07 Further
Assurances....... 27
5.08 Public
Announcements.... 27
5.09 Post-Closing
Governance....... 28
5.10 Tax-Free
Reorganization
Treatment;
Accounting....... 28
5.11 Stock
Listing.......... 28
5.12 Employment
and Benefit
Matters.......... 28
5.13 Accountants'
Letters.......... 30
5.14 Directors'
and Officers'
Indemnification
and Insurance.... 30
5.15 Conversion of
Seller Stock
Options.......... 31
5.16 Maintenance
of Records....... 31
5.17 Leases....... 31
5.18 Dividends.... 31
5.19 Notice of
Change........... 31
5.20 Changes in
Accounting....... 31
5.21 SEC Filings.. 31
5.22 Covenants of
Buyer............ 32
5.23 Regulatory
Reports.......... 32
5.24 Registration
of Shares........ 32
ARTICLE VI--CLOSING
CONDITIONS......... 32
6.01 Conditions to
Each Party's
Obligations Under
This Agreement... 32
6.02 Conditions to
the Obligations
of the Buyer
Under This
Agreement........ 33
6.03 Conditions to
the Obligations
of the Seller
Under This
Agreement........ 34
ARTICLE VII--
CLOSING............ 35
7.01 Time and
Place............ 35
7.02 Deliveries at
the Closing...... 35
ARTICLE VIII--
TERMINATION,
AMENDMENT AND
WAIVER............. 35
8.01 Termination.. 35
8.02 Effect of
Termination...... 37
8.03 Amendment,
Extension and
Waiver........... 37
ARTICLE IX--
MISCELLANEOUS...... 38
9.01 Expenses..... 38
9.02 Survival..... 38
9.03 Notices...... 38
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
9.04 Parties in Interest.................................................. 39
9.05 Complete Agreement................................................... 39
9.06 Counterparts......................................................... 39
9.07 Governing Law........................................................ 39
9.08 Captions............................................................. 39
9.09 Effect of Investigations............................................. 40
9.10 Severability......................................................... 40
9.11 Specific Enforceability.............................................. 40
9.12 Alternative Structure................................................ 40
</TABLE>
iii
<PAGE>
AFFILIATION AGREEMENT AND PLAN OF REORGANIZATION
AFFILIATION AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as
of July 31, 1998 between BANKNORTH GROUP, INC., a Delaware corporation (the
"Buyer"), and EVERGREEN BANCORP, INC., a Delaware corporation (the "Seller").
The Boards of Directors of the Buyer and the Seller deem it advisable and in
the best interests of their respective stockholders to consummate, and have
approved, the business combination transactions provided for herein.
In consideration of the mutual covenants, representations, warranties and
agreements contained herein and in consideration of the Seller Option
Agreement (as hereinafter defined), pursuant to which the Seller has on this
day granted the Seller Option (as hereinafter defined) and in consideration of
the execution and delivery to the Buyer of the Stockholder Agreement (as
hereinafter defined), the parties agree as follows:
ARTICLE I
Definitions
Except as otherwise provided herein or as otherwise clearly required by the
context, the following terms shall have the respective meanings indicated when
used in this Agreement:
"AMEX" shall mean the American Stock Exchange.
"Acquisition Transaction" shall have the meaning ascribed thereto in Section
5.03 hereof.
"Agreement" shall mean this Affiliation Agreement and Plan of Reorganization
by and between the Buyer and the Seller.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Buyer" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Buyer Affiliates" shall have the meaning ascribed thereto in Section
5.06(b) hereof.
"Buyer Affiliates Agreement" shall mean the form of written agreement to be
executed and delivered to the Seller prior to the Effective Time by the Buyer
Affiliates, substantially in the form attached hereto as Exhibit B-1.
"Buyer Balance Sheet" shall have the meaning ascribed thereto in Section
3.05 hereof.
"Buyer Common Stock" shall have the meaning ascribed thereto in Section
3.02(a) hereof.
"Buyer Companies" shall have the meaning ascribed thereto in Section 3.13(a)
hereof.
"Buyer Disclosure Schedule" shall have the meaning ascribed thereto in
Section 3.01(b) hereof.
"Buyer Pension Plans" shall have the meaning ascribed thereto in Section
3.14(a) hereof.
"Buyer Reports" shall have the meaning ascribed thereto in Section 3.10
hereof.
"Buyer Rights Agreement" shall mean that certain Rights Agreement which was
adopted by the Buyer on November 27, 1990, as amended February 13, 1996.
"Closing" shall mean the consummation of the Merger.
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<PAGE>
"Closing Date" shall mean the time and date specified pursuant to Section
7.01 hereof as the time and date on which the parties hereto shall consummate
the Merger.
"CMPs" shall have the meaning ascribed thereto in Section 3.16 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall mean that certain letter agreement between
the Buyer and the Seller dated July 27, 1998.
"Consents" shall have the meaning ascribed thereto in Section 6.01(b)
hereof.
"DCL" shall mean the Delaware General Corporation Law.
"Disclosure Schedules" shall mean the Buyer Disclosure Schedule and the
Seller Disclosure Schedule, considered together.
"D&O Insurance" shall have the meaning ascribed thereto in Section 5.14
hereof.
"DPC Buyer Shares" shall have the meaning ascribed thereto in Section 3.12
hereof.
"DPC Seller Shares" shall have the meaning ascribed thereto in Section 4.19
hereof.
"Effective Time" shall mean the date and time at which the Merger has become
effective pursuant to the applicable laws of the State of Delaware.
"Eligible Window Employee" shall have the meaning ascribed thereto in
Section 5.12(h) hereof.
"EPA" shall mean the United States Environmental Protection Agency.
"Equity Investment" shall have the meaning set forth for such term as of the
date hereof in the FDIC's rules and regulations regarding activities and
investments of insured state banks at 12 C.F.R. (S) 362.2(k).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Evergreen Retirement Plan" shall have the meaning ascribed thereto in
Section 5.12(h) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or either of the Federal Reserve Bank of Boston or New York, as
applicable.
"Filed Tax Returns" shall mean, with respect to the Buyer Companies or the
Seller Companies, all Tax Returns that were required to be filed by any member
of such group of Companies on or prior to the date hereof.
"GAAP" shall mean generally accepted accounting principles and practices in
effect from time to time within the United States applied consistently
throughout the period involved.
"Hazardous Material" shall have the meaning ascribed thereto in Section
4.18(i) hereof.
"Injunction" shall have the meaning ascribed thereto in Section 6.01(d)
hereof.
"Joint Proxy Statement" shall have the meaning ascribed thereto in Section
5.04(a) hereof.
"Proxy Statement" shall have the meaning ascribed thereto in Section 5.04(a)
hereof.
I-2
<PAGE>
"IRS" shall mean the United States Internal Revenue Service.
"Loans" shall have the meaning ascribed thereto in Section 4.24 hereof.
"Loan Property" shall have the meaning ascribed thereto in Section 4.18(i)
hereof.
"Massachusetts Board" shall mean the Board of Bank Incorporation of the
Commonwealth of Massachusetts.
"Material Adverse Effect" shall mean, with respect to any Person, a material
adverse effect on the business, results of operations or financial condition
of such Person taken as a whole; provided that "Material Adverse Effect" shall
not be deemed to include the impact of (a) changes in laws and regulations or
interpretations thereof by courts or governmental authorities (including
changes in insurance deposit assessment rates and special assessments with
respect thereto), (b) changes in GAAP or regulatory accounting principles
generally applicable to financial institutions and their holding companies,
(c) actions and omissions of a party (or any of its Subsidiaries) taken with
the prior written consent of the other party, (d) changes in economic
conditions (including changes in the level of interest rates) generally
affecting financial institutions, and (e) the direct effects of compliance
with this Agreement on the operating performance of the parties including
expenses incurred by the parties hereto in consummating the transactions
contemplated by this Agreement and the expenses associated with the
termination of the Seller Benefit Plans as and to the extent contemplated
herein.
"Merger" shall have the meaning ascribed thereto in Article II hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the National Association of Securities Dealers Automated
Quotation system.
"NYS Department" shall mean the New York State Banking Department,
including, as applicable, the New York State Banking Board and the New York
State Banking Superintendent.
"NYSE" shall mean the New York Stock Exchange.
"OCC" shall mean the United States Office of the Comptroller of the
Currency.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Participation Facility" shall have the meaning ascribed thereto in Section
4.18(i) hereof.
"Person" shall mean any individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other legal entity, or any
governmental agency or political subdivision thereof.
"Plan of Merger" shall mean that certain Agreement and Plan of Merger to be
entered into by and among the Buyer, the Seller and the Merger Subsidiary at
or prior to the Effective Time, substantially in the form attached hereto as
Exhibit A.
"Public Announcement" shall mean a written press release, public
announcement or public information disclosure by the Seller or the Buyer or
any of their subsidiaries relating to the Merger or the other transactions
contemplated hereby.
"Records" means all records and original documents in the Seller's
possession which pertain to and are utilized by the Seller or any of its
Significant Subsidiaries to administer, reflect, monitor, evidence or record
information respecting its business and operations, including but not limited
to all records and documents relating to (a) corporate, regulatory,
supervisory and litigation matters, (b) Tax planning and payment of Taxes,
(c) personnel and employment matters, and (d) the business or conduct of the
business of the Seller or any of its Significant Subsidiaries.
I-3
<PAGE>
"Requisite Regulatory Approvals" shall have the meaning ascribed thereto in
Section 6.01(b) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"S-4" shall have the meaning ascribed thereto in Section 5.04(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning ascribed thereto in the preamble to this
Agreement and, in addition, shall mean throughout this Agreement, unless the
context contemplates otherwise, the Seller and each of its subsidiaries,
considered separately and on a consolidated basis.
"Seller Affiliates" shall have the meaning ascribed thereto in Section
5.06(a) hereof.
"Seller Affiliates Agreement" shall mean the form of written agreement to be
executed and delivered to the Buyer prior to the Effective Time by the Seller
Affiliates, substantially in the form attached hereto as Exhibit B-2.
"Seller Balance Sheet" shall have the meaning ascribed thereto in Section
4.05 hereof.
"Seller Benefit Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Common Stock" shall have the meaning ascribed thereto in Section
4.02(a) hereof.
"Seller Companies" shall have the meaning ascribed thereto in Section
4.10(a) hereof.
"Seller Disclosure Schedule" shall have the meaning ascribed thereto in
Section 4.01(a) hereof.
"Seller Option" shall mean the option granted to the Buyer pursuant to the
Seller Option Agreement.
"Seller Option Agreement" shall mean that certain Stock Option Agreement of
even date herewith by and between the Seller and the Buyer in the form
attached hereto as Exhibit C.
"Seller Other Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Pension Plans" shall have the meaning ascribed thereto in Section
4.11(a) hereof.
"Seller Profit Sharing Plan" shall have the meaning ascribed thereto in
Section 5.12(g) hereof.
"Seller Reports" shall have the meaning ascribed thereto in Section 4.15
hereof.
"Seller Rights Agreement" shall mean that certain rights agreement which was
adopted by Seller on April 17, 1998 and amended on July 31, 1998.
"Stockholders Agreement" shall mean that certain Stockholders Agreement
dated as of the date hereof between the Buyer and the directors of the Seller
substantially in the form attached hereto as Exhibit D.
"Significant Subsidiary" shall mean, when used with reference to a party,
any "significant subsidiary" of such party as such term is defined in
Regulation S-X of the SEC, and with respect to the Seller, the term
"Significant Subsidiary" shall mean Evergreen Bank, N.A.
"subsidiaries" shall mean, when used with reference to a party, any
corporation or other organization, whether incorporated or unincorporated, of
which such party or any other subsidiary of such party is a general partner
(excluding partnerships the general partnership interests of which held by
such party or any subsidiary of such party do not have a majority of the
voting interests in such partnership) or, with respect to such corporation or
other organization, at least a majority of the securities or other interests
having by their terms ordinary voting
I-4
<PAGE>
power to elect a majority of the board of directors or others performing
similar functions is directly or indirectly owned or controlled by such party
or by any one or more of its subsidiaries, or by such party and one or more of
its subsidiaries.
"Tax" or "Taxes" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales,
use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental,
customs, duties, real property, personal property, capital stock, intangibles,
social security, unemployment, disability, payroll, license, employee or other
tax or levy, of any kind whatsoever, including any interest, penalties or
additions to tax in respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return or other document (including any related or supporting
estimates, elections, schedules, statements or information) filed or required
to be filed in connection with the determination, assessment or collection of
any Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.
"Termination Date" shall have the meaning ascribed thereto in Section
8.01(b) hereof.
"Transaction Documents" shall mean this Agreement, the Confidentiality
Agreement, the Plan of Merger, the Seller Option Agreement, the Stockholders
Agreement, and each other agreement, document or instrument executed in
connection herewith or therewith.
"Transferred Employee" shall have the meaning ascribed thereto in Section
5.12(a) hereof.
"Trust Account Shares" shall have the meaning ascribed thereto in Section
3.12 hereof.
ARTICLE II
The Merger
Subject to the terms and conditions of this Agreement and the Plan of
Merger, the Seller will merge with and into the Buyer (the "Merger"), with the
Buyer being the surviving corporation, pursuant to the provisions of, and with
the effect provided in, the DCL. The Plan of Merger provides for the terms and
conditions of the Merger, including but not limited to the conversion and
exchange of Seller Common Stock for Buyer Common Stock, all of which are
incorporated herein and made a part of this Agreement by reference whether or
not the Plan of Merger is executed on or subsequent to the date hereof.
ARTICLE III
Representations And Warranties Of The Buyer
The Buyer hereby represents and warrants to the Seller as follows:
3.01 Corporate Organization.
(a) The Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Buyer has all requisite
corporate power and authority to own, lease or operate all of its properties
and assets and to carry on its business as it is now being conducted. The
Buyer is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location
of the properties and assets owned, leased or operated by it makes such
licensing or qualification necessary, except where the failure to be so
licensed or qualified would not result in, with respect to the Buyer, a
Material Adverse Effect. The Buyer is a bank holding company registered with
the Federal Reserve Board under the BHCA.
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<PAGE>
(b) Except as set forth in Section 3.01 of the disclosure schedule which is
being delivered to the Seller together herewith (the "Buyer Disclosure
Schedule"), the Buyer has no subsidiaries and no Equity Investments (other
than its investments in such subsidiaries).
(c) Each Significant Subsidiary of the Buyer is duly organized, validly
existing and in corporate good standing under the laws of the jurisdiction of
its incorporation. Each Significant Subsidiary of the Buyer has all requisite
corporate power and authority to own, lease or operate all of its properties
and assets and to carry on its business as it is now being conducted. Each
Significant Subsidiary is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased, or operated
by it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would neither individually nor in the
aggregate result in any Material Adverse Effect on the Buyer or such
Significant Subsidiary.
3.02 Capitalization.
(a) The authorized capital stock of the Buyer consists of 70,000,000 shares
of common stock, par value $1.00 per share ("Buyer Common Stock") and 500,000
shares of Preferred Stock, par value $0.01 per share ("Buyer Preferred
Stock"). As of the close of business on July 28, 1998, there were 15,239,296
shares of Buyer Common Stock issued and outstanding. In addition, as of the
close of business on July 28, 1998, there were 903,351 shares of Buyer Common
Stock reserved for issuance upon exercise of outstanding stock options under
the Buyer's 1997 Equity Compensation Plan and 148,772 shares reserved for
issuance under the Buyer's Amended and Restated 1994 Deferred Compensation
Plan for Directors and Selected Executives of Banknorth Group and
Participating Affiliates. All issued and outstanding shares of Buyer Common
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except for rights issuable in accordance
with the Buyer Rights Agreement or as referred to in this Section 3.02 or
reflected in Section 3.02(a) of the Buyer Disclosure Schedule, the Buyer does
not have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments, rights agreements or agreements of any character calling
for the Buyer to issue, deliver or sell, or cause to be issued, delivered or
sold any shares of Buyer Common Stock or any other equity security of the
Buyer or any subsidiary of the Buyer or any securities convertible into,
exchangeable for or representing the right to subscribe for, purchase or
otherwise receive any shares of Buyer Common Stock or any other equity
security of the Buyer or any subsidiary of the Buyer or obligating the Buyer
to grant, extend or enter into any such subscriptions, options, warrants,
calls, commitments, rights agreements or agreements. As of the date hereof
there are no outstanding contractual obligations of the Buyer to repurchase,
redeem or otherwise acquire any shares of capital stock of the Buyer or any
subsidiary of the Buyer.
(b) Section 3.02(b) of the Buyer Disclosure Schedule lists each of the
Significant Subsidiaries of the Buyer on the date of this Agreement and
indicates for each such subsidiary as of such date: (i) the percentage and
type of equity securities owned or controlled by the Buyer; (ii) the
jurisdiction of incorporation; and (iii) if the subsidiary is a depository
institution, whether it is a member of the Federal Reserve System. Each of the
subsidiaries of the Buyer that is a depository institution is an "insured
depository institution" as defined in the FDIA and applicable regulations
thereunder, and the deposits of each such depository institution are insured
by the Bank Insurance Fund of the FDIC in accordance with the FDIA, and each
such depository institution has paid all assessments and filed all reports
required by the FDIA. As of the date hereof, no proceedings for the revocation
or termination of such deposit insurance are pending or, to the knowledge of
the Buyer, threatened. No subsidiary of the Buyer has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for a subsidiary of the Buyer to issue, deliver or
sell, or cause to be issued, delivered or sold any equity security of the
Buyer or of any subsidiary of the Buyer or any securities convertible into,
exchangeable for or representing the right to subscribe for, purchase or
otherwise receive any such equity security or obligating a subsidiary of the
Buyer to grant, extend or enter into any such subscriptions, options,
warrants, calls, commitments or agreements. As of the date hereof, there are
no outstanding contractual obligations of any subsidiary of the Buyer to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Buyer or any subsidiary of the Buyer. Except as may be provided under
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applicable law in the case of any subsidiary of the Buyer that is a bank, all
of the shares of capital stock of each of the subsidiaries of the Buyer held
by the Buyer are fully paid and nonassessable and owned by the Buyer free and
clear of any claim, lien, encumbrance or agreement with respect thereto.
3.03 Authority; No Violation.
(a) The Buyer has all requisite corporate power and authority to execute and
deliver the Transaction Documents to which it is a party and to consummate the
transactions contemplated thereby. The execution and delivery of this
Agreement and the other Transaction Documents to which the Buyer is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by the Board of Directors of the Buyer. The
Board of Directors of the Buyer has directed that this Agreement and the Plan
of Merger and the transactions contemplated hereby and thereby be submitted to
the stockholders of the Buyer for approval at a meeting of such stockholders,
and except for the adoption of this Agreement and the Plan of Merger by the
Buyer's stockholders, no other corporate proceedings on the part of the Buyer
are necessary to consummate any of the transactions so contemplated by the
Transaction Documents. This Agreement and the Seller Option Agreement have
been, and the Plan of Merger and the other Transaction Documents to be
executed by the Buyer will be, duly and validly executed and delivered by the
Buyer and (assuming due authorization, execution and delivery by the Seller)
the Agreement constitutes and the Plan of Merger and such other Transaction
Documents will constitute at the Closing, the valid and binding obligations of
the Buyer, enforceable against the Buyer in accordance with their respective
terms, except that enforcement thereof may be limited by the receivership,
conservatorship and supervisory powers of bank regulatory agencies generally
as well as bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally and except that
enforcement thereof may be subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law) and
the availability of equitable remedies.
(b) Neither the execution and delivery of any of the Transaction Documents
by the Buyer nor the consummation by the Buyer of the transactions
contemplated thereby, nor compliance by the Buyer with any of the terms or
provisions thereof, will (i) assuming that the consents and approvals referred
to in Section 3.04 hereof are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Buyer or any of its subsidiaries or any of their respective
properties or assets, or (ii) violate, conflict with, result in a breach of
any provisions of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the respective properties or assets of
the Buyer or any of its subsidiaries under, any of the terms, conditions or
provisions of (A) the Certificate of Incorporation or other charter document
of like nature or By-Laws of the Buyer, or such subsidiary, as the case may
be, or (B) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Buyer or any of its
subsidiaries is a party as issuer, guarantor or obligor, or by which they or
any of their respective properties or assets may be bound or affected, except,
in the case of clause (ii)(B) above, for such violations, conflicts, breaches
or defaults which either individually or in the aggregate will not result,
with respect to the Buyer or any Significant Subsidiary of the Buyer, in a
Material Adverse Effect.
3.04 Consents and Approvals. Except for consents, waivers or approvals of,
or filings or registrations with, the Federal Reserve Board, the NYS
Department, the Massachusetts Board, the SEC, Nasdaq, the Secretary of State
of the State of Delaware, certain state "Blue Sky" or securities commissioners
and the stockholders of the Buyer, and except as set forth in Section 3.04 of
the Buyer Disclosure Schedule, no consents, waivers or approvals of or filings
or registrations with any public body or authority are necessary, and no
consents or approvals of any third parties (which term does not include the
Board of Directors of the Buyer) are necessary, in connection with (a) the
execution and delivery by the Buyer of the Transaction Documents to which it
is a party or (b) the consummation by the Buyer of the transactions
contemplated by said agreements. The affirmative vote of holders of a majority
of the outstanding shares of Buyer Common Stock taken at a meeting called for
the purpose of voting in the Plan of Merger is the only vote of the holders of
any class or series of capital stock or
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other securities of the Buyer necessary to approve of the Transaction
Documents and the transactions contemplated thereby. Other than as publicly
disclosed, the Buyer has no knowledge of any fact or circumstance relating to
the Buyer or its subsidiaries that is reasonably likely to materially impede
or delay receipt of any Consents of regulatory or governmental authorities or
result in the imposition of a restriction or condition of the type referenced
in Section 6.02(g) herein.
3.05 Financial Statements. The Buyer has made available to the Seller copies
of (a) the consolidated balance sheets of the Buyer and its subsidiaries as of
December 31 for the fiscal years 1995 through 1997, inclusive, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the fiscal years 1995 through 1997, inclusive, as reported in the
Annual Reports of the Buyer on Form 10-K for each of the three fiscal years
ended December 31, 1995 through December 31, 1997 which were filed with the
SEC under the Exchange Act in each case accompanied by the audit report of
KPMG Peat Marwick LLP independent accountants for the Buyer, and (b) the
unaudited consolidated balance sheets of the Buyer and its subsidiaries as of
March 31, 1998 and March 31, 1997, the related unaudited consolidated
statements of income and changes in stockholders' equity for the three months
ended March 31, 1998 and March 31, 1997 and the related unaudited consolidated
statements of cash flows for the three months ended March 31, 1998 and March
31, 1997, all as reported in the Buyer's Quarterly Report on Form 10-Q for the
three months ended March 31, 1998 filed with the SEC under the Exchange Act.
The December 31, 1997 consolidated balance sheet (the "Buyer Balance Sheet")
of the Buyer (including the related notes, where applicable) and the other
financial statements referred to herein (including the related notes, where
applicable) fairly present in all material respects, and the financial
statements to be included in any reports or statements (including reports on
Forms 10-Q and 10-K) to be filed by the Buyer with the SEC after the date
hereof will fairly present in all material respects, the consolidated
financial position and results of the consolidated operations and cash flows
and changes in shareholders' equity of the Buyer and its subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; and
each of such statements (including the related notes, where applicable) has
been and will be prepared in accordance with GAAP consistently applied during
the periods involved, except as otherwise set forth in the notes thereto
(subject, in the case of unaudited interim statements, to normal year-end
adjustments). Except as set forth in Section 3.05 of the Buyer Disclosure
Schedule, the books and records of the Buyer and its subsidiaries have been,
and are being, maintained in accordance with GAAP in all material respects and
applicable legal and regulatory requirements.
3.06 Absence of Undisclosed Liabilities. None of the Buyer or any of its
subsidiaries has any obligation or liability (contingent or otherwise) that is
material on a consolidated basis to the Buyer, or that when combined with all
similar obligations or liabilities would be material on a consolidated basis
to the Buyer or any of its Significant Subsidiaries, except as disclosed or
reflected in the Buyer Balance Sheet or any of the other financial statements
of the Buyer described in Section 3.05 above.
3.07 Broker's Fees. Neither the Buyer nor any of its officers, directors,
employees or agents has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with any of
the transactions contemplated by this Agreement, except for the fees incurred
in connection with the engagement of Sandler O'Neill & Partners L.P. and for
legal, accounting and other professional fees payable in connection with the
Merger. The Buyer will be responsible for the payment of all such fees.
3.08 Absence of Certain Changes or Events. Except as disclosed in the
Buyer's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 or
in any Current Reports of the Buyer on Form 8-K filed prior to the date of
this Agreement, since December 31, 1997, the Buyer and its subsidiaries have
not incurred any material liability, except in the ordinary course of their
business consistent with their past practices, nor has there been any change
in the business, assets, financial condition or results of operations of the
Buyer or any of its subsidiaries which has had, or is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on the Buyer
or any Significant Subsidiary of the Buyer.
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3.09 Legal Proceedings. There is no suit, action or proceeding pending or,
to the best knowledge of the Buyer, threatened, against the Buyer or any
subsidiary of the Buyer or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Plan of Merger, as to which
there is a reasonable possibility of an adverse determination and which, if
adversely determined, would, individually or in the aggregate, have a Material
Adverse Effect on the Buyer or any Significant Subsidiary of the Buyer or
otherwise materially adversely affect the Buyer's ability to perform its
obligations under this Agreement, nor is there any judgment, decree,
injunction, rule or order of any legal or administrative body or arbitrator
outstanding against the Buyer or any subsidiary of the Buyer having, or which
insofar as reasonably can be foreseen, in the future could have, any such
effect.
3.10 Reports. Since January 1, 1995, the Buyer and its subsidiaries have
filed, and subsequent to the date hereof will file, all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with (a) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements
(and all such reports, registrations and statements have been or will be
delivered by the Buyer to the Seller), (b) the Federal Reserve Board, (c) the
FDIC, and (d) any applicable state securities or banking authorities (except,
in the case of state securities authorities, no such representation is made as
to filings which are not material) (all such reports and statements are
collectively referred to herein as the "Buyer Reports"). As of their
respective dates, the Buyer Reports complied and, with respect to filings made
after the date of this Agreement, will at the date of filing comply, in all
material respects with all of the statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed and did not
contain and, with respect to filings made after the date of this Agreement,
will not at the date of filing contain, any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.11 Buyer Common Stock. The Buyer Common Stock to be issued pursuant to the
Plan of Merger is duly authorized and, when issued at the Effective Time, will
be validly issued, fully paid and nonassessable and not subject to preemptive
rights, with no personal liability attaching thereto.
3.12 Ownership of Seller Common Stock. Neither the Buyer nor, to its best
knowledge, any of its affiliates or associates (as such terms are defined
under the Exchange Act) (a) beneficially own, directly or indirectly, or (b)
are parties to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of the Seller (other than shares in trust accounts, managed accounts and
the like that are beneficially owned by third parties (any such shares, "Trust
Account Shares") and shares acquired in satisfaction of any debt previously
contracted (any such shares, "DPC Seller Shares")), which in the aggregate
represent five percent (5%) or more of the outstanding shares of capital stock
of the Seller entitled to vote generally in the election of directors.
3.13 Taxes and Tax Returns.
(a) Except where the failure to do so would not have a Material Adverse
Effect, the Buyer and each of its subsidiaries (referred to for purposes of
this Section 3.13, collectively, as the "Buyer Companies") have, since
December 31, 1991, timely filed in substantially correct form all Filed Tax
Returns.
(b) Except as set forth in Section 3.13(b) of the Buyer Disclosure Schedule,
the Buyer Companies have paid all Taxes shown as being due on the Filed Tax
Returns.
(c) Except as set forth in Section 3.13(c) of the Buyer Disclosure Schedule,
no assessment that has not been settled or otherwise resolved has been made
with respect to Taxes not shown on the Filed Tax Returns, other than such
additional Taxes as are being contested in good faith and which if determined
adversely to the Buyer Companies would not have a Material Adverse Effect. No
deficiency in Taxes or other proposed adjustment that has not been settled or
otherwise resolved has been asserted in writing by any taxing authority
against any of the Buyer Companies, which if determined adversely to the Buyer
Companies would have a Material Adverse Effect.
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No Tax Return of any of the Buyer Companies is now under examination by any
applicable taxing authority. There are no material liens for Taxes (other than
current Taxes not yet due and payable) on any of the assets of any Buyer
Company.
(d) Adequate provision has been made on the Buyer Balance Sheet for all
Taxes of the Buyer Companies in respect of all periods through the date
hereof.
(e) Except with respect to intra-Buyer Company agreements made or required
under the federal banking, bank holding company or consolidated tax return
regulations, and except as set forth in Section 3.13(e) of the Buyer
Disclosure Schedule, none of the Buyer Companies is a party to or bound by any
Tax indemnification, Tax allocation or Tax sharing agreement with any person
or entity or has any current or potential contractual obligation to indemnify
any other person or entity with respect to Taxes.
(f) Except as set forth in Section 3.13(f) of the Buyer Disclosure Schedule,
none of the Buyer Companies has filed or been included in a combined,
consolidated or unitary income Tax Return (including any consolidated federal
income Tax Return) other than one of which one of the Buyer Companies was the
parent.
(g) Except as set forth in Section 3.13(g) of the Buyer Disclosure Schedule,
none of the Buyer Companies has made any payments, is obligated to make any
payments, or is a party to any agreement that could obligate it to make any
payments that will not be deductible under Code Section 280G.
3.14 Employees.
(a) To the best knowledge of the Buyer, the current value of the assets of
each of the "employee pension benefit plans," as such term is defined in
Section 3 of ERISA, which is maintained or contributed to by the Buyer (each a
"Buyer Pension Plan"), and which is subject to Title IV of ERISA, exceeds that
plan's "Benefit Liabilities" as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if that plan
terminated in accordance with all applicable legal requirements.
(b) To the best knowledge of the Buyer, each of the Buyer Pension Plans and
each of the "employee welfare benefit plans" (the "Buyer Benefit Plans"), as
such term is defined in Section 3 of ERISA, which is maintained or contributed
to by the Buyer, has been administered in compliance with its terms in all
material respects and is in compliance in all material respects with the
applicable provisions of ERISA (including, but not limited to, the funding and
prohibited transactions provisions thereof), the Code and other applicable
laws, except to the extent that non-compliance would not have a Material
Adverse Effect on the Buyer, taken as a whole.
(c) To the best knowledge of the Buyer, there has been no reportable event
within the meaning of Section 4043(b) of ERISA or any waived funding
deficiency within the meaning of Section 412(d)(3) (or any predecessor
section) of the Code with respect to any Buyer Pension Plan.
(d) To the best knowledge of the Buyer, each of the Buyer Pension Plans
which is intended to be a qualified plan within the meaning of Section 401(a)
of the Code is so qualified, and the Buyer is not aware of any fact or
circumstance which would adversely affect the qualified status of any such
plan.
3.15 Agreements with Banking Authorities. Neither the Buyer nor any of its
subsidiaries is a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding or order to cease and desist with any federal or
state governmental entity charged with the supervision or regulation of banks
or bank holding companies or engaged in the insurance of bank deposits which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, credit policies, management or overall safety and
soundness or such entity's ability to perform its obligations hereunder, and
neither the Buyer nor any of its subsidiaries has received written
notification from any such federal or state governmental entity that any such
Person may be requested to enter into, or otherwise be subject to, any such
commitment, letter, written agreement, memorandum of understanding or cease
and desist order.
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3.16 Compliance with Applicable Law. Each of the Buyer and each Significant
Subsidiary thereof holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of its business, and each of the Buyer and
each Significant Subsidiary thereof has complied with, and is not in violation
of or default in any respect under any, applicable law, statute, order, rule,
regulation or policy of, or agreement with, any federal, state or local
governmental agency or authority relating to the Buyer or such Significant
Subsidiary (other than where such default or noncompliance will not result in,
or create the possibility of resulting in, a material limitation on the
conduct of the business of the Buyer, will not cause, or create the
possibility of causing, the Buyer or any Significant Subsidiary thereof to
incur any financial penalty in excess of $20,000 (including but not limited to
any civil money penalty or other monetary sanction under Section 8(i)(2) of
the FDIA, 12 U.S.C.(S)1818(i)(2), or under any applicable state law ("CMPs")),
and will not otherwise result, or create the possibility of resulting in, any
Material Adverse Effect on the Buyer or any Significant Subsidiary of the
Buyer), and neither the Buyer nor any Significant Subsidiary of the Buyer has
received any notice of any violation of any such law, statute, order, rule,
regulation, policy or agreement, or the commencement of any proceeding in
connection with any such violation (including but not limited to any hearing
or investigation relating to the imposition or contemplated imposition of
CMPs), and does not know of any violation of, any such law, statute, order,
rule, regulation, policy or agreement which would have such a result.
3.17 Year 2000 Compliance. The Buyer and the Buyer's subsidiaries have taken
all reasonable steps necessary to address the software, accounting and record
keeping issues raised in order for the data processing systems used in the
business conducted by the Buyer and its subsidiaries to be substantially Year
2000 compliant on or before the end of 1999 and in conformity with applicable
guidance from federal and state regulatory agencies except to the extent that
noncompliance therewith does not and is not likely to result in a Material
Adverse Effect with respect to Buyer or any of its Significant Subsidiaries.
3.18 Environmental Matters.
(a) Except as set forth in Section 3.18(a) of the Buyer Disclosure Schedule,
the Buyer, each of its Significant Subsidiaries and the Participation
Facilities (as such term is hereinafter defined) are and have been in material
compliance with all applicable laws, rules, regulations, standards and
requirements of the EPA and of state and local agencies with jurisdiction over
pollution or protection of the environment.
(b) Except as set forth in Section 3.18(b) of the Buyer Disclosure Schedule,
there is no suit, claim, action or proceeding now pending or, to the best
knowledge of the Buyer, threatened, before any court, governmental agency or
board or other forum in which the Buyer, any of its Significant Subsidiaries
or any Participation Facility has been or, with respect to threatened
proceedings, may be, named as a defendant (i) for alleged noncompliance
(including by any predecessor), with any environmental law, rule or regulation
or (ii) relating to the release into the environment of any Hazardous Material
(as hereinafter defined) whether or not occurring at or on a site owned,
leased or operated by the Buyer, any of its Significant Subsidiaries or any
Participation Facility.
(c) Except as set forth in Section 3.18(c) of the Buyer Disclosure Schedule,
to the best knowledge of the Buyer, there is no suit, claim, action or
proceeding pending, or threatened, before any court, governmental agency or
board or other forum in which any Loan Property (as hereinafter defined) has
been or, with respect to threatened proceedings, may be, named as a defendant
or involved (i) for alleged noncompliance (including by any predecessor) with
any environmental law, rule or regulation or (ii) relating to the release into
the environment of any Hazardous Material whether or not occurring at or on a
site owned, leased, operated or involving a Loan Property.
(d) Except as set forth in Sections 3.18(a), (b) and (c) of the Buyer
Disclosure Schedule, to the best knowledge of the Buyer's management, there is
no reasonable basis for any suit, claim, action or proceeding as described in
subsection (b) or (c) of this Section 3.18.
(e) Except as set forth in Section 3.18(e) of the Buyer Disclosure Schedule,
during and, to the best knowledge of the Buyer, prior to the period of (i) the
ownership or operation by the Buyer or any of its
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Significant Subsidiaries of any of their current properties, or (ii) the
participation by the Buyer or any of its Significant Subsidiaries in the
management of any Participation Facility, there has been no release of
Hazardous Material in, on, under or affecting such properties, that would
subject the Buyer or such Significant Subsidiary to any liability which would
result in a Material Adverse Effect with respect to the Buyer or such
Significant Subsidiary. Except as set forth in Section 3.18(e) of the Buyer
Disclosure Schedule, to the best knowledge of the Buyer, none of the branch
offices of any subsidiary or any other real property owned, operated or leased
by the Buyer was at any time the site of any gas station, manufacturing plant
or industrial business or activity or was at any time a site on which any
Hazardous Material, was stored, produced or otherwise located.
(f) The Buyer and its Significant Subsidiaries have asked for
representations from borrowers and/or have conducted due diligence with
respect to each of the Loan Properties in a manner consistent with industry
practice at the time the loan was granted for secured loan transactions of the
size and type of the loan for which such Loan Property was granted as
security, and in the course thereof, or subsequent thereto, nothing has come
to the attention of the Buyer or any of its Significant Subsidiaries which
could be reasonably likely to prevent the Buyer or such Significant Subsidiary
from exercising its right to foreclose on its security interest therein.
(g) To the best knowledge of the Buyer, none of the disclosures set forth in
Section 3.18 of the Buyer Disclosure Schedule is reasonably likely to result
in the closure of any of the branch offices of any of the Significant
Subsidiaries of the Buyer or in a Material Adverse Effect with respect to the
Buyer or any Significant Subsidiary.
(h) To the best knowledge of the Buyer, the transactions contemplated herein
are not subject to the provisions of any applicable environmental restrictive
transfer law.
(i) The following definitions apply for purposes of this Section 3.18: (i)
"Loan Property" means any property in which the Buyer or any of its
Significant Subsidiaries holds a security interest, and, where required by the
context, said term means the owner or operator of such property; (ii)
"Participation Facility" means any facility in which the Buyer or any of its
Significant Subsidiaries participates in the management and, where required by
the context, said term means the owner or operator of such property; (iii)
"Hazardous Material" means any pollutant, contaminant, hazardous material,
hazardous waste, or hazardous substance as defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
seq., or the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S) 6901 et
seq., the Clean Water Act, 33 U.S.C. (S)1321, et seq., or any other federal,
state or local law relating to safety, health, or environmental protection or
any regulations promulgated under any of the foregoing, and specifically
includes oil and any other petroleum derived products, asbestos,
polychlorinated biphenyls (PCB's) and, with respect to any residential
property, lead paint and radon.
3.19 Regulatory Capital. As of the date hereof, without giving effect to the
transactions contemplated hereby, the subsidiaries of the Buyer which are
"insured depository institutions" (a) are "well capitalized," as defined in
the FDIA, and (b) meet all capital requirements, standards and ratios required
by each state or federal bank regulator with jurisdiction over such Persons.
No such regulator has indicated that it will condition any of the regulatory
approvals upon an increase in any such Person's capital or compliance with any
special capital requirement, standard or ratio.
3.20 CRA Rating. Each subsidiary of the Buyer which is an "insured
depository institution" was rated "Satisfactory" or better following its most
recent Community Reinvestment Act examination by the regulatory agency
responsible for its supervision. Neither the Buyer nor any of such
subsidiaries has received any notice of and none of such Persons has any
knowledge of any planned or threatened objection by any community group to the
transactions contemplated hereby.
3.21 Buyer Information. The information relating to the Buyer and its
subsidiaries to be contained in the Joint Proxy Statement and the S-4, as
described in Section 5.04 hereof, and any other documents filed with the SEC
or any regulatory agency in connection herewith, to the extent such
information is provided in writing by
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the Buyer, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make such information not misleading.
3.22 Disclosure. To the best knowledge of the Buyer, all information
material to the Merger and the transactions contemplated by this Agreement, or
which is necessary to make the representations and warranties herein
contained, taken as a whole, not misleading, has been disclosed in writing to
the Seller.
ARTICLE IV
Representations And Warranties Of The Seller
The Seller hereby represents and warrants to the Buyer as follows:
4.01 Corporate Organization.
(a) The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Seller has all requisite
corporate power and authority to own, lease or operate all of its properties
and assets and to carry on its business as it is now being conducted. The
Seller is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location
of the properties and assets owned, leased or operated by it makes such
licensing or qualification necessary, except where the failure to be so
licensed or qualified would not result in, with respect to the Seller, any
Material Adverse Effect. The Seller is a bank holding company registered with
the Federal Reserve Board under the BHCA.
(b) Except as set forth in Section 4.01 of the disclosure schedule delivered
to the Buyer together herewith (the "Seller Disclosure Schedule"), the Seller
has no subsidiaries and no Equity Investments (other than its investments in
such subsidiaries).
(c) Each Significant Subsidiary of the Seller is duly organized, validly
existing and in corporate good standing under the laws of the jurisdiction of
its incorporation. Each Significant Subsidiary of the Seller has all requisite
corporate power and authority to own, lease or operate all of its properties
and assets and to carry on its business as it is now being conducted. Each
Significant Subsidiary is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased or operated
by it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would, neither individually nor in the
aggregate, result in any Material Adverse Effect on the Seller or such
Significant Subsidiary.
(d) The minute books of the Seller contain complete and accurate records of
all corporate actions taken since January 1, 1996 to date by the stockholders
and Board of Directors of the Seller.
4.02 Capitalization.
(a) The authorized capital stock of the Seller consists of 20,000,000 shares
of common stock, par value $3.33 1/3 per share ("Seller Common Stock"). As of
the close of business on July 28, 1998, there were 8,784,976 shares of Seller
Common Stock issued and outstanding. In addition, as of the close of business
on July 28, 1998, there were 553,925 shares of Seller Common Stock reserved
for issuance upon the exercise of outstanding stock options and incentive
plans and 150,000 shares of Seller Common Stock reserved for issuance under
the Seller's Employee Stock Purchase Plan. All issued and outstanding shares
of Seller Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Except for rights issuable in
accordance with the Seller Rights Agreement, the Seller Option Agreement, or
as referred to in this Section 4.02, the Seller does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, commitments,
rights agreements or agreements of any character calling for the Seller to
issue, deliver or sell, or cause to be issued, delivered or sold any shares of
Seller Common Stock or any other equity security of the Seller or any
subsidiary of the Seller or
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any securities convertible into, exchangeable for or representing the right to
subscribe for, purchase or otherwise receive any shares of Seller Common Stock
or any other equity security of the Seller or any subsidiary of the Seller or
obligating the Seller to grant, extend or enter into any such subscriptions,
options, warrants, calls, commitments, rights agreements or agreements. As of
the date hereof, there are no outstanding contractual obligations of the
Seller to repurchase, redeem or otherwise acquire any shares of capital stock
of the Seller or any subsidiary of the Seller. In addition, Section 4.02(a) of
the Seller Disclosure Schedule sets forth, as of the date hereof, the number
of shares of Seller Common Stock subject to outstanding stock options, the
various dates on which such options were granted, the various exercise prices
for such options, the number of shares subject to such options that are
currently vested and the vesting schedule for the balance of shares subject to
such options that are not currently vested.
(b) Section 4.02(b) of the Seller Disclosure Schedule lists each of the
Significant Subsidiaries of the Seller as of the date of this Agreement and
indicates for each such subsidiary as of such date: (i) the percentage and
type of equity securities owned or controlled by the Seller; (ii) the
jurisdiction of incorporation; and (iii) if the subsidiary is a depository
institution, whether it is a member of the Federal Reserve System. Each of the
subsidiaries of the Seller that is a depository institution is an "insured
depository institution" as defined in the FDIA and applicable regulations
thereunder, and the deposits of each such depository institution are insured
by the Bank Insurance Fund of the FDIC in accordance with the FDIA. Each such
depository institution has paid all assessments and filed all reports required
by the FDIA. As of the date hereof no proceedings for the revocation or
termination of such deposit insurance are pending or to the knowledge of the
Seller, threatened. Except as to the 12% Series A Preferred Stock of Evergreen
Realty Funding Corp., a subsidiary of Evergreen Bank, N.A., no subsidiary of
the Seller has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for a
subsidiary of the Seller to issue, deliver or sell, or cause to be issued,
delivered or sold, any equity security of the Seller or of any subsidiary of
the Seller or any securities convertible into, exchangeable for or
representing the right to subscribe for, purchase or otherwise receive any
such equity security or obligating a subsidiary of the Seller to grant, extend
or enter into any such subscriptions, options, warrants, calls, commitments or
agreements. As of the date hereof, there are no outstanding contractual
obligations of any subsidiary of the Seller to repurchase, redeem or otherwise
acquire any shares of capital stock of the Seller or any subsidiary of the
Seller. Except as may be provided under applicable law in the case of any
subsidiary of the Seller that is a bank, all of the shares of capital stock of
each of the subsidiaries held by the Seller are fully paid and nonassessable
and owned by the Seller free and clear of any claim, lien, encumbrance or
agreement with respect thereto.
4.03 Authority; No Violation.
(a) The Seller has full corporate power and authority to execute and deliver
the Transaction Documents to which it is a party and to consummate the
transactions contemplated thereby. The execution and delivery of this
Agreement and the other Transaction Documents to which the Seller is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by the Board of Directors of the Seller. The
Board of Directors of the Seller has directed that this Agreement and the Plan
of Merger and the transactions contemplated hereby and thereby be submitted to
the stockholders of the Seller for approval at a meeting of such stockholders
and, except for the adoption of this Agreement and the Plan of Merger by its
stockholders, no other corporate proceedings on the part of the Seller are
necessary to consummate any of the transactions so contemplated by the
Transaction Documents. This Agreement and the Seller Option Agreement have
been, and the Plan of Merger and the other Transaction Documents to be
executed by the Seller will be, prior to the Closing Date, duly and validly
executed and delivered by the Seller and (assuming due authorization,
execution and delivery by the Buyer) the Agreement constitutes and the Plan of
Merger and such other Transaction Documents will constitute at the Closing,
the valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except that enforcement
thereof may be limited by the receivership, conservatorship and supervisory
powers of bank regulatory agencies generally as well as bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally and except that enforcement thereof
may be subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and the
availability of equitable remedies.
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(b) Neither the execution and delivery of any of the Transaction Documents
by the Seller, nor the consummation by the Seller of the transactions
contemplated thereby, nor compliance by the Seller with any of the terms or
provisions thereof, will (i) assuming that the consents and approvals referred
to in Section 4.04 are duly obtained, violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
the Seller or any of its subsidiaries or any of their respective properties or
assets, or (ii) violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Seller or
any of its subsidiaries under, any of the terms, conditions or provisions of
(A) the Certificate of Incorporation or other charter document of like nature
or By-Laws of the Seller or such subsidiary, as the case may be, or (B) any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Seller or any of its subsidiaries
is a party as issuer, guarantor or obligor, or by which they or any of their
respective properties or assets may be bound or affected, except, in the case
of clause (ii)(B) above, for such violations, conflicts, breaches or defaults
which either individually or in the aggregate will not result, with respect to
the Seller or any Significant Subsidiary of the Seller, in any Material
Adverse Effect.
4.04 Consents and Approvals. Except as set forth in Section 4.04 of the
Seller Disclosure Schedule and except for consents, waivers, approvals of, or
filings or registrations with, the Federal Reserve Board, the NYS Department,
the SEC, the Secretary of State of the State of Delaware, Nasdaq, certain
state "Blue Sky" or securities commissioners and the stockholders of the
Seller, and except as set forth in Section 4.04 of the Seller Disclosure
Schedule, no consents, waivers or approvals of or filings or registrations
with any public body or authority are necessary, and no consents or approvals
of any third parties (which term does not include the Board of Directors of
the Seller or any subsidiary of the Seller) are necessary, in connection with
(a) the execution and delivery by the Seller of the Transaction Documents to
which it is a party or (b) the consummation by the Seller of the transactions
contemplated by such agreements. The affirmative vote of holders of a majority
of the outstanding shares of Seller Common Stock taken at a meeting called for
the purpose of voting on the Plan of Merger is the only vote of the holders of
any class or series of capital stock or other securities of the Seller
necessary to approve of the Transaction Documents and the transactions
contemplated thereby. Other than as publicly disclosed, the Seller has no
knowledge of any fact or circumstance relating to the Seller or its
subsidiaries that is reasonably likely to materially impede or delay receipt
of any Consents of regulatory or governmental authorities or result in the
imposition of a restriction or condition of the type referenced in Section
6.02(g) herein.
4.05 Financial Statements. The Seller has made available to the Buyer copies
of (a) the consolidated balance sheets of the Seller and its subsidiaries as
of December 31 for the fiscal years 1995 through 1997, inclusive, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the fiscal years 1995 through 1997, inclusive, as reported
in the Annual Reports of the Seller on Form 10-K for each of the three fiscal
years ended December 31, 1995 through December 31, 1997 which were filed with
the SEC under the Exchange Act, in each case accompanied by the audit report
of KPMG Peat Marwick LLP, independent accountants for the Seller, and (b) the
unaudited consolidated balance sheets of the Seller and its subsidiaries as of
March 31, 1998, the related unaudited consolidated statements of operations
and changes in stockholders' equity for the three months ended March 31, 1998
and March 31, 1997 and the related unaudited consolidated statements of cash
flows for the three months ended March 31, 1998 and March 31, 1997, all as
reported in the Seller's Quarterly Report on Form 10-Q for the three months
ended March 31, 1998 filed with the SEC under the Exchange Act. The December
31, 1997 consolidated balance sheet (the "Seller Balance Sheet") of the Seller
(including the related notes, where applicable) and the other financial
statements referred to herein (including the related notes, where applicable)
fairly present, and the financial statements to be included in any reports or
statements (including reports in all material respects on Forms 10-Q and 10-K)
to be filed by the Seller with the SEC after the date hereof will fairly
present, the consolidated financial position and results of the consolidated
operations and cash flows and changes in shareholders' equity of the Seller
and its subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth; and each of such statements
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(including the related notes, where applicable) has been and will be prepared
in accordance with GAAP in all material respects during the periods involved,
except as otherwise set forth in the notes thereto (subject, in the case of
unaudited interim statements, to normal year-end adjustments). Except as set
forth in Section 4.05 of the Seller Disclosure Schedule, the books and records
of the Seller and its subsidiaries have been, and are being, maintained in
accordance with GAAP and applicable legal and regulatory requirements.
4.06 Absence of Undisclosed Liabilities. None of the Seller or any of its
subsidiaries has any obligation or liability (contingent or otherwise) that is
material on a consolidated basis to the Seller, or that when combined with all
similar obligations or liabilities would be material on a consolidated basis
to the Seller or any of its Significant Subsidiaries, except as disclosed or
reflected in the Seller Balance Sheet or any of the other financial statements
described in Section 4.05 above.
4.07 Broker's Fees. Neither the Seller nor any of its officers, directors,
employees or agents has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with any of
the transactions contemplated by this Agreement, except for the fees incurred
in connection with the engagement of Keefe Bruyette & Woods, Inc. and except
for legal, accounting and other professional fees payable in connection with
the Merger. The Seller will be responsible for the payment of all such fees.
4.08 Absence of Certain Changes or Events. Except as disclosed in the
Seller's Quarterly Report on Form 10-Q for the three (3) months ended March
31, 1998 or in any Current Reports of the Seller on Form 8-K filed prior to
the date of this Agreement, since December 31, 1997, the Seller and its
subsidiaries have not incurred any material liability, except in the ordinary
course of their business consistent with their past practices, nor has there
been any change in the business, assets, financial condition or results of
operations of the Seller or any of its subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Seller or any Significant Subsidiary of the Seller.
4.09 Legal Proceedings. Except as set forth in Section 4.09 of the Seller
Disclosure Schedule, there is no suit, action or proceeding pending or, to the
best knowledge of the Seller, threatened, against the Seller or any subsidiary
of the Seller or challenging the validity or propriety of the transactions
contemplated by this Agreement or the Plan of Merger, as to which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on the Seller or any Significant Subsidiary of the Seller or otherwise
materially adversely affect the Seller's ability to perform its obligations
under this Agreement, nor is there any judgment, decree, injunction, rule or
order of any legal or administrative body or arbitrator outstanding against
the Seller or any subsidiary of the Seller having, or which insofar as
reasonably can be foreseen, in the future could have, any such effect.
4.10 Taxes and Tax Returns.
(a) Except where the failure to do so would not have a Material Adverse
Effect, the Seller and each of its subsidiaries (referred to for purposes of
this Section 4.10, collectively, as the "Seller Companies") have, since
December 31, 1991, timely filed in substantially correct form all Filed Tax
Returns.
(b) The Seller Companies have paid all Taxes shown as being due on the Filed
Tax Returns.
(c) No assessment that has not been settled or otherwise resolved has been
made with respect to Taxes not shown on the Filed Tax Returns, other than such
additional Taxes as are being contested in good faith and which if determined
adversely to the Seller Companies would not have a Material Adverse Effect. No
deficiency in Taxes or other proposed adjustment that has not been settled or
otherwise resolved has been asserted in writing by any taxing authority
against any of the Seller Companies, which if determined adversely to the
Seller Companies would have a Material Adverse Effect. Except as set forth in
Section 4.10(c) of the Seller Disclosure Schedule, no Tax Return of any of the
Seller Companies is now under examination by any applicable taxing authority.
There are no material liens for Taxes (other than current Taxes not yet due
and payable) on any of the assets of any Seller Company.
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(d) Adequate provision has been made on the Seller Balance Sheet for all
Taxes of the Seller Companies in respect of all periods through the date
hereof.
(e) Except with respect to intra-Seller Company agreements made or required
under the federal banking, bank holding company, or consolidated tax return
regulations, none of the Seller Companies is a party to or bound by any Tax
indemnification, Tax allocation or Tax sharing agreement with any person or
entity or has any current or potential contractual obligation to indemnify any
other person or entity with respect to Taxes.
(f) None of the Seller Companies has filed or been included in a combined,
consolidated or unitary income Tax Return (including any consolidated federal
income Tax Return) other than one of which one of the Seller Companies was the
parent.
(g) Except as set forth in Section 4.10(g) of the Seller Disclosure
Schedule, none of the Seller Companies has made any payments, is obligated to
make any payments, or is a party to any agreement that could obligate it to
make any payments that will not be deductible under Code Section 280G.
4.11 Employees.
(a) Except as set forth in Section 4.11(a) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries maintains or
contributes to any "employee pension benefit plan," as such term is defined in
Section 3 of ERISA (the "Seller Pension Plans"), "employee welfare benefit
plan," as such term is defined in Section 3 of ERISA (the "Seller Benefit
Plans"), stock option plan, stock purchase plan, deferred compensation plan,
other employee benefit plan for employees of the Seller or any subsidiary
thereof, or any other plan, program or arrangement of the same or similar
nature that provides benefits to non-employee directors of the Seller or any
subsidiary thereof (collectively, the "Seller Other Plans").
(b) Prior to the date hereof, the Seller has made available to the Buyer a
complete and accurate copy of each of the following with respect to each of
the Seller Pension Plans, the Seller Benefit Plans and the Seller Other Plans:
(i) plan document; (ii) trust agreement or insurance contract, if any; (iii)
most recent IRS determination letter, if any; (iv) most recent actuarial
report, if any; and (v) most recent annual report on Form 5500.
(c) To the best knowledge of the Seller, the value of the assets of each of
the Seller Pension Plans subject to Title IV of ERISA will exceed as of the
Effective Time that plan's "Benefit Liabilities" as that term is defined in
Section 4001(a)(16) of ERISA, when determined under actuarial factors used in
the most recent actuarial valuation for each such plan.
(d) To the best knowledge of the Seller, each of the Seller Pension Plans
and each of the Seller Benefit Plans has been administered in compliance with
its terms in all material respects and is in compliance in all material
respects with the applicable provisions of ERISA (including, but not limited
to, the funding and prohibited transactions provisions thereof), the Code and
other applicable laws, except to the extent that non-compliance would not have
a Material Adverse Effect on the Seller, taken as a whole.
(e) To the best knowledge of the Seller, there has been no reportable event
within the meaning of Section 4043(b) of ERISA or any waived funding
deficiency within the meaning of Section 412(d)(3) (or any predecessor
section) of the Code with respect to any Seller Pension Plan.
(f) The Seller and its subsidiaries have made or provided for all
contributions to the Seller Pension Plans required thereunder or by Section
412 of the Code.
(g) Other than as set forth in Section 4.11(g) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries contributes or has
contributed to any multiple employer pension plan, any plan described in
Section 4063(a) of ERISA, or to any "Multiemployer Plan," as such term is
defined in Section 3(37) of ERISA.
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(h) To the best knowledge of the Seller, each of the Seller Pension Plans
which is intended to be a qualified plan within the meaning of Section 401(a)
of the Code is so qualified, and the Seller is not aware of any fact or
circumstance which would adversely affect the qualified status of any such
plan.
(i) Except as set forth in Section 4.11(i) of the Seller Disclosure
Schedule, neither the Seller nor any of its subsidiaries is party to or
maintains any contract or other arrangement with any employee or group of
employees, providing severance payments, stock or stock-equivalent payments or
post-employment benefits of any kind or providing that any otherwise disclosed
plan, program or arrangement will irrevocably continue, with respect to any or
all of its participants, for any period of time.
4.12 Agreements with Banking Authorities. Neither the Seller nor any of its
subsidiaries is a party to any commitment, letter (other than letters
addressed to regulated depository institutions generally), written agreement,
memorandum of understanding or order to cease and desist with any federal or
state governmental entity charged with the supervision or regulation of banks
or bank holding companies or engaged in the insurance of bank deposits which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, credit policies, management or overall safety and
soundness or such entity's ability to perform its obligations hereunder, and
neither the Seller nor any of its subsidiaries has received written
notification from any such federal or state governmental entity that any such
Person may be requested to enter into, or otherwise be subject to, any such
commitment, letter, written agreement, memorandum of understanding or cease
and desist order.
4.13 Material Agreements. Except as set forth in any of the Seller
Disclosure Schedules or the index of exhibits in the Seller's Annual Report on
Form 10-K for the year ended December 31, 1997, as of the date of this
Agreement, except for this Agreement and the other Transaction Documents,
neither the Seller nor any of its subsidiaries is a party to or is bound by
(a) any agreement, arrangement, or commitment that is material to the
financial condition, results of operations or business of the Seller or any
Significant Subsidiary of the Seller, except those entered into in the
ordinary course of business; (b) any written (or oral, if material) agreement,
arrangement, or commitment relating to the employment of any person or the
election or retention in office or severance of any present or former director
or officer of the Seller or any of its subsidiaries; (c) any contract,
agreement, or understanding with any labor union; (d) any agreement by and
among the Seller, its subsidiaries and/or any affiliate thereof, or (e) any
contract or agreement or amendment thereto that would be required to be filed
as an Exhibit to a Form 10-K filed by the Seller as of the date hereof that
has not been filed as an Exhibit to the Form 10-K filed by it for 1997.
4.14 Ownership of Property. Section 4.14 of the Seller Disclosure Schedule
sets forth a true and complete list of all real property owned, leased or
operated by the Seller or its subsidiaries (including all of the branches of
the Seller's subsidiary bank and all of the Seller's properties acquired by
foreclosure proceedings in the ordinary course of business but excluding any
specific listing of any real property carried at nominal value, for which only
a generic description will be included on such schedule) as of the date
hereof. The Seller directly or indirectly through its subsidiaries has good
and marketable title to all assets and properties, whether real or personal,
tangible or intangible, including, without limitation, the capital stock of
its subsidiaries and all other assets and properties reflected in its
consolidated balance sheet as of March 31, 1998, or acquired subsequent
thereto subject to no encumbrances, customary utility easements, liens,
mortgages, security interests or pledges, except (a) those items that secure
liabilities that are reflected in said balance sheet or the notes thereto or
incurred in the ordinary course of business after the date of such balance
sheet and not otherwise prohibited by the terms hereof, (b) dispositions for
adequate consideration in the ordinary course of business or as expressly
permitted by the terms hereof, (c) statutory liens for amounts not yet
delinquent or which are being contested in good faith, (d) those items that
secure public or statutory obligations or any discount with, borrowing from,
or other obligations to, any Federal Reserve Bank or Federal Home Loan Bank,
inter-bank credit facilities, or any transaction by a subsidiary acting in a
fiduciary capacity, and (e) such encumbrances, liens, mortgages, security
interests, and pledges that are not material in character, amount or extent.
Neither the Seller nor any of its subsidiaries has received any notice of
violation of any applicable zoning or environmental regulation, ordinance or
other law, order, regulation, or requirement relating to its properties,
except as set forth in Section 4.14 of the
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Seller Disclosure Schedule. The Seller and its subsidiaries as lessees have
the right under valid and existing leases to occupy, use, possess and control
all property leased by the Seller and its subsidiaries as presently occupied,
used, possessed and controlled by the Seller and its subsidiaries. Neither the
Seller nor any of its subsidiaries is in default, and there has not occurred
any event that with the lapse of time or giving of notice or both would
constitute a default, under any leases pursuant to which the Seller or any of
its subsidiaries leases any real property, except for such defaults which,
individually or in the aggregate, would not result in the forfeiture of the
use or occupancy of the property covered by any such lease or would not result
in a material liability to the Seller or any Significant Subsidiary of the
Seller which is not reflected on the consolidated balance sheet of the Seller
dated as of June 30, 1998. All such leases constitute legal, valid and binding
obligations of the Seller or its subsidiaries and, to the knowledge of the
Seller, the other party thereto, enforceable by the Seller or such subsidiary
in accordance with their respective terms, except that enforcement thereof may
be limited by the receivership, conservatorship and supervisory powers of bank
regulatory agencies generally as well as bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally and except that enforcement thereof may be subject
to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and the availability of
equitable remedies. Section 4.14 of the Seller Disclosure Schedule sets forth
the expiration date and renewal terms of each such lease. Neither the Seller
nor any of its subsidiaries has received notice of, or made a claim with
respect to, any breach or default under any leases pursuant to which the
Seller or any of its subsidiaries lease any real property.
4.15 Reports. Since January 1, 1995, the Seller and its subsidiaries have
filed, and subsequent to the date hereof will file, all reports, registrations
and statements, together with any amendments required to be made with respect
thereto, that were and are required to be filed with (a) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements
(and all such reports, registrations and statements have been or will be
delivered by the Seller to the Buyer), (b) the Federal Reserve Board, (c) the
FDIC or OCC, as applicable, and (d) any applicable state securities or banking
authorities (except, in the case of state securities authorities, no such
representation is made as to filings which are not material) (all such reports
and statements are collectively referred to herein as the "Seller Reports").
As of their respective dates, the Seller Reports complied and, with respect to
filings made after the date of this Agreement, will at the date of filing
comply, in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which
they were filed and did not contain and, with respect to filings made after
the date of this Agreement, will not at the date of filing contain, any untrue
statement of a material fact.
4.16 Compliance with Applicable Law. Each of the Seller and each Significant
Subsidiary thereof holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of its business, and each of the Seller and
each Significant Subsidiary thereof has complied with, and is not in violation
of or default in any respect under any, applicable law, statute, order, rule,
regulation or policy of, or agreement with, any federal, state or local
governmental agency or authority relating to the Seller or such Significant
Subsidiary (other than where such default or noncompliance will not result in,
or create the possibility of resulting in, a material limitation on the
conduct of the business of the Seller, or will not cause, or create the
possibility of causing, or create the possibility of resulting in any Material
Adverse Effect on the Seller or any Significant Subsidiary of the Seller), and
neither the Seller nor any Significant Subsidiary of the Seller has received
any notice of any violation of any such law, statute, order, rule, regulation,
policy or agreement, or the commencement of any proceeding in connection with
any such violation (including but not limited to any hearing or investigation
relating to the imposition or contemplated imposition of CMPs), and does not
know of any violation of, any such law, statute, order, rule, regulation,
policy or agreement which would have such a result.
4.17 Year 2000 Compliance. The Seller and the Seller's subsidiaries have
taken all reasonable steps necessary to address the software, accounting and
record keeping issues raised in order for the data processing systems used in
the business conducted by the Seller and its subsidiaries to be substantially
Year 2000 compliant on or before the end of 1999 and in conformity with
applicable guidance from federal and state regulatory agencies except to the
extent that noncompliance therewith does not and is not likely to result in a
Material Adverse Effect with respect to Seller or any of its Significant
Subsidiaries.
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4.18 Environmental Matters.
(a) Except as set forth in Section 4.18(a) of the Seller Disclosure
Schedule, the Seller, each of its Significant Subsidiaries and the
Participation Facilities (as such term is hereinafter defined) are and have
been in material compliance with all applicable laws, rules, regulations,
standards and requirements of the EPA and of state and local agencies with
jurisdiction over pollution or protection of the environment.
(b) Except as set forth in Section 4.18(b) of the Seller Disclosure
Schedule, there is no suit, claim, action or proceeding now pending or, to the
best knowledge of the Seller, threatened, before any court, governmental
agency or board or other forum in which the Seller, any of its Significant
Subsidiaries or any Participation Facility has been or, with respect to
threatened proceedings, may be, named as a defendant (i) for alleged
noncompliance (including by any predecessor), with any environmental law, rule
or regulation or (ii) relating to the release into the environment of any
Hazardous Material (as hereinafter defined) whether or not occurring at or on
a site owned, leased or operated by the Seller, any of its Significant
Subsidiaries or any Participation Facility.
(c) Except as set forth in Section 4.18(c) of the Seller Disclosure
Schedule, to the best knowledge of the Seller, there is no suit, claim, action
or proceeding pending, or threatened, before any court, governmental agency or
board or other forum in which any Loan Property (as hereinafter defined) has
been or, with respect to threatened proceedings, may be, named as a defendant
or involved (i) for alleged noncompliance (including by any predecessor) with
any environmental law, rule or regulation or (ii) relating to the release into
the environment of any Hazardous Material whether or not occurring at or on a
site owned, leased, operated or involving a Loan Property.
(d) Except as set forth in Sections 4.18(a), (b) and (c) of the Seller
Disclosure Schedule, to the best knowledge of the Seller's management, there
is no reasonable basis for any suit, claim, action or proceeding as described
in subsection (b) or (c) of this Section 4.18.
(e) Except as set forth in Section 4.18(e) of the Seller Disclosure
Schedule, during and, to the best knowledge of the Seller, prior to the period
of (i) the ownership or operation by the Seller or any of its Significant
Subsidiaries of any of their current properties, or (ii) the participation by
the Seller or any of its Significant Subsidiaries in the management of any
Participation Facility, there has been no release of Hazardous Material in,
on, under or affecting such properties, that would subject the Seller or such
Significant Subsidiary to any liability which would result in a Material
Adverse Effect with respect to the Seller or such Significant Subsidiary.
Except as set forth in Section 4.18(e) of the Seller Disclosure Schedule, to
the best knowledge of the Seller, none of the branch offices of any subsidiary
or any other real property owned, operated or leased by the Seller was at any
time the site of any gas station, manufacturing plant or industrial business
or activity or was at any time a site on which any Hazardous Material, was
stored, produced or otherwise located.
(f) The Seller and its Significant Subsidiaries have asked for
representations from borrowers and/or have conducted due diligence with
respect to each of the Loan Properties in a manner consistent with industry
practice at the time the loan was granted for secured loan transactions of the
size and type of the loan for which such Loan Property was granted as
security, and in the course thereof, or subsequent thereto, nothing has come
to the attention of the Seller or any of its Significant Subsidiaries which
could be reasonably likely to prevent the Seller or such Significant
Subsidiary from exercising its right to foreclose on its security interest
therein.
(g) To the best knowledge of the Seller, none of the disclosures set forth
in Section 4.18 of the Seller Disclosure Schedule is reasonably likely to
result in the closure of any of the branch offices of any of the Significant
Subsidiaries of the Seller or in a Material Adverse Effect with respect to the
Seller or any Significant Subsidiary.
(h) To the best knowledge of the Seller, the transactions contemplated
herein are not subject to the provisions of any applicable environmental
restrictive transfer law.
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(i) The following definitions apply for purposes of this Section 4.18: (i)
"Loan Property" means any property in which the Seller or any of its
Significant Subsidiaries holds a security interest, and, where required by the
context, said term means the owner or operator of such property; (ii)
"Participation Facility" means any facility in which the Seller or any of its
Significant Subsidiaries participates in the management and, where required by
the context, said term means the owner or operator of such property; (iii)
"Hazardous Material" means any pollutant, contaminant, hazardous material,
hazardous waste, or hazardous substance as defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S)9601 et
seq., or the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)6901 et
seq., the Clean Water Act, 33 U.S.C. (S)1321, et seq., or any other federal,
state or local law relating to safety, health, or environmental protection or
any regulations promulgated under any of the foregoing, and specifically
includes oil and any other petroleum derived products, asbestos,
polychlorinated biphenyls (PCB's) and, with respect to any residential
property, lead paint and radon.
4.19 Ownership of Buyer Common Stock. As of the date hereof, neither the
Seller nor, to its best knowledge, any of its affiliates or associates (as
such terms are defined under the Exchange Act), (a) beneficially own, directly
or indirectly, or (b) are parties to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
in each case, shares of capital stock of the Buyer (other than Trust Account
Shares and shares acquired in satisfaction of any debt previously contracted
(any such shares, "DPC Buyer Shares")), which in the aggregate represent five
percent (5%) or more of the outstanding shares of capital stock of the Buyer
entitled to vote generally in the election of directors.
4.20 Insurance. The Seller and its subsidiaries maintain the insurance
coverages set forth in Section 4.20 of the Seller Disclosure Schedule. The
Seller has made available to the Buyer copies of policies relating to
insurance maintained by the Seller or its subsidiaries with respect to their
properties and the conduct of their respective businesses.
4.21 Labor. No work stoppage involving the Seller or any of its subsidiaries
is pending or, to the best knowledge of the Seller, threatened. Neither the
Seller nor any of its subsidiaries is involved in, or, to the best knowledge
of the Seller, threatened with or affected by, any dispute, arbitration,
lawsuit or administrative proceeding relating to labor or employment matters
which might reasonably be expected to result in a Material Adverse Effect with
respect to the Seller or any of its Significant Subsidiaries. No employees of
the Seller or any of its subsidiaries are represented by any labor union, and,
to the best knowledge of the Seller, no labor union is attempting to organize
employees of the Seller or any of its subsidiaries.
4.22 Material Interests of Certain Persons. Except as disclosed in Section
4.22 of the Seller Disclosure Schedule, no officer or director of the Seller,
or any "associate" (as such term is defined in Rule 14a-1 under the Exchange
Act) of any such officer or director, has any material interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of the Seller or any of its subsidiaries.
4.23 Absence of Registration Obligations. Neither the Seller nor any of its
subsidiaries is under any obligation, contingent or otherwise, by reason of
any agreement to register any of its securities under the Securities Act which
will survive the Merger.
4.24 Loans. All currently outstanding loans of, or current extensions of
credit by, the Seller or any of its Significant Subsidiaries (individually, a
"Loan," and collectively, the "Loans") were solicited, originated and
currently exist in material compliance with all applicable requirements of
federal and state law and regulations promulgated thereunder and applicable
loan policies of the Person extending the same, except for such changes to the
circumstances of the obligor thereunder or the collateral occurring subsequent
to the origination thereof and over which the Seller or such subsidiary had no
control, and except where noncompliance would not result in a Material Adverse
Effect with respect to Seller or any of its Significant Subsidiaries. The
Loans are adequately documented and, to the best knowledge of the Seller, each
note evidencing a Loan or loan or credit agreement or security instrument
related to the Loans constitutes a valid, legal and binding obligation of the
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obligor thereunder, enforceable in accordance with the terms thereof, except
where the failure thereof, individually or in the aggregate, would not have a
Material Adverse Effect with respect to the Seller or any of its Significant
Subsidiaries. There are no oral modifications or amendments or additional
agreements related to the Loans that are not reflected in the records of the
Seller or such subsidiary, and no claims of defense as to the enforcement of
any Loan has been asserted and the Seller is aware of no acts or omissions
which would give rise to any claim or right of rescission, set-off,
counterclaim or defense, except where such modifications, amendments,
additional agreements, claims of defense, or acts or omissions would not have,
either individually or in the aggregate, a Material Adverse Effect with
respect to the Seller or any of its Significant Subsidiaries. The Seller and
its Significant Subsidiaries currently maintain, and shall continue to
maintain, an allowance for loan losses allocable to the Loans which, in
Seller's reasonable judgment, is adequate to provide for all known and
reasonably estimable losses, net of any recoveries relating to such extensions
of credit previously charged off, on the Loans, such allowance for loan losses
complying in all material respects with all applicable loan loss reserve
requirements established in accordance with GAAP and by any governmental
authorities having jurisdiction with respect to the Seller or any such
subsidiary. Except as set forth in Section 4.24 of the Seller Disclosure
Schedule, none of the Loans are presently serviced by third parties and, other
than pursuant to obligations in accordance with sales contracts entered into
in the ordinary course of business and consistent with past practice, there is
no obligation which could result in any Loan becoming subject to any third
party servicing.
4.25 Regulatory Capital. As of the date hereof, without giving effect to the
transactions contemplated hereby, the subsidiaries of the Seller which are
"insured depository institutions" (a) are "well capitalized," as defined in
the FDIA, and (b) meet all capital requirements, standards and ratios required
by each state or federal bank regulator with jurisdiction over such Persons.
No such regulator has indicated that it will condition any of the regulatory
approvals upon an increase in any such Person's capital or compliance with any
special capital requirement, standard or ratio.
4.26 CRA Rating. Each subsidiary of the Seller which is an "insured
depository institution" was rated "Satisfactory" or better following its most
recent Community Reinvestment Act examination by the regulatory agency
responsible for its supervision. Neither the Seller nor any of such
subsidiaries has received any notice of and none of such Persons has any
knowledge of any planned or threatened objection by any community group to the
transactions contemplated hereby.
4.27 Seller Information. The information relating to the Seller and its
subsidiaries to be contained in the Joint Proxy Statement as described in
Section 5.04 hereof, and any other documents filed with the SEC or any
regulatory agency in connection herewith, to the extent such information is
provided in writing by the Seller, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make such
information not misleading.
4.28 Disclosure. To the best knowledge of the Seller, all information
material to the Merger and the transactions contemplated by this Agreement, or
which is necessary to make the representations and warranties herein
contained, taken as a whole, not misleading, has been disclosed in writing to
the Buyer.
ARTICLE V
Covenants Of The Parties
5.01 Conduct of the Business of Seller. During the period from the date of
this Agreement to the earlier of the Effective Time or the date of termination
of this Agreement, the Seller:
(a) shall, and shall cause each of its subsidiaries to, conduct its business
and engage in transactions, only in the ordinary and usual course of business
consistent with past practices, which shall mean (i) conducting its banking
and other business in the ordinary and usual course, (ii) refraining from any
of the activities described
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in Section 5.01(b) below, (iii) not entering into any material transactions
except in the ordinary and usual course of business consistent with past
practices and (iv) complying with the following covenants:
(A) maintaining its corporate existence and good standing, except where
any failure to maintain such good standing does not or would not have a
Material Adverse Effect on the Seller or any of its Significant
Subsidiaries;
(B) using reasonable efforts to maintain and keep its properties in as
good repair and condition in all material respects as they presently exist,
except for ordinary wear and tear and damage due to casualty;
(C) using reasonable efforts to maintain in full force and effect
insurance generally comparable in amount and in scope of coverage to that
now maintained by it;
(D) complying with and performing in all material respects its
obligations and duties (y) under contracts, leases and documents relating
to or affecting its assets, properties and business and (z) imposed upon it
by all federal, state and local laws and all rules, regulations and orders
imposed by federal, state or local governmental authorities, judicial
orders, judgments, decrees and similar determinations; and
(E) using reasonable efforts to preserve its business organization intact
and the goodwill of those having business relationships with the Seller or
any of the Seller's subsidiaries, to keep available the services of its
officers and employees as a group and to maintain satisfactory
relationships with borrowers, depositors, other customers and others having
business relationships with it;
(b) shall not and shall not permit any of its subsidiaries to, without the
prior written consent of the Buyer, which shall not unreasonably be withheld:
(i) engage or participate in any material transaction or incur or
sustain any material obligation or liability except in the ordinary,
regular and usual course of its businesses consistent with past
practices;
(ii) offer an interest rate with respect to any deposit that would
constitute such deposit a "brokered deposit" under C.F.R. (S)
337.6(a)(1)(ii);
(iii) except in the ordinary, regular and usual course of business
consistent with past practices, sell, lease, transfer, assign, encumber
or otherwise dispose of or enter into any contract, agreement or
understanding to lease, transfer, assign, encumber or dispose of any of
its assets; provided that the Seller and its subsidiaries may acquire
and dispose of loans and investment securities in the ordinary course
of business consistent with past practice;
(iv) file any application to open, close or relocate any branch
office;
(v) open, close, relocate, or give any notice (written or verbal) to
customers or governmental authorities or agencies to open, close or
relocate the operations of any branch office; or
(vi) waive any material right, whether in equity or at law, that it
has with respect to any asset except in the ordinary, regular and usual
course of business consistent with past practice;
(c) shall, at the Buyer's request and expense, use its reasonable best
efforts to cooperate with the Buyer with respect to preparation for the
combination and integration as of the Effective Time of the businesses,
systems and operations of the Buyer and the Seller, and shall confer on a
regular and frequent basis with one or more representatives of the Buyer to
report on operational and related matters;
(d) shall not declare or pay any dividends on or make any other
distributions in respect of Seller Common Stock, except for regular quarterly
cash dividends on Seller Common Stock at a rate not in excess of the Seller's
current dividend rate and subject to the terms of Section 5.18 hereof;
(e) from and after June 30, 1998, shall not have adopted or amended (other
than amendments required by applicable law or amendments that reduce amounts
payable by it or its subsidiaries) in any material respect any Seller Pension
Plan, any Seller Benefit Plan or any Seller Other Plan or entered (or
permitted any of its subsidiaries to enter) into any employment, retention,
severance or similar contract with any person (including, without limitation,
contracts with management which might require that payments be made upon the
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consummation of the transactions contemplated hereby) or amended any such
existing agreements, plans or contracts to increase any amounts payable
thereunder or benefits provided thereunder, or granted or permitted any
increase in compensation to its or its subsidiaries' employees as a class or
paid any bonus except as provided in Section 5.12(f) hereof;
(f) except as permitted in Section 5.01(b)(iii), shall not, with respect to
itself or any of its subsidiaries, authorize, recommend, propose or announce
an intention to authorize, recommend or propose, or enter into an agreement
with respect to, any merger, consolidation, purchase and assumption
transaction or business combination (other than the Merger), any acquisition
of a material amount of assets or securities or assumption of liabilities
(including deposit liabilities), any disposition of a material amount of
assets or securities, or any release or relinquishment of any material
contract rights;
(g) shall not propose or adopt amendments to its or any of its subsidiaries'
Certificates of Incorporation or By-Laws;
(h) shall not issue, deliver or sell any shares (whether original issuance
or from treasury shares) of its capital stock or securities convertible into
or exercisable for shares of its capital stock (or permit any of its
subsidiaries to issue, deliver or sell any shares of such subsidiaries'
capital stock or securities convertible into or exercisable for shares of such
subsidiaries' capital stock), except for the sale of up to 50,000 shares of
Seller Common Stock pursuant to the Seller's Employee Stock Purchase Plan and
except upon exercise or fulfillment of rights or options issued or existing
pursuant to employee benefit plans, programs or arrangements, dividend
reinvestment plans, or the terms of convertible securities, all to the extent
outstanding or in existence on the date hereof, and except upon exercise of
the Seller Option, as applicable, or effect any stock split, reverse stock
split, recapitalization, reclassification or similar transaction or otherwise
change its equity capitalization as it existed on June 30, 1998;
(i) shall not grant, confer or award any options, warrants, conversion
rights or other rights, not existing on the date hereof, to acquire any shares
of its capital stock;
(j) shall not purchase, redeem or otherwise acquire, or permit any of its
subsidiaries to purchase, redeem or otherwise acquire, any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock, except in a fiduciary capacity or in satisfaction of
debts previously contracted;
(k) shall not impose, or suffer the imposition, on any share of capital
stock held by it or by any of its subsidiaries of any material lien, charge,
or encumbrance, or permit any such lien, charge, or encumbrance to exist;
(l) shall not incur, or permit any of its subsidiaries to incur, any
additional debt obligation or other obligation for borrowed money, or to
guaranty any additional debt obligation or other obligation for borrowed
money, except in the ordinary course of business consistent with past
practices, which shall include but not necessarily be limited to creation of
deposit liabilities, Federal Home Loan Bank advances, purchases of federal
funds, sales of certificates of deposit and entry into repurchase agreements
or other similar arrangements commonly employed by banks;
(m) except as set forth in Section 5.01(m) of the Seller Disclosure
Schedule, shall not incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith, other than capital
expenditures and such related obligations or liabilities incurred or committed
to in the ordinary and usual course of business consistent with past
practices, and, in all cases, the Seller agrees to consult with the Buyer with
respect to capital expenditures that individually exceed $50,000 or
cumulatively exceed $200,000;
(n) shall not, except as expressly contemplated hereby, enter into any
contract with any affiliate except normal banking services and continuations
of existing contractual relationships which have been disclosed to Buyer;
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(o) shall not, except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material contract
or agreement, or make any changes in any of its material leases or contracts,
other than renewals of contracts for less than a two (2) year period and,
subject to the provisions of Section 5.17 hereof, leases without material
adverse change of terms;
(p) shall not, other than in prior consultation with the other party to this
Agreement or except in the ordinary course of business and consistent with
past practice, restructure or materially change its investment securities
portfolio or its "gap position" through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported;
(q) shall not agree, in writing or otherwise, to take any of the foregoing
actions or any action which would make any of its representations or
warranties contained herein untrue or incorrect in any material respect.
5.02 Access to Properties and Records; Confidentiality. The Seller shall
permit the Buyer reasonable access to its properties and those of its
subsidiaries, and shall disclose and make available to the Buyer all Records,
including all books, papers and records relating to the assets, stock
ownership, properties, operations, obligations and liabilities of the Seller
and its subsidiaries, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors and
stockholders meetings, organizational documents, By-Laws, material contracts
and agreements, filings with any regulatory authority, accountants' work
papers (to the extent consent from such accountants is obtained), litigation
files, plans affecting employees, and any other business activities or
prospects in which the Buyer may reasonably have an interest in light of the
transactions contemplated hereby. The Seller shall make arrangements with each
third party provider of services to the Seller to permit the Buyer reasonable
access to all of the Seller's Records held by each such third party. The Buyer
shall permit the Seller reasonable access to such properties and records of
the Buyer and/or its subsidiaries in which the Seller may reasonably have an
interest in light of the transactions contemplated hereby. Neither the Buyer
nor the Seller nor any of their respective subsidiaries shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of any customer, would jeopardize the
attorney-client privilege of the institution in possession or control of such
information, or would contravene any law, rule, regulation, order, judgment,
decree or binding agreement or, in the event of any litigation or threatened
litigation between the parties over the terms of this Agreement where access
to information may be adverse to the interests of such party. The parties will
use all reasonable efforts to make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply and both parties hereunder shall continue to be subject to the
provisions of the Confidentiality Agreement.
5.03 No Solicitation. Unless and until this Agreement shall have been
properly terminated by either party pursuant to Section 8.01 hereof, neither
the Seller nor any of its subsidiaries shall (and the Seller and each of its
subsidiaries shall use its best efforts to cause its Representatives,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, initiate or participate
in any discussions or negotiations with, or, subject to the fiduciary
obligations of the Seller's Board of Directors (as determined in good faith in
consultation with outside counsel), provide any information to, any
corporation, partnership, person or other entity or group (other than the
Buyer and its affiliates or Representatives) concerning any merger, tender
offer, sale of substantial assets, sale of shares of capital stock or debt
securities or similar transaction involving the Seller or any of its
subsidiaries (an "Acquisition Transaction"), provided that in accordance with
the fiduciary obligations of the Seller's Board of Directors, the Seller may
participate in discussions in the event that the Seller did not solicit or
initiate such discussions with respect to Acquisition Transactions.
Notwithstanding the foregoing, nothing contained in this Section 5.03 shall
prohibit the Seller or its Board of Directors from taking and disclosing to
the Seller's stockholders a position with respect to a tender offer by a third
party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act
or from making such disclosure to the Seller's stockholders which, in the
judgment of the Board of Directors determined in good faith in consultation
with outside counsel, may be required under applicable law. The Seller will
immediately communicate to the Buyer the terms of any proposal, discussion,
negotiation or inquiry relating to an Acquisition
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Transaction and the identity of the party making such proposal or inquiry
which it may receive in respect of any such transaction (which shall mean that
any such communication shall be delivered no less promptly than by telephone
within 24 hours of the Seller's receipt of any such proposal or inquiry) or
its receipt of any request for information from the Federal Reserve Board, the
OCC, the NYS Department, or any other governmental agency or authority with
respect to a proposed Acquisition Transaction.
5.04 Regulatory Matters; Consents.
(a) The Buyer and the Seller shall cooperate in the prompt preparation and
filing with the SEC of a joint proxy statement in definitive form relating to
the meetings of the Buyer's and the Seller's stockholders to be held in
connection with this Agreement and the transactions contemplated hereby (the
"Joint Proxy Statement") and the Buyer shall promptly prepare and file with
the SEC a registration statement on Form S-4 (the "S-4") in which the Joint
Proxy Statement will be included as a prospectus. Each of the Buyer and the
Seller shall use all reasonable efforts to have the S-4 declared effective
under the Securities Act as promptly as practicable after such filing, and the
Buyer and the Seller shall thereafter mail the Joint Proxy Statement to their
respective stockholders. The Buyer shall also use all reasonable efforts to
obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement, and the
Buyer and the Seller shall each furnish to the other all information
concerning itself and the holders of its Common Stock as may be reasonably
requested in connection with any such action.
(b) The Seller and the Buyer shall have the right to review in advance, and
to the extent practicable each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all the
information relating to the Seller or the Buyer, as the case may be, and any
of their respective subsidiaries, which appear in any filing made with, or
written materials submitted to, any third party or any government regulatory
body, department, agency or authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and government regulatory bodies, departments, agencies or
authorities necessary or advisable to consummate the transactions contemplated
by this Agreement, and each party will keep the other apprised of the status
of matters relating to completion of the transactions contemplated herein.
(c) The Buyer and the Seller shall, upon request, furnish each other with
all information concerning themselves, their subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Joint Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of the Buyer,
the Seller or any of their respective subsidiaries to any governmental
regulatory body, department, agency or authority in connection with the Merger
and the other transactions contemplated by this Agreement.
(d) The Seller and the Buyer shall promptly advise each other upon receiving
any communication from any government regulatory body, department, agency or
authority whose consent or approval is required for consummation of the
transactions contemplated by this Agreement which causes such party to believe
that there is a reasonable likelihood that such requisite approval will not be
obtained or that the receipt of such approval will be materially delayed.
(e) Each of the Seller and the Buyer will cooperate with the other and use
all reasonable efforts to prepare all necessary documentation, to obtain all
necessary permits, consents, approvals and authorizations of all third parties
and governmental bodies necessary to consummate the transactions contemplated
by this Agreement.
(f) The Buyer shall prepare and file as soon as practicable and the Seller
shall cooperate in the preparation and, where appropriate, filing of,
applications requesting the Consents (as contemplated in Section 6.01(b)
herein), from all required governmental or regulatory authorities or agencies.
The Buyer shall provide the Seller and its counsel with copies of such
applications for comment prior to the filing thereof. The parties shall
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immediately upon receipt deliver to each other copies of all filings,
correspondence and orders to and from such governmental or regulatory
authorities or agencies transmitted or received in connection with the
transactions contemplated hereby.
5.05 Approval of Stockholders. Each party hereto will (a) as promptly as
practicable, take all steps necessary to duly call, give notice of, convene
and hold a meeting of its stockholders for the purpose of approving this
Agreement and the Merger, and for such other purposes as may be necessary or
desirable, (b) recommend to its stockholders the approval of the
aforementioned matters to be submitted by it to its stockholders (subject to
compliance with their fiduciary duties as determined in good faith in
consultation with outside counsel), and (c) cooperate and consult with the
other with respect to each of the foregoing matters.
5.06 Agreements of Affiliates; Publication of Combined Financial Results.
(a) The Seller shall identify in a letter to the Buyer, after consultation
with counsel, all Persons who, at the time of the meeting of its stockholders
referred to in Section 5.05 hereof, it believes may be deemed to be
"affiliates" of the Seller, as that term is defined for purposes of paragraphs
(c) and (d) of Rule 145 under the Securities Act and SEC Accounting Series
Releases 130 and 135 (the "Seller Affiliates"). The Seller shall use all
reasonable efforts to cause each Person who is identified as a Seller
Affiliate in the letter referred to above to deliver to the Buyer at least
forty (40) days prior to the Effective Time an executed copy of the Seller
Affiliates Agreement. Prior to the Effective Time, the Seller shall amend and
supplement such letter and use all reasonable efforts to cause each additional
person who is identified as a Seller Affiliate to execute a copy of the Seller
Affiliates Agreement.
(b) The Buyer shall identify in a letter to the Seller, after consultation
with counsel, all Persons who, at the time of the meeting of its stockholders
referred to in Section 5.05 hereof, it believes may be deemed to be
"affiliates" of the Buyer, as that term is defined for purposes of SEC
Accounting Series Releases 130 and 135 (the "Buyer Affiliates"). The Buyer
shall use all reasonable efforts to cause each Person who is identified as a
Buyer Affiliate in the letter referred to above to deliver to the Seller at
least forty (40) days prior to the Effective Time an executed copy of the
Buyer Affiliates Agreement. Prior to the Effective Time, the Buyer shall amend
and supplement such letter and use all reasonable efforts to cause each
additional person who is identified as a Buyer Affiliate to execute a copy of
the Buyer Affiliates Agreement.
(c) The Buyer shall use its best efforts to publish, no later than thirty
(30) days after the end of the first month after the Effective Time in which
there are at least thirty (30) days of post-Merger combined operations (which
month may be the month in which the Effective Time occurs), combined sales and
net income figures as contemplated by and in accordance with the terms of SEC
Accounting Series Release No. 135.
5.07 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to,
as promptly as practicable, take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement or to vest the Buyer with full
title to all properties, assets, rights, approvals, immunities and franchises
of the Seller. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement or to
vest the Buyer with full title to all properties, assets, rights, approvals,
immunities and franchises of the Seller, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
5.08 Public Announcements. From the date of this Agreement to the Closing
Date, neither of the parties hereto shall make or send a Public Announcement
unless the other party shall have first been afforded reasonable opportunity
to review and comment on the text of such Public Announcement prior to the
delivery of the same; provided, however, that nothing in this Section shall
prohibit any party hereto from making any Public Announcement which its legal
counsel deems necessary under law, if it makes a good faith effort to obtain
the other party's comments on the text of the Public Announcement before
making it public.
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5.09 Post-Closing Governance. From and after the Effective Time, the Board
of Directors of the Buyer shall be expanded by three members and Mr. George W.
Dougan and two (2) additional individuals selected by the Seller and approved
of by the Buyer in its reasonable business judgment prior to the Effective
Time shall be appointed as directors of the Buyer and shall resign any offices
they may hold at any subsidiary of the Seller. The directors selected by the
Seller to serve as directors of the Buyer shall be divided equally among the
three classes of directors of the Buyer, with Mr. Dougan to be appointed vice
chairman of the Board and to serve in the class of directors whose term comes
up for reelection in the year 2001. At the Effective Time, the Board of
Directors of the subsidiary of the Seller which is a depository institution
shall consist of those pre-existing directors of such subsidiary who are not
appointed directors of Buyer under this Section and such additional persons as
shall be designated by the Buyer prior to the Effective Time. At the Effective
Time, the President and Chief Executive Officer of such subsidiary shall be a
person selected by the Seller and approved by the Buyer in its reasonable
business judgment from among the senior executive officers of such subsidiary
and such person shall become a member of the Board of Directors of such
subsidiary and of the Buyer's Presidents' Council. At such time, the Chairman
of the Board of Directors of such subsidiary shall be an outside director
designated by the Buyer.
5.10 Tax-Free Reorganization Treatment; Accounting.
(a) Neither the Buyer nor the Seller shall intentionally take or cause to be
taken any action, whether before or after the Effective Time, which would
disqualify the Merger as a "reorganization" within the meaning of Section
368(a) of the Code; provided, however, that nothing herein shall limit the
ability of the Buyer to exercise its rights under the Seller Option Agreement.
(b) Neither the Buyer nor the Seller shall intentionally take or cause to be
taken any action, whether before or after the Effective Time, which would
prevent the Merger from qualifying for pooling of interests accounting
treatment.
5.11 Stock Listing. Buyer shall use all reasonable efforts to cause the
shares of Buyer Common Stock to be issued in connection with the Merger to be
approved for listing on Nasdaq, subject to official notice of issuance, as of
or prior to the Effective Time.
5.12 Employment and Benefit Matters.
(a) Service Credit. With respect to each employee of the Seller or its
affiliates who becomes an employee of the Buyer or any affiliate of the Buyer
(each such employee, a "Transferred Employee"), the Buyer shall cause each
employee benefit plan, program or arrangement maintained or contributed to by
the Buyer or its affiliates that is applicable to the Transferred Employee to
treat the prior service of such Transferred Employee with the Seller or its
affiliates as service rendered to the Buyer or its affiliate, as the case may
be, for purposes of eligibility to participate and vesting under such plan,
program or arrangement of the Buyer, and for purposes of determining the
amount of vacation and severance benefits to which the Transferred Employee is
entitled, but not for purposes of benefit accrual. From and after the
Effective Time, the Buyer will provide the Transferred Employees with the
types and levels of employee benefits maintained by the Buyer for similarly
situated employees of the Buyer and will provide the directors and employees
of subsidiaries of Seller the levels and types of benefits maintained by Buyer
for persons holding equivalent positions at other subsidiaries of the Buyer of
comparable size and category. The Buyer shall cause its medical, dental and
other welfare benefit plans and policies applicable to the Transferred
Employees after the Closing to (i) waive with respect to the Transferred
Employees any waiting periods and restrictions and limitations for preexisting
conditions or insurability, and (ii) credit the Transferred Employees with any
deductible, co-payment, co-insurance, or maximum out-of-pocket payments made
by such Transferred Employees under the Seller's medical, dental, and other
welfare benefit plans and policies so as to reduce the amount of any
deductible, co-payment, co-insurance, or maximum out-of-pocket payments
payable by the Transferred Employees under the Buyer's medical, dental, and
other welfare benefit plans and policies.
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(b) Severance Obligations. For a period of one (1) year after the Closing
Date, the Buyer will provide Transferred Employees a severance plan with
provisions which are at least as favorable in the aggregate to any terminating
Transferred Employee as the severance plan maintained as of June 30, 1998 by
the Seller for such employee. Unless otherwise required by law, Transferred
Employees who are eligible for benefits under the Seller's change-in-control
plan and whose employment is terminated within one (1) year after the
Effective Time, may elect to receive benefits under either the change-in-
control plan of the Seller or the severance plan provided by the Buyer under
this section, but not both. Any employee of the Seller or its affiliates who
is not a Transferred Employee whose position is terminated on or prior to the
Effective Time shall be entitled to severance benefits in accordance with the
severance plan, if any, maintained by the Seller for such employee on June 30,
1998.
(c) Terminated Plans. The Seller shall take such actions as may reasonably
be requested by the Buyer to cause any of the Seller Benefit Plans to
terminate effective as of the Effective Time.
(d) Employment Agreement. As of the Effective Time, the existing Employment
Agreement between the Seller and Mr. Dougan shall be terminated and Mr. Dougan
shall, subject to the provisions thereof, be entitled to the payment and
benefits determined pursuant to Section 13(c) of such agreement as in effect
on June 30, 1998, such payments to be made no later than the Effective Time.
From and after the Effective Time, the Buyer shall honor the Supplemental
Executive Retirement Plan of the Seller with respect to Mr. Dougan.
(e) For purposes of any employment benefit and compensation plans,
agreements and arrangements (including, but not limited to, any severance
agreements or arrangements) of the Seller, the Buyer acknowledges that the
consummation of the Merger will constitute a "change in control" of the
Seller.
(f) As reflected in the Seller Disclosure Schedule, Seller and its
subsidiaries maintain an annual bonus plan (the "Bonus Plan") pursuant to
which certain employees of Seller and its subsidiaries would be granted cash
bonus awards for 1998 in the ordinary course. The Seller and its subsidiaries
will maintain the Bonus Plan through the Effective Time. If the Effective Time
is prior to January 1, 1999, the Seller and its subsidiaries will pay cash
bonus awards for 1998 in the ordinary course and consistent with its past
practice and the Bonus Plan, including any performance criteria thereof, but
without regard under such criteria to expenses properly allocable to the
Merger, not more than three business days before the Effective Time, and such
cash bonus awards for 1998 under the Bonus Plan shall in the aggregate not
exceed an amount equal to $600,000 multiplied by a fraction, the numerator of
which is the number of days in 1998 prior to the Effective Time and the
denominator of which is 365. If the Effective Time is after December 31, 1998,
the Seller and the subsidiaries may pay the cash bonus amounts for 1998
described in the preceding sentence and continue the Bonus Plan through the
Effective Time and pay cash bonus awards for 1999 thereunder not more than
three business days before the Effective Time, in the ordinary course and
consistent with its past practice and the Plan, including any performance
criteria thereof, but without regard under such criteria to expenses properly
allocable to the Merger, in an aggregate amount which shall not in any event
exceed an amount equal to $600,000 multiplied by a fraction, the numerator of
which is the number of days in 1999 prior to the Effective Time and the
denominator of which is 365.
(g) If the Effective Time is before January 1, 1999, the Seller and its
subsidiaries in the ordinary course and consistent with past practice and the
Employees' Profit Sharing and Salary Reduction Plan of the Seller (the "Seller
Profit Sharing Plan"), may make a profit sharing contribution for 1998 to the
Seller Profit Sharing Plan not more than three business days before the
Effective Time, for the benefit of eligible participants thereunder, not to
exceed an aggregate amount equal to $300,000 multiplied by a fraction, the
numerator of which is the number of days in 1998 prior to the Effective Time
and the denominator of which is 365. If the Effective Time is after December
31, 1998, Seller and its Subsidiaries may make such profit sharing
contribution for 1998 and, in the ordinary course and consistent with past
practice and the Seller Profit Sharing Plan, make a profit sharing
contribution to the Seller Profit Sharing Plan for 1999 not more than three
business days before the Effective Time, for the benefit of eligible
participants thereunder, in an aggregate amount not to exceed $300,000
multiplied by a fraction, the numerator of which is the number of days in 1999
prior to the Effective Time and the denominator of which is 365.
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(h) Prior to the Effective Time, the Seller shall take all such actions as
may be necessary or appropriate so as to cause each Eligible Window Employee
(defined as those individuals listed in Section 5.12(h) of the Seller
Disclosure Schedule) who terminates employment within the one year period
beginning as of the Effective Time to be treated, as of the date of the
Eligible Window Employee's termination of employment and for all purposes
under the Employees' Retirement Plan of Evergreen Bancorp, Inc. (the
"Evergreen Retirement Plan"), as having the age and years of service and
credited service under the Evergreen Retirement Plan as such Eligible Window
Employee would have had upon termination of employment if he terminated
employment with the Buyer and its affiliates (or any successors thereto) five
years after the employee's actual date of termination of employment, assuming
the continuation of the Evergreen Retirement Plan during such period.
5.13 Accountants' Letters.
(a) Comfort Letters. Each of the Buyer and the Seller (each, in such
capacity, the "Client") shall use all reasonable efforts to cause to be
delivered to the other party (each, in such capacity, the "Recipient") a
letter from KPMG Peat Marwick LLP, in form and substance reasonably acceptable
to the Recipient, stating that (a) they are independent public accountants
with respect to Client within the meaning of the 1933 Act and the published
rules and regulations thereunder, (b) in their opinion the consolidated
financial statements of Client included in the Registration Statement comply
as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations
thereunder, and (c) a reading of the latest available unaudited consolidated
financial statements of Client and its subsidiaries and inquiries of certain
officials of Client and its subsidiaries responsible for financial and
accounting matters as to transactions and events since the date of the most
recent consolidated statement of condition included in their most recent audit
report with respect to Client did not cause them to believe that (i) such
latest available unaudited consolidated financial statements of Client are not
stated on a basis consistent with that followed in Client's audited
consolidated financial statements; or (ii) except as disclosed in the letter,
at a specified date not more than five business days prior to the date of such
letter, there was any change in Client's capital stock or any change in
consolidated long-term debt or any decrease in the consolidated net assets of
Client or the consolidated allowance for loan and lease losses of Client as
compared with the respective amounts shown in the most recent Client audited
consolidated financial statements. Each such letter shall also cover such
other matters pertaining to Client's and its subsidiaries' financial data and
statistical information included in the Registration Statement as may be
reasonably requested by Recipient and as are customarily covered in such
letters in transactions of the type contemplated hereby.
(b) Pooling Letters. Each of the Buyer and the Seller (each, in such
capacity, the "Client") shall use all reasonable efforts to cause to be
delivered to such Client a letter from KPMG Peat Marwick LLP, in form and
substance reasonably acceptable to the Buyer, dated the date of or shortly
prior to each of the mailing date of the proxy statement (the "Proxy
Statement") and other proxy materials to the shareholders of the Buyer, and
the Effective Time, stating the opinion of KPMG that the reorganization
contemplated by this Agreement shall qualify for pooling-of-interest
accounting treatment (provided, that the Pooling Letter delivered at the date
of mailing of the Proxy Statement may assume no changes in relevant facts
between the date of such letter and an assumed Effective Time.
5.14 Directors' and Officers' Indemnification and Insurance.
(a) After the Effective Time, the Buyer shall honor the indemnification
provisions for officers and directors currently set forth in the Certificate
of Incorporation (or charter or other organizational documents) and By-Laws of
the Seller and its subsidiaries with respect to acts and omissions taken prior
to the Effective Time by such officers and directors, but only to the extent
permitted by federal and Delaware law and regulations.
(b) The Buyer shall maintain the Seller's (including its subsidiaries')
existing directors' and officers' liability insurance (the "D&O Insurance")
covering persons who are currently covered by the Seller's D&O Insurance for a
period of six (6) years after the Effective Time on terms no less favorable
than those in effect on the date hereof, provided, however, that the Buyer may
substitute therefor policies providing at least comparable coverage and
containing terms and conditions no less favorable than those in effect on the
date hereof.
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5.15 Conversion of Seller Stock Options. At the Effective Time, all rights
with respect to Seller Common Stock pursuant to stock options granted by the
Seller under any currently existing stock option plans of the Seller shall be
converted into corresponding rights to purchase shares of Buyer Common Stock
in accordance with the applicable provisions of the Plan of Merger.
5.16 Maintenance of Records. Through the Effective Time, each of the Buyer
and the Seller will maintain the Records in the same manner and with the same
care that the Records have been maintained prior to the execution of this
Agreement. The Buyer may, at its own expense, make such copies of and excerpts
from the Records as it may deem desirable. All Records, whether held by the
Buyer or the Seller, shall be maintained for such periods as are required by
law, unless the parties shall, applicable law permitting, agree in writing to
a different period. From and after the Effective Time, the Buyer shall be
solely responsible for continuing maintenance of the Records.
5.17 Leases. The Seller shall use all reasonable efforts to renew or extend
on a month-to-month basis or for such term as requested by the Buyer, any
lease of a branch office of any subsidiary, other lease of real property or
lease relating to furniture, fixtures or equipment that is currently in effect
but that would otherwise expire on or prior to the Effective Time. The Seller
shall not cancel, terminate or take other action that is likely to result in
any cancellation or termination of any such lease without prior written notice
to the Buyer.
5.18 Dividends. After the date of this Agreement, each of the Seller and the
Buyer shall coordinate with the other the declaration of any dividends in
respect of Seller Common Stock and Buyer Common Stock and the record dates and
payment dates relating thereto, it being the intention of the parties hereto
that holders of Seller Common Stock or Buyer Common Stock shall not receive
two dividends, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of Seller Common Stock and/or Buyer
Common Stock and any share of Buyer Common Stock any such holder received in
exchange therefor in the Merger.
5.19 Notice of Change. Each of the parties hereto shall, subject to any
restrictions under applicable law or regulation, promptly notify the other of
any emergency or other change in the normal course of its or its subsidiaries'
businesses or in the operation of its or its subsidiaries' properties and of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency, change,
complaint, investigation or hearing would be material to the business, results
of operations, financial condition or prospects of such Person on a
consolidated basis or any of its Significant Subsidiaries considered
independently. Further, each party agrees to give written notice promptly to
the other party upon becoming aware of the occurrence or impending occurrence
of any event or circumstance relating to it or any of its subsidiaries which
(i) is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on it or (ii) would cause or constitute a material breach of
any of its representations, warranties, or covenants contained herein, and to
use its reasonable efforts to prevent or promptly to remedy the same.
5.20 Changes in Accounting. Except with the prior consent of the other party
which shall not be unreasonably withheld, between the date hereof and the
Closing Date, neither of the parties hereto shall change its methods of
accounting as in effect at December 31, 1997, except as may be required by
changes in GAAP, tax, or regulatory accounting requirements, as concurred in
by such party's independent auditors, nor shall they change their respective
fiscal years.
5.21 SEC Filings. Each of the parties hereto shall file all reports,
applications and other documents required to be filed by it with the SEC or
any other governmental entity between the date of this Agreement and the
Effective Time and shall make available to the other copies of all such
reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements
will fairly present the consolidated financial position of the entity filing
such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods
then ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
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material respects with applicable securities laws and will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
5.22 Covenants of Buyer. From the date of this Agreement until the earlier
of the Effective Time or the date of termination of this Agreement, the Buyer
covenants and agrees that it shall take no action which would (a) materially
adversely affect the ability of any party to obtain any Consents required for
consummation of the transactions contemplated hereby without the imposition of
a condition or restriction of the type referred to in Section 6.02(g) of this
Agreement, (b) materially adversely affect the ability of any party to perform
its covenants and agreements under this Agreement, or (c) result in the Buyer
entering into an agreement with respect to an acquisition proposed with a
third party which would result in the Merger not being consummated. Nothing in
this Agreement shall prevent the Buyer from issuing or reissuing to third
parties such number of shares of Buyer Common Stock at or prior to the
Effective Time as the Buyer may reasonably determine to be necessary to
qualify the transactions contemplated herein for "pooling of interests"
accounting treatment
5.23 Regulatory Reports. Each party and its subsidiaries shall file all
reports required to be filed by it with regulatory authorities between the
date of this Agreement and the Effective Time and, to the extent permitted by
law, shall deliver to the other party copies of all such reports promptly
after the same are filed.
5.24 Registration of Shares. On or prior to the Effective Time, the Buyer
shall file a registration statement on Form S-3 or Form S-8, as the case may
be (or any successor or other appropriate form), with respect to the shares of
Buyer Common Stock subject to the stock options of the Seller to be assumed by
the Buyer pursuant to Section 2.04 of the Plan of Merger and the Buyer shall
use its reasonable efforts to maintain the effectiveness of such registration
statement (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
ARTICLE VI
Closing Conditions
6.01 Conditions to Each Party's Obligations Under This Agreement. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions,
none of which may be waived:
(a) Stockholders' Approval. This Agreement and the Plan of Merger and the
transactions contemplated hereby and thereby shall have been approved by the
affirmative vote of the holders of at least a majority of the outstanding
shares of Seller Common Stock and at least a majority of the outstanding
shares of Buyer Common Stock, in each case in accordance with applicable law.
(b) Governmental Consents. All authorizations, consents, orders or approvals
of, or declarations or filings with, and all expirations of waiting periods
imposed by, any governmental or regulatory authority or agency (all of the
foregoing being referred to as "Consents") which are necessary for the
consummation of the Merger, other than Consents the failure of which to obtain
would neither make it impossible to consummate the Merger nor result in a
Material Adverse Effect on the Buyer (on a consolidated basis with the Seller)
after the Merger, shall have been filed, occurred or been obtained (all such
authorizations, orders, declarations, approvals, filings and consents and the
lapse of all such waiting periods being referred to as the "Requisite
Regulatory Approvals") and all such Requisite Regulatory Approvals shall be in
full force and effect. In addition, the Buyer shall have received all state
securities or blue sky permits and other authorizations necessary to issue
Buyer Common Stock pursuant to the Merger in accordance with all applicable
state securities or Blue Sky laws.
(c) S-4. The S-4 shall have become effective under the Securities Act and
shall not be subject to a stop order or a threatened stop order.
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(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
(e) Accounting Treatment. The Buyer and the Seller shall each have received
letters (the "Pooling Letters") from KPMG Peat Marwick LLP, the independent
auditing firm of each of them, dated the date of or shortly prior to each of
the mailing date of the proxy statement (the "Proxy Statement") and other
proxy materials to the shareholders of the Buyer, and the Effective Time,
stating the opinion of KPMG that the reorganization contemplated by this
Agreement shall qualify for pooling-of-interest accounting treatment
(provided, that the Pooling Letter delivered at the date of mailing of the
Proxy Statement may assume no changes in relevant facts between the date of
such letter and an assumed Effective Time); provided, that such delivery of
the Pooling Letters shall not be a condition to the obligations of a party
hereunder if KPMG is unable to deliver the Pooling Letters as a result of (a)
any affirmative act on the part of such party or any of its affiliates, or (b)
any event or circumstance or failure to act which constitutes a breach by such
party of any of its representations, warranties, covenants or agreements under
this Agreement.
6.02 Conditions to the Obligations of the Buyer Under This Agreement. The
obligations of the Buyer under this Agreement shall be further subject to the
satisfaction or waiver by the Buyer, at or prior to the Effective Time, of the
following conditions:
(a) Absence of Material Adverse Changes. There shall not have occurred any
change in the business, assets, financial condition, or results of operations
of the Seller or any of its subsidiaries which has had, or is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
the Seller taken as a whole.
(b) Representations and Warranties; Performance of Obligations. (i) The
obligations of the Seller required to be performed by it at or prior to the
Closing pursuant to the terms of this Agreement shall have been duly performed
and complied with in all material respects and (ii) the representations and
warranties of the Seller contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time (except as
otherwise specifically contemplated by this Agreement and except as to any
representation or warranty which specifically relates to an earlier date);
provided, however, that for purposes of determining the satisfaction of the
conditions contained in clause (ii) of this paragraph (b), no effect shall be
given to any exception in such representations and warranties relating to
materiality or the existence of a Material Adverse Effect and, provided
further, however, that for purposes of clause (ii) of this paragraph (b), such
representations and warranties shall be deemed to be true and correct in all
material respects unless the failure or failures of such representations and
warranties to be so true and correct, in the aggregate, represents a material
adverse change in the business, assets, financial condition or results of
operations of the Seller on a consolidated basis. The Buyer shall have
received a certificate to the foregoing effect signed by the chairman or
president and the chief financial officer or chief accounting officer of the
Seller.
(c) Third-Party Approvals. Any and all permits, consents, waivers,
clearances, approvals and authorizations of all non-governmental and non-
regulatory third parties which are necessary in connection with the
consummation of the transactions contemplated by this Agreement and are
required to be received or obtained by the Seller, shall have been obtained by
the Seller, other than permits, consents, waivers, clearances, approvals and
authorizations the failure of which to obtain would neither make it impossible
to consummate the Merger nor result in any Material Adverse Effect with
respect to the Buyer (on a consolidated basis with the Seller).
(d) Tax Opinion. The Buyer shall have received an opinion, dated the date of
the Closing from its tax advisor, KPMG Peat Marwick LLP, or other tax advisor
acceptable to the Buyer and the Seller, substantially to the effect that, on
the basis of facts and representations set forth therein, or set forth in
writing elsewhere and
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referred to therein, for federal income tax purposes the Merger constitutes a
reorganization as described in Section 368(a) of the Code and addressing such
other substantial federal income tax effects of the Merger as the Buyer may
reasonably require and which are customary in transactions of a like
character. In rendering any such opinion, advisor counsel may rely, to the
extent they deem necessary or appropriate, upon opinions of counsel and upon
representations of an officer or officers of the Seller and the Buyer or any
of their affiliates.
(e) Seller Affiliates Agreements. The Seller shall have delivered to the
Buyer the letter pertaining to the Seller Affiliates, as contemplated under
Section 5.06 above, and each of the executed Seller Affiliates Agreements that
have been received by the Seller as of the Effective Time.
(f) Termination of Certain Benefit Plans. If and to the extent reasonably
requested by the Buyer, the Seller shall have terminated one or more of the
Seller Benefit Plans effective prior to or as of the Closing.
(g) Burdensome Condition. There shall not be any action taken by any federal
or state governmental agency or authority which, in connection with the
granting of any Consent or Requisite Regulatory Approval necessary to
consummate the Merger or otherwise, imposes any condition or restriction upon
the Buyer, any subsidiary of the Buyer or the Seller after the Merger
(including, without limitation, requirements relating to the disposition of
assets or limitations on interest rates), which would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement as to render inadvisable in the reasonable judgment of the
Buyer the consummation of the Merger.
6.03 Conditions to the Obligations of the Seller Under This Agreement. The
obligations of the Seller under this Agreement shall be further subject to the
satisfaction or waiver by the Seller, at or prior to the Effective Time, of
the following conditions:
(a) Absence of Material Adverse Changes. There shall not have occurred any
change in the business, assets, financial condition or results of operations
of the Buyer or any of its subsidiaries which has had, or is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on the
Buyer taken as a whole with its subsidiaries.
(b) Representations and Warranties; Performance of Obligations. (i) The
obligations of the Buyer required to be performed by it at or prior to the
Closing pursuant to the terms of this Agreement shall have been duly performed
and complied with in all material respects and (ii) the representations and
warranties of the Buyer contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time (except as
otherwise specifically contemplated by this Agreement and except as to any
representation or warranty which specifically relates to an earlier date);
provided, however, that for purposes of determining the satisfaction of the
conditions contained in clause (ii) of this paragraph (b), no effect shall be
given to any exception in such representations and warranties relating to
materiality or the existence of a Material Adverse Effect and, provided
further, however, that for purposes of clause (ii) of this paragraph (b), such
representations and warranties shall be deemed to be true and correct in all
material respects unless the failure or failures of such representations and
warranties to be so true and correct, in the aggregate, represents a material
adverse change in the business, assets, financial condition or results of
operations of the Buyer on a consolidated basis. The Seller shall have
received a certificate to the foregoing effect signed by the chairman or
president and the chief financial officer or chief accounting officer of the
Buyer.
(c) Third-Party Approvals. Any and all permits, consents, waivers,
clearances, approvals and authorizations of all non-governmental and non-
regulatory third parties which are necessary in connection with the
consummation of the transactions contemplated by this Agreement and are
required to be received or obtained by the Buyer, shall have been obtained by
the Buyer, other than permits, consents, waivers, clearances, approvals and
authorizations the failure of which to obtain would neither make it impossible
to consummate the Merger nor result in a Material Adverse Effect on the Buyer
(on a consolidated basis with the Seller) after the Merger.
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(d) Tax Opinion. The Seller shall have received an opinion, dated the dates
of the Proxy Statement and the Closing from its tax advisor, Arnold & Porter,
or other tax advisor acceptable to the Buyer and the Seller, substantially to
the effect that, on the basis of facts and representations set forth therein,
or set forth in writing elsewhere and referred to therein, for federal income
tax purposes the Merger constitutes a reorganization as described in Section
368(a) of the Code and that no gain or loss will be recognized by the
stockholders of the Seller upon the receipt, pursuant to this Agreement, of
Buyer Common Stock solely in exchange for Seller Common Stock (it being
understood that such opinion will not extend to cash received in lieu of
fractional share interests or cash received by dissenters, if any) and in
respect of such other substantial federal income tax effects of the Merger as
the Seller may reasonably require and which are customary in transactions of a
like character. In rendering any such opinion, such advisor may rely, to the
extent they deem necessary or appropriate, upon opinions of other advisors and
upon representations of an officer or officers of the Seller and the Buyer or
any of their affiliates.
(e) Buyer Affiliates Agreements. The Buyer shall have delivered to the
Seller the letter pertaining to the Buyer Affiliates, as contemplated under
Section 5.06 above, and each of the executed Buyer Affiliates Agreements that
have been received by the Buyer as of the Effective Time.
(f) Nasdaq Listing. The shares of Buyer Common Stock issuable to Seller's
stockholders pursuant to this Agreement and the Plan of Merger shall have been
authorized for listing on the Nasdaq upon official notice of issuance.
(g) Exchange Agent Certification. The Exchange Agent (as defined in the Plan
of Merger) shall have delivered to the Seller a certificate, dated as of the
Effective Time, to the effect that the Exchange Agent has received from the
Buyer appropriate instructions and authorization for the Exchange Agent to
issue a sufficient number of shares of Buyer Common Stock in exchange for all
outstanding shares of Seller Common Stock and has deposited with the Exchange
Agent sufficient funds to pay a reasonable estimate of the cash payments
necessary to pay for fractional share interests.
ARTICLE VII
Closing
7.01 Time and Place. Subject to the provisions of Articles VI and VIII
hereof, the Closing of the transactions contemplated hereby shall take place
at the Boston, Massachusetts offices of the law firm of Peabody & Brown, at
10:00 A.M., local time, on the first business day after the date on which all
of the conditions contained in Sections 6.01(a), (b) and (c) hereof are
satisfied or waived; or at such other place, at such other time, or on such
other date as the Seller and the Buyer may mutually agree upon for the Closing
to take place.
7.02 Deliveries at the Closing. Subject to the provisions of Articles VI and
VIII hereof, at the Closing there shall be delivered to the Seller and the
Buyer, the opinions, certificates, and other documents and instruments
required to be delivered under Article VI hereof.
ARTICLE VIII
Termination, Amendment And Waiver
8.01 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this Agreement and the
Plan of Merger and the transactions contemplated hereby and thereby by the
Seller's and the Buyer's stockholders:
(a) by mutual written consent of the Seller and the Buyer authorized by
their respective Boards of Directors; or
(b) by the Seller or the Buyer if the Effective Time shall not have occurred
on or prior to May 31, 1999 (the "Termination Date") or such later date as
shall have been agreed to in writing by the Buyer and the Seller; or
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(c) by the Buyer or the Seller if any governmental or regulatory authority
or agency, or court of competent jurisdiction, shall have issued a final
permanent order or Injunction enjoining, denying approval of, or otherwise
prohibiting the consummation of the Merger and the time for appeal or petition
for reconsideration of such order or Injunction shall have expired without
such appeal or petition being granted; or
(d) by the Buyer or the Seller (provided that the terminating party is not
then in material breach of any representation, warranty or covenant or other
agreement contained herein or in the Seller Option Agreement) if the approval
of such Person's stockholders specified in Section 5.05 shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of such stockholders or at any adjournment thereof; or
(e) by the Buyer or the Seller (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein pursuant to the standard set forth in Section
6.02(b) or 6.03(b), as may be applicable or in the Seller Option Agreement),
in the event of a material breach by the other party of any representation,
warranty, covenant or other agreement contained herein pursuant to the
standard set forth in Section 6.02(b) or 6.03(b), as may be applicable or in
the Seller Option Agreement which breach is not cured after forty-five (45)
days' written notice thereof is given to the party committing such breach; or
(f) by the Seller, by action of its Board of Directors, whether before or
after approval of the Merger by the stockholders of the Seller, by giving
written notice of such election to the Buyer in the event that both of the
following conditions are satisfied:
(i) the average per share last sale prices of Buyer Common Stock as
reported on Nasdaq over the ten (10) consecutive trading day period
immediately preceding the date of the last Requisite Regulatory Approval to
be received, in this case without regard to any waiting period attached to
the effectiveness thereof (such period being hereinafter referred to as the
"Determination Period," and the price so obtained being referred to as, the
"Closing Price") is less than $29.46; and
(ii) the number obtained by dividing the Closing Price by $36.84 is less
than the number obtained by subtracting (A) 0.15 from (B) the quotient
obtained by dividing the Final Index Price (as defined below) by the
Initial Index Price (as defined below).
For the purposes hereof the following terms shall have the following
meanings:
"Final Index Price" shall mean the Weighted Average of the average of the
closing prices of the Index Companies as reported on the NYSE, Nasdaq or
AMEX for the Determination Period.
"Index Companies" shall mean the companies listed on Exhibit E hereto.
"Initial Index Price" shall mean the Weighted Average of the closing
prices of the Index Companies as reported on the NYSE, Nasdaq or AMEX on
the trading day immediately preceding execution of this Agreement.
"Weighted Average" shall mean the average determined by giving the
average of the closing prices for each of the Index Companies the
corresponding weight listed on Exhibit E hereto.
If the Buyer or any company listed on Exhibit E declares a stock dividend or
effects a reclassification, recapitalization, split-up, combination, or
subdivision of its common stock between the trading day immediately preceding
execution of this Agreement and the date of the last Requisite Regulatory
Approval to be received (without regard to any waiting period attached to the
effectiveness thereof), the closing prices for such common stock shall be
appropriately adjusted for the purposes of the definitions above so as to be
comparable to the price on the date immediately preceding execution of this
Agreement. There shall be excluded from the list of companies on Exhibit E any
company as to which there is pending at any time during the Determination
Period any publicly announced proposal for such company to be acquired by
another company in exchange for its stock. Notwithstanding the foregoing,
during the ten (10) business day period commencing with the Buyer's receipt of
the Seller's notice of termination pursuant to this Section 8.01(f), the Buyer
shall have the option to increase the
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consideration to be received by the holders of Seller Common Stock under the
Plan of Merger by adjusting the Conversion Number (hereinafter, as such term
is defined in the Plan of Merger) to equal the lesser of (i) a number
(calculated to the nearest one-thousandth) obtained by dividing (x) $29.46 by
(y) the Closing Price or (ii) a number obtained by dividing (x) said
Conversion Number by (y) the number obtained by subtracting (A) 0.15 from (B)
the quotient obtained by dividing the Final Index Price (as defined above) by
the Initial Index Price (as defined above). If the Buyer so elects within such
ten-day period, it shall give prompt written notice to the Seller of such
election and the revised Conversion Number, whereupon no termination shall
have occurred pursuant to this Section 8.01(f) and the Agreement shall remain
in effect in accordance with its terms (except as the Conversion Number shall
have been so modified); or
(g) By either party (provided that the terminating party is not then in
breach of any representation or warranty, covenant or other agreement
contained in this Agreement or in the Seller Option Agreement) in the event
that any of the conditions precedent to the obligations of such party to
consummate the Merger cannot be satisfied or fulfilled by the date specified
in Section 8.01(b) of this Agreement.
(h) By the Seller upon the execution of a definitive agreement relating to a
proposal of the type contemplated by Section 5.03 hereof, provided that (i)
the Seller shall have complied with its obligations under Section 5.03 hereof,
(ii) the Board of Directors of the Seller shall have determined, after having
received the advice of outside legal counsel to the Seller and the advice of
the Seller's financial advisor, that such action is necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties under
applicable law and (iii) concurrent with its notification of termination, the
Seller shall have made an irrevocable and unconditional offer to the Buyer in
writing to repurchase the Option, as defined in the Seller Option Agreement,
from the Buyer at any time, within 30 days following the date of such offer,
at a price equal to the amount by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Option Price (as defined in the Seller Option
Agreement, multiplied by the number of shares for which the Option may then be
exercised (subject to the limitation set forth in Section 15 of the Seller
Option Agreement), with an undertaking to effect such purchase by wire
transfer of immediately available funds to an account designated by the Buyer
within two business days following receipt of written notice from the Buyer
pursuant to this paragraph (h) of its intention to tender the Option to the
Seller for repurchase and the applicable repurchase price. The term
"Market/Offer Price" shall mean the highest of (i) the price per share of the
Seller Common Stock at which a tender has been made, (ii) the price per share
of the Seller Common Stock to be paid by any third party pursuant to an
agreement with the Seller, (iii) the highest closing price for shares of the
Seller Common Stock within the six-month period immediately preceding the date
the Buyer gives notice of the required repurchase in accordance with this
paragraph (h), or (iv) in the event of a sale of all or a substantial portion
of the Seller's assets, the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of the Seller as
determined by a nationally recognized investment banking firm selected by the
Buyer, and reasonably acceptable to the Seller, divided by the number of
shares of the Seller Common Stock outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm
selected by the Buyer and reasonably acceptable to the Seller.
8.02 Effect of Termination. In the event of termination of this Agreement by
either the Seller or the Buyer as provided above, this Agreement shall
forthwith become null and void (other than Section 9.01 hereof, which shall
remain in full force and effect) and there shall be no further liability on
the part of the Seller or the Buyer or their respective officers or directors
to the other, except (i) any liability of the Seller and the Buyer under said
Section 9.01, (ii) that the Seller Option Agreement shall be governed by its
own terms as to termination, (iii) the Confidentiality Agreement shall survive
in accordance with its terms and (iv) in the event of a willful breach of any
representation, warranty, covenant or agreement contained in this Agreement,
in which case, the breaching party shall remain liable for any and all
damages, costs and expenses, including all reasonable attorneys' fees,
sustained or incurred by the non-breaching party as a result thereof or in
connection therewith or with the enforcement of its rights hereunder.
8.03 Amendment, Extension and Waiver. Subject to applicable law and as may
be authorized by their respective Boards of Directors, at any time prior to
the consummation of the transactions contemplated by this
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Agreement or termination of this Agreement in accordance with the provisions
of Section 8.01 hereof, whether before or after approval thereof by the
stockholders of the Seller and the Buyer, the Buyer and the Seller may, (a)
amend this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (c) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (d) waive compliance with any of the
agreements or conditions contained in Articles V and VI (other than Section
6.01) hereof, provided, however, that after any approval of the transactions
contemplated by this Agreement by the Seller's or the Buyer's stockholders,
respectively, there may not be, without further approval of such stockholders,
any amendment, extension or waiver of this Agreement which (1) alters or
changes the amount or kind of shares, securities, cash, property and/or rights
to be received in exchange for or on conversion of all or any of the shares of
any class or series thereof of such corporation, (2) alters or changes any
term of the certificate of incorporation of the surviving corporation to be
effected by the merger or consolidation, or (3) alters or changes any of the
terms and conditions of the Agreement if such alteration or change would
adversely affect the holder of any class or series thereof of such
corporation. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto. Any agreement on the
part of a party hereto to any extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party, but such
waiver or failure to insist on strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
ARTICLE IX
Miscellaneous
9.01 Expenses. Except as may otherwise be agreed to hereunder or in other
writing by the parties, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses; provided, however,
that all such costs and expenses incurred in connection with the printing and
mailing of the S-4 and the Proxy Statement shall be borne equally by the Buyer
and the Seller.
9.02 Survival. None of the representations, warranties, covenants and
agreements of the Seller or the Buyer shall survive after the Effective Time,
except for the agreements and covenants contained or referred to in Article
II, Section 5.02, the last sentence of Section 5.07, and Sections 5.09, 5.10,
5.12 and 5.14 hereof, and the agreements of the "affiliates" of the Seller
delivered pursuant to Section 5.06, which agreements and covenants shall
survive the Effective Time.
9.03 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by prepaid
registered or certified mail (return receipt requested) or by telecopy, cable,
telegram or telex addressed as follows:
(a) If to the Seller, to:
Evergreen Bancorp, Inc.
237 Glen Street
Glens Falls, NY 12801
Attention: Mr. George W. Dougan,
Chairman and Chief Executive Officer
Facsimile No. (518) 792-4837
with a required copy to:
Evergreen Bancorp, Inc.
237 Glen Street
Glens Falls, NY 12801
Attention: Paul A. Cardinal, Esq.,
General Counsel
Facsimile No.: (518) 792-4837
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and
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
Attention: Steven Kaplan, Esq.
Facsimile No.: (202) 942-5999
(b) If to the Buyer, to:
Banknorth Group, Inc.
300 Financial Plaza
P. O. Box 5420
Burlington, VT 05401
Attention: Mr. William H. Chadwick,
President and Chief Executive Officer
Facsimile No.: (802) 860-5437
with a required copy to:
Peabody & Brown
101 Federal Street
Boston, Massachusetts 02110
Attention: Kevin J. Handly, Esq.
Facsimile No.: (617) 345-1300
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
9.04 Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties, and that nothing in
this Agreement is intended to confer, expressly or by implication, upon any
other person any rights or remedies under or by reason of this Agreement
except as reflected in Sections 5.09, 5.12(d) and 5.14.
9.05 Complete Agreement. This Agreement, including the documents and other
writings referred to herein or delivered pursuant hereto, including the
Confidentiality Agreement, the Plan of Merger, the Stock Option Agreement and
the other Transaction Documents, contains the entire agreement and
understanding of the parties with respect to its subject matter. Except as set
forth in the Transaction Documents or in the Disclosure Schedules, there are
no restrictions, agreements, promises, warranties, covenants or undertakings
between the parties other than those expressly set forth herein or therein.
This Agreement supersedes all prior agreements (other than the Confidentiality
Agreement) and understandings between the parties, both written and oral, with
respect to its subject matter.
9.06 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and each of which shall
be deemed to be an original and shall become effective when a counterpart has
been signed by each of the parties and delivered to each of the other parties.
9.07 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without giving effect to the principles of conflicts of
laws thereof.
9.08 Captions. The Article and Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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9.09 Effect of Investigations. No investigation by the parties hereto made
heretofore or hereafter, whether pursuant to this Agreement or otherwise shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such
investigation, subject, however, to Section 9.02 hereof.
9.10 Severability. In the event that any one or more provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable in
any respect, by any court of competent jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Agreement and the parties shall use their best efforts to substitute a valid,
legal and enforceable provision which, insofar as practicable, implements the
purposes and intents of this Agreement.
9.11 Specific Enforceability. The parties recognize and hereby acknowledge
that it is impossible to measure in money the damages that would result to a
party by reason of the failure of either of the parties to perform any of the
obligations imposed on it by this Agreement. Accordingly, if any party should
institute an action or proceeding seeking specific enforcement of the
provisions hereof, each party against which such action or proceeding is
brought hereby waives the claim or defense that the party instituting such
action or proceeding has an adequate remedy at law and hereby agrees not to
assert in any such action or proceeding the claim or defense that such a
remedy at law exists.
9.12 Alternative Structure. Notwithstanding any provision of this Agreement
to the contrary, the Buyer may, with the written consent of the Seller, which
shall not be unreasonably withheld, elect, subject to the filing of all
necessary applications and the receipt of all required regulatory approvals,
to modify the structure of the acquisition of the Seller and its subsidiaries
set forth herein provided that (i) the federal income tax consequences of any
transactions created by such modification shall not be other than those set
forth in Section 6.02(d) hereof, (ii) any such modification will not
jeopardize pooling of interests accounting treatment, (iii) the consideration
to be paid to the holders of the Seller Common Stock is not thereby changed in
kind or reduced in amount as a result of such modification and (iii) such
modification will not materially delay or jeopardize receipt of any required
regulatory approvals or any other condition to the obligations of the Buyer
set forth in Sections 6.01 and 6.02 hereof.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to
be executed as a sealed instrument by their duly authorized officers as of the
day and year first above written.
BANKNORTH GROUP, INC.
/s/ William H. Chadwick
By:__________________________________
Name: William H. Chadwick
Title: President and Chief
Executive Officer
[SEAL]
EVERGREEN BANCORP, INC.
/s/ George W. Dougan
By:__________________________________
Name: George W. Dougan
Title: Chairman of the Board,
President and Chief Executive
Officer
[SEAL]
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ANNEX II
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 31, 1998 (this "Plan of
Merger") by and between BANKNORTH GROUP, INC., a Delaware corporation (the
"Buyer"), and EVERGREEN BANCORP, INC., a Delaware corporation (the "Seller").
This Plan of Merger is being entered into pursuant to an Affiliation
Agreement and Plan of Reorganization, dated as of July 31, 1998 (as amended
and in effect from time to time, the "Agreement"), between the Buyer and the
Seller.
All capitalized terms used herein without definition are used with the
meanings ascribed thereto in the Agreement.
In consideration of the premises, and the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
The Merger
1.01 Surviving Corporation. In accordance with the provisions of this Plan
of Merger and the Delaware General Corporation Law ("DCL"), at the Effective
Time (as hereinafter defined), the Seller shall be merged with and into the
Buyer (the "Merger"), and the separate corporate existence of the Seller shall
cease. The Buyer shall be the surviving corporation in the Merger (hereinafter
sometimes referred to as the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware.
1.02 Purposes of Surviving Corporation. As of the Effective Time, the
purposes of the Surviving Corporation shall be as stated in the Certificate of
Incorporation of the Buyer immediately prior to the Effective Time.
1.03 Authorized Capital Stock of Surviving Corporation. As of the Effective
Time, the Surviving Corporation shall be authorized to issue that number of
shares of $1.00 par value voting common stock, and of $0.01 par value
preferred stock, issuable in one or more series, which the Buyer is authorized
to issue immediately prior to the Effective Time.
1.04 Description of Classes of Stock. As of the Effective Time, each class
or series of capital stock of the Surviving Corporation shall have the same
preferences, voting powers, qualifications, special or relative rights or
privileges as such class or series of capital stock of the Buyer possessed
immediately prior to the Effective Time.
1.05 Effect of the Merger.
(a) Upon the Effective Time, the separate existence of the Seller shall
cease and the Seller shall be merged into the Surviving Corporation, and the
Surviving Corporation shall thenceforth possess all the rights, privileges,
powers and franchises as well of a public as of a private nature, and shall be
subject to all the restrictions, disabilities and duties of each of the Buyer
and the Seller; and all and singular, the rights, privileges, power and
franchises of each of the Buyer and the Seller, and all property, real,
personal and mixed, and all debts due to either the Buyer or the Seller on
whatever account, as well for stock subscriptions as all other things in
action or belonging to each of the Buyer and the Seller shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
Buyer or the Seller, and the title to any real estate
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vested by deed or otherwise in either of the Buyer or the Seller shall not
revert or be in any way impaired by reason of the Merger; but all rights of
creditors and all liens upon any property of either of the Buyer or the Seller
shall be preserved unimpaired, and all debts, liabilities and duties of each
of the Buyer and the Seller respectively shall thenceforth attach to the
Surviving Corporation, and may be enforced against the Surviving Corporation
to the same extent as if said debts, liabilities and duties had been incurred
or contracted by it.
(b) Upon the Effective Time, any action or proceeding, whether civil,
criminal or administrative, pending by or against the Buyer or the Seller
shall be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in such action or proceeding.
1.06 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Seller acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or to otherwise
carry out this Plan of Merger, the officers and directors of the Surviving
Corporation shall and will be authorized to execute and deliver, in the name
and on behalf of the Seller or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
the Seller or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving
Corporation or to otherwise carry out this Plan of Merger.
1.07 Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of the Buyer, as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation and the By-Laws of
the Buyer, as in effect at the Effective Time, shall be the By-Laws of the
Surviving Corporation and shall thereafter continue to be its Certificate of
Incorporation and By-Laws until amended as provided therein or by law.
1.08 Directors and Officers. At the Effective Time, the Board of Directors
of the Surviving Corporation shall consist of those persons comprising the
Board of Directors of the Buyer prior to the Effective Time and those
individuals named pursuant to Section 5.09 of the Agreement, each to hold
office in accordance with Section 5.09 of the Agreement and the Certificate of
Incorporation and By-Laws of the Surviving Corporation. The officers of the
Buyer immediately prior to the Effective Time shall be the officers of the
Surviving Corporation from and after the Effective Time and in addition,
George W. Dougan, who shall serve as Vice Chairman, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation.
1.09 Effective Time; Conditions. If all of the conditions precedent set
forth in Article VI of the Agreement have been satisfied or waived, and this
Plan of Merger is not terminated under Section 3.01 hereof, a Certificate of
Merger with respect to the Merger shall be prepared by the Buyer and the
Seller and filed and recorded pursuant to Section 251 of the DCL (the
"Certificate of Merger"). The Merger shall become effective at, and the
Effective Time shall be, the date and time specified in the Certificate of
Merger which shall be not later than the next business day after the filing of
the Certificate of Merger (such date and time is herein referred to as the
"Effective Time").
ARTICLE II
Conversion of Shares
2.01 Effect on Outstanding Shares.
(a) Seller Common Stock. (i) By virtue of the Merger, automatically and
without any action on the part of the holder thereof, each share of common
stock of the Seller, par value $3.33 1/3 per share ("Seller Common Stock"),
issued and outstanding immediately prior to the Effective Time (other than any
such shares held directly or indirectly by the Buyer, except in a fiduciary
capacity or in satisfaction of a debt previously contracted, and any such
shares held as treasury stock by the Seller) together with that number of
Seller rights issued pursuant to
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the Seller Rights Agreement associated therewith, shall become and be
converted into 0.90 shares of the common stock of the Buyer, par value $1.00
per share ("Buyer Common Stock"), together with that number of Buyer rights
issued pursuant to the Buyer Rights Agreement associated therewith; provided,
however, that in the event that the Buyer has exercised its option to deliver
additional shares of its Common Stock pursuant to the last paragraph of
Section 8.01(f) of the Agreement, Seller's Common Stock shall be converted
into such number of shares of the Common Stock of the Buyer, par value $1.00
per share, as provided in said Section of the Agreement. The number of shares
of Buyer Common Stock into which each share of Seller Common Stock shall be
converted is hereinafter called the "Conversion Number."
(ii) As of the Effective Time, each share of Seller Common Stock held either
directly or indirectly by the Buyer (other than in a fiduciary capacity or in
satisfaction of a debt previously contracted) or as treasury stock of the
Seller shall be cancelled, retired and cease to exist, and no payment shall be
made with respect thereto. Each certificate which immediately prior to the
Effective Time represented outstanding shares of Seller Common Stock shall on
and after the Effective Time be deemed for all purposes to represent the
number of shares of Buyer Common Stock into which the shares of Seller Common
Stock represented by such certificate shall have been converted pursuant to
this Section 2.01.
(b) Buyer Common Stock. All shares of Buyer Common Stock issued and
outstanding immediately prior to the Effective Time (other than any such
shares held directly or indirectly by the Seller, except in fiduciary capacity
or in satisfaction of a debt previously contracted) shall remain issued and
outstanding upon consummation of the Merger.
2.02 Anti-Dilution. In the event that, subsequent to the date of this Plan
of Merger but prior to the Effective Time, the outstanding shares of Buyer
Common Stock or Seller Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, or other like changes in the
Buyer's or the Seller's capitalization, other than pursuant to the Agreement,
as the case may be (a "Recapitalization"), then an appropriate and
proportionate adjustment shall be made to the Conversion Number so that each
holder of Seller Common Stock shall receive under Section 2.01 hereof the
number of shares of Buyer Common Stock (except for fractional shares) that
such holder would have held immediately following the Recapitalization if the
Merger had occurred immediately prior to the Recapitalization or the record
date therefor, as applicable. For purposes of this Section 2.02, in no event
shall the issuance of shares or securities by the Buyer in connection with the
Buyer acquiring directly or indirectly the stock or assets of any corporation,
bank or other entity be deemed to be a "Recapitalization."
2.03 Procedures.
(a) Certificates which represent shares of Seller Common Stock that are
outstanding immediately prior to the Effective Time (a "Certificate") and are
converted into shares of Buyer Common Stock pursuant to this Article II shall,
after the Effective Time, be deemed to represent shares of Buyer Common Stock
into which such shares have been converted and shall be exchangeable by the
holders thereof in the manner provided in the transmittal materials described
below for new certificates representing the shares of Buyer Common Stock into
which such shares have been converted.
(b) As promptly as practicable after the Effective Time, the Exchange Agent
shall send to each holder of record of shares of Seller Common Stock
outstanding at the Effective Time transmittal materials (which shall be
reviewed with the Seller's counsel prior to the Effective Time) for use in
exchanging the Certificates for such shares for certificates for shares of
Buyer Common Stock into which such shares of Seller Common Stock have been
converted pursuant to this Article II. Upon surrender of a Certificate,
together with a duly executed letter of transmittal and any other required
documents, the holder of such Certificate shall be entitled to receive, in
exchange therefor, a certificate for the number of Shares of Buyer Common
Stock to which such holder is entitled pursuant to Section 2.01(a) hereof, and
such Certificate shall forthwith be cancelled. No dividend or other
distribution payable after the Effective Time with respect to Buyer Common
Stock shall be paid to the holder of any unsurrendered Certificate until the
holder thereof surrenders such Certificate, at which time such holder shall
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receive all dividends and distributions, without interest thereon, previously
payable but withheld from such holder pursuant hereto. After the Effective
Time, there shall be no transfers on the stock transfer books of the Seller of
shares of Seller Common Stock which were issued and outstanding at the
Effective Time and converted pursuant to the provisions of this Article II.
If, after the Effective Time, Certificates are presented for transfer to the
Surviving Corporation, they shall be cancelled and exchanged for the shares of
Buyer Common Stock deliverable in respect thereof as determined in accordance
with the provisions and procedures set forth in this Article II.
(c) In lieu of the issuance of fractional shares of Buyer Common Stock
pursuant to Sections 2.01 of this Plan of Merger, cash adjustments, without
interest, will be paid to the holders of Seller Common Stock in respect of any
fractional share that would otherwise be issuable and the amount of such cash
adjustment shall be equal to an amount in cash determined by multiplying such
holder's fractional interest by the "Average Price" of a share of Buyer Common
Stock (rounded up to the nearest cent). The "Average Price" of a share of
Buyer Common Stock shall be the average of the last sale prices thereof as
reported on the National Association of Securities Dealers Automated Quotation
system over the ten (10) consecutive trading day period immediately preceding
the date on which the Effective Time occurs. For purposes of determining
whether, and in what amounts, a particular holder of Seller Common Stock would
be entitled to receive cash adjustments under this Section 2.03(c), shares of
record held by such holder and represented by two or more Certificates shall
be aggregated.
(d) After the Effective Time, holders of Certificates of Seller Common Stock
shall cease to be, and shall have no rights as, stockholders of the Seller,
other than to receive shares of Buyer Common Stock into which such shares have
been converted and, if applicable, fractional share payments pursuant to the
provisions hereof.
(e) Notwithstanding the foregoing, neither the Buyer nor the Seller nor any
other person shall be liable to any former holder of shares of Seller Common
Stock for any shares or any dividends or distributions with respect thereto
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon receipt of appropriate evidence as to such loss, theft or destruction and
to the ownership of such Certificate by the person claiming such Certificate
to be lost, stolen or destroyed, and the receipt by the Buyer of appropriate
and customary indemnification, the Buyer will issue in exchange for such lost,
stolen or destroyed Certificate shares of Buyer Common Stock and the
fractional share payment, if any, deliverable in respect thereof as determined
in accordance with this Article II.
(g) If any certificate representing shares of Buyer Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered; it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer (including, but not limited to, that the signature of the
transferor shall be properly guaranteed by a commercial bank, trust company,
member firm of the NASD or other eligible guarantor institution), and that the
person requesting such exchange shall pay to the Exchange Agent (as such term
is defined in Section 4.01 hereof) in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of
Buyer Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is
not payable.
2.04 Conversion of Options. Each stock option (other than the Seller Option)
issued by the Seller to a third party, whether or not currently exercisable,
which entitles such third party to purchase Seller Common Stock, and which is
outstanding and unexercised immediately prior to the Effective Time, shall be
converted into an option to purchase shares of Buyer Common Stock, and the
Buyer shall assume each such option in accordance with the terms of the Seller
stock option plan under which it was granted and the stock option or other
agreement by which it is evidenced, with the following terms:
(a) The number of shares of Buyer Common Stock shall be equal to the product
of the number of shares of Seller Common Stock previously subject thereto and
the Conversion Number, rounded down to the nearest whole share; and
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(b) The exercise price per share of Buyer Common Stock shall be equal to the
exercise price per share of Seller Common Stock previously subject thereto
divided by the Conversion Number, rounded up to the nearest cent; and
(c) The duration and other terms of such Stock Option shall be unchanged
except that all references to the Seller shall be deemed to be references to
the Buyer; and
(d) The Buyer shall assume the option as contemplated by Section 424(a) of
the Code; and
(e) With respect to any stock option on Seller's Common Stock which is an
incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, the Buyer shall take such actions (other
than delaying the date the options on Buyer Common Stock become exercisable
beyond the date on which such options would otherwise become exercisable
pursuant to the relevant Seller Stock Plan) as may be necessary or appropriate
to cause such option, upon being converted to an option on Buyer Common Stock,
to remain such an incentive stock option.
ARTICLE III
Amendment and Termination
3.01 Termination. Notwithstanding the approval and adoption of this Plan of
Merger by the stockholders of the Seller and the Buyer, this Plan of Merger
shall terminate forthwith in the event that the Agreement shall be terminated
as therein provided. In the event of the termination of this Plan of Merger as
provided above, this Plan of Merger shall forthwith become null and void and
there shall be no liability on the part of any of the parties hereto except as
otherwise provided in the Agreement.
3.02 Amendment. This Plan of Merger shall not be amended except by an
instrument in writing signed on behalf of both of the parties hereto pursuant
to an amendment to the Agreement approved in the manner therein provided. If
any such amendment to the Agreement is so approved, any amendment to this Plan
of Merger required by such amendment to the Agreement shall be effected by the
parties hereto by action taken by their respective Boards of Directors.
ARTICLE IV
Miscellaneous
4.01 Exchange Agent. Prior to the Effective Time, the Buyer shall appoint an
agent for the purpose of exchanging certificates representing shares of Buyer
Common Stock for Certificates representing shares of Seller Common Stock (the
"Exchange Agent"), and the Buyer shall issue and deliver to the Exchange Agent
certificates representing shares of Buyer Common Stock and shall pay to the
Exchange Agent such amounts of cash as shall be required to be delivered to
holders of shares of Seller Common Stock in lieu of fractional shares of Buyer
Common Stock, pursuant to Article II of this Plan of Merger.
4.02 Counterparts. This Plan of Merger may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by both
of the parties and delivered to each other.
4.03 Governing Law. This Plan of Merger shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of laws thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to be
duly executed and delivered as a sealed instrument as of the date first above
written.
Banknorth Group, Inc.
/s/ William H. Chadwick
By:__________________________________
President
/s/ Neal E. Robinson
By:__________________________________
Treasurer
Evergreen Bancorp, Inc.
/s/ George W. Dougan
By:__________________________________
President
/s/ George L. Fredette
By:__________________________________
Treasurer
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ANNEX III
EXHIBIT C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 31, 1998, between EVERGREEN
BANCORP, INC., a Delaware corporation (the "Issuer") and BANKNORTH GROUP,
INC., a Delaware corporation (the "Grantee").
WHEREAS, the Grantee and the Issuer are entering into an Affiliation
Agreement and Plan of Reorganization of even date herewith (as amended and in
effect from time to time, the "Acquisition Agreement"), which agreement is
being executed by the parties thereto simultaneously with this Agreement; and
WHEREAS, as a condition to the Grantee's entry into the Acquisition
Agreement and in consideration for such entry, the Issuer has agreed to grant
the Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Acquisition Agreement, the parties
hereto agree as follows:
1. (a) The Issuer hereby grants to the Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
1,888,923 fully paid and nonassessable shares (the "Option Shares") of common
stock, par value $3.33 1/3 per share, of the Issuer ("Common Stock") at a
price of $27.75 per share (the "Option Price"). The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth provided that in no event
shall the number of shares for which this Option is exercisable exceed 19.9%
of the Issuer's issued and outstanding shares of Common Stock (without giving
effect to any shares of Common Stock issued pursuant to the Option) less the
number of shares previously issued pursuant to exercise of the Option.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to exercise of the Option pursuant to this Agreement or as
contemplated by Section 5(a) of this Agreement), including, without
limitation, pursuant to stock option or other employee plans or as a result of
the exercise of conversion rights, the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, it
equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section l(b) or elsewhere in this
Agreement shall be deemed to authorize the Issuer or the Grantee to breach any
provision of the Acquisition Agreement.
2. (a) The Holder (as such term is defined in paragraph (c) below) may
exercise the Option, in whole or part, if, but only if, both an Initial
Triggering Event (as defined in paragraph (e) below) and a Subsequent
Triggering Event (as defined in paragraph (f) below) shall have occurred prior
to the occurrence of an Exercise Termination Event (as defined in paragraph
(b) below), provided that the Holder shall have sent the written notice of
such exercise (as provided in paragraph (h) of this Section 2) within thirty
(30) days following such Subsequent Triggering Event and prior to the Exercise
Termination Event.
(b) The term "Exercise Termination Event" shall mean the earliest of (i) the
Effective Time of the Merger, (ii) any termination of the Acquisition
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event, and (iii) in the event
of any termination of the Acquisition Agreement in accordance with the
provisions thereof after the occurrence of an Initial Triggering Event, the
passage of twelve (12) months after such termination. Notwithstanding the
termination of the Option, the Grantee shall be entitled to purchase those
Option Shares with respect to which it has exercised the Option in whole or in
part prior to the termination of the Option.
(c) The term "Holder" shall mean the holder or holders of the Option.
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(d) The term "Schedule 13G Investor" shall mean any person holding voting
securities of the Issuer eligible to report the beneficial ownership of such
securities on Schedule 13G pursuant to the provisions of Rule 13d-1 under the
Exchange Act.
(e) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The Issuer or any subsidiary of the Issuer, without having received
the Grantee's prior written consent, shall have entered into an agreement
to engage in an Acquisition Transaction with any Person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and
regulations thereunder), other than the Grantee or any subsidiary of the
Grantee, or, without the consent of the Grantee the Board of Directors of
the Issuer shall have approved an Acquisition Transaction or recommended
that the shareholders of the Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Acquisition Agreement. For
purposes of this Agreement, the term "Acquisition Transaction" shall mean
(A) a merger or consolidation, or any similar transaction, with the Issuer
or any Significant Subsidiary of the Issuer, or any subsidiary of the
Issuer which, after such transaction, would be a Significant Subsidiary of
the Issuer, (B) a purchase, lease or other acquisition of all or
substantially all of the assets of the Issuer or any Significant Subsidiary
of the Issuer or (C) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing ten percent (10%) or more of the voting power of the Issuer or
any Significant Subsidiary of the Issuer;
(ii) The stockholders of the Issuer shall not have approved the
Acquisition Agreement at the meeting of such stockholders held for the
purpose of voting on the Acquisition Agreement, such meeting shall not have
been held or shall have been canceled prior to the termination of the
Acquisition Agreement, or the Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to the Grantee the recommendation
of the Issuer's Board of Directors with respect to the Acquisition
Agreement, in each case after (A), any Person, other than the Grantee or
any subsidiary of the Grantee or the Issuer in a fiduciary capacity, and
other than a Schedule 13G Investor, shall have acquired beneficial
ownership (as hereinafter defined) or the right to acquire beneficial
ownership of ten percent (10%) or more of the outstanding shares of Common
Stock if such Person owned beneficially less than ten percent (10%) of the
outstanding shares of Common Stock on the date of this Agreement, or any
Person shall have acquired beneficial ownership of an additional three
percent (3%) of the outstanding shares of Common Stock if such Person owned
beneficially ten percent (10%) or more of the outstanding shares of Common
Stock on the date of this Agreement (the term "beneficial ownership" for
purposes of this Agreement having the meaning assigned thereto in Section
13(d) of the Exchange Act, and in the rules and regulations thereunder);
(B), any Person, other than the Grantee or any subsidiary of the Grantee,
shall have made a bona-fide proposal to the Issuer or its shareholders to
engage in an Acquisition Transaction by public announcement or written
communication that shall be or become the subject of public disclosure; or
(C), any Person other than the Grantee or any Subsidiary of the Grantee,
other than in connection with a transaction to which the Grantee has given
its prior written consent, shall have filed an application or notice with
the Federal Reserve Board or other federal or state bank regulatory
authority, which application or notice has been accepted for processing,
for approval to engage in an Acquisition Transaction;
(iii) After any Person other than the Grantee or any subsidiary of the
Grantee has made a proposal to the Issuer or its shareholders to engage in
an Acquisition Transaction, the Issuer shall have breached any covenant or
obligation contained in the Acquisition Agreement and such breach (A) would
entitle the Grantee to terminate the Acquisition Agreement and (B) shall
not have been remedied prior to the Notice Date (as defined in paragraph
(h) below); or
(iv) Any person (other than Grantee or any Subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) or shall have filed a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to, a tender offer
or exchange offer to purchase any shares of Issuer Common Stock such that,
upon consummation of such offer, such person
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would own or control 25% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively).
(f) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person (other than a Schedule 13G Investor) of
beneficial ownership of twenty-five percent (25%) or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
subparagraph (i) of paragraph (e) of this Section 2, except that the
percentage referenced in clause (C) thereof shall be twenty-five percent
(25%) in lieu of ten percent (10%).
(g) The Issuer shall notify the Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of such
notice by the Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(h) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to the Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares of Common Stock it will purchase pursuant to such exercise, and (ii) a
place and date not earlier than three (3) business days nor later than sixty
(60) business days from the Notice Date for the closing of such purchase (the
"Closing"); provided that if prior notification to or approval of the Federal
Reserve Board or any other regulatory agency is required in connection with
such purchase, the Holder shall promptly file the required notice or
application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired
or been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. The term "business day" for
purposes of this Agreement means any day, excluding Saturdays, Sundays and any
other day that is a legal holiday in the State of New York or a day on which
banking institutions in the State of New York are authorized by law or
executive order to close.
(i) At the Closing, the Holder shall pay to the Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to the
exercise of the Option in immediately available funds by a wire transfer to a
bank account designated by the Issuer, provided that failure or refusal of the
Issuer to designate such a bank account shall not preclude the Holder from
exercising the Option.
(j) At such Closing, simultaneously with the delivery of immediately
available funds as provided in paragraph (i) above, the Issuer shall deliver
to the Holder a certificate or certificates representing the number of shares
of Common Stock purchased by the Holder and, if the Option should be exercised
in part only, a new Option evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable hereunder, and the Holder shall
deliver to the Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(k) Certificates for the Common Stock delivered at a Closing hereunder may
(in the sole discretion of the Issuer) be endorsed with a restrictive legend
that shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTION PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
JULY 31, 1998 A COPY OF WHICH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificates without such legend if the shares have
been sold or transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of such legend. In
addition, such certificates shall bear any other legend as may be required by
law.
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(l) Upon the giving by the Holder to the Issuer of the written notice of
exercise of the Option provided for under paragraph (h) above, the tender of
the applicable purchase price in immediately available funds and the tender of
a copy of this Agreement to the Issuer, such Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Issuer shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. The Issuer shall pay any and all
expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. The Issuer agrees (a) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without requiring the
Issuer's stockholders to approve an increase in the number of authorized
shares of Common Stock after giving effect to all other options, warrants,
convertible securities and other rights to purchase Common Stock, (b) that it
will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by the
Issuer, (c) promptly to take all action as may from time to time be required
(including without limitation (A) complying with all premerger notification,
reporting and waiting period requirements and (B) cooperating fully with any
Holders in preparing any applications or notices required under the Bank
Holding Company Act of 1956, as amended, or the Change in Bank Control Act of
1978, as amended, or any state banking law), in order to permit such Holders
to exercise the Option and the Issuer duly and effectively to issue shares of
Common Stock pursuant hereto, and (d) promptly to take all action provided
herein to protect the rights of any Holders against dilution.
4. This Agreement (and the Option granted hereby) is exchangeable, without
expense, at the option of each Holder, upon presentation and surrender of this
Agreement at the principal office of the Issuer, for other Agreements
providing for Options of different denominations entitling the Holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
the Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, the Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute for all purposes and under all
circumstances a contractual obligation on the part of the Issuer, whether or
not this Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. In addition to the adjustment in the number of Option Shares pursuant to
Section 1 of this Agreement, the number of Option Shares shall be subject to
adjustment from time to time as provided in this Section 5.
(a) (i) In the event of any change in the shares of Common Stock by reason
of stock dividend, split up, merger, recapitalization, subdivision,
conversion, combination, exchange of shares or similar transaction, the type
and number of Option Shares, and the Option Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so that the Grantee shall receive upon exercise of the
Option the number and class of shares or other securities or property that the
Grantee would have held immediately after such event if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable.
(ii) The Issuer may make such increases in the number of Option Shares, in
addition to those required under subparagraph (a)(i) above, as shall be
determined by its Board of Directors to be advisable in order to avoid
taxation, so far as practicable, of any dividend of stock or stock rights or
any event treated as such for federal income tax purposes to the recipients.
(b) Whenever the number of Option Shares (or other securities) purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option
Price shall be adjusted by multiplying the Option Price by
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a fraction, the numerator of which is equal to the number of Option Shares
prior to the adjustment and the denominator of which is equal to the number of
Option Shares (or other securities) purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within thirty (30) days of such Subsequent Triggering Event (whether
on the Grantor's own behalf or on the behalf of any subsequent Holder of this
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current, with respect to the Option
and the Option Shares, a "shelf" registration statement under Rule 415 of the
Securities Act or any successor provision, and Issuer shall use its best
efforts to qualify such shares under any applicable state securities laws.
Issuer will use its best efforts to cause such registration statement first to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect sales or other
dispositions of Option Shares. Grantee shall have the right to demand two such
registrations. Any registration statement prepared and filed under this
Section 6, and any sales covered thereby, shall be at Issuer's expense, except
for underwriting discounts or commissions, broker's fees and expenses and the
fees and disbursements of Grantee's counsel related thereto. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
the Option or Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common Stock, and if
in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering, the inclusion of the Option or Option Shares would interfere with
the successful marketing of the shares represented by the Option the number of
Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that if such reduction
occurs, the Issuer shall file a registration statement for the balance as
promptly as practicable and no reduction shall thereafter occur. Each such
Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for the Issuer.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of any Holder,
delivered within thirty (30) days following such occurrence (or such later
period as provided in Section 10), the Issuer shall repurchase the Option from
the Holder at a price (the "Option Repurchase Price") equal to the greater of
(1) $7,500,000 and (2) the amount by which (A) the market/offer price (as
defined below) exceeds (B) the Option Price, multiplied by the number of
shares for which this Option may then be exercised, plus, to the extent not
previously reimbursed, the Grantee's reasonable out-of-pocket expenses
incurred in connection with the transactions contemplated by, and the
enforcement of the Grantee's rights under, the Acquisition Agreement,
including without limitation legal, accounting and investment banking fees
(the "Grantee's Out-of-Pocket Expenses"), and (ii) at the request of any owner
of Option Shares from time to time (the "Owner"), delivered within thirty (30)
days following such occurrence (or such later period as provided in Section
10), the Issuer shall repurchase such number of the Option Shares from such
Owner as the Owner shall designate at a price per share ("Option Share
Repurchase Price") equal to the greater of (A) the market/offer price and (B)
the average exercise price per share paid by the Owner for the Option Shares
so designated, plus, to the extent not previously reimbursed, the Grantee's
Out-of-Pocket Expenses. The term "market/offer price" shall mean the highest
of (w) the price per share of the Common Stock at which a tender offer or
exchange offer therefor has been made, (x) the price per share of the Common
Stock to be paid by any Person, other than the Grantee or a subsidiary of the
Grantee, pursuant to an agreement with the Issuer, (y) the highest closing
price for shares of Common Stock within the six (6) month period immediately
preceding the required repurchase of Options or Option Shares, as the case may
be, or (z) in the event of a sale of all or substantially all of the Issuer's
assets, the sum of the price paid in such sale for such assets and the current
market value of the remaining assets of the Issuer as determined by a
nationally recognized investment banking firm selected by a majority in the
interest of the Holders or the Owners, as the case may be, and reasonably
acceptable
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to the Issuer, divided by the number of shares of Common Stock of the Issuer
outstanding at the time of such sale. In determining the market/offer price,
the value of consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by a majority in interest of the
Holders or the Owners, as the case may be, and reasonably acceptable to the
Issuer.
(b) Each Holder and Owner, as the case may be, may exercise its right to
require the Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to the Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares,
as applicable, accompanied by a written notice or notices stating that such
Holder or Owner elects to require the Issuer to repurchase this Option and/or
Option Shares in accordance with the provisions of this Section 7. As promptly
as practicable, and in any event within ten (10) business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, the Issuer shall deliver
or cause to be delivered to each Holder the Option Repurchase Price and/or to
each Owner the Option Share Repurchase Price therefor or the portion thereof
that the Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, or as a result of a
written agreement or other binding obligation with a governmental or
regulatory body or agency, from repurchasing the Option and/or the Option
Shares in full, the Issuer shall immediately so notify each Holder and/or each
Owner and thereafter deliver or cause to be delivered, from time to time, to
such Holder and/or Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is no
longer prohibited from delivering, within ten (10) business days after the
date on which the Issuer is no longer so prohibited; provided, however, that
if the Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
any Holder and/or Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in part or in full (and the
Issuer hereby undertakes to use its best efforts to receive any required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), such Holder or Owner may
revoke its notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon the Issuer shall promptly
(i) deliver to such Holder and/or Owner, as appropriate, that portion of the
Option Purchase Price or the Option Share Repurchase Price that the Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate, either (A)
to such Holder, a new Stock Option Agreement evidencing the right of such
Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered
Stock Option Agreement was exercisable at the time of delivery of the notice
of repurchase by a fraction, the numerator of which is the Option Repurchase
Price less the portion thereof theretofore delivered to the Holder and the
denominator of which is the Option Repurchase Price, or (B) to such Owner, a
certificate for the Option Shares it is then so prohibited from repurchasing.
8. (a) In the event that prior to an Exercise Termination Event, the Issuer
shall enter into an agreement (i) to consolidate with or merge into any
Person, other than the Grantee or one of the Grantee's subsidiaries, and the
Issuer shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than the Grantee or
one of its subsidiaries, to merge into the Issuer and the Issuer shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property,
or the then outstanding shares of Common Stock shall, after such merger,
represent less than fifty percent (50%) of the outstanding shares and share
equivalents of the merged company, or (iii) to sell or otherwise transfer all
or substantially all of its assets to any Person, other than the Grantee or
one of the Grantee's subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (A) the
Acquiring Corporation (as defined in paragraph (b) below) or (B) any Person
that controls the Acquiring Corporation.
III-6
<PAGE>
(b) The following terms have the meanings indicated:
(i) The term "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with the Issuer (if
other than the Issuer), (B) the Issuer in a merger in which the Issuer is
the continuing or surviving Person, and (C) the transferee of all or
substantially all of the Issuer's assets.
(ii) The term "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) The term "Assigned Value" shall mean the "market/offer price," as
defined in paragraph (a) of Section 7 hereof.
(iv) The term "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one (1) year period
immediately preceding the consolidation, merger or sale in question, but in
no event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger or sale,
provided that if the Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by the Person merging into the Issuer or by any company which
controls such Person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall, to the extent legally permissible, be as
similar as possible to, and in no event less advantageous to the Holder than,
the terms of the Option. The issuer of the Substitute Option shall also enter
into an agreement with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock as is equal to (i) the product of (A) the Assigned
Value and (B) the number of shares of Common Stock for which the Option is
then exercisable, divided by (ii) the Average Price. The exercise price of the
Substitute Option per share of the Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction in which the numerator is the
number of Option Shares and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option (without giving effect to any shares of Substitute Common
Stock issued pursuant to the Substitute Option) less the number of shares
previously issued pursuant to the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise but for this paragraph
(e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to the Holder equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in this
paragraph (e) over (ii) the value of the Substitute Option after giving effect
to the limitation in this paragraph (e). The difference in value shall be
determined by a nationally recognized investment banking firm selected by a
majority in interest of the Holders or the Owners, as the case may be.
(f) The Issuer shall not enter into any transaction described in paragraph
(a) of this Section 8 unless the Acquiring Corporation and any Person that
controls the Acquiring Corporation shall have assumed in writing all the
obligations of the Issuer hereunder.
9. (a) At the written request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied
by the number of shares of the Substitute Common Stock for which the
Substitute Option may then
III-7
<PAGE>
be exercised, plus to the extent not previously reimbursed, the Grantee's Out-
of-Pocket Expenses, and at the request of each owner (the "Substitute Share
Owner") of shares of the Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a price
per share (the "Substitute Share Repurchase Price") equal to the greater of
(A) the Highest Closing Price and (B) the average exercise price per share
paid by the Substitute Share Owner for the Substitute Shares so designated,
plus, to the extent not previously reimbursed, the Grantee's Out-of-Pocket
Expenses. The term "Highest Closing Price" shall mean the highest closing
price for shares of the Substitute Common Stock within the six (6) month
period immediately preceding the date the Substitute Option Holder gives
notice of the required repurchase of the Substitute Option or the Substitute
Share Owner gives notice of the required repurchase of the Substitute Shares,
as applicable.
(b) Each Substitute Option Holder and Substitute Share Owner, as the case
may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant
to this Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute Option (or,
in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that such Substitute Option Holder or Substitute Share Owner elects to
require the Substitute Option Issuer to repurchase the Substitute Option
and/or the Substitute Shares in accordance with the provisions of this Section
9. As promptly as practicable, and in any event within five (5) business days
after the surrender of the Substitute Option and/or the certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share Repurchase
Price therefor, or the portion(s) thereof which the Substitute Option Issuer
is not then prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, or
as a result of a written agreement or other binding obligation with a
governmental or regulatory body or agency, from repurchasing the Substitute
Option and/or the Substitute Shares in full, the Substitute Option Issuer
shall immediately so notify each Substitute Option Holder and/or the
Substitute Share Owner and thereafter deliver or cause to be delivered, from
time to time, to the Substitute Option Holder and/or Substitute Share Owner,
as appropriate, that portion of the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five (5) business days after the date on
which the Substitute Option Issuer is no longer so prohibited, provided,
however, that if the Substitute Option Issuer is, at any time after delivery
of a notice of repurchase pursuant to paragraph (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, or as a result of a written agreement or other binding
obligation with a governmental or regulatory body or agency, from delivering
to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in part or in full (and the Substitute Option
Issuer shall use its best efforts to receive all required regulatory and legal
approvals as promptly as practicable in order to accomplish such repurchase),
the Substitute Option Holder or Substitute Share Owner may revoke its notice
of repurchase of the Substitute Option or the Substitute Shares either in
whole or to the extent of the prohibition, whereupon the Substitute Option
Issuer shall promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the Substitute
Option Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substitute Option Holder to purchase that
number of shares of the Substitute Common Stock obtained by multiplying the
number of shares of the Substitute Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing.
III-8
<PAGE>
10. The thirty (30) day period for exercise of certain rights under Sections
2, 6, 7 and 12 hereof shall be extended in each such case: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights
and for the expiration of all statutory waiting periods; and (ii) to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise, provided that notice of intent to exercise such
rights shall be given to the Issuer within the requisite thirty (30) day
period and the Grantee and the Holders shall use their best efforts to
promptly obtain all requisite approvals and cause the expiration of all
requisite waiting periods.
11. The Issuer hereby represents and warrants to the Grantee as follows:
(a) The Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Issuer and no other corporate proceedings on the
part of the Issuer are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by the Issuer. This Agreement is the valid and legally
binding obligation of the Issuer, enforceable against the Issuer in accordance
with its respective terms, except that enforcement thereof may be limited by
the receivership, conservatorship and supervisory powers of bank regulatory
agencies generally as well as bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors rights
generally and except that enforcement thereof may be subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and the availability of equitable remedies.
(b) The Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued, fully
paid, nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other Person, whether by operation of law or otherwise, without the express
written consent of the other party, except that in the event a Subsequent
Triggering Event shall have occurred prior to an Exercise Termination Event,
the Grantee may, subject to the right of first refusal set forth in Section
13, assign, transfer or sell in whole or in part its rights and obligations
hereunder within thirty (30) days following such Subsequent Triggering Event
(or such later period as provided in Section 10); provided, however, that in
the event the Grantee sells, assigns or transfers all or a portion of the
Option to other Holders as permitted by this Agreement, the Grantee may
exercise its rights hereunder on behalf of itself and such Holders.
13. If at any time after the occurrence of a Subsequent Triggering Event
and, with respect to shares of Common Stock or other securities acquired by
the Grantee pursuant to an exercise of the Option, prior to the expiration of
twenty-four (24) months after the expiration of the Option pursuant to Section
2(b), the Grantee shall desire to sell, assign, transfer or otherwise dispose
of the Option, in whole or in part, or all or any of the shares of Common
Stock or other securities acquired by the Grantee pursuant to the Option, the
Grantee shall give the Issuer written notice of the proposed transaction (an
"Offeror's Notice"), identifying the proposed transferee, accompanied by a
copy of a binding offer to purchase the Option or such shares or other
securities signed by such transferee and setting forth the terms of the
proposed transaction. An Offeror's Notice shall be deemed an offer by the
Grantee to the Issuer, which may be accepted within ten (10) business days of
the receipt of such Offeror's Notice, on the same terms and conditions and at
the same price at which the Grantee is proposing to transfer the Option or
such shares or other securities to such transferee. The purchase of the Option
or such shares or other securities by the Issuer shall be settled within five
(5) business days of the date of the acceptance of the offer and the purchase
price shall be paid to the Grantee in immediately available funds,
III-9
<PAGE>
provided that, if prior notification to or approval, consent or waiver of the
Federal Reserve Board or any other regulatory authority is required in
connection with such purchase, the Issuer shall promptly file the required
notice or application for approval, consent or waiver and shall expeditiously
process the same (and the Grantee shall cooperate with the Issuer in the
filing of any such notice or application and the obtaining of any such
approval) and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which, as the case may be, (a) the
required notification period has expired or been terminated or (b) such
approval has been obtained and, in either event, any requisite waiting period
shall have passed. In the event of the failure or refusal of the Issuer to
purchase the Option or the shares or other securities, as the case may be,
covered by an Offeror's Notice or if the Federal Reserve Board or any other
regulatory authority disapproves the Issuer's proposed purchase of the Option
or such shares or other securities, the Grantee may, within sixty (60) days
following the date of the Offeror's Notice (subject to any necessary extension
for regulatory notification, approval, or waiting periods), sell all, but not
less than all, of the portion of the Option (which may be one hundred percent
(100%)) or such shares or other securities, as the case may be, proposed to be
transferred to the proposed transferee identified in the Offeror's Notice at
no less than the price specified and on terms no more favorable to the
proposed transferee than those set forth in the Offeror's Notice. The
requirements of this Section 13 shall not apply to (i) any disposition of the
Option or any shares of Common Stock or other securities by a Person to whom
the Grantee has assigned its rights under the Option with the prior written
consent of the Issuer, (ii) any sale by means of a public offering in which
steps are taken to reasonably ensure that no purchaser will acquire securities
representing more than two percent (2%) of the outstanding shares of Common
Stock of the Issuer or (iii) any transfer to a direct or indirect wholly-owned
subsidiary of the Grantee which agrees in writing to be bound by the terms
hereof.
14. Each of the Grantee and the Issuer will use all reasonable efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation applying to the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended,
for approval to acquire the shares issuable hereunder.
15. (a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $15,000,000
million and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by the Grantee, (iii) pay cash to the Issuer, or
(iv) any combination thereof, so that the Grantee's actually realized Total
Profit shall not exceed $15,000,000 million after taking into account the
foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) of more than $15,000,000
million; provided, that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of (i)(x) the net cash amounts received by the Grantee pursuant
to the sale of shares of Common Stock purchased pursuant to the exercise of
the Option (or any other securities into which such shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of
such shares, plus (ii) any amounts received by the Grantee on the transfer of
the Option (or any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which the Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposed exercise
assuming that this were exercised on such date for such number of shares and
assuming that such shares, together with all other shares of Common Stock
purchased pursuant to the Option and held by the Grantee and its affiliates as
of such date, were sold for cash at the closing market price for the Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
III-10
<PAGE>
16. Notwithstanding anything to the contrary herein, in the event that the
Holder or the Owner or any Related Person thereof (as hereinafter defined) is
a Person making an offer or proposal to engage in an Acquisition Transaction
(other than the transaction contemplated by the Acquisition Agreement), then
(a) in the case of a Holder or any Related Person thereof, the Option held by
it shall immediately terminate and be of no further force or effect, and (b)
in the case of an Owner or any Related Person thereof, the Option Shares held
by it shall be immediately repurchasable by the Issuer at the Option Price.
For purposes of this Agreement, a "Related Person" of a Holder or Owner means
any Affiliate (as defined in Rule 12b-2 of the rules and regulations under the
Exchange Act) of the Holder or the Owner and any Person that is required to
file a Schedule 13D with the Holder or the Owner with respect to shares of
Common Stock or options to acquire the Common Stock.
17. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
18. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or the Issuer
is not permitted to repurchase pursuant to Section 7, the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant
to Sections 1(b) or 5 hereof), it is the express intention of the Issuer to
allow the Holder to acquire or to require the Issuer to repurchase such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in Person, by
cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Acquisition Agreement.
20. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
21. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
22. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
23. Except as otherwise expressly provided herein, this Agreement contains
the entire agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Acquisition Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed [as a sealed instrument] on its behalf by its officers thereunder
duly authorized, all as of the day and year first above written.
Evergreen Bancorp, Inc.
/s/ George W. Dougan
By:__________________________________
Name: George W. Dougan
Title: Chairman and Chief
Executive Officer
Banknorth Group, Inc.
/s/ William H. Chadwick
By:__________________________________
Name: William H. Chadwick
Title: President and Chief
Executive Officer
III-12
<PAGE>
ANNEX IV
December 2, 1998
Evergreen Bancorp, Inc.
237 Glen Street
Glens Falls, NY 12801
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the shareholders of Evergreen Bancorp, Inc.
("Evergreen") of the exchange ratio in the proposed merger (the "Merger") of
Evergreen with Banknorth Group, Inc. ("Banknorth"), pursuant to the Agreement
and Plan of Merger dated as of July 31, 1998 between Evergreen, and Banknorth
(the "Agreement"). Under the terms of the Merger, each outstanding share of
common stock of Evergreen will be exchanged for .90 shares of common stock of
Banknorth (the "Exchange Ratio"). Keefe, Bruyette & Woods, Inc. ("KBW") was
informed by Evergreen, and assumed for purposes of its opinion, that the
Merger (as defined herein) would be accounted for as a pooling-of-interests
under generally accepted accounting principles and that the Merger will
otherwise be consummated on the terms contemplated by the Agreement.
KBW as part of its investment banking business is continually engaged in the
valuation of banking businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies we have experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of our business as a
broker-dealer, we may, from time to time, purchase securities from, and sell
securities to Evergreen and Banknorth and as a market maker in securities, we
may from time to time have a long or short position in, and buy or sell, debt
or equity securities of Evergreen and Banknorth for our own account and for
the accounts of our customers. To the extent we have any such position as of
the date of this opinion it has been disclosed to Evergreen. We have acted as
a financial advisor to the Board of Directors of Evergreen in rendering this
fairness opinion and will receive a fee from Evergreen for our services.
In connection with this opinion, we have reviewed, among other things, the
Agreement and the related stock option agreement; Annual Reports to
Stockholders of Evergreen and Banknorth for the three years ended December 31,
1997; certain interim reports to stockholders and Quarterly Reports on Form
10-Q of Evergreen and Banknorth, and certain internal financial analyses and
1998 adjusted budget forecasts for Evergreen and Banknorth prepared by
management. We also have held discussions with members of the senior
management of Evergreen and Banknorth regarding the past and current business
operations, regulatory relationships, financial condition and future prospects
of their respective companies. In addition, we have compared certain financial
and stock market information for Evergreen and Banknorth with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations
in the banking industry and performed such other studies and analyses as we
considered appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of Evergreen and Banknorth as to the reasonableness
and achievability of the 1998 adjusted budget forecasts (and the assumptions
and bases therefor) provided to us, and we have assumed that such forecasts
reflect the best currently available estimates and judgments of Banknorth and
Evergreen and that such forecasts will be realized in the amounts and in the
time period currently estimated by such managements. We have also assumed that
the aggregate allowances for loan losses for Evergreen and Banknorth are
adequate to cover such losses. In rendering our opinion, we have not made or
obtained any evaluations or appraisals of the property of Evergreen or
Banknorth nor have we examined any individual credit files.
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<PAGE>
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Evergreen and Banknorth; (ii) the assets and liabilities of Evergreen and
Banknorth; and (iii) the nature and terms of certain other merger transactions
involving banks and bank holding companies. We have also taken into account
our assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation and our knowledge of the banking industry generally. Our opinion is
necessarily based upon conditions as they exist and can be evaluated on the
date hereof and the information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio pursuant to the Agreement is fair, from a
financial point of view, to the common shareholders of Evergreen .
Very truly yours,
IV-2
<PAGE>
ANNEX V
_______________________________________________________________
Sandler O'Neill & Partners, L.P. Telephone: 212-466-7700
Investment Banking Group 800-635-6855
Two World Trade Center, 104th Floor Facsimile: 212-466-7711
New York, New York 10048
Sandler O'Neill
December 2, 1998
Board of Directors
Banknorth Group, Inc.
300 Financial Plaza
Burlington, VT 05401
Ladies and Gentlemen:
Banknorth Group, Inc. ("Banknorth") and Evergreen Bancorp, Inc. ("Evergreen")
have entered into an Affiliation Agreement and Plan of Reorganization and
related Agreement and Plan of Merger, each dated as of July 31, 1998 (together,
the "Agreement"), pursuant to which Evergreen will be merged with and into
Banknorth (the "Merger"). Upon consummation of the Merger, each share of
Evergreen common stock, par value $3.33 1/3 per share (together with the rights
attached thereto issued pursuant to the Rights Agreement dated April 17, 1998
and amended July 31, 1998 between Evergreen and Evergreen Bank, N.A., as Rights
Agent), issued and outstanding immediately prior to the Merger, other than
certain shares specified in the Agreement, will be converted into the right to
receive 0.90 shares (the "Conversion Ratio") of Banknorth common stock, par
value $1.00 per share (together with the rights attached thereto issued
pursuant to the Rights Agreement dated November 27, 1990 and amended February
13, 1996 between Banknorth and Registrar & Transfer Company, as Rights Agent),
subject to possible adjustment as set forth in the Agreement. The terms and
conditions of the Merger are more fully set forth in the Agreement. You have
requested our opinion as to the fairness, from a financial point of view, of
the Conversion Ratio to the holders of shares of Banknorth common stock.
Sandler O'Neill & Partners, L.P., as part of its investment banking business,
is regularly engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option
Agreement, dated as of July 31, 1998, by and between Banknorth and Evergreen;
(iii) certain publicly available financial statements of Banknorth and other
historical financial information provided by Banknorth that we deemed relevant;
(iv) certain publicly available financial statements of Evergreen and other
historical financial information provided by Evergreen that we deemed relevant;
(v) the 1998 adjusted budget forecast of Banknorth prepared by and reviewed
with management of Banknorth and the views of senior management of Banknorth
regarding Banknorth's past and current business, operations, results thereof,
financial condition and future prospects; (vi) the 1998 adjusted budget
forecast of Evergreen prepared by and reviewed with management of Evergreen and
the views of senior management of Evergreen regarding Evergreen's past and
current business, operations, results thereof, financial condition and future
prospects; (vii) the pro forma impact of the Merger on Banknorth; (viii) the
publicly reported historical price and trading activity for Banknorth's and
Evergreen's common stock, including a comparison of certain financial and stock
market information for Banknorth and Evergreen with similar publicly available
information for certain other companies the securities of which are publicly
traded; (ix) the financial terms of recent business combinations in the banking
industry, to the extent publicly available; (x) the current market environment
generally and the banking environment in particular; and (xi) such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as we considered relevant.
Sandler O'Neill & Partners, L.P., is a limited partnership, the sole general
partner of which is Sandler O'Neill & Partners Corp., a New York Corporation.
V-1
<PAGE>
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability for the accuracy or completeness thereof. We
did not make an independent evaluation or appraisal of the specific assets, the
collateral securing assets or the liabilities (contingent or otherwise) of
Banknorth or Evergreen or any of their subsidiaries, or the collectibility of
any such assets, nor have we been furnished with any such evaluations or
appraisals. We did not make an independent evaluation of the adequacy of the
allowance for loan losses of Banknorth or Evergreen nor have we reviewed any
individual credit files relating to Banknorth or Evergreen. We have assumed
that the respective aggregate allowances for loan losses for both Banknorth and
Evergreen are adequate to cover such losses and will be adequate on a pro forma
basis for the combined entity. With respect to the financial projections
prepared by and reviewed with management, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of the respective future financial
performances of Banknorth and Evergreen and that such performances will be
achieved, and we express no opinion as to such financial projections or the
assumptions on which they are based. We have also assumed that there has been
no material change in Banknorth's or Evergreen's assets, financial condition,
results of operations, business or prospects since the date of the most recent
financial statements made available to us. We have assumed in all respects
material to our analysis that Banknorth and Evergreen will remain as going
concerns for all periods relevant to our analyses, that all of the
representations and warranties contained in the Agreement and all related
agreements are true and correct, that each party to such agreements will
perform all of the covenants required to be performed by such party under such
agreements, that the conditions precedent in the Agreement are not waived and
that the Merger will be accounted for as a pooling of interests and will
qualify as a tax-free reorganization for federal income tax purposes.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect
this opinion. We have not undertaken to update, revise or reaffirm this opinion
or otherwise comment upon events occurring after the date hereof. We are
expressing no opinion herein as to what the value of Banknorth common stock
will be when issued to Evergreen's shareholders pursuant to the Agreement or
the prices at which Banknorth's or Evergreen's common stock will trade at any
time.
We have acted as Banknorth's financial advisor in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. In the past, we have also provided certain other
investment banking services for Banknorth and have received compensation for
such services.
In the ordinary course of our business as a broker-dealer, we may purchase
securities from and sell securities to Banknorth and Evergreen. We may also
actively trade the debt and equity securities of Banknorth and Evergreen for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of Banknorth in connection
with its consideration of the Merger and does not constitute a recommendation
to any stockholder of Banknorth as to how such stockholder should vote at any
meeting of stockholders called to consider and vote upon the Merger. Our
opinion is not to be quoted or referred to, in whole or in part, in a
registration statement, prospectus, proxy statement or in any other document,
nor shall this opinion be used for any other purposes, without Sandler
O'Neill's prior written consent; provided, however, that we hereby consent to
the inclusion of this opinion as an annex to Banknorth's and Evergreen's
Prospectus/Joint Proxy Statement dated the date hereof and to the references to
this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Conversion Ratio is fair, from a financial point of view, to
the holders of shares of Banknorth common stock.
Very truly yours,
/s/ Sandler O'Neill & Partners, L.P.
V-2
<PAGE>
ANNEX VI
INDEX COMPANIES
<TABLE>
<CAPTION>
INSTITUTION STATE MARKET CAP WEIGHTING
----------- ----- ------------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
FirstMerit Corporation...................................... OH $ 1,834 12.41%
Keystone Financial, Inc..................................... PA $ 1,729 11.70%
Westamerica Bancorporation.................................. CA $ 1,350 9.14%
Webster Financial Corp...................................... CT $ 1,217 8.24%
One Valley Bancorp, Inc..................................... WV $ 1,142 7.73%
HUBCO, Inc.................................................. NJ $ 962 6.51%
Suffolk Bancorp............................................. NY $ 868 5.87%
Susquehanna Bancshares Inc. ................................ PA $ 812 5.50%
UST Corp.................................................... MA $ 785 5.31%
TrustCo Bank Corp. of NY.................................... NY $ 679 4.60%
Chittenden Corp. ........................................... VT $ 505 3.42%
Vermont Financial Services.................................. VT $ 351 2.38%
USBANCORP Inc............................................... PA $ 350 2.37%
Commonwealth Bancorp Inc. .................................. NY $ 328 2.22%
First Source Bancorp Inc.................................... NJ $ 317 2.15%
Dime Community Bancshares, Inc.............................. NY $ 297 2.01%
NBT Bancorp, Inc............................................ NY $ 289 1.96%
BSB Bancorp, Inc............................................ NY $ 276 1.87%
Washington Trust Bancorp.................................... RI $ 255 1.73%
Community Bank System, Inc.................................. NY $ 244 1.65%
Arrow Financial Corp. ...................................... NY $ 187 1.27%
--- ------- ------
TOTAL....................................................... $14,776 100.00%
======= ======
</TABLE>
VI-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the DCL permits a corporation's certificate of
incorporation to eliminate or limit the personal liability of a director to
the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, provided that the relevant provision does not
eliminate or limit the liability of a director for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payment of a dividend or approval of
an unlawful stock purchase or redemption or (iv) any transaction from which
the director derived an improper personal benefit. Article Twelfth of the
Banknorth Certificate of Incorporation provides that no director shall be
personally liable to Banknorth or the Banknorth Shareholders for monetary
damages for breach of fiduciary duty as a director, subject to the foregoing
limitations of DCL Section 102(b)(7).
Section 145(a) of the DCL permits a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation in such a capacity with another business entity,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct
was unlawful.
Section 145(b) of the DCL permits a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be provided in respect of any
claim or issue as to which such person shall have been adjudged liable to the
corporation, unless and only to the extent that, the Delaware Court of
Chancery (or other court in which such action was brought) shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnify for such expenses as the court deems proper.
Section 145 (c) of the DCL provides that a corporation must indemnify a
director or officer of a corporation who has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, against expenses (including attorney's fees) actually and
reasonably incurred by such person in connection therewith.
Section 145 (e) of the DCL permits a corporation to pay expenses (including
attorney's fees) incurred by an officer or director in defending any
proceeding in advance of the final disposition of such matter upon receipt of
an undertaking by or on behalf of such person to repay such amount if it is
ultimately determined that such person is not entitled to indemnity. The
indemnification provided for by Section 145 is not exclusive of any other
rights to which the indemnified party may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Article Eleventh of Banknorth's Certificate of Incorporation and Section 6.6
of its By-laws provide that the registrant shall indemnify its officers and
directors to the fullest extent permitted by law and further provide that
Banknorth may indemnify its employees and agents to the fullest extent
permitted by law. The By-laws of Banknorth contain provisions which (i) set
forth procedures for submitting a claim for indemnification, (ii) establish
indemnification as a contractual right, (iii) require Banknorth to advance
expenses incurred by a director
II-1
<PAGE>
or officer in defending a proceeding, (iv) require a director or officer
seeking advancement of expenses to deliver an undertaking to Banknorth to
repay all amounts so advanced if such person is not entitled to be
indemnified, and (v) allow a person seeking indemnification to sue Banknorth
to recover any amount which remains unpaid by Banknorth within 30 days after
making an indemnification claim.
Section 145 (g) of the DCL provides that a corporation may purchase and
maintain insurance on behalf of any person who was or is a director, officer,
employee or agent of the corporation or was or is serving in such a capacity
at the request of the corporation with another business entity against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under Section 145. Banknorth has purchased directors' and officers'
liability insurance covering certain liabilities which may be incurred by its
directors and officers in connection with the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 --Affiliation Agreement and Plan of Reorganization by and between
Banknorth Group, Inc. and Evergreen Bancorp, Inc., dated as of July
31, 1998, attached as Annex I to the Prospectus/Joint Proxy
Statement included in Part I of this Registration Statement.
2.2 --Agreement and Plan of Merger by and between Banknorth Group, Inc.
and Evergreen Bancorp, Inc., dated as of July 31, 1998, attached as
Annex II to the Prospectus/Joint Proxy Statement included in Part I
of this Registration Statement.
3.1 --Certificate of Incorporation of Banknorth Group, Inc.*
3.2 --Amendment dated June 2, 1998 to Certificate of Incorporation of
Banknorth Group, Inc., incorporated herein by reference to Exhibit
3(i) to Banknorth's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998.
3.3 --Amendment dated September 3, 1998 to Certificate of Incorporation of
Banknorth Group, Inc.*
3.4 --By-laws of Banknorth Group, Inc., as amended, incorporated herein by
reference to Exhibit 3(ii) of Banknorth's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
4.1 --Rights Agreement, as amended, dated as of November 27, 1990, by and
between Banknorth Group, Inc. and Registrar & Transfer Company,
incorporated herein by reference to Exhibit 1 to Banknorth's
Registration Statement on Form 8-A/A, dated September 4, 1998.
5.1 --Opinion of Primmer & Piper, P.C. (with respect to the validity of
the Common Stock to be issued hereunder).*
8.1 --Opinion of Arnold & Porter (with respect to certain tax matters).*
15.1 --Letter of KPMG Peat Marwick LLP re Unaudited Interim Financial
Information (with respect to Banknorth Group, Inc.).*
15.2 --Letter of KPMG Peat Marwick LLP re Unaudited Interim Financial
Information (with respect to Evergreen Bancorp, Inc.).*
23.1 --Consent of Keefe, Bruyette & Woods, Inc.*
23.2 --Consent of Sandler O'Neill & Partners, L.P.*
23.3 --Consent of Primmer & Piper, P.C. (included in Exhibit 5.1 to this
Registration Statement).*
23.4 --Consent of Arnold & Porter (included in Exhibit 8.1 to this
Registration Statement).*
23.5 --Consent of KPMG Peat Marwick LLP (with respect to Banknorth Group,
Inc.).*
23.6 --Consent of KPMG Peat Marwick LLP (with respect to Evergreen Bancorp,
Inc.).*
23.7 --Consent of George W. Dougan, designee for appointment to the Board
of Directors of Banknorth
Group, Inc.*
23.8 --Consent of Robert F. Flacke, designee for appointment to the Board
of Directors of Banknorth
Group, Inc.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.9 --Consent of Anthony J. Mashuta, designee for appointment to the Board
of Directors of Banknorth
Group, Inc.*
24.1 --Power of Attorney.*
99.1 --Stock Option Agreement by and between Banknorth Group, Inc. and
Evergreen Bancorp, Inc., dated as of July 31, 1998, attached as
Annex III to the Prospectus/Joint Proxy Statement included in Part I
of this Registration Statement.
99.2 --Form of Proxy for Special Meeting of Shareholders of Banknorth
Group, Inc.*
99.3 --Form of Proxy for Special Meeting of Shareholders of Evergreen
Bancorp, Inc.*
</TABLE>
- --------
* Filed herewith.
(b)No separate financial statement schedules are filed as exhibits to this
Registration Statement. All information required in such schedules is
contained in the financial statements and related notes incorporated herein by
reference.
(c)No separate fairness opinions are filed as exhibits to this Registration
Statement. Both such opinions are attached as annexes to the Prospectus/Joint
Proxy Statement included in Part I of this Registration Statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes as follows:
(1)To file, during any period in which offers or sales are being made, a
post-effective amendment to his registration statement;
(i)To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii)To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement.
(2)That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3)To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such
II-3
<PAGE>
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(d) The undersigned registrant hereby undertakes that every prospectus (i)
that is filed pursuant to paragraph (c) immediately preceding, or (ii)
that purports to meet the requirements of Sections 10(a)(3) of the
Securities Act and is used in connection with the offering of securities
subject to Rule 415, will be filed as part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF BURLINGTON, STATE OF
VERMONT, ON DECEMBER 2, 1998.
BANKNORTH GROUP, INC.
/s/ WILLIAM H. CHADWICK*
By: ________________________________
William H. Chadwick,
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON THE 2ND DAY OF DECEMBER, 1998.
SIGNATURE TITLE
/s/ WILLIAM H. CHADWICK President, Chief
- --------------------------------- Executive Officer and
William H. Chadwick Director
/s/ THOMAS J. PRUITT Executive Vice President
- --------------------------------- and Chief Financial
Thomas J. Pruitt Officer (Principal
Financial Officer)
/s/ NEAL E. ROBINSON Treasurer (Principal
- --------------------------------- Accounting Officer)
Neal E. Robinson
/s/ THOMAS J. AMIDON* Director
- ---------------------------------
Thomas J. Amidon
/s/ JACQUELINE D. ARTHUR* Director
- ---------------------------------
Jacqueline D. Arthur
/s/ ROBERT A. CARRARA* Director
- ---------------------------------
Robert A. Carrara
/s/ SUSAN C. CRAMPTON* Director
- ---------------------------------
Susan C. Crampton
/s/ LUTHER F. HACKETT* Director
- ---------------------------------
Luther F. Hackett
II-5
<PAGE>
SIGNATURE TITLE
/s/ KATHLEEN HOISINGTON* Director
- ---------------------------------
Kathleen Hoisington
/s/ DOUGLAS G. HYDE* Director
- ---------------------------------
Douglas G. Hyde
/s/ RICHARD M. NARKEWICZ* Director
- ---------------------------------
Richard M. Narkewicz
/s/ JOHN B. PACKARD* Director
- ---------------------------------
John B. Packard
/s/ R. ALLAN PAUL* Director
- ---------------------------------
R. Allan Paul
/s/ ANGELO P. PIZZAGALLI* Director
- ---------------------------------
Angelo P. Pizzagalli
/s/ THOMAS P. SALMON* Director
- ---------------------------------
Thomas P. Salmon
/s/ PATRICK E. WELCH* Director
- ---------------------------------
Patrick E. Welch
- ---------------------------------
*By Owen Becker,
attorney-in-fact, pursuant to
Power of Attorney dated
as of October 7, 1998.
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 --Affiliation Agreement and Plan of Reorganization by and between
Banknorth Group, Inc. and Evergreen Bancorp, Inc., dated as of July
31, 1998, attached as Annex I to the Prospectus/Joint Proxy
Statement included in Part I of this Registration Statement.
2.2 --Agreement and Plan of Merger by and between Banknorth Group, Inc.
and Evergreen Bancorp, Inc., dated as of July 31, 1998, attached as
Annex II to the Prospectus/Joint Proxy Statement included in Part I
of this Registration Statement.
<C> <S>
3.1 --Certificate of Incorporation of Banknorth Group, Inc.*
3.2 --Amendment dated June 2, 1998 to Certificate of Incorporation of
Banknorth Group, Inc., incorporated herein by reference to Exhibit
3(i) to Banknorth's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998.
3.3 --Amendment dated September 3, 1998 to Certificate of Incorporation of
Banknorth Group, Inc.*
3.4 --By-laws of Banknorth Group, Inc., as amended, incorporated herein by
reference to Exhibit 3(ii) of Banknorth's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
4.1 --Rights Agreement, as amended, dated as of November 27, 1990, by and
between Banknorth Group, Inc. and Registrar & Transfer Company,
incorporated herein by reference to Exhibit 1 to Banknorth's
Registration Statement on Form 8-A/A, dated September 4, 1998.
5.1 --Opinion of Primmer & Piper, P.C. (with respect to the validity of
the Common Stock to be issued hereunder).*
8.1 --Opinion of Arnold & Porter (with respect to certain tax matters).*
15.1 --Letter of KPMG Peat Marwick LLP re Unaudited Interim Financial
Information (with respect to Banknorth Group, Inc.).*
15.2 --Letter of KPMG Peat Marwick LLP re Unaudited Interim Financial
Information (with respect to Evergreen Bancorp, Inc.).*
23.1 --Consent of Keefe, Bruyette & Woods, Inc.*
23.2 --Consent of Sandler O'Neill & Partners, L.P.*
23.3 --Consent of Primmer & Piper, P.C. (included in Exhibit 5.1 to this
Registration Statement).*
23.4 --Consent of Arnold & Porter (included in Exhibit 8.1 to this
Registration Statement).*
23.5 --Consent of KPMG Peat Marwick LLP (with respect to Banknorth Group,
Inc.).*
23.6 --Consent of KPMG Peat Marwick LLP (with respect to Evergreen Bancorp,
Inc.)*
23.7 --Consent of George W. Dougan, designee for appointment to the Board
of Directors
of Banknorth Group, Inc.*
23.8 --Consent of Robert F. Flacke, designee for appointment to the Board
of Directors
of Banknorth Group, Inc.*
23.9 --Consent of Anthony J. Mashuta, designee for appointment to the Board
of Directors
of Banknorth Group, Inc.*
24.1 --Power of Attorney.*
99.1 --Stock Option Agreement by and between Banknorth Group, Inc. and
Evergreen Bancorp, Inc., dated as of July 31, 1998, attached as
Annex III to the Prospectus/Joint Proxy Statement included in Part I
of this Registration Statement.
99.2 --Form of Proxy for Special Meeting of Shareholders of Banknorth
Group, Inc.*
99.3 --Form of Proxy for Special Meeting of Shareholders of Evergreen
Bancorp, Inc.*
</TABLE>
- --------
*Filed herewith.
<PAGE>
EXHIBIT 3.1
-----------
CERTIFICATE OF INCORPORATION
OF
BANKNORTH GROUP, INC.
FIRST: The name of the Corporation is BANKNORTH GROUP, INC. (hereinafter
the "Corporation").
SECOND: The address of its registered office in the State of Delaware is a
Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: This Corporation is organized for the purpose of
1. Buying, selling, investing in, holding and dealing in property of
every nature and description, real and personal, tangible and intangible.
2. Acquiring, investing in or holding stock in any subsidiary
enterprise permitted under the Bank Holding Company Act of 1956, as amended
from time to time, and engaging in any other activity or enterprise
permitted to a bank holding company under that Act.
3. Otherwise engaging in any other lawful act or activity for which a
corporation may be organized under the General Corporation Law of the State
of Delaware.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is 20,000,000 shares, Common Stock, with a par value of $1.00
per share. No holders of stock of any class shall have any preemptive or
preferential rights to acquire unissued or treasury shares of any class or any
warrants to purchase such shares or securities convertible into such shares.
FIFTH: The name and mailing address of the incorporators are as follows:
Name Mailing Address
---- ---------------
Thomas M. Dowling Ryan Smith & Carbine, Ltd.
98 Merchants Row
P.O. Box 310
Rutland, VT 05701
John L. Primmer Primmer & Piper, P.C.
100 East State Street
P.O. Box 1309
Montpelier, VT 05601-1309
<PAGE>
SIXTH:
Section 1. The Board of Directors shall be divided into three classes
(designated Class I, Class II and Class III, respectively), as nearly equal in
number as possible. The number of directors of the Corporation shall be fixed
from time to time in the manner provided in this Certificate of Incorporation
and the By-laws up to a maximum of twenty (20). The initial directors of the
Corporation shall serve in the respective classes and until the respective
annual meetings of the stockholders of the Corporation set forth below opposite
their names and mailing addresses, or until their successors are elected and
qualified. Thereafter, each class of directors shall be elected to a term of
office of three years.
<TABLE>
<CAPTION>
Initial
Name Mailing Address Class Term Expires
---- --------------- ----- ------------
<S> <C> <C> <C>
Porter H. Dale, M.D. S. McKinley Street I 1990 Annual Meeting
Montpelier, VT 05602
R. Allan Paul 137 Crescent Road I 1990 Annual Meeting
Burlington, VT 05401
Angelo P. Pizzagalli 1579 Spear St. I 1990 Annual Meeting
So. Burlington, VT 05403
Thomas P. Salmon Parker Hill I 1990 Annual Meeting
Rockingham, VT 05101
Theodore H. Thomas, Jr. Pippin Knoll I 1990 Annual Meeting
Bennington, VT 05201
Leonard F. Wing, Jr. 36 Hillside Rd. I 1990 Annual Meeting
Rutland, VT 05701
Elizabeth G. Woods 191 South Cover Rd. I 1990 Annual Meeting
Burlington, VT 05401
Robert P. Bliss Maqusam Shore II 1991 Annual Meeting
St. Albans, VT 05478
Luther F. Hackett 1295 Spear St. II 1991 Annual Meeting
So. Burlington, VT 05403
Wentworth Hubbard RR 1 Box 804 II 1991 Annual Meeting
Walpole, NH 03608
Richard M. Narkewicz, M.D. 2142 Dorset St. II 1991 Annual Meeting
Shelburne, VT 05482
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Initial
Name Mailing Address Class Term Expires
---- --------------- ----- ------------
<S> <C> <C> <C>
Lawrence H. Reilly Upper Camp St. II 1991 Annual Meeting
Barre, VT 05641
Margaret E. Richey RR 2 Box 380 II 1991 Annual Meeting
Plainfield, VT 05667
Thomas J. Amidon P.O. Box 1156 III 1992 Annual Meeting
Tansy Hill
Stowe, VT 05672
Stephen E. Baker RD 2 Box 102 III 1992 Annual Meeting
Brattleboro, VT 05301
John H. Barry 13 North Shore III 1992 Annual Meeting
Burlington, VT 05401
I. Munn Boardman, Jr. RD 1 Box 2434 III 1992 Annual Meeting
Stowe, VT 05672
Robert A. Carrara Stratton Rd. III 1992 Annual Meeting
Claredon, VT 05759
William H. Chadwick 20 Beaver Creek III 1992 Annual Meeting
Shelburne, VT 05482
Susan C. Crampton Tarbox Road III 1992 Annual Meeting
Box 127
Jericho, VT 05465
</TABLE>
Thereafter, election of directors shall take place as set forth in this
Certificate of Incorporation and the By-laws of the Corporation.
Section 2. Any alteration, change, amendment or repeal to this Certificate
of Incorporation or to the By-laws for the purpose of increasing or decreasing
the maximum number of directors provided herein shall require the affirmative
vote of holders of at least 80% of the outstanding Voting Stock (as defined in
Article Thirteenth), which vote shall include the affirmative vote of at least
two-thirds (2/3) of the outstanding Voting Stock held by stockholders other than
an Interested Stockholder (as defined in Article Thirteenth) if and Interested
Stockholder exists on the record date of the meeting at which such action is
submitted to the stockholders for their consideration; provided, however, that
such higher voting requirement shall not apply to any amendment, alteration,
change, amendment or repeal recommended to the shareholders by a majority of the
Continuing Directors (as defined in Article Thirteenth).
SEVENTH: The Corporation is to have perpetual existence.
<PAGE>
EIGHTH: The private property of the stockholders shall not be subject to
the payment of the Corporation's debts to any extent whatever.
NINTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for defining
and regulating the powers of the Corporation and its directors and stockholders
and are in furtherance and not in limitation of the powers conferred upon the
Corporation by statute:
(a) To the extent not inconsistent with this Certificate of
Incorporation, the By-laws of the Corporation may fix and alter, or provide
the manner for fixing and altering, the number of directors constituting
the whole Board of Directors. In case of any vacancy on the Board of
Directors or any increase in the number of directors constituting the whole
Board, the vacancies or newly-created directorships shall be filled by the
directors or by the stockholders at the time having voting power, as may be
prescribed in this Certificate of Incorporation or the By-laws. Directors
need not be stockholders of the Corporation , and the election of directors
need not be by ballot.
(b) A director may be removed from office only for cause and only by
the affirmative vote of the holders of at least a majority of the voting
power of the then outstanding shares of Voting Stock which vote shall
include the affirmative vote of at least a majority of the outstanding
shares of Voting Stock held by stockholders other than the Interested
Stockholder.
(c) The Board of Directors shall have the power and authority:
(1) to make, alter or repeal By-laws of the Corporation, subject
only to such limitation, if any, as may be from time to time imposed
by law, by this Certificate of Incorporation, or by the By-laws; and
(2) to the full extent permitted or not prohibited by law, and
without the consent of or other action by the stockholders, to
authorize or create mortgages, pledges, or other liens or encumbrances
upon any or all of the assets, real, personal or mixed, and franchises
of the Corporation, including after-acquired property, and to exercise
all of the powers of the Corporation in connection therewith; and
(3) subject to any provision of the By-laws, to determine
whether, to what extent, at what times and places under what
conditions and regulations the accounts, books and papers of the
Corporation (other than the stock ledger), or any of them, shall be
open to the inspection of the stockholders, and no stockholder shall
have any right to inspect any account, book or paper of the
Corporation except as conferred by statute or authorized by the By-
laws or by the Board of Directors.
TENTH: Meetings of stockholders may be held outside the State of Delaware,
if the By-laws so provide. The books of the Corporation may be kept outside of
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-laws of the
<PAGE>
Corporation.
ELEVENTH: The Corporation shall indemnify each director and officer of the
Corporation, his or her heirs, executors and administrators, and may indemnify
each employee and agent of the Corporation, his or her heirs, executors,
administrators and all other persons whom the Corporation is authorized to
indemnify under the provisions of the General Corporation Law of the State of
Delaware, to the extent permitted by law (a) against all expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, or in
connection with any appeal therein, or otherwise, and (b) against all expenses
(including attorney's fees) actually and reasonably incurred by him or her in
connection with any appeal therein, or otherwise; and no provision of this
Article Eleventh is intended to be construed as limiting, prohibiting, denying
or abrogating any of the general or specific powers or rights conferred by the
General Corporation Law of the State of Delaware upon the Corporation to
furnish, or upon any court to award, such indemnification, or indemnification as
otherwise authorized pursuant to the General Corporation Law of the State of
Delaware or any other law now or hereafter in effect.
The Board of Directors of the Corporation may, in its discretion, authorize
the Corporation to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her or
incurred by him or her in any such capacity, or arising out of his or her status
as such, whether or not the Corporation would have the power to indemnify him or
her against such liability under the foregoing paragraph of this Article
Eleventh.
TWELFTH: No director of the Corporation shall be personally liable to the
Corporation or to any of its stockholders for monetary damages for breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability; provided, however, that to the extent required from time to time by
applicable law, this provision shall not eliminate the liability of a director,
to the extent such liability is provided by applicable law; (i) for any breach
of the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of Title 8 of the
Delaware code, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Twelfth
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to the effective date of such amendment or repeal.
THIRTEENTH:
Section 1. In addition to any affirmative vote required by law or under
any other provision of this Certificate of Incorporation and except as otherwise
expressly provided in Section 2:
(a) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder (as
hereinafter defined) or (ii) any other
<PAGE>
corporation (whether or not itself an Interested Stockholder) which, after
such merger or consolidation, would be an Affiliate (as hereinafter
defined) of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any Interested Stockholder of
five per cent (5%) or more of the aggregate fair market value of the assets
of the Corporation or any Subsidiary, or
(c) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary the fair market value of which would be five
per cent (5%) or more of the aggregate fair market value of the securities
of the Corporation or Subsidiary to or with any Interested Stockholder or
any Affiliate of any Interested Stockholder, or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(e) any reclassification of securities (including any reverse stock
split), recapitalization, reorganization, merger or consolidation of the
Corporation with any of its Subsidiaries or any transaction (whether or not
with or into or otherwise involving an Interested Stockholder) that has the
effect directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Corporation or any Subsidiary that is directly or indirectly owned by any
Interested Stockholder,
shall require the affirmative vote of the holders of at least 80% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Thirteenth as one class ("Voting Stock"), which vote shall include the
affirmative vote of at least two-thirds (2/3) of the outstanding Voting Stock
held by stockholders other than the Interested Stockholder.
Section 2. The provisions of Section 1 of this Article Thirteenth shall
not be applicable to any particular business combination, and such business
combination shall require only such affirmative vote as is required by law, any
other provision of this Certificate of Incorporation, or any agreement with any
national securities exchange, if, in the case of a business combination that
does not involve any cash or other consideration being received by the
stockholders of the Corporation, solely in their respective capacities as
stockholders of the Corporation, the condition specified in the following
paragraph (a) is met, or in the case of any other business combination, the
condition specified in the following paragraph (a) or the conditions specified
in the following paragraph (b) are met:
(a) such business combination has been approved by a majority of the
Continuing Directors; or
(b) each of the conditions specified in the following clauses (1)
through (4) have been
<PAGE>
met:
(1) The aggregate amount of the cash and the fair market value as
of the Consummation Date of any consideration other than cash to be
received per share by holders of Voting Stock in such business
combination shall be at least equal to the highest of the following
(it being intended that the requirements of this clause (b)(1) shall
be required to be met with respect to all shares of Voting Stock
outstanding whether or not the Interested Stockholder has acquired any
shares of the Voting Stock);
(i) if applicable, the highest per share price (including
any brokerage commission, transfer taxes and soliciting dealers'
fees) paid in order to acquire any shares of Voting Stock
beneficially owned by the Interested Stockholder (x) within the
two-year period immediately prior to the Announcement Date or (y)
in the transaction in which it became an Interested Stockholder,
whichever is higher; or
(ii) in the fair market value per share of Voting Stock on
the Announcement Date or on the Determination Date, whichever is
higher; or
(iii) an amount which bears the same or greater percentage
relationship to the fair market value of the Voting Stock on the
Announcement Date as the highest per share price determined in
(b)(1)(i) above bears to the fair market value of the Voting
Stock on the date of the commencement of the acquisition of the
Voting Stock by such Interested Stockholders; and
(2) the consideration to be received by holders of a particular class
or series of outstanding Voting Stock shall be in cash or in the same form
as was previously paid in order to acquire beneficially shares of such
class or series of Voting Stock that are beneficially owned by the
Interested Stockholder and, if the Interested Stockholder beneficially owns
shares of any class or series of Voting Stock that were acquired with
varying forms of consideration, the form of consideration to be received by
each holder of such class or series of Voting Stock shall be, at the option
of such holder, either cash or the form used by the Interested Stockholder
to acquire beneficially the largest number of shares of such class or
series of Voting Stock beneficially acquired by it prior to the
Announcement Date; and
(3) after such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such business combination:
(i) such Interested Stockholder shall not have become the
beneficial owner of any additional shares of Voting Stock of the
Corporation, except as part of the transaction in which it became an
Interested Stockholder or upon conversion of convertible securities
acquired by it prior to becoming an Interested Stockholder or as a
result of a pro rata stock dividend or stock split; and
<PAGE>
(ii) such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or tax credits or other tax advantages provided
by the Corporation or any subsidiary, whether in anticipation of or in
connection with such business combination or otherwise; and
(iii) such Interested Stockholder shall not have caused any
material change in the Corporation's business or capital structure,
including, without limitation, the issuance of shares of capital stock
of the Corporation to any third party; and
(iv) there shall have been (y) no reduction in the annual rate of
dividends paid on Voting Stock (except as necessary to reflect any
subdivision of the Voting Stock), except as approved by a majority of
the Continuing Directors and (z) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in the event of
any reclassification (including any reverse stock split),
recapitalization, reorganization, self tender offer or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Voting Stock, unless the failure to increase such annual
rate was approved by a majority of the Continuing Directors; and
(4) a proxy or information statement describing the proposed business
combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules and regulations), whether or not the
Corporation is then subject to such requirements, shall be mailed by and at
the expense of the Interested Stockholder at least thirty days prior to the
Consummation Date of such business combination to the public stockholders
of the Corporation (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent provisions), and
shall contain at the front thereof in a prominent place (i) any
recommendations as to the advisability (or inadvisability) of the business
combination which the Continuing Directors, if any, may choose to state,
and (ii) the opinion of a reputable national investment banking firm as to
the fairness (or not) of such business combination from the point of view
of the remaining public stockholders of the Corporation (such investment
banking firm to be engaged solely on behalf of the remaining public
stockholders, to be paid a reasonable fee for their services by the
Corporation upon receipt of such opinion, to be unaffiliated with such
Interested Stockholder, and, it there are at the time any Continuing
Directors, to be selected by a majority of the Continuing Directors).
Section 3. For the purpose of this Article Thirteenth:
a. A "person" shall mean any individual, firm, corporation or other
entity.
b. "Interested Stockholder" shall mean, in respect of any business,
combination, any person (other than the Corporation or any Subsidiary) who
or which, as of the record date for the determination of stockholders
entitled to notice of and to vote on such business
<PAGE>
combination, or immediately prior to the consummation of any such
transaction:
(i) is the beneficial owner, directly or indirectly, of not less
than 10% of the Voting Stock of the Corporation, or
(ii) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly, or
indirectly, of not less than 10% of the then outstanding Voting Stock
of the Corporation.
(iii) is an assignee of or has otherwise succeeded to any shares
of capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
c. A person shall be the "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates and Associates (as
hereinafter defined beneficially owns, directly or indirectly, or
(ii) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants, or options, or
otherwise, or (b) the right to vote pursuant to any agreement,
arrangement, or understanding, or
(iii) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
d. The term "business combination" shall mean any transaction which
is referred to in any one or more of clauses (i) through (v) of Section 1
of this Article Thirteenth.
e. The outstanding Voting Stock shall include shares deemed owned
through application of subsection c above but shall not include any other
Voting Stock which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise.
f. "Continuing Director" shall mean a person who was a member of the
Board of Directors of the Corporation elected by the public stockholders
prior to the date as of which the Interested Stockholder acquired in excess
of five per cent (5%) of the then outstanding Voting Stock, or a person
recommended to succeed a continuing director by a majority of continuing
directors.
<PAGE>
g. "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on February 28, 1989.
h. "Subsidiary" means any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on
February 28, 1989) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in subsection b of this Section 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
i. In the event of any business combination in which the Corporation
survives, the phrase, "any consideration other than cash to be received" as
used in Section 2(1) and (2) of this Article Thirteenth shall include the
shares of Voting Stock retained by the holders of such shares.
j. "Announcement Date" shall mean the date of first public
announcement of the proposed business combination.
k. "Determination Date" shall mean the date on which the Interested
Stockholders became an Interested Stockholder.
l. "Consummation Date" shall mean the date of the consummation of the
business combination.
Section 4. A majority of the Continuing Directors shall have the power and
duty to determine for the purposes of this Article Thirteenth, on the basis of
information known to them (a) the number of shares of Voting Stock beneficially
owned by any person, (b) whether a person is an Affiliate or Associate of
another, (c) whether a person has an agreement, arrangement or understanding
with another as to the matters referred to in subsection (c)(iii) of Section 3,
(d) the aggregate fair market value of any securities or assets of the
Corporation or any Subsidiary, or (e) such other matters with respect to which a
determination is required under this Article Thirteenth.
Section 5. Any amendment, alteration, change or repeal of this Article
Thirteenth of this Certificate of Incorporation shall require the affirmative
vote of the holders of a least 80% of the then outstanding Voting Stock, which
vote shall include the affirmative vote of at least two-thirds (2/3) of the
outstanding Voting Stock held by stockholders other than an Interested
Stockholder, if an Interested Stockholder exists on the record date for the
meeting at which such action is submitted to the stockholders for their
consideration; provided that this Section 5 shall not apply to, and such higher
vote shall not be required for any amendment, alteration, change or repeal
recommended to the shareholders by a majority of the Continuing Directors.
Section 6. Nothing contained in this Article Thirteenth shall be construed
to relieve any Interested Stockholder of any fiduciary obligation imposed by
law.
<PAGE>
FOURTEENTH: Except as otherwise provided in this Certificate of
Incorporation, any merger, consolidation, sale of assets or dissolution
involving the Corporation that is required to be approved by stockholders of the
Corporation under the provisions of the Delaware General Corporation Law (or any
successor statute), and any amendment to this Certificate of Incorporation,
shall require the affirmative vote of holders of not less than a majority of the
outstanding shares of voting stock of the Corporation.
FIFTEENTH: Any action required by law, by this Certificate of Incorporation
or by the By-laws of the Corporation to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the actions so taken, shall be signed by the holders of all
outstanding shares of capital stock of the Corporation that would be entitled to
vote thereon at such meeting. Any such written consent may be executed in
multiple counterparts, all of which shall be considered a single instrument.
SIXTEENTH: The Board of Directors, when evaluating any offer of another
person to (i) purchase or exchange any securities or property for any
outstanding equity securities of the Corporation, (ii) merge or consolidate the
Corporation with another entity, or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation and its stockholders, give due consideration not
only to the price or other consideration being offered but also to all other
relevant factors, including without limitation, the financial and managerial
resources and future prospects of the other and the possible effects on the
business of the Corporation and its subsidiaries and on the depositors, loan and
other customers, employees and the communities served by the Corporation and its
subsidiaries. In evaluating any such offer, the Board of Directors shall be
deemed to be performing its duly authorized duties and acting in good faith and
in the best interests of the Corporation.
SEVENTEENTH: The Corporation reserves the right to amend, change or repeal
any provisions contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute and by this Certificate of Incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
THE UNDERSIGNED, being in incorporators hereinbefore named, for the purpose
of forming a Corporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this is
our free act and deed and the facts stated herein are true, and accordingly have
hereunto set our hands this 1/st/ day of June, 1989.
/s/ Thomas M. Dowling
Thomas M. Dowling
/s/ John L. Primmer
John L. Primmer
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
*****
Banknorth Group, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, at a meeting
duly held, adopted a resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of the Corporation (the
"Amendment"):
RESOLVED, that the Certificate of Incorporation of Banknorth Group,
Inc. be amended by changing Article FOURTH thereof so that, as
amended, said Article shall be and read as follows:
"The aggregate number of shares of capital stock that the Corporation
shall have authority to issue is 70,500,000 shares, divided into
70,000,000 shares of Common Stock, with a par value of $1.00 per
share, and 500,000 shares of Preferred Stock, with a par value of $.01
per share and issuable from time to time in one or more series. The
Board of Directors of the Corporation is hereby authorized to divide
the shares of Preferred Stock into one or more series and to fix and
determine by resolution the relative rights and preferences of any
series so established, to the fullest extent permitted by law,
including, without limitation, any voting powers, dividend rights,
conversion rights, preemptive rights, liquidation preferences and
redemption provisions."
SECOND: That the stockholders of the Corporation approved and adopted the
Amendment by the vote of a majority of the outstanding stock of the Corporation
entitled to vote thereon at an annual meeting of the Corporation called and
held upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware.
<PAGE>
THIRD: That the Amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said Banknorth Group, Inc. has caused this certificate to
be signed by Thomas J. Pruitt, its Executive Vice President and Chief Financial
Officer, this 3rd day of September, 1998.
/s/ Thomas J. Pruitt
-----------------------------------------------
Name: Thomas J. Pruitt
Title: Executive Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT 5.1
-----------
December 2, 1998
Banknorth Group, Inc.
300 Financial Plaza
P.O. Box 5420
Burlington, VT 05401-5420
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
Reference is made to the Registration Statement of Banknorth Group, Inc. (the
"Company") on Form S-4 (the "Registration Statement"), filed by the Company with
the Securities and Exchange Commission with respect to the proposed merger of
the Company and Evergreen Bancorp, Inc. (the "Merger") and the related issuance
pursuant to such Merger of up to 8,500,000 shares of the Company's common stock,
$1.00 par value per share (the "Common Stock"), together with an equal number
of preferred share purchase rights associated therewith (the "Rights"), to be
issued pursuant to the terms of a Rights Agreement dated as of November 27,
1990, as amended, between the Company and Registrar & Transfer Company.
In connection with this opinion, we have reviewed the Registration Statement and
the exhibits thereto, and we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, agreement,
certificates of public officials and of officers of the Company, and such other
instruments and matters of law and fact as we have deemed necessary to render
the opinion contained herein.
Based on the foregoing, it is our opinion that, upon satisfaction of all
conditions precedent to consummation of the Merger, or waiver of conditions
capable of being waived, the Common Stock issued pursuant to the Merger will be
duly authorized, validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to our firm under the
caption "Legal Opinion" in the Prospectus/Joint Proxy Statement included in the
Registration Statement, with respect to the
<PAGE>
Banknorth Group, Inc. 2 December 2, 1998
limited matters addressed in this opinion. In rendering this opinion and in
giving such consent we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ PRIMMER & PIPER, P.C.
PRIMMER & PIPER, P.C.
- ---------------------------------
<PAGE>
EXHIBIT 8.1
December 1, 1998
Evergreen Bancorp, Inc.
237 Glen Street
Glens Falls, New York 12801
Dear Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the proposed merger (the "Merger") of Evergreen Bancorp, Inc.
("Evergreen") with and into Banknorth Group, Inc. ("Banknorth").
In preparing our opinion, you have directed us to assume that (1) the
Merger will be consummated in accordance with the terms, conditions and other
provisions of (a) the Affiliation Agreement and Plan of Reorganization between
Banknorth and Evergreen, dated as of July 31, 1998 (the "Reorganization
Agreement"), (b) the Agreement and Plan of Merger between Banknorth and
Evergreen, dated as of July 31, 1998 (the "Plan of Merger"), and (c) the Stock
Option Agreement dated as of July 31, 1998 (the "Option Agreement"); and (2) all
of the factual information, descriptions, representations and assumptions set
forth or referred to (a) in this letter (an advance copy of which has been
provided to you), (b) in the Reorganization Agreement (with the exception of
section 3.19 which refers to Banknorth as "well capitalized"), Plan of Merger
and the Option Agreement (collectively referred to as the "Agreements"), (c) in
letters to us from Evergreen dated December 1, 1998, and from Banknorth dated
December 1, 1998, and in letters from KPMG Peat Marwick LLP to Evergreen dated
December 1, 1998, and to Banknorth dated December 1, 1998 (the "Letters"),
and (d) in the Prospectus/Joint Proxy Statement prepared in connection with the
Merger, are accurate and complete and will be accurate and complete at the
Effective Time./1/
- --------------------
/1/ Terms not otherwise defined in this letter shall have the meanings assigned
to them in the Reorganization Agreement.
<PAGE>
Evergreen Bancorp, Inc.
December 1, 1998
Page 2
We have not independently verified any factual matters relating to the
Merger in connection with or apart from our preparation of this opinion.
Accordingly, our opinion does not take into account any matters not set forth
herein which might have been disclosed by independent verification.
OPINION
-------
Assuming that the Merger is consummated in accordance with the terms and
conditions set forth in the Agreements, and based on the facts set forth or
referred to in the Letters and this letter, including all assumptions and
representations in any such documents, and subject to the qualifications and
other matters set forth herein, it is our opinion that for federal income tax
purposes --
1. The Merger will constitute a reorganization within the meaning of
section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
2. Except for cash received in lieu of fractional share interests,
holders of Evergreen Common Stock who receive solely Banknorth Common
Stock in exchange for their shares of Evergreen Common Stock in the
Merger will not recognize gain or loss;
3. The aggregate adjusted tax basis of Banknorth Common Stock received in
the Merger will be the same as the aggregate adjusted tax basis of
Evergreen Common Stock for which it was exchanged, reduced by any
amount allocable to a fractional share interest for which cash is
received; and
4. The holding period of the shares of Banknorth Common Stock will
include the holding period of the Evergreen Common Stock for which it
is exchanged, provided that such Evergreen Common Stock was held as a
capital asset at the Effective Time.
The tax consequences described in this opinion may not be applicable to all
Evergreen Shareholders,
<PAGE>
Evergreen Bancorp, Inc.
December 1, 1998
Page 3
including shareholders who are foreign persons, financial institutions, tax-
exempt organizations, insurance companies, persons who receive their shares of
Banknorth Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation, or persons who acquired Evergreen Common Stock as
part of a hedge, straddle or conversion transaction.
Our opinion is limited to the foregoing federal income tax consequences of
the Merger, which are the only matters as to which you have requested our
opinion, and you must judge whether the matters addressed herein are sufficient
for your purposes. We do not address any other federal income tax consequences
of the Merger or other matters of federal law and have not considered matters
(including state or local tax consequences) arising under the laws of any
jurisdiction other than matters of federal law arising under the laws of the
United States.
Our opinion is based on the understanding that the relevant facts are, and
will be at the Effective Time, as set forth or referred to in this letter. If
this understanding is incorrect or incomplete in any respect, our opinion could
be affected.
Our opinion is also based on the Code, Treasury Regulations promulgated
under the Code, case law, and Internal Revenue Service rulings as they now
exist. These authorities are all subject to change and such change may be made
with retroactive effect. We can give no assurance that after any such change,
our opinion would not be different. Moreover, our opinion is not binding on the
Internal Revenue Service or the courts.
We undertake no responsibility to update or supplement our opinion. Our
opinion may be relied upon only with respect to the consummation of the Merger
described herein.
We hereby consent to the filing with the Securities and Exchange Commission
of this opinion as an exhibit to the Registration Statement on Form S-4 and to
the references to our firm under the headings "SUMMARY - Material Federal Income
Tax Consequences" and "THE MERGER - Material Federal Income Tax Consequences"
in the Prospectus/Joint Proxy Statement contained therein. In giving such
consent, we do
<PAGE>
Evergreen Bancorp, Inc.
December 1, 1998
Page 4
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Arnold & Porter
ARNOLD & PORTER
<PAGE>
EXHIBIT 15.1
------------
The Board of Directors
Banknorth Group, Inc.:
Re: Registration Statement related to the merger with Evergreen Bancorp, Inc.
With respect to the subject registration statement on Form S-4, we acknowledge
our awareness of the use therein of our reports dated April 17, 1998, July 17,
1998, and October 14, 1998 related to our reviews of consolidated interim
financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of section 7 and 11 of the Act.
/s/ KPMG Peat Marwick LLP
Albany, New York
November 30, 1998
<PAGE>
EXHIBIT 15.2
------------
The Board of Directors
Evergreen Bancorp, Inc.:
Re: Registration Statement related to the Evergreen Bancorp, Inc. merger with
Banknorth Group, Inc.
With respect to the subject registration on Form S-4, we acknowledge our
awareness of the use therein of our reports dated May 8, 1998, August 10, 1998,
and November 10, 1998 related to our reviews of consolidated interim financial
information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/ KPMG Peat Marwick LLP
Albany, New York
November 25, 1998
<PAGE>
EXHIBIT 23.1
------------
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the inclusion of our opinion letter dated November 30,
1998 to the Board of Directors of Evergreen Bancorp, Inc. ("Evergreen") as Annex
IV to the Registration Statement on Form S-4 ("Registration Statement") of
Banknorth Group, Inc. ("Banknorth") and to all references to our firm and such
opinion in the Prospectus/Joint Proxy Statement included in such Registration
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, and we do not admit and we
disclaim that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
/s/ KEEFE, BRUYETTE & WOODS, INC.
New York, New York
November 30, 1998
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF SANDLER O'NEILL & PARTNERS, L.P.
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of Banknorth Group, Inc. (the "Company") as Annex V to the
Prospectus/Joint Proxy Statement relating to the proposed merger of Evergreen
Bancorp, Inc. with and into the Company contained in the Registration Statement
on Form S-4, as filed with the Securities and Exchange Commission on the date
hereof, and to the references to our firm and such opinion in such
Prospectus/Joint Proxy Statement. In giving such consent, we do not admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended (the "Act"), or the rules and
regulations of the Securities and Exchange Commission thereunder (the
"Registrations"), nor do we admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Act or the Regulations.
/s/ Sandler O'Neill & Partners, L.P.
December 2, 1998
<PAGE>
EXHIBIT 23.5
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Banknorth Group, Inc.:
We consent to incorporation by reference in the Registration Statement on
Form S-4 related to the merger with Evergreen Bancorp, Inc. of our audit report
dated January 23, 1998, except for note 15 which is as of February 24, 1998
relating to the consolidated balance sheets of Banknorth Group, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the years in the three-year period ended December 31, 1997, which report
appears in the December 31, 1997 Annual Report on Form 10-K of Banknorth Group,
Inc. and to the reference to our firm under the heading "Experts" in the
prospectus. Our audit report refers to the adoption of the provisions of
Statement of Financial Accounting Standards (SFAS) No. 122, "Accounting for
Mortgage Servicing Rights," and SPAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," which
supercedes SFAS No. 122.
/s/ KPMG Peat Marwick LLP
Albany. New York
November 30, 1998
<PAGE>
EXHIBIT 23.6
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Evergreen Bancorp, Inc.
We consent to incorporation by reference in the Registration Statement on
Form S-4 related to the merger with Banknorth Group, Inc. of our audit report
dated January 23, 1998, relating to the consolidated balance sheets of Evergreen
Bancorp, Inc., and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1997, which report appears in the December 31, 1997 Annual Report on Form 10-K
of Evergreen Bancorp, Inc., which is incorporated herein by reference, and to
the reference to our firm under the heading "Experts" in the prospectus.
Albany, New York
November 25, 1998
<PAGE>
EXHIBIT 23.7
------------
CONSENT
I hereby consent to being named in the Prospectus/Joint Proxy Statement of
Banknorth Group, Inc. ("Banknorth") and Evergreen Bancorp, Inc. ("Evergreen")
included in the Registration Statement on Form S-4 of Banknorth, as designee for
appointment or election to the Board of Directors of Banknorth upon consummation
of the merger of Banknorth and Evergreen pursuant to their Affiliation Agreement
and Plan of Reorganization and Agreement and Plan of Merger, both dated as of
July 31, 1998.
/s/ George W. Dougan November 19, 1998
- --------------------------- --------------------
George W. Dougan Date
<PAGE>
EXHIBIT 23.8
------------
CONSENT
I hereby consent to being named in the Prospectus/Joint Proxy Statement of
Banknorth Group, Inc. ("Banknorth") and Evergreen Bancorp, Inc. ("Evergreen")
included in the Registration Statement on Form S-4 of Banknorth, as designee for
appointment or election to the Board of Directors of Banknorth upon consummation
of the merger of Banknorth and Evergreen pursuant to their Affiliation Agreement
and Plan of Reorganization and Agreement and Plan of Merger, both dated as of
July 31, 1998.
/s/ Robert F. Flacke November 19, 1998
- ---------------------------------- -------------------
Robert F. Flacke Date
<PAGE>
EXHIBIT 23.9
------------
CONSENT
I hereby consent to being named in the Prospectus/Joint Proxy Statement of
Banknorth Group, Inc. ("Banknorth") and Evergreen Bancorp, Inc. ("Evergreen")
included in the Registration Statement on Form S-4 of Banknorth, as designee for
appointment or election to the Board of Directors of Banknorth upon consummation
of the merger of Banknorth and Evergreen pursuant to their Affiliation Agreement
and Plan of Reorganization and Agreement and Plan of Merger, both dated as of
July 31, 1998.
/s/ Anthony J. Mashuta November 19, 1998
- --------------------------------- -------------------
Anthony J. Mashuta Date
<PAGE>
EXHIBIT 24.1
------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and/or
officers of Banknorth Group, Inc., a corporation organized under the laws of the
State of Delaware (the "Company") hereby constitutes and appoints Owen Becker,
Katherine O'Connell and Denise J. Deschenes, and each of them (with full power
to each of them to act alone), his(her) true and lawful attorneys-in-fact and
agents for him(her) and on his(her) behalf and in his(her) name, place and
stead, in any and all capacities, to execute and file with the Securities and
Exchange Commission (or any other governmental or regulatory authority), a
Registration Statement an Form S-4 (or other appropriate form), and all
amendments (including post-effective amendments on Form S-4 or other appropriate
form) thereto, with all exhibits and any and all documents required to be filed
with respect thereto, relating to the registration under the Securities Act of
1933, as amended, of shares of the Company's Common Stock to be issued or sold
in connection with the Company's proposed merger with Evergreen Bancorp, Inc.,
granting unto said attorneys, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he(she) might or could do if personally present,
hereby ratifying and confirming all that said attorney-in-fact and agents, or
any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned directors and/or officers has
hereunto set his hand, as of the 7th day of October, 1998.
/s/ William H. Chadwick Luther F. Hackett
- ---------------------------- /s/ Patrick E. Welch
William H. Chadwick ------------------------
Patrick E. Welch
/s/ Kathleen Hoisington
/s/ Thomas J. Pruitt -----------------------
- ---------------------------- Kathleen Hoisington
Thomas J. Pruitt
/s/ Douglas G. Hyde
/s/ Neal E. Robinson -----------------------
- ---------------------------- Douglas G. Hyde
Neal E. Robinson
/s/ Richard M. Narkewicz
/s/ Thomas J. Amidon -------------------------
- ---------------------------- Richard M. Narkewicz
Thomas J. Amidon
/s/ John B. Packard
/s/ Jacqueline D. Arthur -------------------------
- ---------------------------- John B. Packard
Jacqueline D. Arthur
/s/ R. Allan Paul
-------------------------
/s/ Robert A. Carrara R. Allan Paul
- ----------------------------
Robert A. Carrara
/s/ Angelo P. Pizzagalli.
/s/ Susan C. Crampton -------------------------
- ---------------------------- Angelo P. Pizzagalli
Susan C. Crampton
/s/ Thomas P. Salmon
/s/ Luther F. Hackett -------------------------
- ---------------------------- Thomnas P. Salmon
<PAGE>
EXHIBIT 99.2
------------
(SIDE 1)
REVOCABLE PROXY
BANKNORTH GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
Thursday, December 31, 1998
The undersigned shareholder(s) hereby appoints Luther F. Hackett and
Kathleen Hoisington, or either of them, as proxies, with full power of
substitution in each, to vote all shares of common stock of Banknorth Group,
Inc. ("Banknorth") that the undersigned is (are) entitled to vote at the Special
Meeting of Shareholders of Banknorth to be held at the Sheraton-Burlington Hotel
and Conference Center, 870 Williston Road, South Burlington, Vermont 05403, on
Thursday, December 31, 1998, at 10:00 a.m., Eastern Standard Time, and at any
adjournment thereof.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO
ITS EXERCISE.
Please sign and date on the reverse side and mail promptly in the enclosed
postage-paid envelope to Registrar and Transfer Company, 10 Commerce Drive,
Cranford, NJ, 07016-3572 Attn: Proxy Department. If you do not sign and
return a proxy or attend the meeting and vote by ballot, your shares cannot be
voted.
[SIDE 2]
1. To approve the Affiliation Agreement and Plan of Reorganization and a
related Agreement and Plan of Merger between Banknorth and Evergreen
Bancorp, Inc., both dated as of July 31, 1998 (together, the "Agreement"),
pursuant to which Evergreen Bancorp, Inc. will merge with and into
Banknorth with Banknorth as the surviving corporation, upon the terms and
subject to the conditions set forth in the Agreement.
[_] FOR [_] AGAINST [_] ABSTAIN
Should any other matter requiring a vote of the shareholders arise, the
proxies named above are authorized to vote in accordance with their best
judgment in the interest of Banknorth. The Board of Directors is not aware of
any matter which is to be presented for action at the Special Meeting other than
as set forth on this card.
This proxy card, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder(s). If no direction is made, this
proxy will be voted FOR Item 1.
Please sign exactly as name or names appear on this proxy
card. When signing as attorney, executor, administrator,
trustee, guardian or in any other representative capacity,
please so indicate. If a corporation, please sign in
corporate name by an authorized officer. If a partnership,
please sign in partnership name by authorized person.
------------------------------------------------------------
Signature of Shareholder Date
------------------------------------------------------------
Signature of Shareholder Date
<PAGE>
EXHIBIT 99.3
------------
[SIDE 1]
REVOCABLE PROXY
EVERGREEN BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDER
Thursday, December 31, 1998
The undersigned shareholder(s) hereby appoints Russell C. Tharp, Jr., and
Paul E. Pontiff, Esq., or either of them, as proxies, with full power of
substitution in each, to vote all shares of common stock of Evergreen Bancorp,
Inc. ("Evergreen") that the undersigned is (are) entitled to vote at the Special
Meeting of Shareholders of Evergreen to be held at the Queensbury Hotel, 88
Ridge Street, Glens Falls, New York 12801, on Thursday, December 31, 1998, at
10:00 a.m., Eastern Standard Time, and at any adjournment thereof.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO
ITS EXERCISE.
Please sign and date on the reverse side and mail promptly in the enclosed
postage-paid envelope to Proxy Services, Boston EquiServe, L.P., P.O. Box 9379,
Boston, MA, 02205-9954. If you do not sign and return a proxy or attend the
meeting and vote by ballot, your shares cannot be voted.
[SIDE 2]
1. To approve the Affiliation Agreement and Plan or Reorganization and a
related Agreement and Plan of Merger between Banknorth Group, Inc. and
Evergreen, both dated as of July 31, 1998 (together, the "Agreement"),
pursuant to which Evergreen will merge with and into Banknorth Group, Inc.
with Banknorth Group, Inc. as the surviving corporation, upon the terms and
subject to the conditions set forth in the Agreement
[_]FOR [_]AGAINST [_] ABSTAIN
Should any other matter requiring a vote of the shareholders arise, the
proxies named above are authorized to vote in accordance with their best
judgment in the interest of Evergreen. The Board of Directors is not aware of
any matter which is to be presented for action at the Special Meeting other than
as set forth on this card.
This proxy card, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder(s). If no direction is made, this
proxy will be voted FOR Item 1.
Please sign exactly as name or names appear on this proxy
card. When signing as attorney, executor, administrator,
trustee, guardian or in any other representative capacity,
please so indicate. If a corporation, please sign in
corporate name by an authorized officer. If a partnership,
please sign in partnership name by authorized person.
------------------------------------------------------------
Signature of Shareholder Date
------------------------------------------------------------
Signature of Shareholder
