Banknorth Group, Inc. 10-K


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

As of June 28, 2002, the aggregate market value of the 147,095,337 shares of Common Stock of the Registrant issued and outstanding on such date, excluding the approximately 891,640 shares held by all directors and executive officers of the Registrant as a group (which does not include unexercised stock options), was $3.8 billion. This figure is based on the last sale price of $25.70 per share of the Registrant’s Common Stock on June 28, 2002, as reported in The Wall Street Journal on July 1, 2002. Although directors of the Registrant and executive officers of the Registrant and its subsidiaries were assumed to be “affiliates” of the Registrant for purposes of this calculation, the classification is not to be interpreted as an admission of such status.

Number of shares of Common Stock outstanding as of February 28, 2003: 164,186,259

List hereunder the following documents if incorporated by reference and the part of the Form 10-K into which the document is incorporated:

Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on April 22, 2003 are incorporated by reference into Part III, Items 10-13 of this Form 10-K.

In the normal course of business, we, in an effort to help keep our shareholders and the public informed about our operations, may from time to time issue or make certain statements, either in writing or orally, that are or contain forward-looking statements, as that term is defined in the U.S. federal securities laws. Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions made by or to be made by us, projections involving anticipated revenues, earnings, profitability or other aspects of operating results or other future developments in our affairs or the industry in which we conduct business. Forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology such as “anticipate,” “believe,” “expect,” “intend,” “plan,” “estimate” or similar expressions.

Although we believe that the anticipated results or other expectations reflected in our forward-looking statements are based on reasonable assumptions, we can give no assurance that those results or expectations will be attained. Forward-looking statements involve risks, uncertainties and assumptions (some of which are beyond our control), and as a result actual results may differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from forward-looking statements include, but are not limited to, the following, as well as those discussed elsewhere herein:


	•	our investments in our businesses and in related technology could require additional incremental spending, and might not produce expected deposit and loan growth and anticipated contributions to our earnings;

	•	general economic or industry conditions could be less favorable than expected, resulting in a deterioration in credit quality, a change in the allowance for loan and lease losses or a reduced demand for credit or fee-based products and services;

	•	changes in the domestic interest rate environment could reduce net interest income and could increase credit losses;

	•	the conditions of the securities markets could change, which could adversely affect, among other things, the value or credit quality of our assets, the availability and terms of funding necessary to meet our liquidity needs and our ability to originate loans and leases;

	•	changes in the extensive laws, regulations and policies governing financial holding companies and their subsidiaries could alter our business environment or affect our operations;

	•	the potential need to adapt to industry changes in information technology systems, on which we are highly dependent, could present operational issues or require significant capital spending;

	•	competitive pressures could intensify and affect our profitability, including as a result of continued industry consolidation, the increased availability of financial services from non-banks, technological developments such as the internet or bank regulatory reform;

	•	acquisitions may result in large one-time charges to income, may not produce revenue enhancements or cost savings at levels or within time frames originally anticipated and may result in unforeseen integration difficulties; and

	•	acts or threats of terrorism and actions taken by the United States or other governments as a result of such acts or threats, including possible military action, could further adversely affect business and economic conditions in the United States generally and in our principal markets, which could have an adverse effect on our financial performance and that of our borrowers and on the financial markets and the price of our common stock.

You should not put undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events except to the extent required by federal securities laws.

We, Banknorth Group, Inc., are a Maine corporation and a registered bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended. We conduct business from our headquarters in Portland, Maine and, as of December 31, 2002, 326 banking offices located in Maine, New Hampshire, Massachusetts, Vermont, New York and Connecticut. At December 31, 2002, we had consolidated assets of $23.4 billion and consolidated shareholders’ equity of $2.1 billion. Based on total assets at that date, we are one of the 35 largest commercial banking organizations in the United States.

Our principal asset is all of the capital stock of Banknorth, NA, a national bank which was initially formed as a Maine-chartered savings bank in the mid-19th century. Effective January 1, 2002, we consolidated all of our other banking subsidiaries and our trust company subsidiary into Banknorth, NA, which was known as “Peoples Heritage Bank” prior to these consolidations. Banknorth, NA operates under the trade name “Peoples Heritage Bank” in Maine, “Bank of New Hampshire” in New Hampshire and “Evergreen Bank” in New York to take advantage of the strong brand identity associated with the names of these predecessor banks. Banknorth, NA operates under its name elsewhere in our market areas. Through Banknorth, NA we offer a full range of banking services and products to individuals, businesses and governments throughout our market areas, including commercial, consumer and trust and investment services.

Unless the context otherwise requires, the words “Banknorth,” “we,” “our” and “us” herein refer to Banknorth Group, Inc. and its subsidiaries.

Our principal business consists of attracting deposits from the general public through our offices and using these deposits to originate loans secured by first mortgage liens on existing single-family (one-to-four units) residential real estate and existing multi-family (over four units) residential and commercial real estate, construction loans, commercial business loans and leases and consumer loans. We also provide various mortgage banking services and investment management services, as well as, through subsidiaries of Banknorth, NA, engage in equipment leasing, investment planning, securities brokerage and insurance brokerage activities. We also invest in investment securities and other permitted investments.

We derive our income principally from interest charged on loans and leases and, to a lesser extent, from interest and dividends earned on investments. We also increasingly derive income from non-interest sources such as fees received in connection with various lending services, deposit services, trust and investment management services, investment planning services and merchant and electronic banking services, as well as insurance brokerage commissions and, from time to time, gains on the sale of assets. Our principal expenses are interest expense on deposits and borrowings, operating expenses, provisions for loan and lease losses and income tax expense. Funds for activities are provided principally by deposits, advances from the Federal Home Loan Bank, securities sold under repurchase agreements, amortization and prepayments of outstanding loans, maturities and sales of investment securities and other sources.

Through Banknorth, NA we provide extensive trust and investment management services to our customers. We offer employee benefit trust services in which we act as trustee, custodian, administrator and/or investment advisor, among other things, for employee benefit plans and for corporate, self-employed, municipal and not-for-profit employers located throughout our market areas. In addition, we serve as trustee of both living trusts and trusts under wills and in this capacity hold, account for and manage financial assets, real estate and special assets. Custody, estate settlement and fiduciary tax services, among others, also are offered by us. Assets held in a fiduciary capacity by us are not included in our consolidated balance sheet for financial reporting purposes.

We are subject to extensive regulation and supervision under federal and state banking laws. For additional information in this regard, see “Supervision and Regulation” below.

Our profitability and market share have been enhanced in recent years through internal growth and acquisitions of both financial and nonfinancial institutions. We continually evaluate acquisition opportunities and frequently conduct due diligence in connection with possible acquisitions. As a result, acquisition discussions and, in some cases, negotiations frequently take place and future acquisitions involving cash, debt or equity securities can be expected. Acquisitions typically involve the payment of a premium over book and market values, and therefore, some proforma dilution of our book value and net income per common share may occur in connection with any future transactions. Moreover, acquisitions commonly result in significant one-time charges against earnings, although cost-savings, especially incident to in-market acquisitions, frequently are anticipated, as are revenue enhancements.

Our only direct subsidiaries at December 31, 2002 were Banknorth, NA, Northgroup Realty, Inc., an acquired subsidiary which holds certain commercial real estate located in Burlington, Vermont, Northgroup Captive Insurance, Inc. and the financing vehicles Peoples Heritage Capital Trust I, Banknorth Capital Trust I, Banknorth Capital Trust II and Ipswich Statutory Trust I. For additional information on these trusts, see Note 15 to the Consolidated Financial Statements included in Item 8 hereof. Northgroup Captive Insurance, Inc. is a subsidiary formed in 2002 to self-insure against certain risks of Banknorth. Northgroup Captive, Inc. has, in turn, formed a subsidiary — Northgroup Sponsored Captive Insurance Co. — to provide a vehicle for other entities to self-insure against certain risks.

Set forth below is a brief description of certain of our indirect non-banking subsidiaries and certain other equity investments.

Insurance Brokerage Activities. We conduct insurance brokerage activities through Banknorth Insurance Group, Inc., which holds all of the outstanding stock of Morse, Payson & Noyes Insurance, the largest insurance brokerage firm in Maine. Morse Payson & Noyes Insurance also conducts business in (i) New Hampshire under the trade name A.D. Davis Insurance, (ii) Massachusetts through Catalano Insurance Agency Inc., a wholly-owned subsidiary of Morse, Payson & Noyes Insurance, and under the trade names Waters Insurance Agency and Palmer Goodell Insurance Agency, (iii) Connecticut through Arthur A. Watson & Co., Inc., a wholly-owned subsidiary of Morse Payson & Noyes Insurance and (iv) upstate New York under the trade name Community Insurance Agencies.

Investment Planning and Securities Brokerage Activities. We conduct investment planning and securities brokerage activities through Bancnorth Investment Planning Group, Inc. We also offer, through Bancnorth Investment Planning Group, investments in mutual funds and annuities throughout our market areas. Bancnorth Investment Planning Group offers its services to individuals and small businesses from its office located in Portland, Maine and from certain of our other locations in Maine, Massachusetts, New Hampshire, Vermont, New York and Connecticut. Sales professionals at Bancnorth Investment Planning Group are registered representatives of Primevest Financial Services, Inc., a registered broker/ dealer, and all securities brokerage activities are conducted through Primevest Financial Services, Inc. The sales professionals receive referrals from our branch offices throughout our market areas.

In addition to the foregoing, Bancnorth Investment Planning Group conducts insurance sales activities directly in Maine, New Hampshire, Connecticut, Vermont and New York and indirectly, through its wholly-owned insurance agency, Bancnorth Investment and Insurance Agency, Inc., in Massachusetts. Bancnorth Investment Planning Group, either directly or through other agencies, offers life insurance and long-term care insurance products in conjunction with the sales of investments and annuities.

Equipment Leasing Activities. We conduct equipment leasing activities through Banknorth Leasing Corp. This company is headquartered in Portland, Maine and engages in direct equipment leasing

activities, primarily involving office equipment, in the States of Maine, New Hampshire, Massachusetts, Vermont, New York, Connecticut, Rhode Island and California. At December 31, 2002, Banknorth Leasing Corp. had $102.9 million of leases outstanding.

Other Equity Investments. We hold certain other equity investments, primarily through Banknorth, NA and Four Eighty-One Corp., a wholly-owned subsidiary of Banknorth, NA. At December 31, 2002, these investments consisted of (i) $51.8 million of interests in limited partnerships formed for the purpose of investing in real estate for lower-income families, elderly housing projects and/or the preservation or restoration of historically or architecturally significant buildings or structures and (ii) an aggregate of $14.9 million of interests in limited partnerships which invest in small business investment companies and equity investments in entities which generally are intended to promote community welfare. For additional information about these investments see Note 19 to the Consolidated Financial Statements included in Item 8 hereof.

We are subject to vigorous competition in all aspects and areas of our business from banks and other financial institutions, including savings and loan associations, savings banks, finance companies, credit unions and other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies and insurance companies. We also compete with non-financial institutions, including retail stores that maintain their own credit programs and governmental agencies that make available low-cost or guaranteed loans to certain borrowers. Certain of these competitors are larger financial institutions with substantially greater resources, lending limits, larger branch systems and a wider array of commercial banking services than us. Competition from both bank and non-bank organizations will continue.

The banking industry is experiencing rapid changes in technology. In addition to improving customer services, effective use of technology increases efficiency and enables financial institutions to reduce costs. Technological advances also likely will enhance competition by enabling more companies to provide financial resources. As a result, our future success will depend in part on our ability to address our customers’ needs by using technology. We cannot assure you that we will be able to effectively develop new technology-driven products and services or be successful in marketing these products to our customers. Many of our competitors have far greater resources than we have to invest in technology.

We had approximately 6,600 full-time equivalent employees as of December 31, 2002. None of these employees is represented by a collective bargaining agent, and we believe that we enjoy good relations with our personnel.

The following discussion sets forth certain of the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain specific information relevant to Banknorth. The regulatory framework is intended primarily for the protection of depositors and the insurance funds administered by the FDIC and not for the protection of security holders. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have a material effect on our business.

General. Banknorth currently is registered as a bank holding company and a financial holding company under the Bank Holding Company Act of 1956, as amended. As such, we are subject to regulation, supervision and examination by the Federal Reserve Board. We also are registered as a Maine financial institution holding company under Maine law and as such are subject to regulation and examination by the Superintendent of Banking of the State of Maine. Banknorth, NA is a national bank subject to regulation, supervision and examination by the Office of the Comptroller of the Currency

(“OCC”), its chartering authority, and by the Federal Deposit Insurance Corporation (“FDIC”), which insures Banknorth, NA’s deposits to the maximum extent permitted by law.

Financial Modernization. Effective March 11, 2000, the Gramm-Leach-Bliley Act permits bank holding companies to become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature and which are not authorized for bank holding companies. A bank holding company may become a financial holding company if each of its subsidiary banks is “well capitalized” under the prompt corrective action provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and the applicable regulations thereunder, is “well managed” and has at least a satisfactory rating under the Community Reinvestment Act by filing a declaration with the Federal Reserve Board that the bank holding company seeks to become a financial holding company. Banknorth became a financial holding company effective January 25, 2002.

No regulatory approval is required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board. The Gramm-Leach-Bliley Act defines “financial in nature” to include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve Board has determined to be closely related to banking. A national bank also may engage, subject to limitations on investment, in activities that are financial in nature, other than insurance underwriting, insurance company portfolio investment, real estate development and real estate investment, through a financial subsidiary of the bank, if the bank is well capitalized, well managed and has at least a “satisfactory” Community Reinvestment Act rating. Subsidiary banks of a financial holding company or national banks with financial subsidiaries must continue to be well capitalized and well managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions, which could include divestiture of the financial in nature subsidiary or subsidiaries. In addition, a financial holding company or a bank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holding company or the bank has a Community Reinvestment Act rating of “satisfactory” or better.

Bank Acquisitions. Pursuant to the Bank Holding Company Act, we are required to obtain the prior approval of the Federal Reserve Board before acquiring more than 5% of any class of voting stock of any bank that is not already majority owned by us. Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking and Branching Act”), a bank holding company became able to acquire banks in states other than its home state beginning September 29, 1995, without regard to the permissibility of such acquisitions under state law, but subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company, prior to or following the proposed acquisition, controls no more than 10% of the total amount of deposits of insured depository institutions in the United States and less than 30% of such 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, subject to certain restrictions, thereby creating interstate branches. Pursuant to the Interstate Banking and Branching Act, a bank also may open new branches in a state in which it does not already have banking operations if the state enacts a law permitting such de novo branching.

Capital and Operational Requirements. The Federal Reserve Board, the OCC and the FDIC have issued substantially similar risk-based and leverage capital guidelines applicable to U.S. banking organizations such as Banknorth and Banknorth, NA. 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 Federal Reserve Board risk-based guidelines define a three-tier capital framework. “Tier 1 capital” generally consists of common and qualifying preferred stockholders’ equity, less certain intangibles and other adjustments. “Tier 2 capital” and “Tier 3

capital” generally consist of subordinated and other qualifying debt, preferred stock that does not qualify as Tier 1 capital and the allowance for credit losses up to 1.25% of risk-weighted assets.

The sum of Tier 1, Tier 2 and Tier 3 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 of risk weights, based primarily on relative credit risk. The minimum Tier 1 risk-based capital ratio is 4% and the minimum total risk-based capital ratio is 8%. At December 31, 2002, our Tier 1 risk-based capital and total risk-based capital ratios under these guidelines were 9.66% and 12.15%, respectively.

The “leverage ratio” requirement is determined by dividing Tier 1 capital by adjusted average total assets. Although the stated minimum ratio is 3%, most banking organizations are required to maintain ratios of at least 100 to 200 basis points above 3%. At December 31, 2002, our leverage ratio was 7.13%.

Federal bank regulatory agencies require banking organizations that engage in significant trading activity to calculate a capital charge for market risk. Significant trading activity means trading activity of at least 10% of total assets or $1 billion, whichever is smaller, calculated on a consolidated basis for bank holding companies. Federal bank regulators may apply the market risk measure to other banks and bank holding companies as the agency deems necessary or appropriate for safe and sound banking practices. Each agency may exclude organizations that it supervises that otherwise meet the criteria under certain circumstances. The market risk charge will be included in the calculation of an organization’s risk-based capital ratios.

FDICIA identifies five capital categories for insured depository institutions (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) and requires the respective U.S. federal regulatory 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 regulatory agencies to prescribe certain non-capital 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 bank regulatory agencies have adopted substantially similar regulations that define the five capital categories identified by FDICIA, using the total risk-based capital, Tier 1 risk-based capital and leverage capital ratios 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. Under these guidelines, Banknorth, NA is considered “well capitalized.”

The Federal bank regulatory agencies also have adopted regulations which mandate that regulators take into consideration concentrations of credit risk and risks from non-traditional 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 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. The banking agencies do not intend to establish an explicit risk-based capital charge for interest rate risk but will continue to assess capital adequacy for interest rate risk under a risk assessment approach based on a combination of quantitative and qualitative factors and have provided guidance on prudent interest rate risk management practices.

Distributions. We derive funds for cash distributions to our stockholders primarily from dividends received from our banking subsidiary. Banknorth, NA is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. The appropriate U.S. federal regulatory authority is authorized to determine under certain circumstances relating to the financial condition of the bank or bank/financial holding company that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof.

In addition to the foregoing, the ability of us and Banknorth, NA to pay dividends may be affected by the various minimum capital requirements and the capital and non-capital standards established under FDICIA, as described above. Our right and the right of our stockholders and creditors to participate in any distribution of the assets or earnings of our subsidiaries is further subject to the prior claims of creditors of such subsidiaries.

“Source of Strength” Policy. According to Federal Reserve Board policy, bank/financial 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/ financial holding company may not be able 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 default of a banking or thrift subsidiary of a bank/financial holding company such as Banknorth or related to FDIC assistance provided to a subsidiary in danger of default — the other banking subsidiaries of such bank/ financial holding company may be assessed for the FDIC’s loss, subject to certain exceptions.

Community Investment and Consumer Protection Laws. In connection with its lending activities, Banknorth, NA is subject to a variety of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population. Included among these are the federal Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act and Community Reinvestment Act.

The Community Reinvestment Act requires insured institutions to define the communities that they serve, identify the credit needs of those communities and adopt and implement a “Community Reinvestment Act Statement” pursuant to which they offer credit products and take other actions that respond to the credit needs of the community. The responsible federal banking regulator must conduct regular Community Reinvestment Act examinations of insured financial institutions and assign to them a Community Reinvestment Act rating of “outstanding,” “satisfactory,” “needs improvement” or “unsatisfactory.” In 2002, the Community Reinvestment Act rating of Banknorth, NA was “outstanding.”

Miscellaneous. Banknorth, NA is subject to certain restrictions on loans to Banknorth or its non-bank subsidiaries, on investments in the stock or securities thereof, on the taking of such stock or securities as collateral for loans to any borrower, and on the issuance of a guarantee or letter of credit on behalf of Banknorth or its non-bank subsidiaries. Banknorth, NA also is subject to certain restrictions on most types of transactions with Banknorth or its non-bank subsidiaries, requiring that the terms of such transactions be substantially equivalent to terms of similar transactions with non-affiliated firms.

Regulatory Enforcement Authority. The enforcement powers available to federal banking regulators is substantial and includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions against banking organizations and institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws

and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.

Sarbanes-Oxley Act of 2002. On July 30, 2002, President George W. Bush signed into law the Sarbanes-Oxley Act of 2002, which generally establishes a comprehensive framework to modernize and reform the oversight of public company auditing, improve the quality and transparency of financial reporting by those companies and strengthen the independence of auditors. Certain of the new legislation’s more significant reforms are noted below.


	•	The new legislation creates a public company accounting oversight board which is empowered to set auditing, quality control and ethics standards, to inspect registered public accounting firms, to conduct investigations and to take disciplinary actions, subject to SEC oversight and review. The new board will be funded by mandatory fees paid by all public companies. The new legislation also improves the Financial Accounting Standards Board, giving it full financial independence from the accounting industry.

	•	The new legislation strengthens auditor independence from corporate management by, among other things, limiting the scope of consulting services that auditors can offer their public company audit clients.

	•	The new legislation heightens the responsibility of public company directors and senior managers for the quality of the financial reporting and disclosure made by their companies. Among other things, the new legislation provides for a strong public company audit committee that will be directly responsible for the appointment, compensation and oversight of the work of the public company auditors.

	•	The new legislation contains a number of provisions to deter wrongdoing. CEOs and CFOs will have to certify that company financial statements fairly present the company’s financial condition. If a misleading financial statement later resulted in a restatement, the CEO and CFO must forfeit and return to the company any bonus, stock or stock option compensation received in the twelve months following the misleading financial report. The new legislation also prohibits any company officer or director from attempting to mislead or coerce an auditor. Among other reforms, the new legislation empowers the SEC to bar certain persons from serving as officers or directors of a public company; prohibits insider trades during pension fund “blackout periods;” directs the SEC to adopt rules requiring attorneys to report securities law violations; and requires that civil penalties imposed by the SEC go into a disgorgement fund to benefit harmed investors.

	•	The new legislation imposes a range of new corporate disclosure requirements. Among other things, the new legislation requires public companies to report all off-balance-sheet transactions and conflicts, as well as to present any pro forma disclosures in a way that is not misleading and in accordance with requirements to be established by the SEC. The new legislation also accelerated the required reporting of insider transactions, which now generally must be reported by the end of the second business day following a covered transaction; requires that annual reports filed with the SEC include a statement by management asserting that it is responsible for creating and maintaining adequate internal controls and assessing the effectiveness of those controls; and requires companies to disclose whether or not they have adopted an ethics code for senior financial officers, and, if not, why not, and whether the audit committee includes at least one “financial expert,” a term which is to be defined by the SEC in accordance with specified requirements. The new legislation also requires the SEC, based on certain enumerated factors, to regularly and systematically review corporate filings.

	•	The new legislation contains provisions which generally seek to limit and expose to public view possible conflicts of interest affecting securities analysts.

	•	Finally, the new legislation imposes a range of new criminal penalties for fraud and other wrongful acts, as well as extends the period during which certain types of lawsuits can be brought against a company or its insiders.

We are subject to those rules of federal income taxation generally applicable to corporations under the Internal Revenue Code. Banknorth and its subsidiaries, as members of an affiliated group of corporations within the meaning of Section 1504 of the Internal Revenue Code, file a consolidated federal income tax return, which has the effect of eliminating or deferring the tax consequences of inter-company distributions, including dividends, in the computation of consolidated taxable income.

We also are subject to various forms of state taxation under the laws of Maine, New Hampshire, Massachusetts, Vermont, New York and Connecticut as a result of the business which we conduct in these states.

The following information, included under Items 6, 7 and 8 of this report, is incorporated by reference herein.

Table 1 — Three-Year Average Balance Sheets, which presents average balance sheet amounts, related taxable equivalent interest earned or paid and related average yields earned and rates paid and is included in Item 7;

Table 2 — Changes in Net Interest Income, which presents changes in taxable equivalent interest income and expense for each major category of interest-earning assets and interest-bearing liabilities and is included in Item 7;

Table 5 — Securities Available for Sale and Held to Maturity, which presents information regarding carrying values of investment securities by category of security and is included in Item 7;

Table 6 — Maturities of Securities, which presents information regarding the maturities and weighted average yield of investment securities by category of security and is included in Item 7;

Table 7 — Composition of Loan Portfolio, which presents the composition of loans and leases by category of loan and lease and is included in Item 7;

Table 8 — Scheduled Contractual Amortization of Certain Loans and Leases at December 31, 2002, which presents maturities and sensitivities of loans and leases to changes in interest rates and is included in Item 7;

Table 15 — Five Year Schedule of Nonperforming Assets, which presents information concerning non-performing assets and accruing loans 90 days or more overdue and is included in Item 7;

“Credit Risk Management” and Note 1 to the Consolidated Financial Statements, which discuss our policies for placing loans on non-accrual status, as well as in the case of the former potential problem loans, which are included in Items 7 and 8, respectively;

Table 12 — Five-Year Table of Activity in the Allowance for Loan and Lease Losses, included in Item 7;

Table 13 — Allocation of the Allowance for Loan and Lease Losses — Five Year Schedule, included in Item 7;

Table 14 — Net Charge-offs as a Percent of Average Loans and Leases Outstanding, included in Item 7;

Table 1 — Three-Year Average Balance Sheets, which includes average balances of deposits by category of deposit and is included in Item 7;

Table 11 — Maturity of Certificates of Deposit of $100,000 or more at December 31, 2001, included in Item 7;

“Selected Financial Data,” which presents return on assets, return on equity, dividend payout and equity to assets ratios and is included in Item 6; and

Note 12 to the Consolidated Financial Statements, which includes information regarding short-term borrowings and is included in Item 8.

For additional information regarding our business and operations, see “Selected Financial Data” in Item 6 hereof, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 hereof and the Consolidated Financial Statements in Item 8 hereof.

We make available on our web site, which is located at http://www.banknorth.com, our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K on the date which we electronically file these reports with the Securities and Exchange Commission. Investors are encouraged to access these reports and the other information about our business and operations on our web site.

At December 31, 2002, we conducted business from our executive offices at Two Portland Square, Portland, Maine and 326 offices located in Maine, New Hampshire, Massachusetts, Vermont, New York and Connecticut.

The following table sets forth certain information with respect to our offices as of December 31, 2002.

For additional information regarding our premises and equipment and lease obligations, see Notes 7 and 19 respectively, to the Consolidated Financial Statements included in Item 8 hereof.

We are involved in routine legal proceedings occurring in the ordinary course of business which in the aggregate are believed by us to be immaterial to our financial condition and results of operations.

There were no matters submitted to a vote of our security holders in the fourth quarter of 2002.

Our common stock is traded on the New York Stock Exchange, Inc. The following table sets forth the high and low prices of the common stock as reported on the New York Stock Exchange, Inc. and the dividends declared per share of common stock for the periods indicated.

As of December 31, 2002, there were 150,578,767 shares of common stock outstanding which were held by approximately 15,800 holders of record. Such number of record holders does not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms and other nominees.

We have historically paid quarterly dividends on our common stock and currently intend to continue to do so in the foreseeable future. Our ability to pay dividends depends on a number of factors, however, including restrictions on the ability of Banknorth, NA to pay dividends under federal laws and regulations, and as a result there can be no assurance that dividends will be paid in the future.


(1)	Certain amounts of prior periods have been restated to conform with current presentation.

(2)	Special charges consist of merger charges, charter consolidation costs, asset write-downs and branch closing costs where applicable.

(3)	Net interest income calculated on a fully-taxable equivalent basis divided by average interest-earning assets.

(4)	Cash dividends paid divided by net income.

(5)	Nonperforming assets consist of nonperforming loans, other real estate owned, repossessed assets and investment securities placed on non-accrual status.

The discussion and analysis which follows focuses on the results of operations of Banknorth Group, Inc. during 2002, 2001, and 2000 and its financial condition at December 31, 2002 and 2001. The Consolidated Financial Statements and related notes should be read in conjunction with this review. Certain amounts in years prior to 2002 have been reclassified to conform to the 2002 presentation.

Banknorth Group, Inc. is a Maine corporation and a registered bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended. We conduct business from our headquarters in Portland, Maine and, as of December 31, 2002, from our 326 banking offices located in Maine, New Hampshire, Massachusetts, Vermont, New York and Connecticut. At December 31, 2002, we had consolidated assets of $23.4 billion and consolidated shareholders’ equity of $2.1 billion. Based on total assets at that date, we are one of the 35 largest commercial banking organizations in the United States.

Our principal asset is all of the capital stock of Banknorth, NA (the “Bank”), which operates under the trade name “Peoples Heritage Bank” in Maine, “Bank of New Hampshire” in New Hampshire and “Evergreen Bank” in New York to take advantage of the strong brand identity associated with the names of these predecessor banks. The Bank operates under its own name elsewhere in our market areas. Through the Bank, we offer a full range of banking services and products to individuals, businesses and governments throughout our market areas, including commercial banking, consumer banking and investment management and investment planning services. In addition, Banknorth Insurance Group, Inc., a subsidiary of the Bank, offers insurance brokerage services.

We are subject to extensive regulation and supervision under federal and state banking laws. See “Regulation and Supervision” under Item 1.

Our primary business segments are Community Banking, Insurance Brokerage, Investment Planning and Investment Management. Our community banking business, which represents over 90% of our consolidated income, consists of attracting deposits from the general public and using such deposits and other sources of funds to originate commercial business loans and leases, commercial real estate loans, residential mortgage loans and a variety of consumer loans and leases. In addition to keeping loans for our own portfolio, we sell residential mortgage loans into the secondary market. We also invest in mortgage-backed securities and securities issued by the United States Government and agencies thereof, as well as other securities. Our Insurance Brokerage business earns commissions on insurance brokerage activities, our Investment Planning business earns commissions from the sale of third party mutual funds, annuities, stocks and bonds and our Investment Management business reflects fees from trust and investment management operations.

Our goal is to sustain profitable, controlled growth by focusing on increasing our loan and deposit market share in New England and upstate New York; developing new financial products, services and delivery channels; closely managing yields on earning assets and rates on interest-bearing liabilities; increasing noninterest income through, among other things, expanded investment management, investment planning and insurance brokerage services, and controlling the growth of noninterest expenses. It is also part of our business strategy to supplement internal growth with targeted acquisitions of other financial institutions and insurance agencies in our current or contiguous market areas. See “Acquisitions” below and under Item 1.

We strive to maintain a diversified loan and deposit mix and strong asset quality. We are focused on improving efficiencies as we integrate all of our acquisitions. We will continue to evaluate our operations and organizational structures to ensure they are closely aligned with our goal of maximizing earnings per share growth.

Reflecting trends in the national economy, our market area generally witnessed a decline in economic growth in 2002, and interest rate decreases in 2002 and 2001 began to compress our net interest margin in the second quarter of 2002. Although these developments have not had a materially adverse affect on us to date, we continue to monitor them closely as discussed herein. The economies and real estate markets in our primary market areas will continue to be significant determinants of the quality of our assets in future periods and, thus, our results of operations, liquidity and financial condition. We believe future economic activity will depend on consumer confidence, personal consumption expenditures and business expenditures for new capital equipment. For a description of other factors which could affect our financial performance and that of our common stock, see “Forward-Looking Statements” at the beginning of this report.

We completed four acquisitions in 2002 and at December 31, 2002 our proposed acquisition of American Financial Holdings, Inc. was pending. The following table describes the acquisitions for the years ended 2002, 2001 and 2000. The 2002 acquisitions were accounted for as purchases, and as such, were included in our results of operations from the date of acquisition.

For additional information regarding our acquisitions in 2002, see Note 3 to the Consolidated Financial Statements.

We reported net income of $298.6 million or $1.99 per diluted share in 2002, compared to $238.8 million or $1.68 per diluted share in 2001. Return on average assets and return on average equity were 1.39% and 16.25% in 2002 compared to 1.29% and 16.48% in 2001, respectively. The improved results were attributable to increases in our net interest margin, contributions from acquisitions and the discontinuance of goodwill amortization due to the required adoption of new financial accounting standards in July 2001 and January 2002.

Net interest income and noninterest income increased 17% and 14% during 2002, respectively. The increase in net interest income was attributable to the acquisitions in 2002 and 2001 and an 8 basis point increase in the net interest margin. The small increase in the net interest margin reflected pressure on

interest rates in a falling interest rate environment as well as a change in the mix of earning assets to reduce prepayment risk. Noninterest income increased due to strong increases in deposit services income, loan fee income, merchant and electronic banking income and insurance brokerage commissions. These increases were due in part to the introduction of our products in new market areas resulting from our acquisitions.

The provision for loan and lease losses of $44.3 million in 2002 exceeded net charge-offs of $38.7 million and increased $2.4 million compared to 2001. The coverage ratio (allowance for loan and lease losses to nonperforming loans) was 319% at December 31, 2002 compared to 252% at December 31, 2001. Noninterest expenses, excluding special charges, increased 13% in 2002 due primarily to increases in salaries and benefits, equipment and occupancy expenses, primarily resulting from our acquisitions, and the write-off of the branch automation project. Noninterest expense was also impacted by the adoption of new accounting standards that required the discontinuation of amortization of goodwill effective January 1, 2002. Amortization expense on goodwill amounted to $11.9 million in 2001.

Net interest income is the difference between interest income on earning assets such as loans, leases and securities, and interest expense paid on liabilities such as deposits and borrowings, and continues to be our largest source of net revenue. Net interest income is affected by changes in interest rates and by changes in the amount and composition of interest-earning assets and interest-bearing liabilities.

Net interest income on a fully taxable-equivalent basis increased by $115.3 million, or 17%, during 2002 due largely to an increase in interest-earning assets. Average earning assets increased $2.5 billion, or 15%, for the year ended 2002 compared to the year ended 2001 as a result of acquisitions and internal growth on commercial and consumer loans. Average loans and leases increased by $2.0 billion, or 18%, in 2002 compared to 2001. Excluding acquisitions, average loans and leases increased by approximately $363 million, or 3%, primarily as a result of increases in commercial business loans and leases and commercial real estate loans, offset by a reduction in residential real estate loans. Average securities increased $479.8 million, or 8%, in 2002 due primarily to acquisitions. Average deposits increased $2.0 billion, or 16% during 2002. Excluding acquisitions, average deposits increased by approximately $216 million, or 2%, as strong growth in demand and money market accounts was offset by declines in higher costing certificates of deposit. Average borrowings increased $464.8 million, or 11%, in 2002 compared to 2001, primarily due to acquisitions.

The net interest margin increased to 4.07% in 2002 from 3.99% during 2001, an increase of 8 basis points. Several factors contributed to this increase, including non-interest-bearing deposits comprising a higher percentage of our total funding base in 2002 versus 2001 and the momentum from Federal Reserve Board interest rate cuts during 2001 carrying over to 2002. Information on average balances, yields and rates for the past three years can be found in Table 1. Table 2 shows the changes from 2001 to 2002 in tax equivalent net interest income by category due to changes in rate and volume. Information on interest rate sensitivity can be found under “Asset-Liability Management” below.

We recorded a provision for loan and lease losses in 2002 of $44.3 million, as compared to a $41.9 million provision in 2001, which reflected an increase in our classified loans resulting from the uncertain and slowing economy and an increase in net charge-offs. Net charge-offs were $38.7 million in 2002 compared to $36.9 million in 2001. Net charge-offs to average loans outstanding was 0.29% in 2002, as compared to 0.33% in 2001.

The allowance for loan and lease losses amounted to $208.3 million at December 31, 2002, as compared to $189.8 million at December 31, 2001. The increase was due to acquisitions and the provision. The allowance to total portfolio loans and leases at December 31, 2002 and 2001 was 1.48% and 1.49%, respectively. The ratio of the allowance for loan and lease losses to nonperforming loans was 319% at December 31, 2002 and 252% at December 31, 2001. Nonperforming assets were $68.9 million, or 0.29%

of total assets, at December 31, 2002 as compared to $81.2 million, or 0.39% of total assets, at December 31, 2001. The $12.3 million decrease in nonperforming assets from December 31, 2001 to December 31, 2002 was primarily attributable to decreases in nonperforming commercial business loans and leases and other nonperforming assets. Accruing loans 90 days or more past due were $3.4 million at December 31, 2002, as compared to $6.2 million at December 31, 2001, a decrease of 45%.

The allowance for loan and leases losses is maintained at a level determined to be adequate by management to absorb future charge-offs of loans and leases deemed uncollectable. This allowance is increased by provisions charged to income and by recoveries on loans previously charged off. Arriving at an appropriate level of allowance for loan and lease losses necessarily involves a high degree of judgment and is determined based on management’s ongoing evaluation. As discussed under “Critical Accounting Policies,” we believe that the methods used by us in determining the allowance for loan and lease losses constitute a critical accounting policy. Although we utilize judgment in providing for losses, for the reasons discussed under “Critical Accounting Policies” and “Credit Risk Management — Nonperforming Assets,” there can be no assurance that we will not have to increase the amount of our provision for loan and lease losses in future periods.

For information about the allocation of and activity in our allowance for loan and lease losses, see Tables 12 and 13.

Noninterest income was $274.5 million in 2002 compared to $240.5 million in 2001. This increase was primarily due to increases of $9.5 million in deposit services income, $7.4 million in loan fee income, $6.0 million in net securities gains, $5.7 million in merchant and electronic banking income and $5.1 million in insurance commissions, which more than offset a $2.6 million decrease in mortgage banking services income.

Deposit services income of $82.1 million in 2002 increased 13% from 2001 and was attributable to volume and fee increases in checking account and overdraft fees, which were in part due to acquisitions.

Insurance brokerage commissions income was $44.4 million and $39.4 million in 2002 and 2001, respectively, an increase of 13%. The increase was partly attributable to the acquisition of Community Insurance Agencies, Inc. (“Community”) in the third quarter of 2002, which generated commission income of $2.4 million in 2002.

Merchant and electronic banking income of $38.1 million in 2002 increased 17% from 2001 due to increases in the volume of transactions processed. This income represents fees and interchange income generated by the use of our ATMs, ATM and debit cards issued by us along with charges to merchants for credit card transactions processed, net of third-party costs directly attributable to handling these transactions.

Trust and investment management services income of $32.5 million decreased 5% during 2002 primarily due to broad-based declines in the stock market, which adversely impacted fees that are dependent upon the market value of assets. Assets under management were $8.1 billion and $8.5 billion at December 31, 2002 and 2001, respectively, a decrease of 5%.

Loan fee income amounted to $21.9 million and $14.5 million during 2002 and 2001, respectively, an increase of 51%. Loan fee income includes letter of credit fees, late charges, transaction fees on refinancings and other loan related fees. The $7.4 million increase in fee income in 2002 was primarily due to increased volumes, refinancing activity and acquisitions.

Income from bank owned life insurance (“BOLI”) was $20.0 million and $18.4 million in 2002 and 2001, respectively. BOLI represents life insurance on the lives of certain employees who have provided positive consent allowing the Bank to be the beneficiary of such policies. The 9% increase in income reflected an increase in cash surrender value and included additional income resulting from a $40 million purchase of BOLI in the first quarter of 2002, which resulted in higher cash surrender value. The cash

surrender value of BOLI was $380.4 million at December 31, 2002 compared to $321.1 million at December 31, 2001. Most of our BOLI is invested in the ‘general account’ of insurance companies. All such companies were rated AA- or better by Standard and Poors at December 31, 2002. Our investment in BOLI represented 21.46% of capital and reserves at December 31, 2002.

Investment planning services income of $11.6 million increased 40% during 2002 primarily due to sales of fixed annuities. Investment planning services income is primarily comprised of commissions earned from the sale of third party mutual funds, annuities, stocks and bonds.

Mortgage banking services income of $8.5 million during 2002 decreased $2.6 million or 23% from $11.1 million during 2001. This decrease was primarily due to a $1.4 million decline in residential mortgage servicing income and a $2.9 million writedown of mortgage servicing rights, which were partially offset by a $2.3 million increase in residential mortgage sales income. Strong originations and refinancings in 2002, prompted by lower interest rates, led to profitable pricing, delivery and sales of conforming fixed-rate loans. Our portfolio of residential mortgages serviced for investors was $701.3 million at December 31, 2002 compared to $964.0 million and $1.6 billion at December 31, 2001 and 2000, respectively. Mortgage loans serviced for others decreased as a result of principal payments, loan prepayments and a sale of mortgage servicing rights in the first quarter of 2001. Also, since January 1, 2001, substantially all residential loans sold by us into the secondary market have been sold on a servicing-released basis. As a result, new mortgage servicing rights assets are not being created as loans are sold. Capitalized mortgage servicing rights decreased from $8.5 million at December 31, 2001 to $3.6 million at December 31, 2002 as we recorded amortization expense of $3.3 million and valuation write-downs of $2.9 million in 2002. See Table 3 and Note 9 to the Consolidated Financial Statements.

Net securities gains amounted to $7.3 million and $1.3 million during 2002 and 2001, respectively. Of the $7.3 million of net securities gains in 2002, $6.0 million was recorded in the fourth quarter of 2002 on sales of $152.0 million of mortgage-backed securities. Net securities gains in 2001 included a $2 million write-down reflecting an other than temporary decline in the value of a trust preferred security. Gains from the sale of securities are subject to market and economic conditions and, as a result, there can be no assurance that gains reported in prior periods will be achieved in the future.

Other noninterest income amounted to $8.1 million and $8.4 million during 2002 and 2001, respectively. In 2002, other noninterest income included $7.3 million of premium income on covered call options related to mortgage-backed securities and $1.9 million of commissions on official checks, which were offset in part by $2.8 million in losses on venture capital investments in small business investment companies and start-up ventures in our market area. In 2001, other noninterest income included $3.3 million of premium income recognized on covered call options related to mortgage-backed securities, $3.1 million of commissions on official checks, a gain of $1.3 million on the sale of a limited partnership interest and a $929 thousand gain on the sale of an equity interest in an ATM network.

Noninterest expense was $579.4 million in 2002 compared to $509.3 million in 2001. Excluding special charges, write-off of certain costs incurred in connection with a branch automation project (discussed below) and the effect of goodwill amortization in 2001, noninterest expense in 2002 was $558.5 million compared to $489.8 million in 2001, an increase of $68.7 million or 14%. This increase was primarily due to our acquisitions in 2002. The increased noninterest expense in 2002 was primarily due to increases in salaries and benefits, equipment expense and occupancy expense. The efficiency ratio improved to 54.10% during 2002 from 55.34% in 2001 primarily as a result of the efficiencies created by the integration of recent acquisitions, as well as operating improvements.

Salaries and benefits expense of $311.4 million increased by $50.1 million or 19% from $261.3 million during 2002. The increase was primarily due to additional employees from purchase acquisitions and higher levels of incentive compensation. The total number of full-time equivalent employees was approximately 6,596 at December 31, 2002 compared to 5,960 at December 31, 2001. Pension expense (which is included in salaries and benefits expense) was $5.3 million and $3.0 million for the years ended

December 31, 2002 and 2001, respectively. An important component in the determination of pension expense next year will be the fair value of assets in the pension plan at the end of the year. The fair value of plan assets as of December 31, 2002 was $154.9 million as compared to $141.0 million at December 31, 2001. Pension expense is expected to increase significantly in 2003 primarily due to the 2003 and 2002 acquisitions and the use of a lower discount rate and expected rate of return. In addition, pension expense will increase due to the continued amortization of unrecognized actuarial losses (which occur when investment returns are less than expected).

Data processing expense increased 5% to $40.7 million in 2002 from $38.7 million during 2001. The increase was primarily attributable to continued investments in information technology, increased transaction volume and vendor rate increases related to acquisitions. These increases were offset by a change in check processing. Beginning in July 2002, check processing was insourced and the primary costs are now recorded in salaries and benefits. Previously a third-party vendor handled check processing and its charges were recorded as data processing costs.

Occupancy expense in 2002 increased 14% to $52.4 million from $45.9 million in 2001. The $6.5 million increase was primarily due to the cost of new facilities and additional facilities from acquisitions. Equipment expense increased $6.4 million or 18% in 2002 compared to 2001 due to increased depreciation on new technology equipment and software (eg. e-commerce and imaging).

Advertising and marketing expense amounted to $17.2 million and $11.9 million for the years ended December 31, 2002 and 2001, respectively. The $5.3 million increase was primarily attributable to acquisitions in 2002 and additional expenses for the introduction of our products in new market areas.

Amortization of goodwill was $0 and $11.9 million for the years ended December 31, 2002 and 2001, respectively. In accordance with SFAS No. 142, the amortization of goodwill was discontinued effective January 1, 2002 and goodwill must now be reviewed for impairment at least annually. We perform impairment reviews quarterly and no adjustments have yet been required. Amortization of identifiable intangible assets amounted to $6.5 million and $10.2 million for the years ended December 31, 2002 and 2001, respectively. The decline was largely due to our reclassification of unidentifiable intangible assets associated with branch acquisitions from intangible assets to goodwill in accordance with SFAS No. 147. SFAS No. 147 was issued in October 2002 and requires that unidentifiable intangible assets related to branch acquisitions, which meet the definition of the acquisition of a business, be recorded as goodwill and therefore not be amortized but be subject to impairment reviews. SFAS No. 147 amended SFAS No. 72, which previously required that these unidentifiable intangibles be amortized over a term not to exceed the estimated remaining life of the long-term interest-earning assets acquired. Banknorth had two branch acquisitions in the 1990s that were covered by the provisions of SFAS No. 147, with a total of $34.7 million of unidentifiable intangible assets remaining as of December 31, 2001. Banknorth adopted SFAS No. 147 retroactive to January 1, 2002 and reclassified $34.7 million of intangible assets to goodwill.

Special charges amounted to $14.7 million and $7.6 million during 2002 and 2001, respectively. Special charges include expenses related to acquisitions, charter consolidation costs, branch closing costs and certain asset write-downs. For a tabular analysis of our special charges, see Note 11 to the Consolidated Financial Statements.

In 2002, $6.2 million of previously capitalized costs related to a branch automation project were written off. The costs were incurred during the early phases of a multi-phase project to update all teller and platform workstations and software in our branch network. These costs included direct vendor fees, capitalized salaries, hardware and project specific software. Design concerns and cost overruns prompted a thorough review of the long-term viability of the project in its current form. In October 2002, management met with the lead software vendor to discuss concerns related to cost overruns and project design. To comply with contract provisions, shortly after this meeting, the vendor was notified of our intent to terminate the branch automation contract. In December 2002, we determined it was not prudent to continue development and decided to abandon the project. A total of $9.1 million had been capitalized on this project. The impairment charge was determined based on a review of all costs incurred. Management concluded that $6.2 million should be written-off related to the abandonment of that project and that

$2.9 million of hardware and off-the-shelf software programs were of on-going value and could be redeployed throughout the Bank. This $6.2 million is included as a separate component of noninterest expense.

Other noninterest expense, which is comprised primarily of general and administrative expenses, increased $2.1 million in 2002. See Table 4 for a detail of other noninterest expenses for each of the years ended December 31, 2002, 2001 and 2000.

Our effective tax rate was 33% in 2002 and 34% in 2001. The decline in the effective tax rate was due primarily to the adoption of SFAS No. 142 under which goodwill is no longer amortized for book purposes as of January 1, 2002. Prior to January 1, 2002, we amortized goodwill that was not deductible on our tax return.

During the fourth quarter of 2001, we prepaid $174.6 million of Federal Home Loan Bank borrowings and incurred a prepayment penalty of $6.0 million ($3.9 million net of tax), which was recorded as an extraordinary item. The FHLB borrowings, which had relatively high rates, were prepaid to improve our interest rate position and net interest margin in future periods. These FHLB borrowings had a weighted average cost of 5.62% and a weighted average maturity of two years.

We adopted SFAS No. 133, as amended by SFAS No. 138, effective January 1, 2001 and recognized an after-tax loss from the cumulative effect of adoption of $290 thousand. This was recorded as a net unrealized loss on forward sale commitments and commitments to originate rate-locked loans at December 31, 2000, which hedged residential mortgage loans held for sale.

Our comprehensive income amounted to $373.0 million and $313.9 million during 2002 and 2001, respectively. Comprehensive income differed from our net income in 2002 because of a $77.3 million net unrealized gain on securities, a $2.1 million net unrealized loss on cash flow hedges and an $825 thousand unrealized loss on a minimum pension liability. Our comprehensive income differed from our net income in 2001 because of a $74.8 million net unrealized gain on securities and a $274 thousand net hedging gain on cash flow hedges. For additional information, see the Consolidated Statements of Changes in Shareholders’ Equity in the Consolidated Financial Statements.

Our available for sale investment portfolio had net unrealized gains (losses) of $181.3 million, $62.0 million and ($53.1) million, ($117.5 million, $40.3 million and ($34.5) million net of applicable income tax effects, respectively) at December 31, 2002, 2001 and 2000, respectively. The improvement related to lower prevailing interest rates. For additional information, see Note 4 to the Consolidated Financial Statements. The change in value of our liabilities, which tend to fall in rising interest rate environments and rise in falling interest rate environments, is not included in “other comprehensive income.”

Our primary business segments are Community Banking, Insurance Brokerage, Investment Planning and Investment Management. The Community Banking segment represents over 90% of the combined revenues and income of the consolidated group, and thus, is the only reporting segment as defined by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Insurance Brokerage reflects commissions on insurance brokerage activities, Investment Planning reflects commissions from the sale of third party mutual funds, annuities, stocks and bonds and Investment Management

reflects fees from trust and investment management operations. Selected operating data for these segments is provided for informational purposes only in Table 16.

In the fourth quarter of 2002, we had net income of $77.1 million, or $0.52 per diluted share, as compared to $61.6 million, or $0.42 per diluted share in the fourth quarter of 2001. Results for the quarters ended December 31, 2002 and 2001 were reduced by special charges (which included merger-related costs, branch consolidation costs, certain asset write-downs and branch closings). The results for the fourth quarter ended December 31, 2002 also included a $6.2 million write-off of certain capitalized costs incurred in connection with a branch automation project and net securities gains of $6.7 million. The fourth quarter of 2001 included $3.0 million of goodwill amortization, which ceased January 1, 2002 under new accounting rules.

Annualized return on average equity (“ROE”) and return on average assets (“ROA”) were 15.75% and 1.35%, respectively for the quarter ended December 31, 2002 and were 14.45% and 1.23%, respectively, for the comparable quarter last year.

Results for the fourth quarter of 2002 improved over the fourth quarter of 2001 due primarily to increased net interest income, which increased by 6% as a result of purchase acquisitions and, to a lesser extent, internal growth. The net interest margin for the quarter ended December 31, 2002 was 3.86%, a decrease of 27 basis points from the fourth quarter last year. This decrease was primarily due to long-term rates declining more than short-term rates and the effects of prepayments on mortgage-related assets. Noninterest income totaled $84.4 million and $63.6 million, an increase of $20.8 million, or 33%, for the quarters ended December 31, 2002 and 2001, respectively. The increase was primarily due to increases of $6.7 million in net securities gains, $2.9 million in deposit services income, $2.9 million in mortgage banking services income and $2.6 million in insurance brokerage commissions income. Noninterest expenses increased by 15% due primarily to acquisitions. The efficiency ratio was 55.68% in the fourth quarter of 2002 compared to 54.76% in the comparable period last year. The increase in the efficiency ratio was due in part to the write-off of the branch automation project. See Table 17 “Fourth Quarter Summary” and Note 25 in the Consolidated Financial Statements for selected quarterly data for the years ended December 31, 2002 and 2001.

Our consolidated total assets increased by $2.9 billion, or 16%, from $18.2 billion at December 31, 2000 to $21.1 billion at December 31, 2001. This increase was primarily attributable to the acquisition of Andover in the fourth quarter of 2001. Shareholders’ equity totaled $1.8 billion and $1.3 billion at December 31, 2001 and 2000, respectively. The increase was primarily attributable to net earnings and the issuance of stock for an acquisition in the fourth quarter of 2001.

We reported net income of $238.8 million for 2001, or $1.68 per diluted share, compared with net income of $191.7 million, or $1.32 per diluted share, for 2000. Return on average assets and return on average equity were 1.29% and 16.48%, respectively, for 2001 and 1.05% and 15.69%, respectively, for 2000.

Net interest income on a fully taxable-equivalent basis totaled $686.3 million during 2001, as compared with $609.7 million in 2000. The $76.6 million, or 13%, increase in 2001 was primarily attributable to an 87 basis point decrease in average rates paid on interest-bearing liabilities, which more than offset a 50 basis point decrease in the average yield on interest-earning assets. As a result, the net interest margin increased 39 basis points to 3.99% compared to 3.60% in 2001 and 2000, respectively.

The provision for loan and lease losses was $41.9 million in 2001 compared to a $23.8 million provision in 2000. Net charge-offs were $36.9 million in 2001 compared to $25.3 million in 2000. The ratio of the allowance to nonperforming loans at December 31, 2001 was 252% compared to 249% at December 31, 2000. The allowance for loan and lease losses represented 1.49% of total loans at December 31, 2001

compared to 1.42% at December 31, 2000. Nonperforming assets increased $14.1 million from $67.1 million, or 0.37% of total assets, at December 31, 2000 to $81.2 million, or 0.39% of total assets, at December 31, 2001. This increase was primarily due to nonaccruing commercial loans and leases acquired in acquisitions. Accruing loans 90 days past due were $6.2 million at December 31, 2001, up 4% from the prior year end.

Noninterest income was $240.5 million and $211.2 million for the years ended December 31, 2001 and 2000, respectively. Increases of $5.6 million in deposit services income and $13.6 million in insurance brokerage commissions more than offset a $10.8 million decrease in mortgage banking services income related to the sale of the mortgage servicing rights portfolio. Deposit services income of $72.6 million reflected 8% growth from 2000. The 53% increase in insurance brokerage commissions reflected our purchase acquisitions of insurance agencies in Massachusetts and Connecticut late in the third quarter of 2000.

Noninterest expense was $509.3 million for 2001 compared with $502.5 million for 2000. Excluding special charges, noninterest expense in 2001 was $501.7 million compared to $459.5 million in 2000, an increase of $42.2 million, or 9%. The increase in 2001 was primarily due to increases in salaries and benefits and occupancy expense and as a result of acquisitions. The efficiency ratio improved to 55.34% during 2001 from 61.67% in 2000 primarily as a result of the efficiencies created by the integration of acquired companies, as well as operating improvements.

Our comprehensive income amounted to $313.9 million and $282.6 million during 2001 and 2000, respectively. Comprehensive income differed from our net income in 2001 primarily because of a $74.8 million net unrealized gain on securities and a $274 thousand hedging gain on cash flow hedges. For additional information, see the Consolidated Statements of Shareholders’ Equity in the Consolidated Financial Statements.

Our consolidated total assets increased by $2.3 billion, or 11%, from $21.1 billion at December 31, 2001 to $23.4 billion at December 31, 2002. Total average assets were $21.5 billion and $18.5 billion for the years ended December 31, 2002 and 2001, respectively. These increases were primarily due to the acquisitions in 2002 and 2001. See the acquisitions table under “General — Acquisitions.” Shareholders’ equity totaled $2.1 billion and $1.8 billion at December 31, 2002 and 2001, respectively.

The securities portfolio is utilized for several purposes. It serves as a vehicle to manage interest rate and prepayment risk, generates interest and dividend income from the investment of excess funds, provides liquidity to meet liquidity requirements and is used as collateral for public deposits and wholesale funding sources.

The average balance of the securities portfolio, which consists of securities available for sale and securities held to maturity, was $6.4 billion in 2002 and $5.9 billion in 2001, an increase of $480 million. The portfolio is comprised primarily of U.S. Government and agency securities and mortgage-backed securities, most of which are seasoned 15-year federal agency securities. Other securities in the portfolio are collateralized mortgage obligations, which include securitized residential real estate loans held in REMICS, and asset-backed securities. The majority of securities available for sale are rated AAA or equivalently rated. In 2002, the portfolio was managed to mitigate prepayment risk by purchasing U. S. Government agency securities as mortgage-backed securities were paid down. The average yield on securities was 5.52% during the year ended December 31, 2002, compared to 6.29% for the year ended December 31, 2001, which reflects declines in interest rates during 2002. See Table 5 for a detail of securities available for sale and held to maturity and Table 6 for information regarding the contractual maturity of our debt securities at December 31, 2002.

Securities available for sale are carried at fair value and had net unrealized gains of $181.3 million and $62.0 million at December 31, 2002 and 2001, respectively. See Note 4 to the Consolidated Financial Statements. These unrealized gains do not impact net income or regulatory capital but are recorded as adjustments to shareholders’ equity, net of related deferred income taxes. Unrealized gains, net of related deferred income taxes, are a component of our “Comprehensive Income” contained in the Consolidated Statement of Changes in Shareholders’ Equity.

Total loans and leases (including loans held for sale) averaged $13.2 billion during the year ended December 31, 2002 compared to $11.2 billion for the previous year, an increase of $2.0 billion, or 18%. This increase was primarily attributable to acquisitions and growth in commercial real estate loans. Average loans as a percent of average earning assets was 67% and 65% for the years ended December 31, 2002 and 2001, respectively.

Residential real estate loans (including loans held for sale) averaged $2.6 billion and $2.3 billion in 2002 and 2001, respectively, including the effects of acquisitions. While residential real estate loans increased $345 million, acquisitions accounted for $754 million resulting in a net decrease in the portfolio of $409 million. This decrease was primarily due to increased refinancing activity and prepayments in a declining interest rate environment. Mortgage loans held for sale amounted to $128.6 million and $117.7 million at December 31, 2002 and 2001, respectively. The increase in loans held for sale compared to last year was due primarily to higher origination volumes resulting from declining interest rates. We are currently selling substantially all 30-year conforming fixed-rate loans that we originate.

Commercial real estate loans averaged $4.3 billion in 2002 and $3.2 billion in 2001, a 33% increase. Acquisitions accounted for approximately $568 million of the $1.1 billion increase.

Commercial loans and leases averaged $2.7 billion in 2002 and $2.3 billion in 2001, an increase of 14%. Acquisitions accounted for approximately $136 million of the $324 million increase. The remaining increase in 2002 was largely attributable to additional opportunities in certain market areas due to broadening our franchise.

Consumer loans and leases averaged $3.6 billion in 2002 and $3.4 billion in 2001, an increase of 7%. Acquisitions accounted for approximately $169 million of the $245 million increase. The growth in consumer loans was primarily in indirect automobile loans and home equity loans. Although the internal increase in consumer loans in 2002 was relatively modest, new loan originations have been offset by significant prepayment activity as proceeds of mortgage loans refinancings have been used to pay down consumer loans.

For a description of the types of loans and leases in our loan and lease portfolio and a breakdown of our consumer loans, see “Credit Risk.”

Total deposits averaged $14.6 billion during 2002 compared to $12.5 billion during 2001, an increase of 16%. Acquisitions accounted for approximately $1.8 billion of the $2.0 billion increase. The deposit mix also changed favorably in 2002 as certificates of deposit and brokered deposits (which tend to pay higher rates) declined to 33% of average deposits during 2002 from 37% of average deposits during 2001. For additional information about changes in the composition of our deposits, see Table 10.

Average noninterest-bearing deposits increased 21% in 2002 to $2.6 billion from $2.2 billion in 2001. Acquisitions accounted for approximately $257 million of the $455 million increase. The remainder of the increase reflected strong growth in commercial, government and personal accounts.

Average interest-bearing deposits increased by $1.6 billion during 2002 to $11.9 billion. Substantially all of this increase resulted from acquisitions. Our existing base of interest-bearing deposits did not increase over the prior year as growth in NOW and money-market accounts were offset by declines in

higher-costing certificates of deposits. Excluding acquisitions, the average balance of NOW and money-market accounts increased $679 million while the average balance of certificates of deposit (including brokered certificates of deposit) declined by $633 million. The average rate paid on certificates of deposit fell from 5.02% in 2001 to 3.18% in 2002. See Table 11 for the scheduled maturities of certificates of deposits of $100,000 or more. As part of our overall funding strategy, we may use deposits obtained through investment banking firms which obtain funds from their customers for deposit with us (“brokered deposits”). There were no brokered deposits at December 31, 2002 compared to $72.2 million at December 31, 2001.

Included within the deposit categories above are government banking deposits, which averaged $1.4 billion in 2002 and $1.2 billion in 2001. Government banking deposits include deposits received from state and local governments, school districts, public colleges/universities, utility districts, public housing authorities and court systems in our market area. Many of these deposits exceed the FDIC insurance coverage amounts and require us to pledge specific collateral or maintain private insurance.

We use both short-term and long-term borrowings to fund the growth of earning assets in excess of deposit growth. Short-term borrowings, which include federal funds purchased, retail securities sold under agreements to repurchase and other short-term borrowings, amounted to $1.3 billion at December 31, 2002, up $163 million, or 15%, from $1.1 billion at December 31, 2001. See Note 12 to the Consolidated Financial Statements.

At December 31, 2002, we also had a $110 million unsecured line of credit. The line is renewable every 364 days and, if used, carries interest at LIBOR plus 0.625%. The average balance outstanding under this line of credit during 2002 was $2.1 million.

Long-term debt includes FHLB advances, subordinated notes, wholesale securities sold under agreements to repurchase, capital lease obligations and other debt with terms greater than one year. Long-term debt was $3.9 billion at December 31, 2002 up from $3.4 billion at December 31, 2001. The increase in long-term debt was primarily due to borrowings assumed in acquisitions.

At December 31, 2002 and 2001, FHLB borrowings amounted to $2.5 billion and $2.6 billion, respectively. FHLB collateral consists primarily of first mortgage loans secured by single-family properties, certain unencumbered securities and other qualified assets. These borrowings had an average cost of 4.50% during 2002 as compared to 5.30% during 2001. Our additional borrowing capacity with the FHLB at December 31, 2002 was approximately $2.1 billion. See Note 13 to the Consolidated Financial Statements.

Subordinated notes consisted of $200 million of 7.625% subordinated notes due 2011 issued by our banking subsidiary in 2001. The notes qualify as Tier 2 capital for regulatory purposes.

At December 31, 2002 and 2001, wholesale securities sold under repurchase agreements amounted to $1.2 billion and $571 million, respectively, and were collaterallized by mortgage-backed securities and U.S. Government obligations. See Note 13 to the Consolidated Financial Statements.

At December 31, 2002, through subsidiary trusts, we had outstanding $295.1 million of capital securities which qualify as Tier 1 capital for regulatory purposes. See the “Capital” section below.

We have entered into numerous contractual obligations and commitments. The following table summarizes our contractual cash obligations and other commitments at December 31, 2002.


(1)	Except for liabilities related to employee benefit plans, other liabilities are short term in nature.

See Note 19 to the Consolidated Financial Statements for more information regarding the nature and business purpose and the importance of all off-balance sheet arrangements.

The primary goal of our risk management program is to determine how certain existing or emerging issues in the financial services industry affect the nature and extent of the risks faced by us. Based on a periodic self-evaluation, we determine key issues and develop plans and/or objectives to address risk. Our board of directors and management believe that there are seven applicable “risk categories,” consisting of credit, interest rate, liquidity, transaction, compliance, strategic and reputation risk. Each risk category is viewed from a quantity of risk perspective (high, medium or low) coupled with a quality of risk perspective. In addition, an aggregate level of risk is assigned as a whole as well as the direction of risk (stable, increasing or decreasing). Each risk category and the overall risk level is compared to regulatory views on a regular basis and then reported to the board with an accompanying explanation as to the

Our board of directors has established the overall strategic direction. It approves our overall risk policies and oversees our overall risk management process. The board has established two board committees, consisting of Audit and Board Risk management, and has charged each committee with overseeing key risks. In addition, there is a management operational risk committee, which is comprised of senior officers in key business lines, which identifies and monitors key operational risks. The Operational Risk Committee reports to the Board Risk Committee on a regular basis.

The Board Risk Management Committee monitors our credit risk management. Our strategy for credit risk management includes stringent, centralized policies and uniform underwriting criteria for all loans. The strategy also includes diversification on a geographic, industry and customer level, regular credit examinations and quarterly management review of large loans and loans with a deterioration of credit quality. We maintain an internal rating system that provides a mechanism to regularly monitor the credit quality of our loan portfolio. The rating system is intended to identify and measure the credit quality of lending relationships. For consumer loans, we utilize standard credit scoring systems to assess consumer credit risks and to price consumer products accordingly. We strive to identify potential problem loans early, take any necessary charge-offs promptly and maintain adequate reserve levels. See “Results of Operations — Provision and Allowance for Loan and Lease Losses” and Note 1 to the Consolidated Financial Statements.

Our residential loan portfolio accounted for 17% of the total loan portfolio at December 31, 2002 and 21% at December 31, 2001. Our residential loans are generally secured by single-family homes (one-to-four units) and have a maximum loan to value ratio of 80%, unless the excess is protected by mortgage insurance. At December 31, 2002, 0.24% of our residential loans were nonperforming, as compared to 0.32% at December 31, 2001, as nonperforming residential real estate loans decreased by $2.6 million while the total residential loan portfolio decreased by $244.9 million. Net charge-offs to average residential loans outstanding for the year ended December 31, 2002 was (.01%.)

Our commercial real estate loan portfolio accounted for 34% of the total loan portfolio at December 31, 2002 and 32% at December 31, 2001. This portfolio consists primarily of loans secured by income-producing commercial real estate (including office and industrial buildings), service industry real estate (including hotels and health care facilities), multi-family (over four units) residential properties and retail trade real estate (food stores). These loans generally are secured by properties located in the New England states and upstate New York. At December 31, 2002, 0.37% of our commercial real estate loans were nonperforming, as compared to 0.42% at December 31, 2001. Net charge-offs to average commercial real estate loans outstanding for the year ended December 31, 2002 was .03%.

Our commercial business loan and lease portfolio accounted for 21% of the total loan portfolio at December 31, 2002 compared to 19% at December 31, 2001. Commercial business loans and leases are generally made to small to medium size businesses located within our market areas. These loans are not concentrated in any particular industry, but reflect the broad-based economy of New England and upstate New York. Commercial loans consist primarily of loans secured by various equipment, machinery and other corporate assets, as well as loans to provide working capital to businesses in the form of lines of credit. Through a subsidiary, we also offer direct equipment leases, which amounted to $102.9 million at December 31, 2002. We do not emphasize the purchase of participations in syndicated commercial loans. At December 31, 2002, we had $205 million of outstanding participations in syndicated commercial loans and had an additional $295 million of unfunded commitments related to these participations. At December 31, 2002, 1.10% of our commercial business loans were nonperforming, as compared to 1.64% at December 31, 2001. Net charge-offs to average commercial business loans and leases outstanding for the year ended December 31, 2002 was .58%.

Consumer loans and leases accounted for 28% of our total loan portfolio at December 31, 2002 and 2001. At December 31, 2002, 0.23% of our consumer loans were nonperforming, as compared to 0.27% at December 31, 2001. Net charge-offs to average consumer loans outstanding for the year ended December 31, 2002 was .61%. The following table lists our consumer loans by type as of December 31, 2002 and 2001:

See Table 7 for information about the composition of our loan portfolio for the last five years, Table 8 for information about the scheduled contractual amortization of certain parts of our loan portfolio at December 31, 2002 and Table 10 for information about the geographic distribution of our commercial real estate loans and commercial business loans and leases at December 31, 2002 and 2001.

Nonperforming assets consist of nonperforming loans (which do not include accruing loans 90 days or more overdue), other real estate owned, repossessed assets and certain securities available for sale. Total nonperforming assets as a percentage of total assets were 0.29% at December 31, 2002 and 0.39% at December 31, 2001. Total nonperforming assets as a percentage of total loans and other nonperforming assets was 0.49% and 0.64% at December 31, 2002 and 2001, respectively. See Table 15 for a summary of nonperforming assets for the last five years.

We continue to focus on asset quality issues and to allocate significant resources to the key asset quality control functions of credit policy and administration and loan review. The collection, workout and asset management functions focus on the reduction of nonperforming assets. Despite the ongoing focus on asset quality and reductions of nonperforming asset levels, there can be no assurance that adverse changes in the real estate markets and economic conditions in our primary market areas will not result in higher nonperforming asset levels in the future and negatively impact our operations through higher provisions for loan losses, net loan charge-offs, decreased accrual of interest income and increased noninterest expenses as a result of the allocation of resources to the collection and workout of nonperforming assets.

Residential real estate loans are generally placed on nonaccrual when they become 120 days past due or are in the process of foreclosure. All closed-end consumer loans 90 days or more past due and any equity line in the process of foreclosure are placed on nonaccrual status. Consumer loans are charged-off upon reaching 120 or 180 days past due depending on the type of loan. We generally place all commercial real estate loans and commercial business loans and leases which are 90 days or more past due, unless secured by sufficient cash or other assets immediately convertible to cash, on nonaccrual status. At December 31, 2002, we had $3.4 million of accruing loans which were 90 days or more delinquent, as compared to $6.2 million and $6.0 million of such loans at December 31, 2001 and 2000, respectively.

We also may place loans on nonaccrual and, therefore, nonperforming status currently less than 90 days past due or performing in accordance with their terms but which in our judgment are likely to present future principal and/or interest repayment problems and which thus ultimately would be classified as nonperforming.

Net charge-offs were $38.7 million during 2002, as compared to $36.9 million in 2001. Net charge-offs represented 0.29% and 0.33% of average loans and leases outstanding in 2002 and 2001, respectively. See Table 14 for net charge-offs by loan type for the past three years and Table 12 for more information concerning charge-offs and recoveries during the past five years.

In addition to nonperforming loans as discussed in the “Credit Risk Management” section above, we also have loans that are 30 to 89 days delinquent and still accruing. These loans amounted to $139 million at December 31, 2002. These loans and delinquency trends are considered in the evaluation of the allowance for loan and lease losses and the related determination of the provision for loan and lease losses.

The goal of asset-liability management is the prudent control of market risk, liquidity and capital. Asset-liability management is governed by policies reviewed and approved annually by our board of directors and monitored periodically by the Board Risk Committee. The board delegates responsibility for asset-liability management to the Asset Liability Management Committee (“ALCO”), which is comprised of members of senior management who set strategic directives that guide the day-to-day asset-liability management of our activities. The ALCO also reviews and approves all major risk, liquidity and capital management programs, except for product pricing. Product pricing is reviewed and approved by the Pricing Committee, which is comprised of a subset of ALCO members and state presidents.

Market risk is the sensitivity of income to changes in interest rates, foreign exchange rates, commodity prices and other market-driven rates or prices. We have no trading operations and thus are only exposed to non-trading market risk.

Interest-rate risk, including mortgage prepayment risk, is by far the most significant non-credit risk to which we are exposed. Interest-rate risk is the sensitivity of income to changes in interest rates. Changes in interest rates, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, our primary source of revenue. This risk arises directly from our core banking activities — lending and deposit gathering. In addition to directly impacting net interest income, changes in the level of interest rates can also affect (i) the amount of loans originated and sold by the institution, (ii) the ability of borrowers to repay adjustable or variable rate loans, (iii) the average maturity of loans, (iv) the rate of amortization of premiums paid on securities and capitalized mortgage servicing rights, (v) the amount of unrealized gains and losses on securities available for sale and (vi) the fair value of our saleable assets and derivatives and the resultant ability to realize gains.

The primary objective of interest-rate risk management is to control our exposure to interest-rate risk both within limits approved by our board and guidelines established by the ALCO. These limits and guidelines reflect our tolerance for interest-rate risk over both short-term and long-term horizons. We attempt to control interest-rate risk by identifying, quantifying and, where appropriate, hedging our exposure.

We quantify and measure interest-rate exposure using a model to dynamically simulate net interest income under various interest rate scenarios over a 12-month period. Simulated scenarios include deliberately extreme interest rate “shocks” and more gradual interest rate “ramps.” Key assumptions in these simulation analyses relate to behavior of interest rates and spreads, increases or decreases of product balances and the behavior of our deposit and loan customers. The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans, mortgage-backed securities and mortgage servicing rights). The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, the resultant interest rate sensitivity of loan assets

cannot be determined exactly. Complicating our efforts to measure interest rate risk is the uncertainty of the maturity, repricing and/or runoff of some of our assets and liabilities.

To cope with these uncertainties, we give careful attention to our assumptions. For example, many of our interest-bearing deposit products (e.g. interest checking, savings and money market deposits) have no contractual maturity and based on historical experience have only a limited sensitivity to movements in market rates. Because we believe we have some control with respect to the extent and timing of rates paid on non-maturity deposits, certain assumptions regarding rate changes are built into the model. In the case of prepayment of mortgage assets, the majority of assumptions are derived from a vendor supported loan prepayment model that is periodically tested using observed loan prepayment behavior.

We manage the interest-rate risk inherent in our core banking operations primarily using on-balance sheet instruments, which sometimes contain embedded options, mainly fixed-rate investment securities and borrowed funds. When appropriate, we consider interest rate instruments such as interest-rate swaps, interest rate floors, interest rate caps and interest rate corridor agreements, among other instruments. At December 31, 2002, the only such instruments which we had were forward commitments related to hedging our mortgage banking operations and swaps and caps offered to commercial borrowers through our commercial borrower derivative hedging program. We believe that our exposure to commercial customer derivatives is minimal because these contracts are secured by loan collateral and are matched with a similar fixed-rate swap product. The program is designed to retain variable-rate commercial loans while allowing the commercial borrowers to synthetically fix the loan rate by entering into a variable-to-fixed interest rate swap. Since its inception in 2002, we have recorded a notional amount of approximately $60 million in derivative contracts with commercial borrowers. It is anticipated that, over time, customer interest rate derivatives will reduce the interest rate risk inherent in our longer-term, fixed-rate commercial business and commercial real estate loans.

We manage the interest-rate risk inherent in our mortgage banking operations by entering into forward sales contracts and, to a lesser extent, by using purchased mortgage-backed security options. An increase in market interest rates between the time we commit to terms on a loan and the time we ultimately sell the loan in the secondary market will have the effect of reducing the gain (or increasing the loss) we record on the sale. We attempt to mitigate this risk by entering into forward sales commitments in amounts sufficient to cover all closed loans and approximately 75% to 80% of loan commitments on rate-locked loans. Purchased mortgage-backed security options are used to hedge a percentage of rate-locked loans.

The average balances during 2002 and 2001 of residential mortgage loans held for sale and related average hedge positions are summarized below:

Our policy on interest-rate risk simulation specifies that if interest rates were to shift gradually up or down 2%, estimated net interest income for the subsequent 12 months should decline by less than 5%. Our gradual 2% rising rate scenario was within compliance guidelines at December 31, 2002 and 2001. However, the gradual 2% falling rate scenario was slightly outside guidelines at December 31, 2002 and 2001. ALCO voted to approve the guidelines exception because a gradual 2% decreasing rate scenario was deemed unlikely based on the current level of interest rates. ALCO currently is more focused on the gradual decreasing 1% rate scenario than on the gradual decreasing 2% scenario and on strategies that prove beneficial to income should rates decline or the yield curve flatten. Strategies under review include

The following table sets forth the estimated effects on our net interest income over a 12-month period following the indicated dates in the event of the indicated increases or decreases in market interest rates.

The results implied in the above table indicate estimated changes in simulated net interest income for the subsequent 12 months assuming a gradual shift up or down in market rates of 100 and 200 basis points across the entire yield curve. Assuming a downward shift in rates, most deposit accounts have implied interest rate floors and it is assumed that the related interest expense on these accounts will not decrease in proportion to the downward shift in rates. Assuming an upward shift in rates of 200 basis points, the simulated increase in interest income would be more than the simulated increase in interest expense because total adjustable earning assets will reprice more quickly than will total adjustable cost liabilities. It should be emphasized, however, that the results are dependent on material assumptions such as those discussed above. For instance, asymmetrical rate behavior can have a material impact on the simulation results.

The most significant factors affecting market risk exposure of net interest income during the year ended December 31, 2002 were (i) the shape of the U.S. Government securities and interest rate swap yield curve, (ii) changes in the composition of the investment portfolio, (iii) changes in the composition of mortgage assets and prepayment speeds of mortgage assets, (iv) reduction of deposit interest expense, and (v) changes in the wholesale borrowings portfolio structure. Since December 2001, the yield curve fell significantly in both the 5-year and 10-year terms (approximately 160 and 121 basis points, respectively). As a result, projected mortgage and loan prepayments increased throughout 2002 as interest rates reached levels not seen in 40 years. Because of historically low rates and increased loan cash inflows, effective duration estimates for loans and mortgage-backed securities became much shorter in 2002 than in 2001, thus increasing asset sensitivity. Asset liability management actions taken throughout 2002 helped to reduce asset sensitivity and included the purchase of investments with more structured cash flows and floating rate wholesale borrowings with embedded caps and floors. The above table reflects the net impact of these changes. The relatively small net change in the estimated sensitivity of our net interest income to changes in interest rates during 2002 was a result of these factors and asset liability management actions. We remain asset sensitive and project net interest income to increase if short and long interest rates move symmetrically higher.

In connection with the acquisition of Andover in 2001, we acquired mortgage servicing rights with a fair value of $8.8 million. As a result of prepayments and valuation adjustments, mortgage servicing rights declined from $8.5 million at December 31, 2001 to $3.6 million at December 31, 2002. Mortgage servicing rights represented 0.51% of the underlying balance of loans serviced for others at December 31, 2002. New mortgage servicing rights from originations are sold on a flow basis shortly after the mortgages are sold. As a result, future earnings exposure to changes in the value of mortgage servicing rights is not expected to be material.

Our earnings are not directly and materially impacted by movements in foreign currency rate or commodity prices. Virtually all transactions are denominated in the U.S. dollar. Movements in equity prices may have an indirect but modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related businesses.

Our Board Risk Management Committee establishes policies and analyzes and manages liquidity to ensure that adequate funds are available to meet normal operating requirements in addition to unexpected customer demands for funds, such as high levels of deposit withdrawals or loan demand, in a timely and cost-effective manner. The most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and growth of a large, stable supply of core deposits and wholesales funds. Ultimately, public confidence is generated through profitable operations, sound credit quality and a strong capital position. Liquidity management is viewed from a long-term and a short-term perspective, as well as from an asset and liability perspective. We monitor liquidity through a regular review of loan and deposit maturities, yield and rate scenarios and loan and deposit forecasts to minimize funding risk. Other factors affecting a bank’s ability to meet liquidity needs include variations in the markets served and general economic conditions. We have various funding sources available to us on a parent-only basis as well as through our banking subsidiary, as outlined below.

On a parent-only basis, our commitments and debt service requirements at December 31, 2002 consisted primarily of junior subordinated debentures (including accrued interest) issued to four subsidiaries totaling $295.1 million which mature starting in 2027. See “Capital” and Notes 14 and 23 to the Consolidated Financial Statements. The principal sources of funds for us to meet parent-only obligations are dividends from our banking subsidiary, which are subject to regulatory limitations, and borrowings from public and private sources. At December 31, 2002, our subsidiary bank had $364.2 million available for dividends that could be paid without prior regulatory approval. See also “Financial Condition — Other Funding Sources” above. For information on restrictions on the payment of dividends by our banking subsidiary, see Note 16 to the Consolidated Financial Statements.

For the Bank, liquidity represents the ability to fund asset growth, accommodate deposit withdrawals and meet other contractual obligations and commercial commitments. See “Contractual Obligations and Commitments” above.

In addition to traditional retail deposits, the Bank has various other liquidity sources, including proceeds from maturing securities and loans, the sale of securities, asset securitizations and borrowed funds such as FHLB advances, reverse repurchase agreements and brokered deposits.

We continually monitor and forecast our liquidity position. There are several interdependent methods used by us for this purpose, including daily review of fed funds positions, monthly review of balance sheet changes, monthly review of liquidity ratios, periodic liquidity forecasts and periodic review of contingent funding plans.

As of December 31, 2002, the Bank had in the aggregate $3.2 billion of “immediately accessible liquidity,” defined as cash that could be raised within 1-3 days through collateralized borrowings or security sales. This represented 20% of deposits, as compared to a policy minimum of 10% of deposits.

Also as of December 31, 2002, the Bank had in the aggregate “potentially volatile funds” of $1.5 billion. These are funds that might flow out of the banks over a 90-day period in an adverse environment. Management estimates this figure by applying adverse probabilities to its various credit-sensitive and economically-sensitive funding sources.

As of December 31, 2002, the ratio of “immediately accessible liquidity” to “potentially volatile funds” was 207%, compared to a policy minimum of 100%.

In addition to the liquidity sources discussed above, we believe that our residential and consumer loan portfolios provide a significant amount of contingent liquidity that could be accessed in a reasonable time period through sales or securitizations. We believe we also have significant untapped access to the national brokered deposit market. These sources are contemplated as secondary liquidity in our contingent funding plan. We believe that the level of liquidity is sufficient to meet current and future funding requirements.

We have a shelf registration on file with the Securities and Exchange Commission which allows us to sell up to $1.0 billion of debt securities, preferred stock, depository shares, common stock and warrants and which allows subsidiary trusts to sell capital securities. We had $800 million remaining on this shelf registration statement as of December 31, 2002.

In addition, at December 31, 2002, we also had a $110 million unsecured line of credit. The line is renewable every 364 days and, if used, carries interest at LIBOR plus 0.625%.

We are committed to managing capital for shareholder benefit and maintaining protection for depositors and creditors. At December 31, 2002 and 2001, our shareholders’ equity totaled $2.1 billion and $1.8 billion, respectively, or 8.81% and 8.49% of total assets, respectively. In addition, through subsidiary trusts, we had outstanding at December 31, 2002 $295.1 million of capital securities as follows:

The capital securities qualify as Tier 1 capital for regulatory purposes. A total of $333.5 million of capital trust securities were originally issued, of which $38.4 million had been repurchased by us as of December 31, 2002.

The changes in shareholders’ equity included net income for the year ended December 31, 2002 of $298.6 million and a $77.3 million net unrealized gain on securities available for sale, which were partially offset by $154.1 million of stock repurchases (6,350,100 shares) and $85.9 million in dividends to shareholders. In addition, we issued shares of our common stock with an aggregate value of $102.9 million in connection with acquisitions in 2002.

In February 2002, our board authorized 8 million shares to be repurchased in the open market. As of December 31, 2002, a total of 7.3 million shares were available for repurchase under existing Board authorizations.

Capital guidelines issued by the Federal Reserve Board require us to maintain certain ratios. We manage various capital ratios to exceed “well capitalized” capital levels in accordance with capital guidelines approved by our board of directors. Our Tier 1 Capital, as defined by the Federal Reserve Board, was $1.6 billion or 7.13% of average assets at December 31, 2002, compared to $1.4 billion or 7.14% of average assets at December 31, 2001. We also are required to maintain capital ratios based on the level of our assets, as adjusted to reflect their perceived level of risk. Our regulatory capital ratios currently exceed all applicable requirements. See Note 15 to the Consolidated Financial Statements.

The Bank is also subject to federal regulatory capital requirements. At December 31, 2002, the Bank was deemed to be “well capitalized” under the regulations of the Office of the Comptroller of Currency of the United States and in compliance with applicable capital requirements. See Note 15 to the Consolidated Financial Statements.

We consider the following to be our critical accounting policies due to the potential impact on our results of operations and the carrying value of certain of our assets based on any changes in judgments and assumptions required to be made by us in the application of these policies.

We maintain an allowance for loan and lease losses at a level, which we believe, is sufficient to cover potential charge-offs on loans and leases deemed to be uncollectible based on continuous review of a variety of factors. These factors consist of the character and size of the loan portfolio, business and economic conditions, loan growth, charge-off experience, delinquency trends, nonperforming loan trends, portfolio migration data and other asset quality factors. The primary means of adjusting the level of this allowance is through provisions for loan and lease losses, which are established and charged to income on a quarterly basis. Although we use available information to establish the appropriate level of the allowance for loan and lease losses, future additions to the allowance may be necessary because our estimates of the potential losses in our loan and lease portfolio are susceptible to change as a result of changes in the factors noted above. Any such increases would adversely affect our results of operations. At December 31, 2002, our allowance for loan and lease losses amounted to $208.3 million, and during 2002, 2001 and 2000 our provisions for loan and lease losses amounted to $44.3, $41.9 and $23.8 million, respectively. See also “Credit Risk Management” below.

For the commercial business loans and leases and the commercial real estate loans portfolios, we evaluate specific loan status reports on certain loans rated “substandard” or worse in excess of a specified dollar amount. On an ongoing basis, an independent loan review function reviews classified loans to ensure the accuracy of the loan classifications. Estimated reserves for each of these credits are determined by reviewing current collateral value, financial information, cash flow, payment history and trends and other relevant facts surrounding the particular credit. In addition, the appraisal function reviews the reasonableness of the third party appraisals. Provisions for losses on the remaining commercial loans are based on pools of similar loans using a combination of historical loss experience and migration analysis, which considers the probability of a loan moving from one risk rating category to another over the passage of time, transition matrix and qualitative adjustments.

For the residential real estate and consumer loan portfolios, the range of reserves is calculated by applying historical charge-off and recovery experience to the current outstanding balance in each loan category, with consideration given to loan growth over the preceding twelve months.

Accounting for Acquisitions and Review of Goodwill and Other Intangible Assets

In connection with acquisitions of other companies, we generally record as assets on our financial statements both goodwill, an intangible asset which is equal to the excess of the purchase price which we pay for another company over the estimated fair value of the net assets acquired, and identifiable intangible assets such as core deposit intangibles, non-compete agreements and customer lists. Due to a change in an accounting standard, since January 1, 2002 we are no longer required to amortize the amount of our goodwill through a charge to expense over the period of its expected life, and instead regularly evaluate whether the carrying value of our goodwill has become impaired, in which case we reduce its carrying value through a charge to our earnings. Goodwill is evaluated for impairment at the reporting unit level, and there is goodwill recorded in the following reporting units: Community Banking, Insurance Brokerage and Investment Management. Core deposit and other identifiable intangible assets are amortized to expense over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The valuation techniques used by us to determine the carrying value of tangible and intangible assets acquired in acquisitions and the estimated lives of identifiable intangible assets involve estimates for discount rates, projected future cash flows and time period calculations, all of which are susceptible to change based on changes in economic conditions and other factors. Any changes in the estimates which we use to

determine the carrying value of our goodwill and identifiable intangible assets or which otherwise adversely affects their value or estimated lives would adversely affect our results of operations. At December 31, 2002, our goodwill and identifiable intangible assets amounted to $660.7 and $34.5 million, respectively, and during 2002, 2001 and 2000 our amortization expense amounted to $6.5 million, $22.1 million and $21.0 million, respectively (which reflects our cessation of the amortization of goodwill).

We use a December 31 measurement date to determine our pension expense and related financial disclosure information. In accordance with SFAS No. 87, we set the discount rate for our retirement plans by reference to investment grade bond yields. We use Moody’s published AA yield for long-term corporate bonds for the month of December as an index, and our discount rate is set within 25 basis points of the index. Moody’s AA yield dropped from 7.19% for December 2001 to 6.63% for December 2002. Similarly, we evaluate the expected long-term rate of return on the assets held in our defined benefit pension plan based on market and economic conditions, the Plan’s asset allocation and other factors. As a consequence of our most recent annual review, we reduced the discount rate for all of our employee benefit plans from 7.25% as of December 31, 2001 to 6.75% as of December 31, 2002 and reduced our expected rate of return on our pension plan assets from 9.0% for 2002 to 8.5% for 2003. Pension expense is very sensitive to changes in the discount rate and the expected return on assets. For example, a change in the discount rate by 0.25% (while holding other assumptions constant) would result in a $1.0 million change in our annual pension expense, and a change in the expected rate of return by 0.25% (while holding other assumptions constant) would result in a $.4 million change in our annual pension expense.

As with the computations on pension expense, cash contribution requirements to the pension plan are sensitive to changes in the assumed discount rate and the assumed rate of return on plan assets. We have traditionally contributed the maximum tax-deductible amount to the pension plan each year, and we do not anticipate that any increases in contribution requirements generated by recent poor stock market performance will have a material impact on future cash flows.

Unrecognized actuarial losses (which occur when investment returns are less than expected) amounted to $25 and $18 million in 2002 and 2001, respectively, and will continue to be amortized into pension expense in future periods. For a discussion of pension expense in recent periods and a projected increase in pension expense in 2003 as a result of these changes in our pension plan estimates, see “Results of Operations — Comparison of 2002 and 2001 — Noninterest Expense.”

In January 2003,the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51”. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interest in variable interest entities created or obtained after January 31, 2003. The Interpretation requires certain disclosures in financial statements issued after January 31, 2003 if it is reasonably possible that we will consolidate or disclose information about variable interest entities when the Interpretation becomes effective. We do not expect that the provisions of this Interpretation will have a material impact on our financial condition or results of operations.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”. SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation” to provide alternative methods of transition when companies elect to change from the intrinsic method to the fair value method of accounting for stock-based employee compensation, including stock options. In addition, the Statement amends the disclosure requirement of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the fair value based method of accounting for stock-based employee compensation and the effect of the method used on reported results. The statement is effective for fiscal years ended after December 15, 2002 and the disclosures to be provided in interim financial reports will be required for interim periods beginning after December 15,

2002. We currently use the intrinsic method of accounting for stock options and have not yet determined if we will change from the intrinsic value method to the fair value method of accounting for employee stock options. For additional information regarding our accounting for stock compensation, including a tabular presentation of the effects on our net income and earnings per share had we utilized the fair value method of accounting for stock options and other stock compensation, see “Stock Compensation Plans” in Note 1 to the Consolidated Financial Statements under Item 8.

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This Interpretation requires the recording at fair value the issuance of guarantees which would include the issuance of standby letters of credit. The disclosure provisions of this Interpretation were implemented by us as of December 31, 2002 and the initial recognition and measurement provisions will be implemented beginning January 1, 2003. Adoption of the Interpretation is not expected to materially affect our financial condition, results of operations, earnings per share or cash flows. See also Note 19 to the Consolidated Financial Statements.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires the recognition of certain costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. This Statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Adoption of this standard is not expected to materially affect our financial condition, results of operations, earnings per share or cash flows.

In April 2002, the FASB issued SFAS No. 145 which rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. Additionally, SFAS No. 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. We will adopt SFAS 145 in 2003. Upon adoption, we must reclassify prior period items that do not meet the extraordinary item classification criteria in Opinion No. 30. In the fourth quarter of 2001, under the provisions of SFAS No. 4, we recorded an extraordinary item from the early extinguishment of debt of $3.9 million after-tax, or $.03 per diluted share. Upon adoption of SFAS No. 145, this will no longer qualify for extraordinary treatment and must be reclassified and included with noninterest expense.

In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset. It is effective for financial statements issued for fiscal years beginning after June 15, 2002. The adoption of this standard is not expected to have a material impact on our financial condition, results of operations, earnings per share or cash flows.

Certain statements contained herein are not based on historical facts and are “forward-looking statements” within the meaning of federal securities laws. See “Forward Looking Statements” at the beginning of this report.

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income on interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average cost; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin. For purposes of the table and the following discussion, (i) income from interest-earning assets and net interest income is presented on a fully-taxable equivalent basis primarily by adjusting income and yields earned on tax-exempt interest received on loans to qualifying borrowers and on certain of our securities to make them equivalent to income and yields earned on fully-taxable investments, assuming a federal income tax rate of 35%, and (ii) unpaid interest on nonaccrual loans has not been included for purposes of determining interest income. Information is based on average daily balances during the indicated periods.


(1)	Loans and leases include portfolio loans and leases, loans held for sale and nonperforming loans, but unpaid interest on nonperforming loans has not been included for purposes of determining interest income.

The following table presents certain information on a fully-taxable equivalent basis regarding changes in our interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate) and (3) changes in rate/volume (change in rate multiplied by change in volume).


(1)	Volume increases include the effects of the acquisitions of Andover Bancorp, Inc. and MetroWest Bank on October 31, 2001, Ipswich Bancshares, Inc. on July 26, 2002 and Bancorp Connecticut, Inc. on August 31, 2002.

(2)	Includes changes in interest income and expense not due solely to volume or rate changes.

The following table sets forth certain information relating to our mortgage banking activities at the dates and for the period indicated.

The following table sets for other noninterest expenses for the periods indicated.

The following table sets forth our investment securities at the dates indicated.

The following table sets forth the contractual maturities and fully-taxable equivalent weighted average yields of our debt securities at December 31, 2002. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following table sets forth the composition of our loan and lease portfolio at the dates indicated.

Table 8 — Scheduled Contractual Amortization of Certain Loans and Lease at December 31, 2002

The following table sets forth the scheduled contractual amortization of our construction and development loans and commercial business loans and leases at December 31, 2002, as well as the amount of loans which are scheduled to mature after one year which have fixed or adjustable interest rates.

The following table presents commercial loans by geographical area at the dates indicated.

The following table presents the changes in the balances of deposits outstanding at the dates indicated.

Table 11 — Maturity of Certificates of Deposits of $100,000 or more at December 31, 2002

The following table sets forth the scheduled maturity of certificates of deposit of $100,000 or more at December 31, 2002.

Table 12 — Five-Year Table of Activity in the Allowance for Loan and Lease Losses

The following table sets forth information concerning the activity in our allowance for loan and lease losses during the periods indicated.

The allowance for loan and lease losses is available for offsetting credit losses in connection with any loan, but is internally allocated to various loan categories as part of our process for evaluating the adequacy of the allowance for loan and lease losses. The following table sets forth information concerning the allocation of our allowance for loan and lease losses by loan categories at the dates indicated.

The following table sets for information regarding our nonperforming assets at the dates indicated.

The following table presents selected operating data for our business segments for the year ended December 31, 2002.

The following table presents operating results for the quarter ended December 31, 2002 and 2001.


(1)	Special charges consist of merger charges, charter consolidation costs, asset write-downs and branch closing costs where applicable.

(2)	Annualized.

(3)	Represents noninterest expenses as a percentage of net interest income and noninterest income.

The information contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations -Asset Liability Management” in Item 7 hereof is incorporated herein by reference.

For the years ended December 31, 2002, 2001 and 2000, interest of $434,685, $596,315 and $712,843 and income taxes of $104,810, $121,592 and $92,970 were paid, respectively. During 2000 $3,094 of investment securities were transferred to securities available for sale.

The accounting and reporting policies of Banknorth Group, Inc. (“Banknorth”) and its subsidiaries conform to accounting principles generally accepted in the United States of America and to general practice within the banking industry. Banknorth’s principal business activities are retail and commercial banking as well as trust and investment management, investment planning and insurance brokerage services, and are conducted through the Banknorth’s direct and indirect subsidiaries located in Maine, New Hampshire, Massachusetts, Connecticut, Vermont and New York. Banknorth and its subsidiaries are subject to regulation of, and periodic examination by, the Office of the Comptroller of Currency and the Federal Reserve Board and the Superintendent of the Maine Bureau of Financial Regulations, among other agencies. The following is a description of the more significant accounting policies.

The Consolidated Financial Statements include the accounts of Banknorth and its subsidiaries. Banknorth’s principal operating subsidiary is Banknorth, NA (the “Bank”). All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts in prior periods have been reclassified to conform to the current presentation.

Assets held in a fiduciary capacity are not assets of Banknorth and, accordingly, are not included in the Consolidated Balance Sheets.

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to change relate to the determination of the allowance for loan and lease losses, accounting for acquisitions and review of goodwill and intangible assets, and accounting for pension plans.

Banknorth is required to comply with various laws and regulations of the Federal Reserve Board which require that Banknorth maintain certain amounts of cash on deposit and is restricted from investing those amounts.

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, federal funds sold and other short-term investments with maturities less than 90 days minus federal funds purchased. Generally, federal funds are sold or purchased for one-day periods.

Investments in debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and reflected at amortized cost.

Investments not classified as “held to maturity” are classified as “available for sale.” Securities available for sale consist of debt and equity securities that are available for sale in order to respond to changes in market interest rates, liquidity needs, changes in funding sources and other similar factors. These assets are specifically identified and are carried at market value. Changes in market value of available for sale securities, net of applicable income taxes, are reported as a separate component of shareholders’ equity and comprehensive income. When a decline in market value of a security is considered other than temporary, generally six months or longer, the cost basis of the individual security is

written down to market value as the new cost basis and the loss is charged to net securities gains (losses) in the consolidated statements of income as a writedown. Banknorth does not have a trading portfolio.

Premiums and discounts are amortized and accreted over the term of the securities on a method that approximates the interest method. Gains and losses on the sale of securities are recognized at the time of the sale using the specific identification method.

Loans are carried at the principal amounts outstanding adjusted by partial charge-offs and net deferred loan costs or fees. Residential real estate loans are generally placed on nonaccrual when reaching 120 days past due or in process of foreclosure. All closed-end consumer loans 90 days or more past due and any equity line in the process of foreclosure are placed on nonaccrual status. Secured consumer loans are written down to realizable value and unsecured consumer loans are charged-off upon reaching 120 or 180 days past due depending on the type of loan. Commercial real estate loans and commercial business loans and leases which are 90 days or more past due are generally placed on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. When a loan has been placed on nonaccrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when collectibility of principal is reasonably assured and the loan has performed for a period of time, generally six months. Loans are considered impaired when it is probable that Banknorth will not be able to collect all amounts due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and collateral value.

Loan origination and commitment fees and certain direct origination costs are deferred, and the net amount is amortized as an adjustment of the related loan’s yield using methods that approximate the level yield method over the estimated lives of the related loans.

Consumer lease financing loans are carried at the amount of minimum lease payments plus residual values, less unearned income which is amortized into interest income using the interest method.

The allowance for loan and lease losses is maintained at a level determined to be adequate by management and approved by the Board Risk Committee to absorb future charge-offs of loans and leases deemed uncollectable. This allowance is increased by provisions charged to operating expense and by recoveries on loans previously charged off, and reduced by charge-offs on loans and leases.

Arriving at an appropriate level of allowance for loan and lease losses necessarily involves a high degree of judgment. The ongoing evaluation process includes a formal analysis of the allowance each quarter, which considers, among other factors, the character and size of the loan portfolio, business and economic conditions, loan growth, charge-off experience, delinquency trends, nonperforming loan trends, portfolio migration data and other asset quality factors.

For the commercial business loan and lease and the commercial real estate loan portfolios, we evaluate specific loan status reports on certain commercial and commercial real estate loans rated “substandard” or worse in excess of a specified dollar amount. Estimated reserves for each of these credits is determined by reviewing current collateral value, financial information, cash flow, payment history and trends and other relevant facts surrounding the particular credit. Provisions for losses on the remaining commercial and commercial real estate loans are based on pools of similar loans using a combination of historical loss experience and migration analysis, which considers the probability of a loan moving from one risk rating category to another over the passage of time, transition matrix and qualitative adjustments.

Although management uses available information to establish the appropriate level of the allowance for loan and lease losses, future additions to the allowance may be necessary because estimates are susceptible to change as a result of changes in economic conditions and other factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review Banknorth’s allowance for loan and lease losses. Such agencies may require Banknorth to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

Bank owned life insurance (“BOLI”) represents life insurance on the lives of certain employees who have provided positive consent allowing the Bank to be the beneficiary of such policies. Increases in the cash value of the policies, as well as insurance proceeds received, are recorded in other noninterest income, and are not subject to income taxes. The cash value is included in assets. Banknorth reviews the financial strength of the insurance carrier prior to the purchase of BOLI and annually thereafter, and BOLI with any individual carrier is limited to 10% of capital plus reserves.

Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of related assets; generally 25 to 40 years for premises and 3 to 7 years for equipment.

Costs of software developed for internal use, such as those related to software licenses, programming, testing, configuration and integration, are capitalized and included in premises and equipment. Included in the capitalized costs are those costs related to both Company personnel and third party consultants involved in the development and installation. Once placed in service, the capitalized asset is amortized on a straight-line basis over its estimated useful life, generally five to seven years. Capitalized costs of software developed for internal use are reviewed on an ongoing basis for compliance with accounting standards. In addition, management periodically reviews capitalized costs for impairment. Significant judgment is exercised in these impairment reviews including the periodic evaluation of the cost/benefit analyses of software projects under development and the determination of the remaining useful life of completed software projects.

Banknorth’s acquisition strategy has historically used both the pooling-of-interest and purchase method of accounting for acquisitions. Effective July 1, 2001, the purchase method of accounting is the only acceptable accounting method. For acquisitions accounted for under the purchase method, assets acquired and liabilities assumed must be recorded based on their estimated fair value, which in many instances involves estimates based on third party valuations, discounted cash flows or other valuation techniques. Certain liabilities such as employee severance, facility closings and contract terminations may be accrued as part of the cost of acquisition. Purchase acquisitions typically result in goodwill or other intangible assets which are subject to ongoing periodic impairment tests. Goodwill is evaluated for impairment at least annually using several fair value techniques, including market capitalization, discounted future cash flows and multiples of revenues/earnings. The valuation techniques contain estimates such as discount rate, projected future cash flows and time period in their calculations. Furthermore, the determination of which intangible assets have finite lives is subjective, as is the determination of the amortization period for such intangible assets. Goodwill is evaluated for impairment

at the reporting unit level, and there is goodwill recorded in the following reporting units: Community Banking, Insurance Brokerage and Investment Management.

Identifiable intangible assets consists of core deposit intangibles, noncompete agreements and customer lists and are amortized over their estimated useful lives on a method that approximates the amount of economic benefits to Banknorth. They are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The useful lives are shown below:

Banknorth reviews long-lived assets, including premises and equipment and other intangible assets for impairment at least annually or whenever events or changes in business circumstances indicate that the remaining useful life may warrant revision or that the carrying amount of the long-lived asset may not be fully recoverable. Banknorth performs undiscounted cash flow analyses to determine if impairment exists. If impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Residential mortgage loans originated for sale are classified as held for sale. These loans are specifically identified and carried at the lower of aggregate cost or estimated market value. Market value is estimated based on outstanding investor commitments or, in the absence of such commitments, current investor yield requirements. Forward commitments to sell residential real estate mortgages are contracts that Banknorth enters into for the purpose of reducing the market risk associated with originating loans for sale should interest rates change. Forward commitments to sell are recorded at fair value and are included with loans held for sale. Commitments to originate rate-locked loans are also accounted for at fair value and are classified in loans held for sale.

Gains and losses on sales of mortgage loans are determined using the specific identification method and recorded as mortgage sales income, a component of mortgage banking services income. The gains and losses resulting from the sales of loans with servicing retained are adjusted to recognize the present value of future servicing fee income over the estimated lives of the related loans. Since the fourth quarter of 2000, Banknorth has generally sold residential loans and the related servicing rights on a flow basis.

Mortgage servicing rights are amortized on a method that approximates the estimated weighted average life of the underlying loans serviced for others. Amortization is recorded as a charge against mortgage service fee income, a component of mortgage banking services income. Banknorth’s assumptions with respect to prepayments, which affect the estimated average life of the loans, are adjusted periodically to reflect current circumstances. In evaluating the realizability of the carrying values of mortgage servicing rights, Banknorth obtains third party valuations based on loan level data including note rate, type and term on the underlying loans.

Mortgage servicing fees received from investors for servicing their loan portfolios are recorded as mortgage servicing fee income when received. Loan servicing costs are charged to noninterest expenses when incurred.

Effective January 1, 2001, Banknorth adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 133 sets accounting and reporting standards for derivative instruments and hedging activities and requires that all derivatives be recognized on the balance sheet at fair value. Banknorth recognized an after-tax loss of $290 thousand from the cumulative effect of adoption of this accounting standard.

Starting January 1, 2001, Banknorth recognizes all derivatives on the balance sheet at fair value. On the date the derivative is entered into, Banknorth designates whether the derivative is part of a hedging relationship (cash flow or fair value hedge). Banknorth formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. Banknorth also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows or fair values of hedged items.

From time to time Banknorth may use certain hedging strategies which include the use of derivative financial instruments. The primary objective of Banknorth’s hedging strategies is to reduce net interest rate exposure arising from Banknorth’s asset and liability structure and mortgage banking activities. Banknorth uses forward delivery contracts to reduce interest rate risk on closed residential mortgage loans held for sale and rate-locked loans expected to be closed and held for sale. Banknorth also purchases mortgage-backed security options to modify its forward mortgage commitments. Changes in fair value of the options are included in the calculation of the carrying value of loans held for sale.

Changes in fair value of a derivative that is highly effective and that qualifies as a cash flow hedge are recorded in other comprehensive income and are reclassified into earnings when the related forecasted transaction affects earnings, generally within 60 to 90 days. Banknorth discontinues hedge accounting when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedge item, because it is unlikely that the forecasted transaction will occur, or management determines that the designation of the derivative as a hedging instrument is no longer appropriate.

In 2002, Banknorth began offering commercial customers interest rate swap and cap products to enable these customers to synthetically fix the interest rate on variable interest rate loans. These pay variable, receive fixed interest rate swaps on our books are offset by entering into simultaneous pay fixed, receive variable rate swaps with a third party broker/dealer. Both of these swap products are marked to market and are carried on our balance sheet at fair value.

Banknorth has non-contributory defined benefit pension plans that cover most employees. The benefits are based on years of service and the employee’s career average earnings. Banknorth has historically made cash contributions to the defined benefit pension plan for the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.

Banknorth uses a December 31 measurement date to determine its pension expense and related financial disclosure information. In accordance with SFAS No. 87, the discount rate is set for the retirement plans by reference to investment grade bond yields. Banknorth uses Moody’s published AA yield for long-term corporate bonds for the month of December as an index, and the discount rate is set within 25 basis points of the index. Moody’s AA yield dropped from 7.19% for December 2001 to 6.63% for December 2002. Similarly, the expected long-term rate of return on the assets held in our defined benefit pension plan was evaluated based on market and economic conditions, the Plan’s asset allocation and other factors. As a consequence of the most recent annual review, the discount rate for all of our

employee benefit plans was reduced from 7.25% as of December 31, 2001 to 6.75% as of December 31, 2002 and the expected rate of return on the pension plan assets was reduced from 9.0% for 2002 to 8.5% for 2003. Pension expense is very sensitive to changes in the discount rate and the expected return on assets.

Significant actuarial losses (which occur when investment returns are less than expected) resulted during 2002 and 2001 when one-year investment returns were substantially lower than the long-term assumption as a result of declines in the stock market. These actuarial losses amounted to approximately $25 million and $18 million in 2002 and 2001, respectively. The unrecognized actuarial loss will continue to be amortized into earnings in future periods. Continued volatility in pension expense is expected as assumed investment returns vary from actual.

Banknorth maintains Section 401(k) savings plans for substantially all of its employees. Employees are eligible to participate in the 401(k) Plan on the first day of the month following their date of hire. Under the plans, Banknorth makes a matching contribution of a portion of the amount contributed by each participating employee, up to a percentage of the employee’s annual salary. The plans allow for supplementary profit sharing contributions by Banknorth, at its discretion, for the benefit of participating employees.

Banknorth previously sponsored a Profit Sharing Employee Stock Ownership Plan (the “ESOP”) which was designed to invest primarily in Banknorth common stock. The ESOP was merged into the 401(k) Plan effective January 1, 2001. Banknorth previously sponsored a leveraged employee stock ownership plan which was merged with and into the ESOP. The debt of the ESOP was fully paid in the fourth quarter of 2002.

Statement of Financial Accounting Standards SFAS No. 123, “Accounting for Stock-Based Compensation” encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees,” whereby compensation cost is the excess, if any, of the quoted market price of the underlying stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock upon exercise of the stock option. Banknorth has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, must make pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied. The pro forma disclosures include the effects of all awards granted on or after January 1, 1995 and the effects of the Employee Stock Purchase Plan. Had Banknorth determined cost based on the fair value at the grant date for its stock options and

expense related to the employee stock purchase plan under SFAS No. 123, its net income would have been reduced to the pro forma amounts indicated as follows:

Banknorth has investments in both tax advantaged and small business investment limited partnerships. The tax advantaged limited partnerships are primarily involved in approved low income housing investment tax credit projects in Banknorth’s market area while the small business investment limited partnerships are primarily providing seed money to small businesses also in Banknorth’s market area. These investments are included in other assets. Investments in the tax advantaged limited partnerships are amortized over the same period the tax benefits are expected to be received. The investments in small business investment limited partnerships, for which Banknorth has the ability to exercise significant influence (generally, a 3% or greater ownership interest), are reviewed and adjusted quarterly based on the equity method. If Banknorth does not exercise significant influence, Banknorth’s investment is accounted for under the cost method and the carrying value is periodically evaluated for other than temporary impairment. Except for fixed capital or loan commitments agreed to in advance, the partnerships have no recourse to Banknorth.

Banknorth uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income taxes are allocated to each entity in the consolidated group based on its share of taxable income. Management exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed on a regular basis as regulatory and business factors change.

Tax credits generated from limited partnerships are reflected in earnings when realized for federal income tax purposes.

Earnings per share have been computed in accordance with SFAS No. 128, “Earnings Per Share.” Basic earnings per share have been calculated by dividing net income by weighted average shares outstanding before any dilution and adjusted to exclude the weighted average number of unallocated shares held by the ESOP. Diluted earnings per share have been calculated by dividing net income by weighted average shares outstanding after giving effect to the potential dilution that could occur if the potential common shares were converted into common stock using the treasury stock method.

An operating segment is defined as a component of a business for which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and evaluate performance. Banknorth’s primary business is community banking, which provides over 90% of its revenues and profits. Accordingly, disaggregated segment information is not presented in the notes to the financial statements.

In January 2003,the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51”. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interest in variable interest entities created or obtained after January 31, 2003. The Interpretation requires certain disclosures in financial statements issued after January 31, 2003 if it is reasonably possible that Banknorth will consolidate or disclose information about variable interest entities when the Interpretation becomes effective. Banknorth does not expect that the provisions of this Interpretation will have a material impact on its financial condition or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This Interpretation requires the recording at fair value the issuance of guarantees which would include the issuance of standby letters of credit. The disclosure provisions of this Interpretation have been implemented as of December 31, 2002 and the initial recognition and measurement provisions will be implemented beginning January 1, 2003. Adoption of the Interpretation is not expected to materially affect our financial condition, results of operations, earnings per share or cash flows. As of December 31, 2002, the approximate fair value of the premium guarantees on the standby letters of credit was $890 thousand. See also Note 19 to the Consolidated Financial Statements.

Acquisitions are an important part of Banknorth’s strategic plans. The following table summarizes acquisitions completed since January 1, 2000. The 2002 acquisitions were accounted for as purchases, and as such, were included in our results of operations from the date of acquisition.

During 2002, Banknorth acquired Ipswich Bancshares, Inc. (“Ipswich”), Bancorp Connecticut, Inc. (“Bancorp”), Community Insurance Agencies, Inc. (“Community”) and Warren Bancorp (“Warren”). The following table summarizes the estimated fair value of the assets acquired and liabilities assumed for Ipswich, Bancorp, CIA and Warren at the date of acquisition. Banknorth expects that some adjustments of the estimated fair values assigned to the assets acquired and liabilities assumed will be recorded in 2003, although such adjustments are not expected to be significant. It is estimated that none of the goodwill will be deductible for income tax purposes.

A summary of the amortized cost and market values of securities available for sale and held to maturity follows:

The amortized cost and market values of debt securities at December 31, 2002 by contractual maturities are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At December 31, 2002, Banknorth had $830.1 million of securities available for sale with call provisions.

A summary of realized gains and losses on securities available for sale for 2002, 2001 and 2000 follows: Included in realized losses for 2001 was a $2.1 million other than temporary impairment loss on a trust preferred security.

Banknorth’s lending activities are conducted principally in New England and upstate New York. The principal categories of loans in Banknorth’s portfolio are residential real estate loans, which are secured by single-family (one to four units) residences; commercial real estate loans, which are secured by multi-

family (five or more units) residential and commercial real estate; commercial business loans and leases; and consumer loans and leases. A summary of loans and leases follows:

Loans and leases include net deferred charges of $14.5 million at December 31, 2002 and $7.5 million at December 31, 2001. Deferred charges included deferred loan origination costs, net of deferred loan origination fees, and unearned income on leases.

The following table sets forth information regarding nonperforming loans and accruing loans 90 days or more overdue at the dates indicated:

Interest income that would have been recognized for 2002 and 2001 if nonperforming loans at December 31, 2002 and 2001 had been performing in accordance with their original terms approximated $2.9 million in 2002 and $3.1 million in 2001.

Impaired loans are commercial and commercial real estate loans which Banknorth believes will probably not result in the collection of all amounts due according to the contractual terms of the loan agreement. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,”

although the two categories overlap. All commercial and commercial real estate nonaccrual loans are impaired, but not all such impaired loans are on nonaccrual. Accrual of interest on commercial and commercial real estate loans is generally discontinued when collectibility of principal or interest is uncertain or on which payments of principal or interest have become contractually past due 90 days. Banknorth may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectibility. The amount of reserves for impaired loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original contractual interest rate, and its recorded value, or, as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral less cost to sell.

At December 31, 2002 and 2001, total impaired loans were $50.3 million and $57.5 million, of which $33.6 million and $53.6 million had related allowances of $10.9 million and $14.7 million, respectively. During the years ended December 31, 2002 and 2001, the income recognized related to impaired loans was $1.8 million and $2.6 million, respectively, and the average balance of outstanding impaired loans was $53.3 million and $54.2 million, respectively. Banknorth generally applies cash received on impaired loans to the principal balance of the loan.

Internally developed software, which is comprised of $20.9 million of software in use and $8.9 million of software in development, had a remaining book value of $21.3 million at December 31, 2002 and is

included in furniture, fixtures and equipment above. A project to develop software to automate teller stations and customer service platforms was abandoned in December 2002. As a result, $6.2 million of previously capitalized costs that have no future benefit were written-off in December 2002.

During 2002, Banknorth entered into a 15-year lease to occupy 140,000 square feet of office space in the Greater Portland, Maine area. This lease is being accounted for as a capital lease. As of December 31, 2002, the gross amount of premises under the capital lease was $23.5 million. Amortization of the asset held under the capital lease is included with depreciation expense. As of December 31, 2002, the capital lease obligation was partially offset by a $17.1 million outstanding loan held by Banknorth on the property. The net obligation under the capital lease obligation of $6.1 million is included in other long-term debt.

Banknorth adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”) effective January 1, 2002. As of the date of adoption, we had unamortized goodwill totaling $409.3 million and unamortized identifiable intangible assets totaling $57.3 million, all of which were subject to the transition provisions of SFAS No. 141, “Business Combinations” and SFAS No. 142. Banknorth has completed the transitional impairment test on goodwill assets and has concluded that the amount of recorded goodwill was not impaired as of January 1, 2002. Banknorth does not currently have any other indefinite-lived intangible assets recorded in the consolidated balance sheet. No material reclassifications or adjustments to the useful lives of finite-lived intangible assets were made as a result of adopting the new standards. At December 31, 2002, Banknorth had $34.5 million in unamortized identifiable intangible assets consisting of core deposit intangibles, noncompete agreements and customer lists.

In October 2002, the FASB issued SFAS No. 147, “Acquisitions of Certain Financial Institutions, an amendment of SFAS Nos. 72 and 144 and FASB Interpretation No. 9.” SFAS No. 147 amends SFAS No. 72 to exclude from its scope most acquisitions of financial institutions and to require that such transactions be accounted for in accordance with SFAS No. 141 and, under certain circumstances, previously recognized SFAS No. 72 intangible assets be reclassified as goodwill. SFAS No. 147 also amends SFAS No. 144 to include within its applicability long-term customer-relationship intangible assets of financial institutions. Banknorth has adopted SFAS No. 147 effective January 1, 2002 and has reclassified $34.7 million of SFAS No. 72 intangible assets to goodwill in accordance with SFAS No. 142.

The changes in the carrying amount of goodwill and other intangibles for the years ended December 31, 2001 and 2002 are as follows:

The following table sets forth the reconcilement of net income and earning per share excluding goodwill and SFAS No. 72 intangible amortization for the years ended December 31, 2002, 2001 and 2000:

An analysis of mortgage servicing rights for the years ended December 31, 2002, 2001 and 2000 follows:

The following table reconciles the expected federal income tax expense (computed by applying the federal statutory tax rate to income before taxes) to recorded income tax expense:

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities, which are included in Other Assets and Other Liabilities, respectively, at December 31, 2002 and 2001 follow:

Banknorth has determined that a valuation allowance is not required for any of the deferred tax assets since it is more likely than not that these assets will be realized principally through carryback to taxable income in prior years, and future reversals of existing taxable temporary differences.

During 2002, notices to assess tax plus interest for the years 2001, 2000 and 1999 were received from the Massachusetts Department of Revenue (“DOR”) related to certain banks that we have acquired. To our knowledge, the acquired banks are among approximately 40 banking institutions in Massachusetts that have received notices of this type. The notices relate to four Massachusetts-based banks that have been acquired by us through December 2002 and had a real estate investment trust (“REIT”) in their corporate structure. These banks have since been combined with Banknorth, N.A. The DOR contends that dividend distributions from a REIT to a parent company are fully taxable in Massachusetts. We disagree with the position of the DOR and contend that Massachusetts law provides for a 95% dividends-received deduction. Because the legal issues raised are substantially similar for all of the financial institutions involved, we have acted together with those institutions to appeal assessments and to pursue all available means to defend our position. This appeal is still pending. The aggregate assessment of tax in connection with our acquired REITs for 2001, 2000 and 1999 is approximately $5.9 million, net of Federal benefit. It is our intention to record this assessment in the first quarter of 2003 as taxes payable (with an offsetting increase to goodwill previously recorded by us in connection with these acquisitions) pending resolution of the appeal.

Codifying the DOR position discussed above, on March 5, 2003, legislation was signed into Massachusetts law that retroactively disallows the dividends received deduction from a REIT effective for tax years ending on or after December 31, 1999 and, for tax years 2002 and later, gives the DOR expanded powers for reviewing the business purpose of transactions that have tax benefits. At the current time we do not believe that this legislation will have a material adverse affect on our financial condition, results of operations, earnings per share or cash flows.

Special charges include merger-related, charter consolidation, asset write-downs and branch closing expenses. The following table summarizes special charges for the years ended December 31, 2002, 2001 and 2000.

Merger-related personnel costs on business combinations accounted for under the purchase method of accounting includes the costs of maintaining duplicate employees at the acquired bank during the systems integration period and related employee benefits and outplacement services. For business combinations accounted for under the purchase method of accounting, severance costs are accrued at merger date (and are included in the determination of goodwill) for those employees identified to be severed at time of closing. Merger-related personnel costs on business combinations accounted for under the pooling of interests method include severance costs, the costs of maintaining duplicate employees at the acquired bank during the systems integration period, and related employee benefits and outplacement services. The approximate number of employees that were severed in each of the banking acquisitions was: Andover/ MetroWest — 220, Ipswich — 30, Bancorp Connecticut — 75, and Banknorth Vermont — 220.

Systems conversions and integration costs and customer communications costs are recorded as incurred and are associated with the costs of converting the accounts, records and data processing equipment of the acquired companies to the systems maintained by Banknorth, as well as the costs of required notices to customers of the acquired bank concerning the acquisition and conversion of their accounts to Banknorth systems.

Asset write-downs/facility costs relate primarily to branch closings and acquisitions accounted for under the pooling of interests. The costs represent lease termination costs and impairment of assets for redundant office space, closed branches and equipment to be disposed of or abandoned.

Charter consolidation costs represent costs incurred to consolidate the charters of the Company’s eight national bank subsidiaries to a single national bank charter effective January 1, 2002.

Other special charges include write-downs of $0.9 million and $3.7 million in 2001 and 2000, respectively, on the residual values assigned to auto lease receivables that were acquired in mergers completed prior to 2001. Banknorth ceased making auto leases in 1997. In 2000, Banknorth incurred a $3.1 million termination charge in connection with the terminating a contract with a sales and marketing organization that had helped sign-up new merchants under our merchant card processing program.

The following table presents activity in the accrual account for special charges for the years ended December 31, 2002 and 2001, respectively.

Retail securities sold under repurchase agreements generally have maturities of 365 days or less and are collateralized by mortgage-backed securities and U.S. Government obligations.

At December 31, 2002, Banknorth also had a $110 million unsecured line of credit. The line is renewable every 364 days and, if used, carries interest at LIBOR plus 0.625%. The average balance outstanding under this line of credit during 2002 was $2.1 million.

A summary of long-term debt (debt with original maturities of more than one year) follows:

Wholesale securities sold under agreements to repurchase have maturities greater than one year and are generally sold to broker/dealers.

The following table presents the maturities of long-term debt outstanding at the dates indicated:

Callable borrowings of $1.0 billion are shown in their respective periods assuming that the callable debt is redeemed at the initial call date while all other borrowings are shown in the periods corresponding to their scheduled maturity date.

Borrowings from the Federal Home Loan Bank, which consist of both fixed and adjustable rate borrowings, are secured by a blanket lien on qualified collateral, consisting primarily of loans with first mortgages secured by one to four family properties, certain unencumbered investment securities and other

qualified assets. During the fourth quarter of 2001, Banknorth prepaid $174.6 million of FHLB borrowings and incurred a prepayment penalty of $6.0 million ($3.9 million net of tax) which was recorded as an extraordinary item. The FHLB borrowings which were prepaid had a weighted average cost of 5.62% and a weighted average maturity of 2 years.

In June 2001, Banknorth’s subsidiary issued $200 million of 7.625% subordinated notes due in 2011. Banknorth incurred $2.0 million of debt issuance costs, which is being amortized over the ten-year term. Interest is payable semi-annually in June and December. The notes qualify as Tier 2 capital.

The following is a summary of the capital trust securities outstanding as of December 31, 2002:

There were issuance costs associated with the issuance of the capital trust securities. The net cost of the securities, including the amortization of the issuance costs was 8.72% and 9.54% at December 31, 2002 and 2001.

On February 22, 2002, Banknorth Capital Trust II, a subsidiary of Banknorth issued $200 million of 8% trust preferred securities to the public and invested the proceeds from this offering in an equivalent amount of junior subordinated debentures issued by Banknorth. The proceeds from the offering to Banknorth, which was net of $6.8 million of issuance costs, were used for general corporate purposes. These securities pay interest quarterly, are mandatorily redeemable on April 1, 2032 and may be redeemed by the Trust at par any time on or after April 1, 2007.

In connection with the acquisition of Ipswich Bancshares, Inc. on July 26, 2002, Banknorth assumed the obligations of Ipswich under Ipswich’s outstanding 10.20% capital securities, of which $3.5 million was outstanding at September 30, 2002.

Banknorth repurchased in the open market $5.0 million in 2001 and $31.2 million in 1999 of trust preferred securities originally issued by Peoples Heritage Capital Trust I in 1997.

The trust preferred securities qualify as Tier 1 capital for regulatory purposes.

Banknorth’s subsidiary bank must maintain noninterest-bearing cash balances on reserve with the Federal Reserve Bank (“FRB”). In 2002 and 2001, the average required reserve balances were $60.0 million and $49.4 million, respectively.

FRB adopted quantitative measures which assign risk weightings to assets and off-balance sheet items and also define and set minimum regulatory capital requirements (risk-based capital ratios.) Banks are required to have core capital (Tier 1) of at least 4% of risk-weighted assets, total capital of at least 8% of risk-weighted assets and a minimum Tier 1 leverage ratio of 3% of adjusted quarterly average assets. Tier 1 capital consists principally of shareholders’ equity, including qualified perpetual preferred stock but excluding unrealized gains and losses on securities available for sale, less goodwill and certain other

intangibles. Total capital consists of Tier 1 capital plus certain debt instruments and the reserve for credit losses, subject to limitations. Failure to meet certain capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on the Consolidated Financial Statements. The regulations also define well-capitalized levels of Tier 1, total capital and Tier 1 leverage as 6%, 10% and 5%, respectively. At December 31, 2002 and 2001, Banknorth and its depository subsidiary were “well-capitalized”, as defined, and in compliance with all applicable regulatory capital requirements. There are no conditions or events since December 31, 2002 that management believes would cause a change in Banknorth’s well-capitalized status.

The following table summarizes Banknorth’s and its depository subsidiary’s regulatory capital requirements at December 31, 2002 and 2001.


*	Banknorth NA was formed in January 2002 as a result of the consolidation of eight banking charters within Banknorth Group. Ratios for 2001 are presented on a proforma combined basis.

In 2002, Banknorth issued 3.8 million shares in connection with acquisitions. In February 2002, Banknorth’s Board of Directors authorized the repurchase of up to 8 million shares, or approximately 6% of the outstanding Company common stock in addition to the 13 million share repurchase program authorized in 2001. During 2002, Banknorth repurchased 6.3 million shares at a total cost of $154.1 million. A total of 7.3 million shares remained under this authorization at December 31, 2002.

Dividends paid by subsidiaries are the primary source of funds available to Banknorth for payment of dividends to its shareholders. Banknorth’s banking subsidiary is subject to certain requirements imposed by federal banking laws and regulations. These requirements, among other things, establish minimum levels of capital and restrict the amount of dividends that may be distributed by the banking subsidiary to Banknorth. At December 31, 2002, Banknorth NA had $364.2 million available for dividends that could be paid without prior regulatory approval.

In 1989, Banknorth’s Board of Directors adopted a Stockholder Rights Plan declaring a dividend of one preferred Stock Purchase Right for each outstanding share of Company common stock. The rights will remain attached to the Common Stock and are not exercisable except under limited circumstances relating to the acquisition of, the right to acquire beneficial ownership of, or tender offer for 15% or more of the outstanding shares of Company common stock. The rights have no voting or dividend privileges and, until they become exercisable, have no dilutive effect on the earnings of Banknorth. On July 27, 1999 the Board of Directors amended and restated the Stockholder Rights Plan to, among other things, extend the expiration date of the rights to September 25, 2009. On July 25, 2000, Banknorth again amended and restated the Stockholder Rights Plan to reflect its acquisition of Banknorth.

The following table presents the reconciliation of transactions affecting Accumulated Other Comprehensive Income included in shareholder’s equity for the periods indicated.

The following table presents a computation of earnings per share for the periods indicated.

Weighted average shares outstanding exclude unallocated ESOP shares which averaged 94 thousand, 283 thousand, and 378 thousand shares in 2002, 2001 and 2000, respectively.

Banknorth is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to originate loans, commitments to invest in real estate limited partnerships, standby letters of credit, recourse arrangements on serviced loans, forward commitments to sell loans, foreign currency forward contracts and commercial loan interest rate swaps. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. The contract or notional amounts of those instruments reflect the extent of involvement Banknorth has in particular classes of financial instruments.

Banknorth’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments, standby letters of credit and recourse arrangements is represented by the contractual amount of those instruments. Banknorth uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. For forward commitments to sell loans, the contract or notional amounts do not represent exposure to credit loss. Banknorth controls the credit risk of its forward commitments to sell loans through credit approvals, limits and monitoring procedures.

Financial instruments with off-balance sheet risk at December 31, 2002 and 2001 follow:

Commitments to originate loans, unused lines of credit and unadvanced portions of construction loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Banknorth evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Banknorth upon extension of credit, is based on management’s credit evaluation of the borrower.

Standby letters of credit are conditional commitments issued by Banknorth to guarantee the performance by a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

At December 31, 2002, Banknorth had $51.8 million of investments in tax advantaged limited partnerships primarily involved in approved low income housing investment tax credit projects in Banknorth’s market area and commitments to invest up to an additional $24.9 million in such partnerships. At December 31, 2002, Banknorth had $14.9 million invested in small business limited partnerships which primarily provide seed money to businesses in Banknorth’s market area and commitments to invest up to an additional $15.8 million in such partnerships. Investments in both of the foregoing categories of assets are included under other assets.

Loans serviced with recourse represent Banknorth’s recourse obligations in certain of Banknorth’s servicing arrangements with investors for serviced loan portfolios. In the event of foreclosure on a serviced loan, Banknorth is obligated to repay the investor to the extent of the investor’s remaining balance after application of proceeds from the sale of the underlying collateral. To date, losses related to these recourse arrangements have been insignificant and while Banknorth cannot project future losses, the fair value of this recourse obligation is deemed to be likewise insignificant.

Forward commitments to sell residential mortgage loans are contracts which Banknorth enters into for the purpose of reducing the market risk associated with originating loans for sale. Risks may arise from the possible inability of Banknorth to originate loans to fulfill the contracts, in which case Banknorth would normally purchase loans from correspondent banks or in the open market to deliver against the contract.

Foreign currency forward contracts are contracts that Banknorth enters into as an accommodation for customers involved in international trade for the future delivery or purchase of foreign currency at a specified price. For these customers, Banknorth generally sets aside a percentage of their available line of credit until the foreign currency contract is settled. Generally, Banknorth enters into forward foreign contracts with approved reputable dealers. Risks arise from the possible inability of the seller and/or our customer to perform and from any resultant exposure to movement in foreign currency exchange rates, limiting Banknorth’s exposure to the replacement value of the contracts rather than the notional principal or contract amounts. The foreign exchange contracts outstanding at December 31, 2002 all mature within two years.

Commercial loan swaps enable customers to synthetically convert variable interest rate loans with fixed rate loans. These pay variable, receive fixed interest rate swaps on our books are offset by entering into simultaneous pay fixed, receive variable rate swaps with a third party broker/ dealer. Both of these swap products are marked to market and carried on our balance sheet at fair value.

Banknorth and certain of its subsidiaries have been named as defendants in various legal proceedings arising from their normal business activities. Although the amount of any ultimate liability with respect to such proceedings cannot be determined, in the opinion of management, based upon the opinions of counsel, any such liability will not have a material effect on the consolidated financial position, results of operations or liquidity of Banknorth and its subsidiaries.

Banknorth leases certain properties used in operations under terms of operating leases which include renewal options. Rental expense under these leases approximated $20.9 million, $19.9 million and $18.1 million for the years ended 2002, 2001 and 2000, respectively.

The following table sets forth the approximate future minimum lease payments over the remaining terms of the leases as of December 31, 2002.

In 1995, Banknorth adopted a stock option plan for non-employee directors, which was amended and restated in 2000 to authorize the issuance of up to an additional 530,000 shares. The maximum number of shares which may be issued under the amended plan is 1,060,000 shares, of which 161,250 shares had been issued upon exercise of the stock options granted pursuant to this plan through December 31, 2002. Options to purchase 113,500 shares were granted in 2002 at an exercise price of $26.34 per share, options to purchase 109,750 shares were granted in 2001 at $19.80 per share and options to purchase

100,000 shares were granted in 2000 at $14.13 per share. At December 31, 2002, there were 454,500 shares available for future options under the plan.

Banknorth has adopted or assumed in acquisitions various stock option plans for key employees. These plans include a stock option plan adopted in 1996 (the “1996 Option Plan”). The 1996 Option Plan, as amended, authorizes grants of options and other stock awards covering up to 13,000,000 shares of Common Stock. Stock options are granted with an exercise price equal to the stock’s fair market value at the date of the grant and expire 10 years from the date of the grant. At December 31, 2002, there were 1,920,268 additional shares available for grant under the 1996 Option Plan.

The per share weighted-average fair value of all stock options granted by Banknorth during 2002, 2001 and 2000 was $7.09, $6.10 and $5.23 on the date of the grants using the Black Scholes option-pricing model with the following average assumptions:

Activity for all stock option plans during the three-year period ended December 31, 2002 is summarized as follows:

The range of per share exercise prices for outstanding and exercisable stock options at December 31, 2002 was as follows:

Banknorth and its subsidiaries have 401(k) Plans covering substantially all permanent employees. Banknorth matches employee contributions based on a predetermined formula and may make additional discretionary contributions. Effective January 1, 2001, Banknorth merged the Profit Sharing Employee Stock Ownership Plan (the “ESOP”) into the 401(k) Plan. The total expense for these plans in 2002, 2001 and 2000 was $7.5 million, $5.2 million and $5.0 million, respectively.

Banknorth has an Employee Stock Purchase Plan that is available to employees with one year of service. Under the plan, shares of Banknorth’s common stock may be purchased at six-month intervals at 85% of the lower of the fair market value on the first or the last business day of each six-month period, subject to limitations set forth in the plan. Employees have the right to authorize payroll deductions up to 10% of their salary. During 2002, 2001 and 2000, employees purchased 180,955 shares, 139,427 shares and 162,537 shares at average prices of $19.24, $17.51 and $12.48 per share, respectively. The maximum number of shares which may be issued under the Employee Stock Purchase Plan is 2,852,000 shares, of which an additional 1,500,000 shares was approved by shareholders in April 2002. As of December 31, 2002, 1,427,004 shares have been issued out of this plan with 1,424,996 shares remaining to be issued. The proforma expense calculated under SFAS No. 123 approximated $933 thousand, $709 thousand and $813 thousand for 2002, 2001 and 2000, respectively.

In 1990, Banknorth adopted a Restricted Stock Plan under which up to $10,000 of the annual fee payable to each non-employee Director of Banknorth and participating subsidiaries is payable solely in shares of Company common stock. Shares issued under this plan totaled 5,599, 6,358 and 12,066 in 2002, 2001 and 2000, respectively.

Banknorth has an Incentive Plan covering all full and part-time employees. Incentives are earned based on Banknorth’s, department or individual performance as measured against targets set in connection with the annual budget. Each employee’s incentive potential is a fixed percentage of their base pay and, for a significant number of employees, can be modified up or down based on actual performance versus target.

In 2002, shareholders approved the Executive Incentive Plan under which Banknorth may pay cash incentive awards to selected officers based on Banknorth’s performance over specified periods. The Executive Incentive Plan is administered by a committee of the Board of Directors. No awards have yet been made under the Plan.

Banknorth has a noncontributory defined benefit plan covering most permanent, full-time employees. Benefits are based on career average earnings and length of service. Banknorth has historically made cash contributions to the defined benefit pension plan for the maximum amount that can be deducted for federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. Pension plan assets are invested in stocks, bonds and mutual funds.

Banknorth has adopted supplemental retirement plans for certain key officers. These plans were designed to offset the impact of changes in the pension plans that limit the benefits for highly-paid employees under qualified pension plans.

Banknorth and its subsidiaries sponsor limited post-retirement benefit programs which provide medical coverage and life insurance benefits to a closed group of employees and directors who meet minimum age and service requirements.

Banknorth and its subsidiaries recognize costs related to post-retirement benefits under the accrual method, which recognizes costs over the employee’s period of active employment. The impact of adopting SFAS No. 106 is being amortized over a twenty-year period beginning January 1, 1993.

The following tables set forth the funded status and amounts recognized in Banknorth’s Consolidated Balance Sheets at December 31, 2002 and 2001 for the pension plans (defined benefit and supplemental executive retirement plans) and other post-retirement benefit plans:

The expected return on plan assets equals the long-term rate of return multiplied by the market related value, plus the expected contributions, weighted for timing, plus expected expenses, minus the expected distributions, weighed for timing.

Interest cost equals the discount rate multiplied by the projected benefit obligation plus the service cost minus expected expenses, minus the expected distributions, weighted for timing.

Banknorth discloses fair value information about financial instruments for which it is practicable to estimate fair value. Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in certain cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, Banknorth’s fair values should not be compared to those of other banks.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market value of Banknorth. For certain assets and liabilities, the information required under SFAS No. 107 is supplemented with additional information relevant to an understanding of the fair value.

The following describes the methods and assumptions used by Banknorth in estimating the fair values of financial instruments and certain non-financial instruments:

Cash and cash equivalents, including cash and due from banks, short-term investments and federal funds sold. For these cash and cash equivalents, which have maturities of 90 days or less, the carrying amounts reported in the balance sheet approximate fair values.

Securities and loans held for sale. Fair values are based on quoted bid market prices, where available. Where quoted market prices for an instrument are not available, fair values are based on quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instrument being valued. Fair values are calculated based on the value of one unit without regard to premiums or discounts that might result from selling all of Banknorth’s holdings of a particular security in one transaction.

Loans and leases. The fair values of portfolio loans and leases are estimated by discounting the contractual cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar quality.

For certain variable-rate consumer loans, including home equity lines of credit the carrying value approximates fair value.

For nonperforming loans and certain loans where the credit quality of the borrower has deteriorated significantly, fair values are estimated by discounting cash flows at a rate commensurate with the risk associated with those cash flows.

Commitments and letters of credit not included in the table have contractual values of $5.5 billion and $4.4 billion at December 31, 2002 and 2001, respectively. These instruments generate ongoing fees at Banknorth’s current pricing levels. Of the commitments at December 31, 2002, 28% mature within one year.

Mortgage Servicing Rights. The fair value of Banknorth’s mortgage servicing rights at December 31, 2002 was based on a third party valuation analysis which considered the expected present value of future mortgage servicing income, net of estimated servicing costs, considering market consensus loan prepayment predictions at that date.

Deposits. The fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of time deposits is based on the discounted value of contractual cash flows, applying interest rates currently being offered on the deposit products of similar maturities.

The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding (“deposit base intangibles”)

Borrowings, including federal funds purchased, securities sold under repurchase agreements, borrowings from the Federal Home Loan Bank and other borrowings. The fair value of Banknorth’s long-term borrowings is estimated by discounting cash flows based on current rates available to Banknorth for similar types of borrowing arrangements. For short-term borrowings that mature or reprice in 90 days or less, carrying value approximates fair value.

Forward commitments to sell loans held for sale. The fair value of Banknorth’s forward commitments to sell loans reflects the amount Banknorth would receive or pay to terminate the commitment at the reporting date. Of the $234.7 million of forward sales commitments at December 31, 2002, Banknorth had $128.6 million in loans available to sell at that date as well as sufficient loan originations subsequent to December 31, 2002 to fulfill the commitments. Consequently, Banknorth expects to meet all of its forward sales commitments.

Rate-lock commitments to originate loans held for sale. The fair values on commitment to originate residential loans at an agreed upon rate (rate-locked) are based on the estimated gain or loss that would be recognized had the underlying loans been funded and sold on the reporting date (i.e., mark-to-market value).

Commercial loan interest rate swaps. The estimated fair value of these derivative financial instruments is based on dealer quotes.

Loans serviced with recourse. Under certain of Banknorth’s servicing arrangements with investors, Banknorth has $13.1 million of recourse obligations to those serviced loan portfolios. In the event of foreclosure on a serviced loan, Banknorth is obligated to repay the investor to the extent of the investor’s remaining balance after application of proceeds from the sale of the underlying collateral. To date, losses related to these recourse arrangements have been insignificant and while Banknorth cannot project future losses, the fair value of this recourse obligation is deemed to be likewise insignificant.

A summary of the carrying values and estimated fair values of Banknorth’s significant financial instruments at December 31, 2002 and 2001 follows:

In connection with the consolidation of its eight subsidiary bank charters into one charter on January 1, 2002, Banknorth contributed $64.5 million of non-monetary assets and $4.8 million of liabilities to the banking subsidiary in 2002. These assets and liabilities were previously held by the parent company as they related to services provided across all banks. However, after the consolidation of banking charters,

these assets and liabilities were contributed to the bank in the form of a non-cash capital contribution. The assets contributed were comprised principally of furniture, equipment, software and intangible assets. The liabilities contributed related mainly to accrued expense of telephone, data processing and marketing costs.

The Parent Company’s Statement of Changes in Shareholders’ Equity are identical to the Consolidated Statement of Changes in Shareholders’ Equity and therefore are not presented here.

On August 22, 2002, Banknorth announced that it had entered into an agreement to acquire Connecticut-based American Financial Holdings, Inc (“American”), parent company of American Savings Bank. American had $2.8 billion of consolidated assets and $438.1 million of shareholders’ equity at December 31, 2002. Under terms of the agreement, each outstanding share of common stock of American will be converted into the right to receive $32.00 in cash or 1.22 shares of Banknorth common stock, plus cash in lieu of any fractional share interest, subject to election and allocation procedures which are intended to ensure that 50% of the outstanding shares of American common stock will be converted into the right to receive Banknorth common stock and 50% of the outstanding American common stock will be converted into cash. The Banknorth and American boards of directors and the American shareholders have approved the agreement. Banknorth has received all required regulatory approvals. The acquisition was completed on February 14, 2003.

We have audited the accompanying consolidated balance sheets of Banknorth Group, Inc. and subsidiaries (“Banknorth”) as of December 31, 2002 and 2001, 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, 2002. These consolidated financial statements are the responsibility of Banknorth’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Banknorth Group, Inc. and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 8 to the Consolidated Financial Statements, effective January 1, 2002, Banknorth adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” and SFAS No. 147, “Acquisitions of Certain Financial Institutions.”

Incorporated by reference to “Election of Directors” on pages 2 through and “Executive Officers who are not Directors” on pages and of our definitive proxy statement, dated March 10, 2003 (the “Proxy Statement”).

Incorporated by reference to “Compensation of Executive Officers and Transactions with Management” on pages through of the Proxy Statement.

Information regarding security ownership of certain beneficial owners and management is incorporated by reference to “Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management” on pages through of the Proxy Statement.

Information regarding our equity compensation plans is incorporated by reference to “Equity Compensation Plan Information” on page of the Proxy Statement.

Incorporated by reference to “Indebtedness of Management” and “Certain Transactions” on page of the Proxy Statement.

Within 90 days prior to the date of this annual report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the Exchange Act is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(a)(1) The following financial statements are incorporated by reference from Item 8 hereof:


	Consolidated balance sheets at December 31, 2002 and 2001

	Consolidated statements of income for each of the years in the three-year period ended December 31, 2002

	Consolidated statements of changes in shareholders’ equity for each of the years in the three-year period ended December 31, 2002

	Consolidated statements of cash flows for each of the years in the three-year period ended December 31, 2002

	Notes to Consolidated Financial Statements

	Independent Auditors’ Report

(a)(2) All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements and related notes thereto.

(a)(3) The following exhibits are included as part of this Form 10-K. Where applicable, references to Banknorth include Peoples Heritage Financial Group, Inc., its name prior to May 10, 2000.


	(1)	Incorporated by reference to Exhibit A to the Agreement and Plan of Merger, dated as of October 27, 1997, between Banknorth and CFX Corporation, which agreement is included as Exhibit A to the Prospectus/ Proxy Statement included in the Form S-4 Registration Statement (No. 333-23991) filed by Banknorth with the SEC on December 31, 1997.

	(2)	Exhibits are incorporated by reference to (i) the proxy statement filed by Banknorth with the SEC on March 23, 1998, (ii) the proxy statement filed by Banknorth with the SEC on March 22, 2000 and (iii) the Form S-4 Registration Statement (No. 333-95587) filed by Banknorth with the SEC on January 28, 2000, which describes an amendment which changed the name of the registrant to “Banknorth Group, Inc.”

	(3)	Exhibit is incorporated by reference to the Form 10-K report filed by Banknorth for the year ended December 31, 2000.

	(4)	Exhibit is incorporated by reference to the Form S-4 Registration Statement (No. 333-95587) filed by Banknorth with the SEC on January 28, 2000.

	(5)	Exhibit is incorporated by reference to the Form 8-A/A report filed by Banknorth with the SEC on July 26, 2000.

	(6)	Banknorth has no instruments defining the rights of holders of its long-term debt where the amount of securities authorized under any such instrument exceeds 10% of the total assets of Banknorth and its subsidiaries on a consolidated basis. Banknorth hereby agrees to furnish a copy of any such instrument to the SEC upon request.

	(7)	Exhibit is incorporated by reference to Banknorth’s Form 10-K report for the year ended December 31, 1990.

	(8)	Exhibit is incorporated by reference to Banknorth’s Form 10-K report for the year ended December 31, 1995.

	(9)	Exhibit is incorporated by reference to the Form S-4 Registration Statement (No. 33-20243) filed by Banknorth with the SEC on February 22, 1988. An amendment to the 1986 Stock Option and Stock Appreciation Rights Plan is incorporated by reference to the proxy statement filed by Banknorth with the SEC on March 24, 1994.


(10)	Exhibit is incorporated by reference to the proxy statement dated March 22, 2002 filed by Banknorth with the SEC.

(11)	Exhibit is incorporated by reference to the Form 10-K report filed by Banknorth for the year ended December 31, 1996.

(12)	Exhibit is incorporated by reference to the Form 10-K report filed by Banknorth for the year ended December 31, 2001.

(13)	Exhibit is incorporated by reference to the Form 10-K report filed by Bank of New Hampshire Corporation (File No. 0-9517) for the year ended December 31, 1994.

(14)	Exhibit is incorporated by reference to the Form 10-K report filed by Evergreen Bancorp, Inc. for the year ended December 31, 1996.

(15)	Exhibit is incorporated by reference to the proxy statement dated March 10, 2003 filed by Banknorth with the SEC.

Banknorth’s management contracts or compensatory plans or arrangements consist of Exhibit Nos. 10(a)-(p).

(b) Banknorth did not file a Current Report on Form 8-K during the fourth quarter of the period covered by this report.

(d) There are no other financial statements and financial statement schedules which were excluded from this report which are required to be included herein.

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Banknorth has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	By:	/s/ WILLIAM J. RYAN



	William J. Ryan
	Chairman, President and Chief
	Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.


	1. I have reviewed this annual report on Form 10-K of Banknorth Group, Inc. (the “Registrant”);

	2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

	3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

	4. The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:


	a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):


	a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and


	6. The Registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


	1. I have reviewed this annual report on Form 10-K of Banknorth Group, Inc. (the “Registrant”);

	2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

	3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

	4. The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:


	a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):


	a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and


	6. The Registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

98 EX-10.(A) 3 b45642bgexv10wxay.txt EX-10(A) FORM OF SEVERANCE AGREEMENT - RYAN EXHIBIT 10(a) BANKNORTH GROUP, INC. AMENDED AND RESTATED SEVERANCE AGREEMENT WILLIAM J. RYAN This Amended and Restated Severance Agreement (this "Agreement") is made and entered into as of the 1st day of January, 2003, by and between Banknorth Group, Inc. (the "Company") and William J. Ryan (the "Executive"); W I T N E S S E T H: WHEREAS, the Company and the Executive are parties to a certain Severance Agreement dated January 1, 2000, as amended by a First Amendment to Severance Agreement dated as of May 22, 2001 (as so amended, the "Prior Agreement"); and WHEREAS, the Company and the Executive wish to amend and restate the Prior Agreement in its entirety as hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree, and amend and restate the Prior Agreement in its entirety, as follows: 1. Definitions (a) Accrued Benefits means: (i) All salary earned or accrued through the date the Executive's employment is terminated; (ii) reimbursement for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive through the date the Executive's employment is terminated; (iii) any and all other compensation previously earned by the Executive and deferred under or pursuant to any deferred compensation plan or plans of the Company then in effect together with any interest or deemed earnings thereon; (iv) any bonus earned by the Executive for a Year or other performance period ending prior to the Year or other performance period in which employment terminates, but not yet paid to the Executive, under any bonus or incentive compensation plan or plans in which the Executive is a participant; (v) to the extent not previously paid to the Executive for the Year in which employment terminates, a pro rata portion of the maximum Annual Bonus payable to the Executive for the Year in which employment terminates under any bonus or incentive compensation plan or plans of the Company in which the Executive is a participant, determined as if the Executive had remained in employment for the full Year and prorated based upon weeks, including partial weeks, of employment during that Year; (vi) to the extent not previously paid to the Executive for the "Performance Period" (as defined in the EIP) in which employment terminates, a pro rata Long-Term Incentive Award in an amount determined as described in Section 5 of the EIP; 2 (vii) to the extent not previously paid or provided to the Executive, all other payments and benefits to which the Executive may be entitled under the terms of any applicable compensation or benefit plan, program or arrangement of the Company. (b) Act means the Securities Exchange Act of 1934, as amended. (c) Affiliate of any specified persons means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (d) Annual Bonus means any bonus or incentive award under any bonus or incentive compensation plan, program or arrangement of the Company in which the Executive is a participant the performance period for which is or was initially scheduled to be one year or less. (e) Annual Compensation means the sum of: (i) the Executive's annual base salary at the rate in effect on the date of a termination of employment as described in Section 3 or in Section 7(d) (or, in the event of a termination for "Good Reason" under Section 1(k)(i)(A) below, the annual base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) the greatest of the Annual Bonuses, if any, either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. 3 (f) Base Amount means an amount equal to the Executive's Annualized Includable Compensation for the Base Period as defined in Section 280G(d)(1) and (2) of the Code (as hereinafter defined). (g) Bonus (whether or not capitalized) means any bonus or incentive award (including any Annual Bonus or Long-Term Incentive Award) under any bonus or incentive compensation plan, program or arrangement of the Company in which the Executive is a participant. (h) Cause means (i) the executive's conviction of, or plea of nolo contendere to, a felony; or (ii) willful and intentional misconduct, willful neglect, or gross negligence in the performance of the Executive's duties, which has caused a demonstrable and serious injury to the Company, monetary or otherwise. The Executive shall be given written notice that the Company intends to terminate his employment for Cause. Such written notice shall specify the particular acts, or failures to act, on the basis of which the decision to so terminate employment was made. In the case of a termination for Cause as described in clause (ii), above, the Executive shall be given the opportunity within thirty (30) days of the receipt of such notice to meet with the Board to defend such acts, or failures to act, prior to termination. The Company may suspend the Executive's title and authority pending such meeting, and such suspension shall not constitute "Good Reason," as defined in subsection (n) below. (i) "Change in Control" of the Company shall mean a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the 4 foregoing, a Change in Control of the Company also shall mean the occurrence of any of the following events: (i) any "person" (as defined under Section 3(a)(9) of the Act) or "group" of persons (as provided under Section 13d-3 of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act), of capital stock of the Company the holders of which are entitled to vote for the election of directors ("voting stock") representing that percentage of the Company's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than twenty-five percent (25%) of all such voting stock; (ii) during any period of twenty four consecutive months, individuals who at the beginning of such period constituted the Board of Directors of the Company (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors of the Company (excluding any Board seat that is vacant or otherwise unoccupied). (iii) there shall be consummated any consolidation, merger, stock for stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which holders of voting stock of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting stock of the 5 Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation). (j) Code means the Internal Revenue Code of 1986, as amended. (k) Disability means a disability entitling the Executive to payments under the Company's long-term disability plan applicable to the Executive. (l) Effective Date means the date this Agreement is executed by the parties. (l) EIP means the Banknorth Group, Inc. Executive Incentive Plan as amended and in effect from time to time, and any successor plan. (m) Employment Period means a period commencing on the date of a Change in Control of the Company and ending on the earlier of (i) the last day of the twenty-fourth month following the month in which the Change in Control occurs or (ii) the Executive's Normal Retirement Date. (n) Good Reason means: (i) any breach of this Agreement by the Company, including without limitation (A) any reduction during the Employment Period in the amount of the Executive's base salary or aggregate benefits as in effect from time to time, (B) failure to provide the Executive with the same fringe benefits that were provided to the Executive immediately prior to a Change in Control of the Company, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits 6 taken as a whole, or (C) any other breach by the Company of its obligations contained in Section 6 below; (ii) without the Executive's express written consent, the assignment to the Executive of any duties which are materially inconsistent with the Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Company, a material change in the Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction in the Executive's title, duties or responsibilities, or in the level of his support services as in effect immediately prior to the Change in Control; (iii) the relocation of the Executive's principal place of employment, without the Executive's written consent, to a location outside the same metropolitan area in which the Executive was employed at the time of such Change in Control, or the imposition of any requirement that the Executive spend more than ninety (90) business days per year at a location other than such principal place of employment; or (iv) any purported termination of the Executive's employment for Cause or Disability which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (q) below; or (v) a change in the ownership of the Company (either accompanying or following the Change in Control), such that the Executive's duties, reporting responsibilities, or authority is no longer consistent with those of an executive of an independent company. Upon the occurrence of any of the events described in (i), (ii), (iii), (iv) or (v) above, the Executive shall give the Company written notice that such event constitutes Good Reason, and 7 the Company shall thereafter have thirty (30) days in which to cure. If the Company has not cured in that time, the event shall constitute Good Reason. (o) Long-Term Incentive Award means an incentive award under the EIP the performance period for which is or was initially scheduled to be in excess of one year. (p) Normal Retirement Date means Normal Retirement Date as defined in the Retirement Plan. (q) Notice of Termination shall mean a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. ` (r) Person or Group means a "person" or "group," as defined in Section 1(g)(i) hereof. (s) Plan Year with respect to any of the Retirement Plan or the 401(k) Plan, the "plan year" as defined in such plan. (t) Retirement Plan means the Banknorth Group, Inc. Retirement Plan, as amended and in effect from time to time and any successor plan. (u) SERP Agreement means the Amended and Restated Supplemental Retirement Agreement dated January 1, 2002 between the Executive and the Company, as amended. (v) Year means a calendar year unless otherwise specifically provided. (w) 401(k) Plan means the Banknorth Group, Inc. 401(k) Plan dated January 1, 2001, as amended, which plan constitutes a continuation and merger of the Banknorth Group, Inc. 8 Thrift Incentive Plan and the Banknorth Group, Inc. Profit Sharing and Employee Stock Ownership Plan. 2. Term of Agreement. This Agreement shall begin on the Effective Date and shall continue until the third anniversary of such date, provided that, on the first anniversary of the Effective Date, and on each succeeding anniversary, the term shall be renewed for an additional period of one year unless either party has given written notice that the term is not so renewed, which notice must be delivered to the other party at least ninety (90) days prior to the date of any such renewal, and further provided that if a Change in Control of the Company occurs during such term, the term shall in all events continue through the last day of the Employment Period. This Agreement is also subject to earlier termination as provided in Section 3 below. All rights and obligations hereunder shall survive to the extent necessary to the intended enforcement thereof. 3. Termination of Employment Prior to a Change in Control. (a) The Company and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. In the event the Executive's employment is terminated prior to a Change in Control of the Company, this Agreement shall, except as provided in subsection (b) below, be terminated and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease. (b) If the Executive's employment is terminated by the Company prior to the occurrence of a Change in Control of the Company, and if it can be shown that the Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Company thereafter, or (ii) otherwise occurred 9 in connection with, or in anticipation of, the Change in Control of the Company, the Executive shall have the rights described in Section 7(d) below, as if a Change in Control of the Company had occurred on the date immediately preceding such termination. 4. Employment Following a Change in Control. If a Change in Control of the Company occurs when the Executive is employed by the Company, the Company will continue thereafter to employ the Executive, and the Executive will remain in the employ of the Company, during the Employment Period, in accordance with the terms and provisions of this Agreement. 5. Duties. During the Employment Period, the Executive shall serve the Company in such capacities and positions as may be assigned by the Company consistent with the Executive's capacities and positions immediately prior to the Change in Control and shall devote the Executive's best efforts and all of the Executive's business time, attention and skill to the business and affairs of the Company, as such business and affairs now exist and as they may hereafter be conducted. 6. Compensation. During the Employment Period, the Executive shall be compensated by the Company as follows: (a) the Executive shall receive, at such intervals and in accordance with such standard policies as in effect immediately prior to the Change in Control of the Company, an annual base salary not less than the Executive's annual base salary as in effect immediately prior to the Change in Control of the Company, subject to adjustment as hereinafter provided; 10 (b) the Executive shall be included in all plans providing incentive compensation to executives, including but not limited to bonus, deferred compensation, annual or other incentive compensation, supplemental pension, stock ownership, stock option, stock appreciation, stock bonus and similar or comparable plans as any such plans are extended by the Company from time to time to senior corporate officers, key employees and other employees of comparable status; (c) the Executive shall be reimbursed, at such intervals and in accordance with such standard policies as may be in effect on the date of the Change in Control of the Company, for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company, including travel expenses; (d) the Executive shall be allowed to participate, on the same basis as applicable to other employees of comparable status and position, in any and all plans, programs or arrangements covering employee benefits or perquisites, including but not limited to the following: group medical insurance, hospitalization benefits, disability benefits, medical benefits, dental benefits, pension benefits, profit sharing and stock bonus plans; (e) the Executive shall receive annually not less than the amount of paid vacation and not fewer than the number of paid holidays received annually immediately prior to the Change in Control of the Company or available annually to other employees of comparable status and position with the Company. During the Employment Term the Board of Directors of the Company, or an appropriate committee thereof, will consider and appraise, at least annually, the contributions of the 11 Executive to the Company's operating efficiency, growth, production and profits and, in accordance with past practice, due consideration shall be given to the upward adjustment of the Executive's compensation rate, at least annually, commensurate with increases generally given to other senior corporate officers and key employees and as the scope of the Executive's duties expands. 7. Termination of Employment. Any termination by the Company or the Executive of the Executive's employment during the Employment Period shall be communicated by written Notice of Termination to the Executive if such notice is delivered by the Company, and to the Company if such notice is delivered by the Executive. The Notice of Termination shall comply with the requirements of Section 17 below. (a) Termination for Disability. If during the Employment Period, the Executive's employment is terminated on account of the Executive's Disability, the Executive shall receive any Accrued Benefits, and shall remain eligible for all benefits as provided pursuant to the terms of any long-term disability programs of the Company in effect at the time of such termination. (b) Termination on the Executive's Death. If, during the Employment Period, the Executive's employment is terminated on account of the Executive's death, the Executive's estate or his designated beneficiary (or beneficiaries), as applicable, shall receive all the Executive's Accrued Benefits. (c) Voluntary Termination or Termination for Cause. If, during the Employment Period, (i) the Executive shall terminate employment with the Company other than 12 for Good Reason, or (ii) the Executive's employment is terminated for Cause, the Executive shall receive from the Company only the Accrued Benefits. (d) Termination by the Company Without Cause or by the Executive for Good Reason. If, during the Employment Period, the Executive's employment with the Company is terminated by the Company other than for Cause, or by the Executive for Good Reason, then: (i) the Executive shall receive from the Company the Accrued Benefits, which shall be paid within ten (10) days after the later of the date of termination of the Executive's employment and the date of the Change in Control; provided that (x) for this purpose, Accrued Benefits shall not include any entitlement to severance under any Company severance policy generally applicable to the Company's salaried employees and (y) to the extent that any Annual Bonus or Long-Term Incentive Award to be paid to the Executive following a Change in Control pursuant to the EIP is included in Accrued Benefits hereunder and paid to the Executive, such payment shall be deemed to satisfy the Company's obligation, if any, to make payment of the same pursuant to the EIP; (ii) the Executive shall receive from the Company, no less than ten (10) days following termination of his employment, a lump sum payment (the "Termination Payment") equal to three (3) times the Annual Compensation; (iii) for purposes of determining the Executive's benefit under the SERP Agreement, the Executive shall be credited with 36 additional months of age and of service determined as follows: (A) The additional 36 months of age and service shall be applied for purposes of benefit accrual, vesting, eligibility for early retirement, subsidized early 13 retirement factors, actuarial equivalence and any other purposes under the Retirement Plan and the SERP Agreement. (B) Any provision under the Retirement Plan or the SERP Agreement prohibiting the accrual of any additional benefits after the Executive has been credited with more than a stated number of years of service shall be disregarded. (C) For purposes of determining the amount of the Executive's benefit under the SERP Agreement, the reduction in respect of the benefit paid under the Retirement Plan shall be based on the Executive's actual Retirement Plan benefit (that is, without any additional deemed service). (D) For purposes of determining the Early Retirement Benefit (as defined in the SERP Agreement) and other forms of benefit under the SERP Agreement, the reductions for early commencement of payment of Early Retirement Benefits described in the second sentence of Section 5.2 of the SERP Agreement shall not apply. (E) The Benefit Computation Base (as defined in the SERP Agreement) shall be determined as if it were being calculated at the end of the 36 month period of service credited to the Executive under this Section 7(d)(iii) and as if during such 36 additional month period the Executive's annualized compensation was the same as such compensation for (I) the Year during which the Executive's employment is terminated, or, (II) any Year before the Change in Control occurred, whichever is greater. (F) Any amendment to the Retirement Plan within the twelve (12) month period prior to the termination of the Executive's employment shall be disregarded to 14 the extent that the application of such amendment would decrease the total amount of the benefits provided for in this Section 7(d)(iii). (G) The Executive shall be entitled to a lump sum distribution of his SERP in all events, and the Company shall not be entitled to require payment over a longer period. If the Executive elects a lump sum payment (i) the actuarial equivalent benefit shall be determined in accordance with the provisions of the Retirement Plan as in effect immediately prior to the Change in Control, or as in effect on termination of the Executive's employment, whichever creates the greater benefit, and (ii) payment shall be made within thirty (30) days following the later of (A) termination of the Executive's employment, or (B) the date the Executive gives written notice of the Executive's intent to elect a lump sum. (iv) the Executive shall be paid a lump sum amount equal to (A) the sum of (I) the total aggregate value of all contributions, other than elective contributions by the Executive and employer matching contributions relating thereto, and forfeitures allocated to the Executive's account under the 401(k) Plan for the Plan Year ending immediately prior to the Change of Control, or, if different, the Plan Year ending immediately prior to the termination of the Executive's employment, whichever Plan Year would produce the greater aggregate value, and (II) (A) the matching contributions under the 401(k) Plan (or its successor) which would have been credited under such plan on Executive's behalf, if the Executive had contributed the maximum salary deferral contribution allowable under Section 402(g) of the Code, for the calendar year in which the Executive's employment with the Company was terminated, multiplied by (B) three (3). 15 (v) all rights under any equity or long-term incentive plan shall be fully vested to the extent not otherwise provided by the terms of any such plan; (vi) the Executive shall continue to be covered at the expense of the Company by the same or equivalent hospital, medical, dental, accident, disability and life insurance coverage as in effect for the Executive immediately prior to termination of his employment, until the earlier of (I) 36 months following termination of employment, or (II) the date the Executive has commenced new employment and has thereby become eligible for comparable benefits; provided that, with respect to any of the coverages described above, if such coverage is provided through an insurance policy with an insurance company unaffiliated with the Company (before or after the Change in Control), and if under the terms of the applicable policy, it is not possible to provide continued coverage (or if continued coverage under such policy would increase the Company's cost allocable to the Executive by more than 100%), then the Company shall pay the Executive a lump sum cash amount, no later than thirty (30) days following termination of employment an amount equal to twice the aggregate allocable cost of such coverage as applicable immediately prior to termination of employment, such payment to be made without any discount for present value. 8. Certain Supplemental Payments by the Company. (a) In the event the Executive's employment is terminated pursuant to Section 3(b) or 7(d) above, and if in connection therewith it is determined that (i) part or all of the compensation and benefits to be paid to the Executive constitute "parachute payments" under Section 280G of the Code, and (ii) the payment thereof will cause the Executive to incur excise tax under Section 4999 of the Code, the Company, on or before the date for payment of such 16 excise tax, shall pay the Executive, in lump sum, an amount (the "Gross-Up Amount") such that, after payment of all federal, state and local income tax and any additional excise tax under Section 4999 of the Code in respect of the Gross-Up Amount payment, the Executive will be fully reimbursed for the amount of such excise tax. (b) The determination of the Parachute Amount, the Base Amount and the Gross-Up Amount, as well as any other calculations necessary to implement this Section 8 shall be made by a nationally recognized accounting or benefits consulting firm selected by the Executive and reasonably satisfactory to the Company. The Consultant's fee shall be paid by the Company. (c) As promptly as practicable following such determination and the elections hereunder, the Company shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement and shall promptly pay to or distribute for the benefit of the Executive in the future such amounts as become due to the Executive under this Agreement. (d) As a result of the uncertainty in the application of Section 280G of the Code at the time of an initial determination hereunder, it is possible that payments will not have been made by the Company which should have been made under clause (a) of this Section 8 ("Underpayment"). In the event that there is a final determination by the Internal Revenue Service, or a final determination by a court of competent jurisdiction, that an Underpayment has been made and the Executive thereafter is required to make any payment of an excise tax, income tax, any interest or penalty, the accounting or benefits consulting firm selected under clause (b) above shall determine the amount of the Underpayment that has occurred and any such 17 Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. If and to the extent that the Executive receives any tax refund from the Internal Revenue Service that is attributable to payments by the Company pursuant to this Section 8 of amounts in excess of the actual Gross-Up Amount as finally determined by the Internal Revenue Service or a court of competent jurisdiction ("Overpayment"), the Executive shall promptly pay to the Company the amount of such refund that is attributable to the Overpayment (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, the Executive shall not have any obligation to pay the Company any amount pursuant to this Section 8(d) if and to the extent that any such obligation would cause the arrangement to be treated as a loan or extension of credit prohibited by applicable law. 9. Further Obligations of the Executive. (a) Confidentiality. During and following the Executive's employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company, except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials or copies thereof relating to the Company's business which the Executive shall prepare, or use, or come into contact with, shall 18 be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company. (b) Non-Solicitation. For the period from the Effective Date until the second anniversary of the termination of the Executive's employment, the Executive will not, directly or indirectly, contact, approach or solicit for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise) any officer of the Company, or an Affiliate of the Company , other than on behalf of the Company or an Affiliate of the Company, without the prior written consent of the Company. 10. Equitable Relief. Executive acknowledges and agrees that in the event of a breach by Executive of any of the provisions of Section 9 hereof, the Company shall suffer irreperable harm for which monetary damages alone will constitute an insufficient remedy. Consequently, in the event of any such breach, the Company may, in addition to other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or proving actual damages. 11. Expenses and Interest. If, after a Change in Control of the Company, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Agreement, or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any provision contained herein, or to recover damages for breach hereof, the Executive shall recover from the Company any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such 19 dispute, and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by Peoples Heritage Bank, or any successor thereto, from time to time as its prime rate from the date that payments to him should have been made under this Agreement. 12. Payment Obligations Absolute. The Company's obligation during and after the Employment Period to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever except as provided in Section 8(d) above. 13. Successors. (a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's 20 employment for Good Reason. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 13(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive hereunder shall be paid, in the event of the Executive's death, to the Executive's estate, heirs and representatives. Except as provided in this Section 13, no party may assign this Agreement or any rights, interests, or obligations hereunder without the prior written approval of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. 14. Enforcement. The provisions of this Agreement shall be regarded as divisible, and if any such provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby. 15. Amendment. This Agreement may not be amended or modified at any time except by a written instrument executed by the Company and the Executive. 16. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes, or charge which 21 it is from time to time required to withhold. The Company shall be entitled to rely on an opinion of counsel if any question as to the amount or requirement of any such withholding shall arise. 17. Governing law This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Maine. 18. Arbitration. Any dispute arising out of this Agreement shall be determined by arbitration in the State of Maine under the rules of the American Arbitration Association then in effect and judgment upon any award pursuant to such arbitration may be enforced in any court having jurisdiction thereof. 19. Notice. Notices given pursuant to this Agreement shall be in writing and shall be deemed given when received and, if mailed, shall be mailed by United States registered or certified mail, return receipt requested, addressee only postage prepaid, to the Company at: Banknorth Group, Inc. P.O. Box 9540 Two Portland Square Portland, ME 04112 Attn: Clerk or if to the Executive, at the address contained in the records of the Company, or to such other address as the party to be notified shall have given to the other. 20. No Waiver. 22 No waiver by any party at any time of any breach by another party of, or compliance with, any condition or provision of this Agreement to be performed by another party shall be deemed a waiver of similar or dissimilar provisions or conditions at any time. 21. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. 22. Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supercedes any prior severance agreements between the Executive and the Company. 23 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above. THE COMPANY BANKNORTH GROUP, INC. By: - ------------------------- ------------------------------------ Witness Carol L. Mitchell Executive Vice President, General Counsel, Secretary and Clerk - -------------------------- --------------------------------------- Witness William J. Ryan 24 EX-10.(B) 4 b45642bgexv10wxby.txt EX-10(B) FORM OF SEVERANCE AGREEMENT - EXEC OFF... EXHIBIT 10(b) BANKNORTH GROUP, INC. AMENDED AND RESTATED SEVERANCE AGREEMENT [NAME OF EXECUTIVE] This Amended and Restated Severance Agreement (this "Agreement") is made and entered into as of the 1st day of January, 2003, by and between Banknorth Group, Inc. (the "Company") and _____________ (the "Executive"); W I T N E S S E T H: WHEREAS, the Company and the Executive are parties to a certain Severance Agreement dated January 1, 2000 (as amended, the "Prior Agreement"); and WHEREAS, the Company and the Executive wish to amend and restate the Prior Agreement in its entirety as hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree, and amend and restate the Prior Agreement in its entirety, as follows: 1. Definitions (a) Accrued Benefits means: (i) All salary earned or accrued through the date the Executive's employment is terminated; (ii) reimbursement for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive through the date the Executive's employment is terminated; (iii) any and all other compensation previously earned by the Executive and deferred under or pursuant to any deferred compensation plan or plans of the Company then in effect together with any interest or deemed earnings thereon; (iv) any bonus earned by the Executive for a Year or other performance period ending prior to the Year or other performance period in which employment terminates, but not yet paid to the Executive, under any bonus or incentive compensation plan or plans in which the Executive is a participant; (v) to the extent not previously paid to the Executive for the Year in which employment terminates, a pro rata portion of the maximum Annual Bonus payable to the Executive for the Year in which employment terminates under any bonus or incentive compensation plan or plans of the Company in which the Executive is a participant, determined as if the Executive had remained in employment for the full Year and prorated based upon weeks, including partial weeks, of employment during that Year; (vi) to the extent not previously paid to the Executive for the "Performance Period" (as defined in the EIP) in which employment terminates, a pro rata Long-Term Incentive Award in an amount determined as described in Section 5 of the EIP; 2 (vii) to the extent not previously paid or provided to the Executive, all other payments and benefits to which the Executive may be entitled under the terms of any applicable compensation or benefit plan, program or arrangement of the Company. (b) Act means the Securities Exchange Act of 1934, as amended. (c) Affiliate of any specified person means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (d) Annual Bonus means any bonus or incentive award under any bonus or incentive compensation plan, program or arrangement of the Company in which the Executive is a participant the performance period for which is or was initially scheduled to be one year or less. (e) Annual Compensation means the sum of: (i) the Executive's annual base salary at the rate in effect on the date of a termination of employment as described in Section 3 or in Section 7(d) (or, in the event of a termination for "Good Reason" under Section 1(q)(i)(A) below, the annual base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) the greatest of the Annual Bonuses, if any, either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. 3 (f) Base Amount means an amount equal to the Executive's Annualized Includable Compensation for the Base Period as defined in Section 280G(d)(1) and (2) of the Code (as hereinafter defined). (g) Benefit Computation Base means either (i) the Benefit Computation Base as defined in the Supplemental Retirement Agreement between Executive and the Company or (ii) if there is no Supplemental Retirement Agreement between the Executive and the Company, the "Average Annual Compensation" as defined and used in the Retirement Plan, solely for purposes of calculating the Executive's benefit under the Banknorth Group, Inc. Supplemental Retirement Plan as affected by this Agreement. (h) Bonus (whether or not capitalized) means any bonus or incentive award (including any Annual Bonus or Long-Term Incentive Award) under any bonus or incentive compensation plan, program or arrangement of the Company in which the Executive is a participant. (i) Cause means (i) the executive's conviction of, or plea of nolo contendere to, a felony; or (ii) willful and intentional misconduct, willful neglect, or gross negligence in the performance of the Executive's duties, which has caused a demonstrable and serious injury to the Company, monetary or otherwise. The Executive shall be given written notice that the Company intends to terminate the Executive's employment for Cause. Such written notice shall specify the particular acts, or failures to act, on the basis of which the decision to so terminate employment was made. In the case of a termination for Cause as described in clause (ii), above, the Executive shall be given the opportunity within thirty (30) days of the receipt of such notice to meet with the Board to defend such acts, or failures to act, prior to termination. The Company may suspend 4 the Executive's title and authority pending such meeting, and such suspension shall not constitute "Good Reason," as defined in subsection (q) below. (j) "Change in Control" of the Company shall mean a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Company also shall mean the occurrence of any of the following events: (i) any "person" (as defined under Section 3(a)(9) of the Act) or "group" of persons (as provided under Section 13d-3 of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act), of capital stock of the Company the holders of which are entitled to vote for the election of directors ("voting stock") representing that percentage of the Company's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than twenty-five percent (25%) of all such voting stock; (ii) during any period of twenty four consecutive months, individuals who at the beginning of such period constituted the Board of Directors of the Company (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a 5 majority of the Board of Directors of the Company (excluding any Board seat that is vacant or otherwise unoccupied). (iii) there shall be consummated any consolidation, merger, stock for stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which holders of voting stock of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting stock of the Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation). (k) Code means the Internal Revenue Code of 1986, as amended. (l) Disability means a disability entitling the Executive to payments under the Company's long-term disability plan applicable to the Executive. (m) Early Retirement Benefit means the "Early Retirement Benefit" or "Early Retirement/Termination of Service Benefit" as defined in the SERP Agreement. (n) Effective Date means the date this Agreement is executed by the parties. (o) EIP means the Banknorth Group, Inc. Executive Incentive Plan as amended and in effect from time to time, and any successor plan. (p) Employment Period means a period commencing on the date of a Change in Control of the Company and ending on the earlier of (i) the last day of the twenty-fourth month following the month in which the Change in Control occurs or (ii) the Executive's Normal Retirement Date. (q) Good Reason means: 6 (i) any breach of this Agreement by the Company, including without limitation (A) any reduction during the Employment Period in the amount of the Executive's base salary or aggregate benefits as in effect from time to time, (B) failure to provide the Executive with the same fringe benefits that were provided to the Executive immediately prior to a Change in Control of the Company, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (C) any other breach by the Company of its obligations contained in Section 6 below; (ii) without the Executive's express written consent, the assignment to the Executive of any duties which are materially inconsistent with the Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Company, a material change in the Executive's reporting responsibilities, titles or offices as an employee as in effect immediately prior to the Change in Control, or a significant reduction in the Executive's title, duties or responsibilities, or in the level of the Executive's support services as in effect immediately prior to the Change in Control; (iii) the relocation of the Executive's principal place of employment, without the Executive's written consent, to a location outside the same metropolitan area in which the Executive was employed at the time of such Change in Control, or the imposition of any requirement that the Executive spend more than ninety (90) business days per year at a location other than such principal place of employment; or 7 (iv) any purported termination of the Executive's employment for Cause or Disability which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (t) below. Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, the Executive shall give the Company written notice that such event constitutes Good Reason, and the Company shall thereafter have thirty (30) days in which to cure. If the Company has not cured in that time, the event shall constitute Good Reason. (r) Long-Term Incentive Award means an incentive award under the EIP the performance period for which is or was initially scheduled to be in excess of one year. (s) Normal Retirement Date means Normal Retirement Date as defined in the Retirement Plan. (t) Notice of Termination shall mean a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. ` (u) Person or Group means a "person" or "group," as defined in Section 1(j)(i) hereof. (v) Plan Year with respect to any of the Retirement Plan or the 401(k) Plan, the "plan year" as defined in such plan. (w) Retirement Plan means the Banknorth Group, Inc. Retirement Plan, as amended and in effect from time to time and any successor plan. (x) SERP Agreement means either (i) the Supplemental Retirement Agreement between the Executive and the Company or (ii) if there is no Supplemental Retirement 8 Agreement between the Executive and the Company, the Banknorth Group, Inc. Supplemental Retirement Plan, as amended. (y) Year means a calendar year unless otherwise specifically provided. (z) 401(k) Plan means the Banknorth Group, Inc. 401(k) Plan dated January 1, 2001, as amended, which plan constitutes a continuation and merger of the Banknorth Group, Inc. Thrift Incentive Plan and the Banknorth Group, Inc. Profit Sharing and Employee Stock Ownership Plan. 2. Term of Agreement. This Agreement shall begin on the Effective Date and shall continue until the third anniversary of such date, provided that, on the first anniversary of the Effective Date, and on each succeeding anniversary, the term shall be renewed for an additional period of one year unless either party has given written notice that the term is not so renewed, which notice must be delivered to the other party at least ninety (90) days prior to the date of any such renewal, and further provided that if a Change in Control of the Company occurs during such term, the term shall in all events continue through the last day of the Employment Period. This Agreement is also subject to earlier termination as provided in Section 3 below. All rights and obligations hereunder shall survive to the extent necessary to the intended enforcement thereof. 3. Termination of Employment Prior to a Change in Control. (a) The Company and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. In the event the Executive's employment is terminated prior to a Change in Control of the Company, 9 this Agreement shall, except as provided in subsection (b) below, be terminated and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease. (b) If the Executive's employment is terminated by the Company prior to the occurrence of a Change in Control of the Company, and if it can be shown that the Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Company thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Company, the Executive shall have the rights described in Section 7(d) below, as if a Change in Control of the Company had occurred on the date immediately preceding such termination. 4. Employment Following a Change in Control. If a Change in Control of the Company occurs when the Executive is employed by the Company, the Company will continue thereafter to employ the Executive, and the Executive will remain in the employ of the Company, during the Employment Period, in accordance with the terms and provisions of this Agreement. 5. Duties. During the Employment Period, the Executive shall serve the Company in such capacities and positions as may be assigned by the Company consistent with the Executive's capacities and positions immediately prior to the Change in Control and shall devote the Executive's best efforts and all of the Executive's business time, attention and skill to the business and affairs of the Company, as such business and affairs now exist and as they may hereafter be conducted. 6. Compensation. 10 During the Employment Period, the Executive shall be compensated by the Company as follows: (a) the Executive shall receive, at such intervals and in accordance with such standard policies as in effect immediately prior to the Change in Control of the Company, an annual base salary not less than the Executive's annual base salary as in effect immediately prior to the Change in Control of the Company, subject to adjustment as hereinafter provided; (b) the Executive shall be included in all plans providing incentive compensation to executives, including but not limited to bonus, deferred compensation, annual or other incentive compensation, supplemental pension, stock ownership, stock option, stock appreciation, stock bonus and similar or comparable plans as any such plans are extended by the Company from time to time to senior corporate officers, key employees and other employees of comparable status; (c) the Executive shall be reimbursed, at such intervals and in accordance with such standard policies as may be in effect on the date of the Change in Control of the Company, for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company, including travel expenses; (d) the Executive shall be allowed to participate, on the same basis as applicable to other employees of comparable status and position, in any and all plans, programs or arrangements covering employee benefits or perquisites, including but not limited to the following: group medical insurance, hospitalization benefits, disability benefits, medical benefits, dental benefits, pension benefits, profit sharing and stock bonus plans; 11 (e) the Executive shall receive annually not less than the amount of paid vacation and not fewer than the number of paid holidays received annually immediately prior to the Change in Control of the Company or available annually to other employees of comparable status and position with the Company. During the Employment Period, the Board of Directors of the Company, or an appropriate committee thereof, will consider and appraise, at least annually, the contributions of the Executive to the Company's operating efficiency, growth, production and profits and, in accordance with past practice, due consideration shall be given to the upward adjustment of the Executive's compensation rate, at least annually, commensurate with increases generally given to other senior corporate officers and key employees and as the scope of the Executive's duties expands. 7. Termination of Employment. Any termination by the Company or the Executive of the Executive's employment during the Employment Period shall be communicated by written Notice of Termination to the Executive if such notice is delivered by the Company, and to the Company if such notice is delivered by the Executive. The Notice of Termination shall comply with the requirements of Section 17 below. (a) Termination for Disability. If during the Employment Period, the Executive's employment is terminated on account of the Executive's Disability, the Executive shall receive any Accrued Benefits, and shall remain eligible for all benefits as provided pursuant to the terms of any long-term disability programs of the Company in effect at the time of such termination. 12 (b) Termination on the Executive's Death. If, during the Employment Period, the Executive's employment is terminated on account of the Executive's death, the Executive's estate or designated beneficiary (or beneficiaries), as applicable, shall receive all the Executive's Accrued Benefits. (c) Voluntary Termination or Termination for Cause. If, during the Employment Period, (i) the Executive shall terminate employment with the Company other than for Good Reason, or (ii) the Executive's employment is terminated for Cause, the Executive shall receive from the Company only the Accrued Benefits. (d) Termination by the Company Without Cause or by the Executive for Good Reason. If, during the Employment Period, the Executive's employment with the Company is terminated by the Company other than for Cause, or by the Executive for Good Reason, then: (i) the Executive shall receive from the Company the Accrued Benefits, which shall be paid within ten (10) days after the date of termination of the Executive's employment and the date of the Change in Control; provided that (x) for this purpose, Accrued Benefits shall not include any entitlement to severance under any Company severance policy generally applicable to the Company's salaried employees and (y) to the extent that any Annual Bonus or Long-Term Incentive Award to be paid to the Executive following a Change in Control pursuant to the EIP is included in Accrued Benefits hereunder and paid to the Executive, such payment shall be deemed to satisfy the Company's obligation, if any, to make payment of the same pursuant to the EIP; 13 (ii) the Executive shall receive from the Company, no less than ten (10) days following termination of the Executive's employment, a lump sum payment (the "Termination Payment") equal to three (3) times the Annual Compensation; (iii) for purposes of determining the Executive's benefit under the SERP Agreement, the Executive shall be credited with 36 additional months of age and of service determined as follows: (A) The additional 36 months of age and service shall be applied for purposes of benefit accrual, vesting, eligibility for early retirement, subsidized early retirement factors, actuarial equivalence and any other purposes under the Retirement Plan and the SERP Agreement. (B) Any provision under the Retirement Plan or the SERP Agreement prohibiting the accrual of any additional benefits after the Executive has been credited with more than a stated number of years of service shall be disregarded. (C) For purposes of determining the amount of the Executive's benefit under the SERP Agreement, the reduction in respect of the benefit paid under the Retirement Plan shall be based on the Executive's actual Retirement Plan benefit (that is, without any additional deemed service). (D) For purposes of determining the Early Retirement Benefit and other forms of benefit under the SERP Agreement, if the Executive is less than fifty-five (55) years of age, the Executive shall be deemed to be at least fifty-five (55) years of age on the date the Executive's employment with the Company terminates, notwithstanding the Executive's actual age, if less. 14 (E) The Benefit Computation Base shall be determined as if it were being calculated at the end of the 36 month period of service credited to the Executive under this Section 7(d)(iii) and as if during such 36 additional month period the Executive's annualized compensation was the same as such compensation for (I) the Year during which the Executive's employment is terminated, or, (II) any Year before the Change in Control occurred, whichever is greater. (F) Any amendment to the Retirement Plan within the twelve (12) month period prior to the termination of the Executive's employment shall be disregarded to the extent that the application of such amendment would decrease the total amount of the benefits provided for in this Section 7(d)(iii). (G) The Executive shall be entitled to a lump sum distribution of SERP Agreement benefits in all events, and the Company shall not be entitled to require payment over a longer period. If the Executive elects a lump sum payment (i) the actuarial equivalent benefit shall be determined in accordance with the provisions of the Retirement Plan as in effect immediately prior to the Change in Control, or as in effect on termination of the Executive's employment, whichever creates the greater benefit, and (ii) payment shall be made within thirty (30) days following the later of (A) termination of the Executive's employment, or (B) the date the Executive gives written notice of the Executive's intent to elect a lump sum. (iv) the Executive shall be paid a lump sum amount equal to (A) the sum of (I) the total aggregate value of all contributions, other than elective contributions by the Executive and employer matching contributions relating thereto, and forfeitures allocated to the Executive's account under the 401(k) Plan for the Plan Year ending immediately prior to the 15 Change of Control, or, if different, the Plan Year ending immediately prior to the termination of the Executive's employment, whichever Plan Year would produce the greater aggregate value, and (II) (A) the matching contributions under the 401(k) Plan (or its successor) which would have been credited under such plan on Executive's behalf, if the Executive had contributed the maximum salary deferral contribution allowable under Section 402(g) of the Code, for the calendar year in which the Executive's employment with the Company was terminated, multiplied by (B) three (3). (v) all rights under any equity or long-term incentive plan shall be fully vested to the extent not otherwise provided by the terms of any such plan; (vi) the Executive shall continue to be covered at the expense of the Company by the same or equivalent hospital, medical, dental, accident, disability and life insurance coverage as in effect for the Executive immediately prior to termination of the Executive's employment, until the earlier of (I) 36 months following termination of employment, or (II) the date the Executive has commenced new employment and has thereby become eligible for comparable benefits; provided that, with respect to any of the coverages described above, if such coverage is provided through an insurance policy with an insurance company unaffiliated with the Company (before or after the Change in Control), and if under the terms of the applicable policy, it is not possible to provide continued coverage (or if continued coverage under such policy would increase the Company's cost allocable to the Executive by more than 100%), then the Company shall pay the Executive a lump sum cash amount, no later than thirty (30) days following termination of employment an amount equal to twice the aggregate allocable 16 cost of such coverage as applicable immediately prior to termination of employment, such payment to be made without any discount for present value. 8. Certain Supplemental Payments by the Company. (a) In the event the Executive's employment is terminated pursuant to Section 3(b) or 7(d) above, and if in connection therewith it is determined that (i) part or all of the compensation and benefits to be paid to the Executive constitute "parachute payments" under Section 280G of the Code, and (ii) the payment thereof will cause the Executive to incur excise tax under Section 4999 of the Code, the Company, on or before the date for payment of such excise tax, shall pay the Executive, in lump sum, an amount (the "Gross-Up Amount") such that, after payment of all federal, state and local income tax and any additional excise tax under Section 4999 of the Code in respect of the Gross-Up Amount payment, the Executive will be fully reimbursed for the amount of such excise tax. (b) The determination of the Parachute Amount, the Base Amount and the Gross-Up Amount, as well as any other calculations necessary to implement this Section 8 shall be made by a nationally recognized accounting or benefits consulting firm selected by the Executive and reasonably satisfactory to the Company. The Consultant's fee shall be paid by the Company. (c) As promptly as practicable following such determination and the elections hereunder, the Company shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement and shall promptly pay to or distribute for the benefit of the Executive in the future such amounts as become due to the Executive under this Agreement. 17 (d) As a result of the uncertainty in the application of Section 280G of the Code at the time of an initial determination hereunder, it is possible that payments will not have been made by the Company which should have been made under clause (a) of this Section 8 ("Underpayment"). In the event that there is a final determination by the Internal Revenue Service, or a final determination by a court of competent jurisdiction, that an Underpayment has been made and the Executive thereafter is required to make any payment of an excise tax, income tax, any interest or penalty, the accounting or benefits consulting firm selected under clause (b) above shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. If and to the extent that the Executive receives any tax refund from the Internal Revenue Service that is attributable to payments by the Company pursuant to this Section 8 of amounts in excess of the actual Gross-Up Amount as finally determined by the Internal Revenue Service or a court of competent jurisdiction ("Overpayment"), the Executive shall promptly pay to the Company the amount of such refund that is attributable to the Overpayment (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, the Executive shall not have any obligation to pay the Company any amount pursuant to this Section 8(d) if and to the extent that any such obligation would cause the arrangement to be treated as a loan or extension of credit prohibited by applicable law. 9. Further Obligations of the Executive. (a) Confidentiality. During and following the Executive's employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company, except to 18 the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials or copies thereof relating to the Company's business which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company. (b) Non-Solicitation. For the period from the Effective Date until the second anniversary of the termination of the Executive's employment, the Executive will not, directly or indirectly, contact, approach or solicit for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise) any officer of the Company, or an Affiliate of the Company , other than on behalf of the Company or an Affiliate of the Company, without the prior written consent of the Company. 10. Equitable Relief. Executive acknowledges and agrees that in the event of a breach by Executive of any of the provisions of Section 9 hereof, the Company shall suffer irreperable harm for which monetary damages alone will constitute an insufficient remedy. Consequently, in the event of any such breach, the Company may, in addition to other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or 19 injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or proving actual damages. 11. Expenses and Interest. If, after a Change in Control of the Company, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Agreement, or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any provision contained herein, or to recover damages for breach hereof, the Executive shall recover from the Company any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by Peoples Heritage Bank, or any successor thereto, from time to time as its prime rate from the date that payments to the Executive should have been made under this Agreement. 12. Payment Obligations Absolute. The Company's obligation during and after the Employment Period to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final and the Company will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever except as provided in Section 8(d) above. 13. Successors. 20 (a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Any failure of the Company to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement and shall entitle the Executive to terminate the Executive's employment for Good Reason. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 13(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive hereunder shall be paid, in the event of the Executive's death, to the Executive's estate, heirs and representatives. Except as provided in this Section 13, no party may assign this Agreement or any rights, interests, or obligations hereunder without the prior written approval of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. 21 14. Enforcement. The provisions of this Agreement shall be regarded as divisible, and if any such provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby. 15. Amendment. This Agreement may not be amended or modified at any time except by a written instrument executed by the Company and the Executive. 16. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes, or charge which it is from time to time required to withhold. The Company shall be entitled to rely on an opinion of counsel if any question as to the amount or requirement of any such withholding shall arise. 17. Governing law This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Maine. 18. Arbitration. Any dispute arising out of this Agreement shall be determined by arbitration in the State of Maine under the rules of the American Arbitration Association then in effect and judgment upon any award pursuant to such arbitration may be enforced in any court having jurisdiction thereof. 22 19. Notice. Notices given pursuant to this Agreement shall be in writing and shall be deemed given when received and, if mailed, shall be mailed by United States registered or certified mail, return receipt requested, addressee only postage prepaid, to the Company at: Banknorth Group, Inc. P.O. Box 9540 Two Portland Square Portland, ME 04112 Attn: Clerk or if to the Executive, at the address contained in the records of the Company, or to such other address as the party to be notified shall have given to the other. 20. No Waiver. No waiver by any party at any time of any breach by another party of, or compliance with, any condition or provision of this Agreement to be performed by another party shall be deemed a waiver of similar or dissimilar provisions or conditions at any time. 21. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. 22. Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supercedes any prior severance agreements between the Executive and the Company. 23 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above. THE COMPANY BANKNORTH GROUP, INC. By: - ------------------------- ------------------------------------ Witness William J. Ryan Chairman, President and CEO - -------------------------- --------------------------------------- Witness [NAME OF EXECUTIVE] 24 EX-10.(C) 5 b45642bgexv10wxcy.txt EX-10(C) AMENDED SUPPLEMENTAL RETIREMENT - RYAN EXHIBIT 10(c) AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT AGREEMENT THIS AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT AGREEMENT (this "Agreement") is made and entered into as of this 1st day of January 2002 by and between Banknorth Group, Inc. (formerly known as Peoples Heritage Financial Group, Inc.), its subsidiaries and affiliates (collectively, the "Corporation"), and William J. Ryan (the "Executive"). WITNESSETH: WHEREAS, the Corporation and the Executive are parties to a certain Supplemental Retirement Agreement dated as of January 1, 1996, as amended by a First Amendment to Supplemental Retirement Agreement dated March 27, 2001 (as so amended, the "Prior Agreement"); WHEREAS, the Corporation and the Executive wish to amend and restate the Prior Agreement in its entirety as hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Corporation and the Executive hereby agree, and amend and restate the Prior Agreement in its entirety, as follows: ARTICLE ONE SECTION 1. EMPLOYMENT. This Agreement is not an agreement of employment and nothing herein shall be deemed to confer on the Executive any right to continued employment with the Corporation or limit in any way the right of the Corporation to terminate such employment. The benefits provided under this Agreement are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. ARTICLE TWO SECTION 2.1. NORMAL RETIREMENT BENEFITS. If the Executive continues in employment with the Corporation until his sixty-fifth (65th) birthday (the "Normal Retirement Date"), he shall be entitled to a retirement benefit (the "Normal Retirement Benefit") commencing on the first day of the month next following his actual retirement (the "Commencement Date") and continuing for fifteen (15) years certain (the "Payment Period"), payable monthly in the annual amount of sixty-five percent (65%) of his Benefit Computation Base (defined in Section 2.2), multiplied by a fraction, not to exceed one (1), the numerator of which is the actual number of months of the Executive's employment with the Corporation (including partial months for month of hire and month of termination) plus sixty-six (66) and the denominator of which is three hundred (300) months, and reduced by: (1) fifty percent (50%) of the Executive's Primary Social Security retirement benefit estimated as of the Normal Retirement Date based on the Social Security retirement benefit formula assuming level future earnings based on his Benefit Computation Base in effect on the date of termination of the Executive's employment with the Corporation; (2) the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, from the tax-qualified defined benefit pension plan maintained by the Corporation (such plan, as it may hereafter be amended, restated, otherwise modified or replaced, is hereinafter referred to as the "Pension Plan"); (3) the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, which is the actuarial equivalent 2 (determined as described below) at the date of determination of the Normal Retirement Benefit, of that portion of the Executive's account balances attributable to contributions by the Corporation to any and all qualified defined contribution plans maintained by the Corporation; and (4) the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, attributable to contributions by the Corporation (but not any amounts attributable to deferrals or contributions by the Executive) from any other qualified or non-qualified retirement plan or agreement maintained or entered into by the Corporation. Whenever an "actuarial equivalent" is required to be determined under this Agreement, such actuarial equivalent shall be determined in the manner provided for determining actuarial equivalents under the Pension Plan; provided however that such manner of determination shall be no less favorable to the Executive than that prescribed for determining actuarial equivalents under the Pension Plan as in effect on the date of this Agreement. SECTION 2.2 BENEFIT COMPUTATION BASE. The Executive's Benefit Computation Base for purposes of Section 2.1 shall be the average of the Executive's compensation from the Corporation for the five (5) consecutive calendar years during the ten (10) years preceding the Executive's termination of employment with the Corporation in which such compensation is the highest (excluding all years of the Executive's employment by the Corporation after the year in which the Normal Retirement Date occurs). For the purposes of this Agreement, compensation shall mean the amount actually paid or made available to the Executive during a calendar year as remuneration of a kind or nature reported by the Corporation on the Executive's W-2. Compensation shall also include annual bonuses, any contributions made on behalf of the 3 Executive by the Corporation pursuant to a salary reduction agreement under Internal Revenue Code Sections 125, 129 and/or 401(k), and any and all other amounts that would have been reportable by the Corporation on the Executive's W-2 but for deferral of payment of such amounts under any agreement or plan or program (other than the Pension Plan), including any voluntary deferrals and any deferrals required or mandated by the terms of any agreement or plan or program of the Corporation or action of its Board of Directors. Compensation shall not include any amounts available to the Executive pursuant to any Stock Option, Stock Appreciation Right, or Senior Management Long Term Incentive Plans of the Corporation. SECTION 2.3 ACCRUED BENEFIT. The term "Accrued Benefit" shall mean the Normal Retirement Benefit (before applying the offsets in clauses (1), (2), (3), and (4) of Section 2.1 above) to which the Executive would be entitled under Section 2.1 commencing at the Normal Retirement Date assuming continuation of the Executive's employment with the Corporation until the Normal Retirement Date based on the Benefit Computation Base on the date the Accrued Benefit is determined, multiplied by a fraction not to exceed one (1), the numerator of which is the actual number of months of the Executive's employment with the Corporation (including partial months for month of hire and month of termination) plus sixty-six (66) and the denominator of which is three hundred (300) months, and reduced by: (1) fifty percent (50%) of the Executive's Primary Social Security retirement benefit estimated as of the Normal Retirement Date based on the Social Security retirement benefit formulas assuming level future earnings based on his Benefit Computation Base in effect on the date of termination of the Executive; (2) the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, from the Pension Plan; 4 (3) the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, which is the actuarial equivalent, at the date of determination of the Accrued Benefit, of that portion of the Executive's account balances attributable to contributions by the Corporation to any and all qualified defined contribution plans maintained by the Corporation; and (4) the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, attributable to contributions by the Corporation (but not any amounts attributable to deferrals or contributions by the Executive) from any other qualified or non-qualified retirement plan or agreement maintained or entered into by the Corporation. SECTION 2.4 OPTIONAL FORMS OF PAYMENT. In lieu of the fifteen-year certain payments described in Section 2.1 above (payments made over a fifteen-year period as described in Section 2.1 above are hereinafter referred to as payments made in the "Normal Form"), or whenever an Accrued Benefit is payable under this Agreement, the Executive may elect, at any time prior to the calendar year in which payments are to begin, an optional form of payment which shall be the actuarial equivalent of payments that would otherwise be made in the Normal Form, and which shall be (x) any optional form which is made available to the Executive under the terms of the Pension Plan or (y) a single lump sum payment. SECTION 2.5 VESTING. The Executive, having completed more than five (5) years of employment with the Corporation, has a vested interest in the Accrued Benefit payable under this Agreement. 5 ARTICLE THREE SECTION 3.1 BENEFICIARY. In the event of the death of the Executive, any payments to be made hereunder after the date of his death ("Remaining Payments") shall be made to the Executive's Beneficiary, as defined below, and in such case all references to "Executive" herein shall, where applicable, apply to the Beneficiary. The Executive may name one or more beneficiaries (each, a "Beneficiary") in writing to the Corporation. If no Beneficiary is so named or if no named Beneficiary is living at the time a payment is due, that payment and all subsequent payments shall be made, when otherwise due, to the Executive's estate, which shall be the "Beneficiary" for purposes of this Agreement. ARTICLE FOUR SECTION 4.1 DISABILITY PRIOR TO RETIREMENT. No disability benefits will be paid under this Agreement. If the Executive's employment is terminated or suspended by reason of mental or physical disability, disability benefits may be paid to the Executive pursuant to insurance provided by the Corporation pursuant to a separate policy, plan or agreement. Upon the later of (x) termination of any such other disability benefits or (y) the Normal Retirement Date, payment to the Executive of his Accrued Benefit (determined as of the date of disability) shall commence and such payment shall be made in the form provided in Section 2.4. If, following termination or suspension of the Executive's employment by reason of disability, the Executive resumes employment with the Corporation in the position he held immediately prior to the onset of disability, this Agreement shall continue in full force and effect as if no such disability or termination or suspension of employment had occurred. For the purposes of the numerator of the fractions in Sections 2.1 and 2.3, the Executive's period of disability shall be treated as a period of employment with the Corporation. 6 ARTICLE FIVE SECTION 5.1 TERMINATION OF EMPLOYMENT PRIOR TO NORMAL RETIREMENT DATE. If the Executive's employment with the Corporation is terminated prior to the Normal Retirement Date for any reason, the Executive shall be entitled to benefits in the amount of the Accrued Benefit determined as of the date of termination of his employment ("Early Retirement Benefits") payable (x) in the Normal Form commencing at the Normal Retirement Date or (y) to the extent so elected by the Executive, in any other form permitted under Section 2.4 and commencing at such other time as may be permitted under Section 5.2 below, subject to such adjustment as may be provided under Section 5.2 below. SECTION 5.2 EARLY PAYMENT. By written notice to the Company, the Executive may elect to have the Corporation commence payment of Early Retirement Benefits at any time after the Executive has both attained age fifty-five (55) and terminated employment with the Corporation or at any earlier time for commencement as the Corporation, in its discretion, may approve. Early Retirement Benefits shall be in the amount(s) determined in accordance with Section 5.1, but further reduced (1) by one-quarter of one percent (.25%) per month for each month or partial month (up to sixty (60)) between the date of commencement of Early Retirement Benefits and the Executive's sixty-fifth (65th) birthday and (2) by one-half of one percent (.50%) per month for each month or partial month between the date of commencement of Early Retirement Benefits and the date of the Executive's sixtieth (60th) birthday. SECTION 5.3 PAYMENT. Benefits payable under this Article Five shall be paid in the Normal Form or in any other manner elected by the Executive and permitted under Section 2.4. SECTION 5.4 FORFEITURE. Notwithstanding anything to the contrary herein, benefits under this Agreement shall be forfeited and all rights of the Executive and his Beneficiary shall become 7 null and void if the Executive's employment is terminated for Cause. For the purposes of this Section 5.4, the term "Cause" shall have the meaning given such term in the William J. Ryan Severance Agreement dated January 1, 2000. ARTICLE SIX SECTION 6.1 ASSIGNMENT . No right to payment of any amount under this Agreement may be assigned, pledged, or encumbered, nor shall any such right or other interest in amounts payable under this Agreement be subject to any attachment, garnishment, execution or other legal process. ARTICLE SEVEN SECTION 7.1 PARTICIPATION IN OTHER PLANS. Nothing contained in this Agreement shall be construed to alter, abridge, or in any manner affect the rights and privileges of the Executive to participate in and be covered by any pension, profit-sharing, group insurance, bonus or any other employee plan or plans which the Corporation may have or hereafter have. SECTION 7.2 ALTERNATIVE BENEFIT UNDER THE SERP PLAN. Without limiting the foregoing, and notwithstanding anything to the contrary in the Banknorth Group, Inc. Supplemental Retirement Plan (as the same may be amended, restated, otherwise modified or replaced, the "SERP Plan"), including, without limitation, Article Three thereof, if on the date that benefits become payable under this Agreement, the actuarial equivalent of the aggregate amount of the benefits payable to the Executive under the terms of this Agreement is less than the actuarial equivalent of the aggregate amount of the benefits to which the Executive would be entitled under the SERP Plan if he were a "Participant" (as defined in the SERP Plan) in the SERP Plan (such amount, the "Alternative Benefit"), the Executive shall be entitled to benefits payable in accordance with the 8 terms of this Agreement but in an aggregate amount equal to the actuarial equivalent of the Alternative Benefit instead of in an aggregate benefit amount determined under this Agreement. ARTICLE EIGHT SECTION 8.1 FUNDING. The Corporation shall have the right, in its discretion, at any time and from time to time to insure or otherwise provide for the obligations of the Corporation under this Agreement or to refrain from same, and to determine the extent, nature and method thereof, including the establishment of one or more trusts. Should the Corporation elect to insure this Agreement, in whole or in part, through the medium of insurance or annuities, or both, the Corporation shall be the owner and beneficiary of the policy. At no time shall the Executive be deemed to have any right, title or interest in or to any specified asset or assets of any such trust or escrow arrangement, including, without limitation, any insurance or annuity or other contracts or proceeds therefrom. No such policy, contract or other asset shall in any way be considered to be security for the performance of the Corporation's obligations under this Agreement. The Executive agrees that, if the Corporation purchases a life insurance or annuity policy on his life, he will sign any papers that may be required for that purpose and undergo any medical examination or tests which may be necessary, and otherwise reasonably cooperate with the Corporation in its efforts to secure any such policy. SECTION 8.2. NO TRUST. Nothing herein and no action taken pursuant hereto shall create or be deemed to create any trust or fiduciary relationship between the Corporation and the Executive, his Beneficiary, or any other person. ARTICLE NINE SECTION 9.1 REORGANIZATION. The Corporation shall not merge with or consolidate into or with another corporation or other entity, or reorganize, or sell substantially all of its assets to 9 another corporation, firm, or person unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligations of the Corporation under this Agreement. Upon the occurrence of any such merger, consolidation, reorganization, or sale, the term "Corporation" as used in this Agreement shall be deemed to refer to such successor, assignee, or survivor or successor Corporation, firm or person. ARTICLE TEN SECTION 10.1 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Executive and his Beneficiary and the Corporation and any successor organization which shall succeed to substantially all of its assets and business without regard to the form of such succession. SECTION 10.2 CORPORATION. As used in this Agreement, the term "Corporation" shall mean Banknorth Group, Inc., and any entity that from time to time is aggregated with Banknorth Group, Inc., its successors and assigns, under Sections 414(b), 414(c), 414(m), 414(n) or 414(o) of the Internal Revenue Code of 1986, as amended. For the purpose of determining the Executive's period of employment with the Corporation as required hereunder, the term "Corporation" shall also include any predecessor of the Corporation. ARTICLE ELEVEN SECTION 11.1. COMMUNICATIONS. Any notice or other communication required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) when delivered or refused if sent by hand during regular business hours, (ii) three (3) business days after being sent by United States Postal Service, registered or certified mail, postage prepaid, return receipt requested, (iii) on the next business day when sent by reputable overnight express mail service that provides tracing and proof of receipt or refusal of items mailed, or (iv) when received by the 10 addressee if by telecopier transmission addressed to the Corporation or Executive, as the case may be, at the address or addresses set forth below or such other addresses as the parties may designate in a notice given in accordance with this Section. To the Corporation: Banknorth Group, Inc. Two Portland Square Portland, ME 04112 To the Executive: William J. Ryan 6 Hemlock Drive Cumberland Center, ME 04021 ARTICLE TWELVE 12.1 CLAIMS PROCEDURE GENERALLY. Any claim for benefits under this Agreement ("Claim") shall be made by written notice (x) describing the basis for the Claim and (y) submitted to the Corporation within six months after the date on which such benefit is claimed to have been due. Within sixty (60) days after its receipt of a Claim, the Corporation shall respond to the Executive (or, if applicable, Beneficiary) by written notice of its determination to approve or deny the same, which notice, in the case of any denial, shall further set forth in reasonable detail the basis for denial, specific reference to the Plan provisions on which the denial is based, steps to be taken to have the denial reviewed and, if applicable, a description of any additional material needed to be provided by the Executive. The Executive may, in his discretion, elect to treat any failure of the Corporation to respond to a Claim within the time period set forth above as denial. SECTION 12.2 REVIEW. If a Claim is denied, the Executive may obtain a review of the denial by written request for review (x) describing the basis for his determination that denial was 11 erroneous and (y) submitted to the Corporation within sixty (60) days after the date of denial or deemed denial of the Claim pursuant to Section 12.1 above, as applicable. Within sixty days (60) following the Corporation's receipt of a request for review, the Corporation shall review the Claim (together with any supporting documents or other written materials reasonably related to the request and submitted therewith) and give the Executive written notice of its determination to approve or deny the same, which notice, in the case of any denial, shall further set forth in reasonable detail the basis for denial. No determination of the Corporation shall be deemed to preclude further action by the Executive (or, if applicable, Beneficiary) with respect to the Claim. ARTICLE THIRTEEN SECTION 13.1 WITHHOLDING. The Corporation shall be entitled to withhold from payment of benefits hereunder any federal, state or local withholding or other taxes, or charge from time to time required to be withheld. ARTICLE FOURTEEN SECTION 14.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supercedes all prior agreements written or oral with respect to its subject matter. This Agreement may be amended only by a written agreement signed by the parties hereto. SECTION 14.2 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maine. SECTION 14.3 SEVERABILITY. Each provision of this Agreement is intended to be severable and the invalidity, illegality, or unenforceability of any portion of this Agreement shall not affect the validity, legality, and enforceability of the remainder. 12 IN WITNESS WHEREOF, the Corporation and the Executive have caused this Agreement to be executed as an instrument under Seal as of the date and year first above written. BANKNORTH GROUP, INC., f/k/a PEOPLES HERITAGE FINANCIAL GROUP, INC. By: - ------------------------------------ --------------------------------- Witness Cynthia H. Hamilton, EVP - ------------------------------------ --------------------------------- Witness William J. Ryan 13 EX-10.(E)(2) 6 b45642bgexv10wxeyx2y.txt EX-10(E)(2) AMENDED SUPPLEMENTAL RETIREMENT AGMNT EXHIBIT 10(e)(2) FIRST AMENDMENT TO SUPPLEMENTAL RETIREMENT AGREEMENT THIS FIRST AMENDMENT TO SUPPLEMENTAL RETIREMENT AGREEMENT (this "Amendment") is made and entered into as of this 1st day of April, 2001 by and between Banknorth Group, Inc. (formerly known as Peoples Heritage Financial Group, Inc. and hereinafter referred to as the "Company"), and John W. Fridlington (the "Executive"). RECITALS: A. The Company and the Executive are parties to a certain Supplemental Retirement Agreement dated as of January 1, 1996 (the "Original Agreement"). The Original Agreement, as amended by this Agreement is referred to as the "Agreement." B. The Company and the Executive wish to amend the Original Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties agree and amend the Original Agreement as follows: 1. AMENDMENT. Section 2.04 of the Agreement is hereby amended by deleting the second to last sentence of thereof in its entirety and replacing it with the following: "In addition, the Executive may elect a lump sum under this plan." The purpose of this Amendment is to make clear that, if the Executive elects lump sum payment, the Company shall not have any right to require that payment be made over a period of five years. 2. NO FURTHER MODIFICATION. Except as expressly amended hereby, the Agreement remains unmodified and in full force and effect. 3. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of Maine without regard to its conflicts of laws principles. 4. SEVERABILITY. Each provision of this Amendment is intended to be severable and the invalidity, illegality or unenforceability of any portion of this Amendment shall not affect the validity, legality and enforceability of the remainder. IN WITNESS WHEREOF, the Company and the Executive have caused this Amendment to be executed as of the date and year first above written. BANKNORTH GROUP, INC. F/K/A PEOPLES HERITAGE FINANCIAL GROUP, INC. By: - --------------------------------- ------------------------------- Witness Name: Title: - ---------------------------------- ---------------------------------- Witness John W. Fridlington 2 FIRST AMENDMENT TO SUPPLEMENTAL RETIREMENT AGREEMENT THIS FIRST AMENDMENT TO SUPPLEMENTAL RETIREMENT AGREEMENT (this "Amendment") is made and entered into as of this 27th day of March, 2001 by and between Banknorth Group, Inc. (formerly known as Peoples Heritage Financial Group, Inc. and hereinafter referred to as the "Company"), and Peter Verrill (the "Executive"). RECITALS: A. The Company and the Executive are parties to a certain Supplemental Retirement Agreement dated as of November 26, 1990 (the "Original Agreement"). The Original Agreement, as amended by this Agreement is referred to as the "Agreement." B. Since the date of the Original Agreement, the Company has adopted the Banknorth Group. Inc. Supplemental Retirement Plan (as amended, the "SERP Plan") and the Company and the Executive now wish to amend the Original Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties agree and amend the Original Agreement as follows: 1. AMENDMENTS. 1.1 Alternative Benefit. Notwithstanding anything to the contrary in the Original Agreement or in the SERP Plan (including, without limitation, Article Three thereof), if on the date that benefits become payable under the Original Agreement, the actuarial equivalent of the aggregate amount of the benefits payable to the Executive under the terms of the Original Agreement is less than the actuarial equivalent of the aggregate amount of the benefits to which the Executive would be entitled under the SERP Plan if he were "Participant" (as defined in the SERP Plan) in the SERP Plan (such amount, the "Alternative Benefit"), the Executive shall be entitled to benefits payable in accordance with the terms of the Original Agreement but in an aggregate amount equal to the actuarial equivalent of the Alternative Benefit instead of in an aggregate benefit amount determined under the Original Agreement. Whenever an "actuarial equivalent" is required to be determined under this Amendment, such actuarial equivalent shall be determined in the manner prescribed for determining actuarial equivalents under the Original Agreement. 1.2 Optional Forms of Payment. Section 2.04 of the Agreement is hereby amended by deleting the second to last sentence thereof in its entirety and replacing it with the following: "In addition, the Executive may elect a lump sum under this plan." The purpose of the amendment set forth in this Section 1.2 is to make clear that, if the Executive elects lump sum payment, the Company shall not have any right to require that payment be made over a period of five years. 2. NO FURTHER MODIFICATION. Except as expressly amended hereby, the Agreement remains unmodified and in full force and effect. 3. GOVERNING LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of Maine without regard to its conflicts of laws principles. 4. SEVERABILITY. Each provision of this Amendment is intended to be severable and the invalidity, illegality or unenforceability of any portion of this Amendment shall not affect the validity, legality and enforceability of the remainder. 2 IN WITNESS WHEREOF, the Company and the Executive have caused this Amendment to be executed as of the date and year first above written. BANKNORTH GROUP, INC. F/K/A PEOPLES HERITAGE FINANCIAL GROUP, INC. By: - ---------------------------- -------------------------------- Witness Name: Title: - ----------------------------- ----------------------------------- Witness Peter Verrill 3 EX-10.(F) 7 b45642bgexv10wxfy.txt EX-10(F) SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10(f) BANKNORTH GROUP, INC. SUPPLEMENTAL RETIREMENT PLAN ARTICLE ONE - GENERAL The purpose of this Banknorth Group, Inc. Supplemental Retirement Plan (this "Plan") is to attract and retain certain key employees of Banknorth Group, Inc. (the "Company") and its affiliates (the Company and its affiliates are collectively referred to as the "Group") by recognizing the past service of such key employees and providing supplemental retirement benefits as herein described. This Plan is made effective as of March 27, 2001 (the "Effective Date"). ARTICLE TWO - ADMINISTRATOR Subject to Article Ten below, the Plan shall be administered by the Company's Board of Directors (the "Board") or a committee thereof (the Board or such committee is hereinafter referred to as the "Administrator"). The Administrator shall interpret the Plan, shall prescribe, amend and rescind rules relating to it from time to time as it deems proper and in the best interests of the Company, and shall take any other action necessary for the administration of the Plan. Any decision or interpretation adopted by the Administrator shall be final conclusive and binding upon all Participants. ARTICLE THREE - PARTICIPATION 3.01 GENERAL. Any individual who, as of the Effective Date, is a Key Employee, as defined below, shall become a Participant on the Effective Date. Any individual who, after the Effective Date, becomes a Key Employee shall become a Participant on the date determined by guidelines established by the Administrator. For the purposes of this Plan the term "Key Employee" means an employee of any member of the Group whose position is designated at Level 20 or above and with respect to whom application of the formula set forth in Section (a) of Article 4.01 below would yield a positive dollar amount; provided, however, that neither the term Key Employee nor the term Participant shall include any employee of any member of the group who is entitled to supplemental retirement benefits under any Supplemental Retirement Agreement or other similar agreement between such employee and any member of the Group. 3.02 TERMINATION; REEMPLOYMENT. A Participant shall cease to be a Participant upon termination of employment with the Group or otherwise ceasing to be a participant in the Pension Plan (defined below). A former Participant who recommences employment as a Key Executive (a "Former Participant") may recommence participation in the Plan only with the permission of and in accordance with guidelines determined by the Administrator. Without limiting the foregoing, in the case of any Former Participant who has received any payments under the Plan, the Administrator, in its discretion, may impose such conditions to subsequent participation (which may include adjustments to the SRA and suspension of benefits under the Plan during any period of subsequent participation) as the Administrator deems appropriate or necessary for the proper administration of the Plan; provided that the Administrator shall first notify the Former Participant of such conditions and offer the Former Participant the option of accepting the same and again becoming a Participant or declining his or her eligibility for subsequent participation. ARTICLE FOUR - RETIREMENT BENEFITS 4.01 GENERAL. Each Participant shall be entitled to a supplemental pension (the "SRA") in an amount equal to the excess, if any of: 2 (i) the benefit to which such Participant would be entitled under the Banknorth Group, Inc. Retirement Plan (known before May 10, 2000, as the Peoples Heritage Financial Group, Inc. Retirement Plan and hereinafter referred to as the "Pension Plan") stated in the form described in the first sentence of Section 3.2 of the Pension Plan (the "Normal Benefit") and commencing on the Executive's "Normal Retirement Date" as defined in the Pension Plan (the "NRD"), computed without regard to those provisions of the Pension Plan implementing the restrictions or limitations imposed by the provisions of Section 1.16 of the Pension Plan following the first paragraph thereof or any other Pension Plan provision implementing the limitations set forth in Sections 401(a)(17), of the Internal Revenue Code of 1986, as amended (the "Code"), and without regard to Section 3.10 of the Pension Plan or any other Pension Plan provision implementing the limitations set forth in Section 415 of the Code (the "Hypothetical Unrestricted Benefit"); over (ii) the amount of the actual Normal Benefit payable to such Participant commencing on the NRD under the Pension Plan. 4.02 CHANGE IN CONTROL. In the event of a "Change in Control" as defined in the Banknorth Group, Inc. Change in Control Protection Plan, as amended and in effect from time to time, the Hypothetical Unrestricted Benefit shall be calculated under Section 4.01 assuming the Pension Plan provided a fully vested benefit at all times (i.e., without any reduction in respect of amounts which might otherwise be forfeited by the Participant under the terms of the Pension Plan). 4.03 PAYMENT OF BENEFIT. Unless otherwise elected as described in this Section 4.03, the SRA shall be paid in the form of a Normal Benefit commencing on 3 the Participant's NRD. Participants may elect to receive the SRA (x) in any of the forms of benefit available under the Pension Plan (including any early retirement benefit to which the Participant is entitled under the Pension Plan), in which case the amount of payments under such alternate form shall be determined in accordance with the provisions of the Pension Plan controlling the determination of the amount of payments under such form under the Pension Plan or (y) in a lump sum payment (to be made within thirty (30) days after termination of employment) in amount equal to the Actuarial Equivalent (as defined in the Pension Plan) of the SRA determined in the manner prescribed for determining Actuarial Equivalents under the Pension Plan. Any election of an alternate form of benefit shall be made in the manner determined by the Administrator; provided that (i) except as provided in Section 4.4(b) of the Pension Plan, no such election may be made after the date on which benefit payments commence and (ii) no such election shall take effect before the date that is twelve months after the date the election is made, unless the Administrator, in its discretion, determines otherwise. 4.04 BENEFICIARY. In the event of death of a Participant, SRA payments, if any, to be made after the date of death (as determined with reference to the benefit election, if any, in effect on the date of the Participant's death, "Remaining Payments") shall be made to his or her Beneficiary, as defined below, and in such case all references to "Participant" herein shall, where applicable, apply to the Beneficiary of the deceased Participant. The "Beneficiary" shall be the person, if any, entitled to receive benefits following the death of a Participant as provided under the Pension Plan. If no Beneficiary is designated, the designation is ineffective, or the Beneficiary dies, any then Remaining Payments shall be paid to the estate of the deceased Participant. 4 4.05 REFERENCES TO PENSION PLAN. In the event of any amendment, restatement or other modification of the Pension Plan (including any replacement of the Pension Plan), this Plan shall be deemed automatically amended to incorporate corresponding modifications to the extent necessary to correct any references to Sections of the Pension Plan herein and to preserve the intended meaning and import of such references. Without limiting the foregoing, the Administrator may at any time and from time to time amend or modify the Plan to the extent it deems necessary to address modifications or amendments to the Pension Plan. ARTICLE FIVE-ASSIGNMENT No right to payment and of any amount under the Plan may be assigned, transferred, pledged or encumbered, nor shall any such right or other interest in amounts payable under the Plan be subject to any attachment, garnishment, execution or other legal process. ARTICLE SIX-OTHER PLANS Nothing in the Plan shall be construed to alter, abridge, or in any manner affect the rights and privileges of any Participant to participate in and be covered by any pension, profit-sharing, group insurance, bonus or any other employee plan or plans which any member of the Group may have or hereafter have, except as otherwise expressly provided herein or in any such other plans. ARTICLE SEVEN - FUNDING The Company, in its discretion, shall have the right at any time and from time to time to insure or otherwise provide for the obligations under the Plan (or to refrain from so insuring or making any such provision) and to determine the extent, nature and method 5 of any such insurance or provision, including the establishment of one or more trusts. If the Company elects to insure its obligations under the Plan, in whole or in part, through the medium of insurance or annuities, or both, the Company, or a designated member of the Group shall be the owner and beneficiary of each such policy or annuity. At no time shall any Participant be deemed to have any right, title or interest in or to any specified asset or assets of any such trust or escrow arrangement, including, without limitation, any insurance, annuity or other contracts or any proceeds therefrom. ARTICLE EIGHT - NO TRUST CREATED Nothing herein shall be deemed to create any trust or fiduciary relationship of any kind between any member of the Group and any Participant, Beneficiary or estate of any Participant. ARTICLE NINE -REORGANIZATION The Company shall not merge or consolidate into or with another corporation, or reorganize, or sell substantially all of its assets to another corporation, firm, or person unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligation of the Company and the Group under the Plan. Upon the occurrence of any such merger, consolidation, reorganization, or sale, the term "the Company" as used in this Plan shall be deemed to refer to such successor, assignee, or survivor corporation firm or person. ARTICLE TEN - CLAIMS PROCEDURE 10.01 GENERAL. Any claim for benefits under the Plan ("Claim") shall be made by written notice (x) specifying in reasonable detail the basis for the Claim and proof of eligibility and (y) submitted to the Administrator within six months after the date on 6 which such benefit is claimed to have been due. Within sixty (60) days after its receipt of a Claim, the Administrator shall respond to the Participant (or Beneficiary or estate in the case of a deceased Participant) submitting the Claim by written notice of its determination to approve or deny the same, which notice, in the case of any denial, shall further set forth in reasonable detail and in a manner calculated to be understood by the claimant the basis for denial, specific reference to the Plan provisions on which the denial is based, steps to be taken to have the denial reviewed and, if applicable, a description of any additional material needed to be provided by the claimant. The claimant may, in its discretion, elect to treat any failure of the Administrator to respond to a Claim within the time period set forth above as denial. 10.02 REVIEW. If a Claim is denied, the claimant may obtain a review of the denial by written request for review (x) specifying in reasonable detail the basis for the claimant's determination that denial was erroneous and (y) submitted to the Administrator within sixty (60) days after the date of denial or deemed denial of the Claim pursuant to Section 10.01 above, as applicable. Within sixty days (60) following the Administrator's receipt of a request for review, the Administrator shall review the Claim (together with any supporting documents or other written materials reasonably related to the request and submitted therewith) and give the claimant written notice of its determination to approve or deny the same, which notice, in the case of any denial, shall further set forth in reasonable detail the basis for denial. Any action, determination or interpretation taken or made by the Administrator shall be conclusive and binding on all Participants and other persons and the Administrator shall have full discretion in carrying out its responsibilities under the Plan; provided, however, that in the event of a Change in 7 Control (as defined in Section 4.02 above), the Administrator shall have no authority to change or reverse any determination made prior to the Change in Control and any determination of the Administrator made after the Change in Control shall be subject to de novo review in any challenge or appeal brought by or on behalf of any Participant. ARTICLE ELEVEN - AMENDMENT, SUSPENSION, TERMINATION The Board may at any time and from time to time amend, suspend or terminate the Plan or any Participant's participation therein; provided, however, that no amendment, suspension or termination may impair the rights of any Participant (or, in the case of a deceased Participant, his or her Beneficiary or estate) to receive benefits accrued prior to the effective date of such amendment, suspension or termination, and further provided that, on termination of the Plan or any Participant's participation, the Company may, in its discretion, elect to pay the entire unpaid balance of any Participant's accrued benefits in a single lump sum amount equal to the Actuarial Equivalent (as defined in the Retirement Plan) of such Participant's accrued benefits as of the date of such termination. The Administrator may amend the Plan, without Board approval, to ensure that the Company may obtain any regulatory approval or to accomplish any other reasonable purpose, provided that the Administrator may not effect a change that would materially increase the cost of the Plan to the Company. ARTICLE ELEVEN - GOVERNING LAW; SEVERABILITY This Plan shall be governed by and construed in accordance with the laws of the State of Maine without regard to its conflicts of laws principles. Each provision of this Plan is intended to be severable and the invalidity, illegality or unenforceability of any portion of this Plan shall not affect the validity, legality and enforceability of the remainder. 8 ARTICLE TWELVE - EMPLOYMENT Nothing herein shall be deemed to confer on any Participant any right to continue in employment with the Company or any other member of the Group, or to interfere with or limit in any way the right of the Company or any other member of the Group to terminate such employment at any time. The benefits provided under this Plan are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. ARTICLE THIRTEEN - WITHHOLDING The Company shall be entitled to withhold from payment of benefits hereunder any federal, state or local withholding or other taxes, or charge from time to time required to be withheld. The Company shall be entitled to rely on the opinion or advice of its counsel in determining its withholding obligations. 9 IN WITNESS WHEREOF, the Company has caused this Plan to be executed as of the Effective Date. BANKNORTH GROUP, INC. By: - ------------------------------ ------------------------------- Witness Name: Title: 10 EX-10.(G) 8 b45642bgexv10wxgy.txt EX-10(G) AMENDED DEFERRED COMPENSATION PLAN EXHIBIT 10(g) DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS AND KEY EMPLOYEES BANKNORTH GROUP, INC. Plan Document - -------------------------------------------------------------------------------- AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2003 COPYRIGHT (C) 2002 BY WESTPORT WORLDWIDE, LLC ALL RIGHTS RESERVED BANKNORTH GROUP, INC. PLAN DOCUMENT continued... TABLE OF CONTENTS

i BANKNORTH GROUP, INC. PLAN DOCUMENT continued... ARTICLE 6 Beneficiary Designation................................................................ 17 6.1 Beneficiary............................................................................ 17 6.2 Beneficiary Designation/Change......................................................... 17 6.3 Acknowledgment......................................................................... 17 6.4 No Beneficiary Designation............................................................. 17 6.5 Doubt as to Beneficiary................................................................ 17 6.6 Discharge of Obligations............................................................... 18 ARTICLE 7 Leave of Absence....................................................................... 18 7.1 Paid Leave of Absence.................................................................. 18 7.2 Unpaid Leave of Absence................................................................ 18 ARTICLE 8 Termination/Amendment/Modification..................................................... 19 8.1 Termination............................................................................ 19 8.2 Amendment.............................................................................. 19 8.3 Acceleration........................................................................... 19 8.4 Effect of Payment...................................................................... 20 8.5 Amendment to Ensure Proper Characterization of the Plan ............................... 20 8.6 Changes in Law Affecting Taxability.................................................... 20 ARTICLE 9 Administration......................................................................... 21 9.1 Committee Duties....................................................................... 21 9.2 Agents................................................................................. 21 9.3 Binding Effect of Decisions............................................................ 22 9.4 Indemnity of Committee................................................................. 22 9.5 Company Information.................................................................... 22 ARTICLE 10 Other Benefits and Agreements.......................................................... 22 10.1 Coordination with Other Benefits....................................................... 22 ARTICLE 11 Claims Procedures...................................................................... 22 11.1 Scope of Claims Procedures............................................................. 22 11.2 Initial Claim.......................................................................... 23 11.3 Review Procedures...................................................................... 24 11.4 Calculation of Time Periods............................................................ 26 11.5 Legal Action........................................................................... 26

ii BANKNORTH GROUP, INC. PLAN DOCUMENT continued... ARTICLE 12 Trust.................................................................................. 27 12.1 Establishment of the Trust............................................................. 27 12.2 Interrelationship of the Plan and the Trust............................................ 27 12.3 Investment of Trust Assets............................................................. 27 12.4 Distributions from the Trust........................................................... 27 ARTICLE 13 Miscellaneous.......................................................................... 27 13.1 Status of Plan......................................................................... 27 13.2 Unsecured General Creditor............................................................. 27 13.3 Company's Liability.................................................................... 28 13.4 Nonassignability....................................................................... 28 13.5 Not a Contract of Employment........................................................... 28 13.6 Furnishing Information................................................................. 28 13.7 Terms.................................................................................. 28 13.8 Captions............................................................................... 29 13.9 Governing Law.......................................................................... 29 13.10 Notice................................................................................. 29 13.11 Successors............................................................................. 29 13.12 Spouse's Interest...................................................................... 29 13.13 Validity............................................................................... 29 13.14 Incompetent............................................................................ 29 13.15 Court Order............................................................................ 30 13.16 Distribution in the Event of Taxation.................................................. 30 13.17 Insurance.............................................................................. 30

iii BANKNORTH GROUP, INC. PLAN DOCUMENT continued... BANKNORTH GROUP, INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS AND KEY EMPLOYEES Amended and Restated Effective January 1, 2003 PURPOSE The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated employees and members of the boards of directors of Banknorth Group, Inc. (the "Sponsor") and those of the Sponsor's affiliates that have adopted this Plan with the approval of the Sponsor's board of directors (the Sponsor, as well as each such affiliate, hereinafter is referred to as the "Company"). This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 DEFINITIONS For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean, with respect to a Participant, a credit on the records of the Company equal to the sum of (i) the Deferral Account balance, (ii) the Company Matching Account balance and (iii) the Company Discretionary Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 "Annual Base Salary" shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, excluding incentives, bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, non-monetary awards, Non-Employee Director Fees and other fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Key Employee's gross income). Annual Base Salary shall be calculated without regard to any reductions for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of the Company (and therefore shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3) or 402(h) pursuant to plans established by the Company). 1.3 "Company Discretionary Amount" shall mean, for the Plan Year of reference, the amount determined in accordance with Section 3.6. 1.4 "Annual Company Matching Amount" shall mean, for the Plan Year of reference, the amount determined in accordance with Section 3.7. 1 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 1.5 "Annual Deferral Amount" shall mean that portion of a Participant's Annual Base Salary and/or Incentive Payments, or Non-Employee Director Fees, that a Participant elects to have, and is, deferred in accordance with Article 3, for the Plan Year of reference. In the event of a Participant's Retirement, Disability (if deferrals cease in accordance with Section 8.1), death or a Termination of Service prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.6 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.7 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.8 "Board" shall mean the board of directors of Banknorth Group, Inc. or Banknorth, N.A. 1.9 "Change in Control" shall have the meaning provided in the Banknorth Group, Inc. Change-in-Control Protection Plan. 1.10 "Claimant" shall have the meaning set forth in Section 14.1. 1.11 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 1.12 "Committee" or "Plan Committee" shall mean the committee described in Section 12.1 or its designee. 1.13 "Common Stock" means the common stock of the Sponsor, $.01 par value or, in the event that the outstanding shares of common stock are later changed into or exchanged for a different class of stock or securities of the Sponsor or another corporation, that other stock or security. 1.14 "Common Stock Fund" means a Measurement Fund (as described in Section 3.10(c)) maintained on the books of the Sponsor reflecting credits to Participants' Account Balances in Stock Units. 1.15 "Common Stock Sub-Account" shall mean the portion (if any) of a Participant's Account Balance allocated to the Common Stock Fund. 1.16 "Company" or "Companies" shall mean the Sponsor, together with those of the Sponsor's affiliates whose inclusion in the Plan has been approved by the Sponsor's Board, and any successor to all or substantially all of the Company's assets or business. 1.17 "Company Discretionary Account" shall mean (i) the sum of all of a Participant's Company Discretionary Amounts, plus (ii) amounts credited or debited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Company Discretionary Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Discretionary Account. 2 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 1.18 "Company Matching Account" shall mean (i) the sum of all of a Participant's Annual Company Matching Amounts, plus (ii) amounts credited or debited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Company Matching Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Matching Account. 1.19 "Deduction Limitation" shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation shall be applied to all distributions that are "subject to the Deduction Limitation" under this Plan. If the Company determines in good faith that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Company would not be deductible by the Company solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Company to ensure that the entire amount of any distribution to the Participant pursuant to this Plan is deductible, the Company may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited or debited with additional amounts in accordance with Section 3.10 below, even if such amount is being paid out in installments. The amounts so deferred and amounts credited or debited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Company in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Company during which the distribution is made will not be limited by Code Section 162(m). Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control. 1.20 "Deferral Account" shall mean (i) the sum of all of a Participant's Annual Deferral Amounts, plus (ii) amounts credited or debited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. 1.21 "Disability" shall mean either (a) eligibility for long-term disability benefits under any applicable long-term disability plan of the Company, or (b) a finding by the Committee, based on medical evidence satisfactory to it, that the Participant is totally disabled, whether due to physical or mental condition, so as to be prevented from engaging in further service to the Company or any of its subsidiaries and that such disability will be permanent and continuous during the remainder of the Participant's life. 1.22 "Disability Benefit" shall mean the benefit set forth in Article 8. 1.23 "Effective Date" shall mean the effective date of this amended and restated version of the Plan, which is January 1, 2003. 1.24 "Election Form" shall mean the form or forms established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.25 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 3 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 1.26 "401(k) Plan" shall mean the Company's tax qualified 401(k) retirement plan, as amended from time to time. 1.27 "Incentive Payments" shall mean any compensation paid to a Participant under the Banknorth Group, Inc. Executive Incentive Plan and relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year. 1.28 "Insider" shall mean any Participant who is either (i) an "officer" as that term is defined under Rule 16(a)-1(f) promulgated by the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended, or any successor rule or regulation, or (ii) a Non-Employee Director. 1.29 "Key Employee" shall mean a person who is an employee of the Company and whose position is designated at Level 22 or above. 1.30 "Non-Employee Director" shall mean any member of the Board who is not also a Key Employee. 1.31 "Non-Employee Director Fees" shall mean any cash retainer and meeting fees paid to a Non-Employee Director for each regular or special meeting and for any committee meetings attended. 1.32 "Participant" shall mean, subject to Section 3.4, any Non-Employee Director and any Key Employee (i) who elects to participate in the Plan, (ii) who signs an Election Form(s) and a Beneficiary Designation Form, (iii) whose signed Election Form(s) and Beneficiary Designation Form are accepted by the Committee, (iv) who commences participation in the Plan. The term Participant shall also include an individual who is continuing to participate in the Plan pursuant to Section 2.5 below. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an Account Balance under the Plan under any circumstance. 1.33 "Plan" shall mean this Deferred Compensation Plan for Non-Employee Directors and Key Employees, as evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time. 1.34 "Plan Year" shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year during which this Plan is in effect. 1.35 "Retirement", "Retire(s)" or "Retired" shall mean severance from employment or directorship with the Company for any reason other than a leave of absence, death or Disability on or after the attainment of age fifty-five (55) and achievement of five full years of continuous employment, or service as a member of the Board by the Company. 1.36 "Short-Term Payout" shall mean the payout set forth in Section 4.1. 1.37 "Stock Unit" means an artificial unit of value, the amount of one unit of which varies with the value of one share of Common Stock. 1.38 "Termination Benefit" shall mean the benefit set forth in Article 5. 4 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 1.39 "Termination of Service" shall mean the severing of (a) employment with the Company, or (b) service as a Non-Employee Director, voluntarily or involuntarily, for any reason other than an authorized leave of absence. A mere transfer of status from employment to service as a Non-Employee Director or from service as a Non-Employee Director to employment shall not be a Termination of Service. 1.40 "Trust" shall mean the trust, if any, established pursuant to this Plan, as amended from time to time. 1.41 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee. 1.42 "Yearly Installment Method" shall be a yearly installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows (subject to Section 3.10(e)): The Account Balance of the Participant shall be calculated as of the close of business on the date of reference (or, if the date of reference is not a business day, on the immediately following business day), and shall be paid as soon as practicable thereafter. The date of reference with respect to the first yearly installment payment shall be as provided in Article 4 or 5, as applicable, and the date of reference with respect to subsequent yearly installment payments shall be the anniversary of the previous payment for the applicable Plan Year. The yearly installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one (1), and the denominator of which is the remaining number of yearly payments due the Participant. By way of example, if the Participant elects a ten (10) year Yearly Installment Method, the first payment shall be one-tenth (1/10) of the Account Balance, calculated as described in this definition. The following year, the payment shall be one-ninth (1/9) of the Account Balance, calculated as described in this definition. ARTICLE 2 SELECTION/ENROLLMENT/ELIGIBILITY 2.1 ELIGIBILITY. Participation in the Plan shall be limited to Non-Employee Directors and to Key Employees who the Committee determines to admit, in its sole discretion. It is intended that Key Employees shall meet the requirement of ERISA that they be members of a select group of management or highly compensated employees of the Company. A new Participant shall not be considered eligible to participate until they have received notice of such eligibility. 2.2 ENROLLMENT REQUIREMENTS. Except as provided in Section 3.4, as a condition to participation, each qualifying Key Employee and each Non-Employee Director shall complete, execute and return to the Committee an Election Form(s) and a Beneficiary Designation Form, or such other forms as the Committee shall determine, all within fifteen (15) days after he or she receives the Election Forms. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are appropriate. 5 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 2.3 COMMENCEMENT OF PARTICIPATION. Provided a qualifying Key Employee or a Non-Employee Director has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Key Employee or Non-Employee Director shall commence participation in the Plan on the first day of the Plan Year following the month in which the Key Employee or Non-Employee Director completes all enrollment requirements. Except as provided in Section 3.4, or as otherwise provided by the Committee, if a Key Employee or Non-Employee Director fails to meet all such requirements within the period required, in accordance with Section 2.2, that Key Employee or Non-Employee Director shall not be eligible to participate in the Plan until the first day of the following Plan Year, again subject to timely delivery to and acceptance by the Committee of the required documents. 2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee determines in good faith that a Key Employee no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant's membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant's then vested Account Balance as a final payment of all amounts due hereunder and terminate the Participant's participation in the Plan. 2.5 LIMITED PARTICIPATION. Any individual who does not meet the definition of Non-Employee Director set forth in Section 1.31, or of Key Employee set forth in Section 1.29, but who, until the Effective Date, had participated in the Plan, shall continue to participate in the Plan (as amended and restated hereby) solely with respect to his or her Account Balance as of the Effective Date. However, such employee shall not be entitled to elect Annual Deferral Amounts, or to have Company contributions made to the Plan on his or her behalf, on or after the Effective Date, and shall be subject to distribution as provided in clause (iii) of Section 2.4 above if the Committee so determines at any time. ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY CONTRIBUTIONS/CREDITING/TAXES 3.1 MINIMUM DEFERRAL. ANNUAL BASE SALARY, INCENTIVE PAYMENTS AND NON-EMPLOYEE DIRECTOR FEES. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Annual Base Salary and/or Incentive Payments, or Non-Employee Director Fees, in the minimum amount of five percent (5%) of each such item of compensation. Notwithstanding the foregoing, the Committee may, in its sole discretion, establish for any Plan Year a different minimum amount for Annual Base Salary and/or Incentive Payments and/or Non-Employee Director Fees. If an election is made with respect to any such item of compensation for less than the stated minimum amount, or if no election is made, the amount deferred with respect to that item of compensation shall be zero (0). 6 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 3.2 MAXIMUM DEFERRAL. (a) ANNUAL BASE SALARY, INCENTIVE PAYMENTS AND NON-EMPLOYEE DIRECTOR FEES. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Annual Base Salary and/or Incentive Payments, or Non-Employee Director Fees, up to the following maximum percentages for each deferral elected:
--------------------------------------------------------------------------- Deferral Type Maximum Percentage --------------------------------------------------------------------------- Annual Base Salary 70% --------------------------------------------------------------------------- Incentive Payments 100% --------------------------------------------------------------------------- Non-Employee Director Fees 100% ---------------------------------------------------------------------------
(b) COMMITTEE'S DISCRETION. Notwithstanding the foregoing, (i) the Committee may, in its sole discretion, establish for any Plan Year maximum percentages which differ from those set forth above. 3.3 ELECTION TO DEFER/EFFECT OF ELECTION FORM. (a) FIRST PLAN YEAR. The Participant shall make a deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form(s) must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee. (b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, a deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made, a new Election Form(s). If no such Election Form(s) is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero (0) for that Plan Year. (c) CHANGE IN ELECTION. A Participant may not elect to change his or her deferral election that is in effect for a Plan Year; provided, however, that a Participant may revoke with the Committee's consent completely a deferral election for Annual Base Salary, not yet payable at the time of the Participant's revocation election (which revocation will itself be irrevocable for the remainder of the Plan Year). 3.4 MANDATORY BONUS DEFERRALS. Notwithstanding anything herein to the contrary, from time to time the Company may require the deferral of all or a portion of bonuses paid to certain members of senior management of Banknorth Group, Inc. in order to comply with provisions of Federal income tax law. If payment of all or a portion of any bonus 7 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... earned by a Key Employee is thus deferred by the Company under an applicable bonus plan, such deferral shall be referred to herein as a "Mandatory Deferral". A Mandatory Deferral for a Plan Year shall be invested and paid according to the terms of the deferral election made with respect to that Plan Year. Should the Participant fail to make such a deferral election, the Mandatory Deferral shall be made according to the terms and conditions of his or her most recent deferral election, or if the Participant has failed to make any such elections, deferral shall be until the later of (i) the date provided for lump sum payment under Article 5 below, or (ii) such date as shall be determined by the Committee as necessary to comply with such tax law provisions. 3.5 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Annual Base Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Annual Base Salary payroll in the percentage elected by the Participant, as adjusted from time to time for increases and decreases in Annual Base Salary. The Incentive Payments portion of the Annual Deferral Amount, if any, shall be withheld at the time the Incentive Payments are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. The Non-Employee Director Fees portion of the Annual Deferral Amount, if any, shall be withheld at the time the Non-Employee Director Fees are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. 3.6 COMPANY DISCRETIONARY AMOUNT. For any Plan Year, the Committee, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant's Company Discretionary Account under this Plan, which amount shall be for that Participant the Company Discretionary Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero (0), even though one or more other Participants receive an Company Discretionary Amount for that Plan Year. Unless otherwise specified by the Committee, the Company Discretionary Amount, if any, shall be credited as of the last day of the Plan Year. Unless otherwise specified by the Committee, if a Participant to whom an Company Discretionary Amount is credited is not employed by the Company or has discontinued service as a Non-Employee Director as of the last day of a Plan Year other than by reason of his or her Retirement, death or Disability, the Company Discretionary Amount for that Plan Year shall be zero (0). 3.7 ANNUAL COMPANY MATCHING AMOUNT. Solely with respect to a Participant who is a Key Employee, the Participant's Annual Company Matching Amount, if any, for the Plan Year of reference shall be equal to (i) the amount of the Company's matching contribution that would be made to the 401(k) Plan on the Participant's behalf for the plan year of the 401(k) Plan that corresponds to the Plan Year if the 401(k) Plan were permitted to include in its definition of "compensation" for Company matching contribution purposes the Participant's Annual Deferral Amount but for the fact that such amounts were deferred hereunder, minus (ii) the amount of the Company's matching contributions that actually are made to the 401(k) Plan on the Participant's behalf for the plan year of the 401(k) Plan that corresponds to the Plan Year. A Participant who is not eligible for the plan year of the 401(k) Plan (or for any portion thereof) to receive an allocation of Company matching contributions under the 401(k) Plan shall not be eligible for the allocation of an Annual Company Matching Amount hereunder. Each Participant's Annual Company Matching Amount shall be credited to his or her Company Matching Account as soon as administratively practicable after the last day of the Plan Year to which it relates. 8 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 3.8 PAYMENT ELECTIONS. At the time of filing the deferral election for the first Plan Year, as described in Section 3.3(a) above, the Participant shall elect on an Election Form to receive his or her benefit as a Short-Term Payout or as a Termination Benefit, and such election shall also direct payment as in a lump-sum, a Yearly Installment Method of five (5) years or, solely for a Termination Benefit applicable to a Retirement, in a Yearly Installment Method of ten (10) years. The Participant may change his or her election to an allowable alternative payout by submitting a new Election Form to the Committee, provided that any such Election Form is submitted at least one (1) year prior to the Participant's Termination of Service and is accepted by the Committee in its sole discretion. A Participant whose status as an employee or director terminated prior to the Effective Date, but who is participating pursuant to Section 2.5 above, may be required by the Committee to change his or her election as per the previous sentence. The Election Form most recently accepted by the Committee shall govern the payout of the entire Termination Benefit. 3.9 VESTING. (a) A Participant shall at all times be one hundred percent (100%) vested in his or her Deferral Account. (b) A Participant shall become vested in his or her Company Discretionary Account pursuant to a vesting schedule, if any, approved and documented by the Committee at the time the Company Discretionary Amounts credited to the Participant's Company Discretionary Account for a Plan Year. (c) A Participant shall become vested in his or her Company Matching Account as and to the extent that the Participant becomes vested in Company matching contributions under the 401(k) Plan. 3.10 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules: (a) ELECTION OF MEASUREMENT FUNDS. A Participant, in connection with his or her initial deferral election in accordance with Section 3.3(a) above, shall elect, on the Election Form(s), one or more Measurement Fund(s) (as described in Section 3.10(c) below) to be used to determine the additional amounts to be credited or debited to his or her Account Balance for the first business day of the Plan Year, continuing thereafter unless changed in accordance with the next sentence. Commencing with the first business day of the Plan Year, and continuing thereafter for the remainder of the Plan Year (unless the Participant ceases during the Plan Year to participate in the Plan), the Participant may (but is not required to) elect at such time or times as shall be determined by the Committee, by submitting an Election Form(s) to the Committee that is accepted by the Committee (which submission may take the form of an electronic transmission, if required or permitted by the Committee), to add or delete one or more Measurement Fund(s) to be used to determine the additional amounts to be credited or debited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund(s). If an election is made in accordance with the previous sentence, it shall apply to the next business day and continue thereafter, unless changed in 9 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... accordance with the previous sentence. Notwithstanding the above, no amount allocated to the Common Stock Fund may thereafter be reallocated to any other Measurement Fund. (b) PROPORTIONATE ALLOCATION. In making any election described in Section 3.10(a) above, the Participant shall specify on the Election Form(s), in whole percentage points, the percentage of his or her Account Balance to be allocated to a Measurement Fund. (c) MEASUREMENT FUNDS. The Participant may elect one or more of the Measurement Funds set forth on Schedule A (the "Measurement Funds"), for the purpose of crediting or debiting additional amounts to his or her Account Balance. The Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund(s). Each such action will take effect as of the first business day that follows by thirty (30) days the day on which the Committee gives Participants advance written notice of such change. If the Committee receives an initial or revised Measurement Fund(s) election which it deems to be incomplete, unclear or improper, the Participant's Measurement Fund(s) election then in effect shall remain in effect (or, in the case of a deficiency in an initial Measurement Fund(s) election, the Participant shall be deemed to have filed no deemed investment direction in which event the Participant shall be deemed to have made such election as the Committee shall determine). If the Committee possesses (or is deemed to possess as provided in the previous sentence) at any time directions as to Measurement Fund(s) of less than all of the Participant's Account Balance, the Participant shall be deemed to have directed that the undesignated portion of the Account Balance be deemed to be invested in a money market, fixed income or similar Measurement Fund made available under the Plan as determined by the Committee in its discretion. Each Participant hereunder, as a condition to his or her participation hereunder, agrees to indemnify and hold harmless the Committee and the Company, and their agents and representatives, from any losses or damages of any kind relating to (i) the Measurement Funds made available hereunder and (ii) any discrepancy between the credits and debits to the Participant's Account Balance based on the performance of the Measurement Funds and what the credits and debits otherwise might be in the case of an actual investment in the Measurement Funds. (d) CREDITING OR DEBITING METHOD. The performance of each elected Measurement Fund (either positive or negative) will be determined by the Committee, in its sole discretion, based on the performance of the Measurement Funds themselves. Subject to Section 3.10(e) below, a Participant's Account Balance shall be credited or debited on a daily basis based on the performance of each Measurement Fund selected by the Participant, or as otherwise determined by the Committee in its sole discretion, as though (i) a Participant's Account Balance were invested in the Measurement Fund(s) selected by the Participant, in the percentages elected by the Participant as of the measurement date, at the closing price on such date; (ii) the portion of the Annual Deferral Amount that was actually deferred was invested in the Measurement Fund(s) selected by the Participant, in the percentages elected by the Participant, no later than the close of business on the third (3rd) business day after the day on which such amounts are actually deferred from the Participant's Annual Base Salary and/or Incentive Payments, or Non-Employee Director Fees, through reductions in his or her pay, at the 10 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... closing price on the date of the deemed investment; and (iii) any distribution made to a Participant that decreases such Participant's Account Balance ceased being invested in the Measurement Fund(s), in the percentages applicable to such calendar day, no earlier than three (3) business days prior to the distribution, at the closing price on the date of the deemed cessation of investment. (e) COMMON STOCK FUND. A Participant's Account Balance attributable to the Common Stock Fund shall be credited with any amounts allocated thereto as follows: on any date on which any Annual Deferral Amounts or Company contributions are credited hereunder (an "Allocation Date"), the Participant's Common Stock Sub-Account shall be credited with a number of Stock Units equal to (i) the amount allocated to the Common Stock Sub-Account divided by (ii) the "Price per Share" (as defined below) on the Allocation Date. Fractional Stock Units shall be rounded to the nearest 1/10th (one-tenth) of a Stock Unit. On any given day, the value of the Common Stock Sub-Account shall equal the number of Stock Units then credited to the Common Stock Sub-Account multiplied by the Price per Share on such date. Stock Units do not constitute shares of Common Stock, interests in Common Stock or any other security of the Company. They merely reflect an unfunded promise to pay deferred compensation in the future. For purposes of this Section 3.10(e), the "Price per Share" shall equal the closing sale price per share at which shares of the Common Stock are sold on the New York Stock Exchange ("NYSE") on such date or, if no Common Stock was traded on the NYSE on such date, the closing sale price at which the Common Stock is sold on the next preceding date the Common Stock was so traded. A Participant's Common Stock Sub-Account shall be credited with additional Stock Units on every date the Sponsor issues a dividend with respect to its Common Stock. The number of Stock Units so credited will equal (i) the product of (A) the dividend per share of Common Stock times (B) the number of Stock Units in the Participant's Common Stock Sub-Account immediately before the dividend is issued, divided by (ii) the Price per Share on the dividend date. In the event of any recapitalization, stock split, stock dividend, exchange of shares, merger, reorganization, change in corporate structure or change in shares of the Sponsor or similar event, the Committee, may make appropriate adjustments to the number of Stock Units credited to each Participant's Common Stock Sub-Account. Payments allocable to the Participant's Common Stock Sub-Account will be paid in cash. If a Participant's Common Stock Sub-Account is to be paid in installments, each installment shall be in an amount equal to the Price per Share on the applicable installment payment date multiplied by a fraction, the numerator which is the total number of Stock Units in such Common Stock Sub-Account on the Participant's payment commencement date, and the denominator of which is the total number of installments. (f) NO ACTUAL INVESTMENT. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Fund(s) are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation of his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any such 11 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... Measurement Fund. In the event that the Company or the trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured general creditor of the Company. (g) BENEFICIARY ELECTIONS. Each reference in this Section 3.10 to a Participant shall be deemed to include, where applicable, a reference to a Beneficiary. 3.11 FICA AND OTHER TAXES. (a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant who is a Key Employee, the Company shall withhold from that portion of the Participant's Annual Base Salary and/or Incentive Payments that are being deferred, in a manner determined by the Company, the Participant's share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.11. (b) COMPANY DISCRETIONARY AMOUNTS OR ANNUAL COMPANY MATCHING AMOUNTS. When a Participant who is a Key Employee becomes vested in a portion of his or her Company Discretionary Account or Company Matching Account, the Company shall withhold from deferred amounts, in a manner determined by the Company, the Participant's share of FICA and other employment taxes. If necessary, the Committee may reduce the vested portion of the Participant's Company Discretionary Amounts or Annual Company Matching Amounts in order to comply with this Section 3.11. (c) DISTRIBUTIONS. The Company, or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all Federal, state and local income, employment and other taxes required to be withheld by the Company, or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Company and the trustee of the Trust. ARTICLE 4 SHORT-TERM PAYOUT/UNFORESEEABLE FINANCIAL EMERGENCIES 4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a future "Short-Term Payout" from the Plan, provided that no such election may apply to that portion of an Insider's Account Balance, which is allocated to the Common Stock Fund. Subject to the Deduction Limitation and to Section 3.10(e), the Short-Term Payout shall be a lump sum payment in an amount that is equal to the Annual Deferral Amount, that year's vested Company Discretionary Amount and vested Annual Company Matching 12 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... Amount, and amounts credited or debited thereto in the manner provided in Section 3.10 above, determined at the time that the Short-Term Payout becomes payable (rather than the date of a Termination of Service) less, amounts attainable to an Insider's Common Stock Fund. Subject to the Deduction Limitation and the other terms and conditions of this Plan (including Section 3.10(e)), each Short-Term Payout elected shall be paid out during the month of March of any Plan Year designated by the Participant that is at least three (3) Plan Years after the Plan Year in which the Annual Deferral Amount is actually deferred and the vested Company contributions are actually contributed, as specifically elected by the Participant. By way of example, if a three (3) year Short-Term Payout is elected for Annual Deferral Amounts that are deferred, and vested Company contributions that are contributed, in the Plan Year commencing January 1, 2003, the three (3) year Short-Term Payout would become payable during March of 2007. In the event a Participant's employment terminates before full distribution under this Section 4.1, all remaining amounts otherwise distributable as Short-Term Payouts shall be treated as amounts subject to a Termination Benefit payment under Article 5, in which case the distribution shall be made. If a Short-Term Payout election is made with respect to any Company contribution that, as of the time of payment, is as yet unvested, such unvested amounts shall not be subject to such Short-Term Payout election, but instead shall be paid out as and when such amounts become vested. 4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM PAYOUT. Should an event occur that triggers a benefit under any other provision of this Plan, any Annual Deferral Amount, vested Company Discretionary Amount and vested Annual Company Matching Amount, plus amounts credited or debited thereon, that are subject to a Short-Term Payout election under Section 4.1 shall not be paid in accordance with Section 4.1 but shall be paid in accordance with the other applicable Article. 4.3 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If a Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by the Participant and/or (ii) receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant's vested Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within sixty (60) days of the date of approval. The payment of any amount under this Section 4.3 shall be subject to Section 3.10(e), but shall not be subject to the Deduction Limitation. ARTICLE 5 TERMINATION BENEFIT/CHANGE IN CONTROL BENEFIT 13 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 5.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the Participant shall receive a Termination Benefit, which shall be equal to the Participant's vested Account Balance when the Participant experiences a Termination of Service. 5.2 PAYMENT OF TERMINATION BENEFIT. If the Participant's vested Account Balance at the time of his or her Termination of Service is less than twenty-five thousand dollars ($25,000), payment of his or her Termination Benefit shall be paid in a lump sum. If the Participant's vested Account Balance at such time is equal to or greater than that amount, the Participant shall be paid in accordance with the applicable Participant Election Form. If a Participant has not made any election with respect to the payment of the Termination Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made within sixty (60) days following the date of the Participant's Termination of Service. Installment payments shall commence during March of the Plan Year following the Plan Year in which occurs the Participant's Termination of Service. Any payment made shall be subject to Section 3.10(e) and the Deduction Limitation. 5.3 CHANGE IN CONTROL BENEFIT. Notwithstanding anything herein to the contrary, upon a Change in Control of the Company, each Participant shall become entitled to receive his or her vested Account Balance in a single lump sum payment on the ninetieth (90th) day following the Change in Control (or as soon thereafter as is administratively feasible), subject to Section 3.10(e). Notwithstanding the preceding, the Participant may irrevocably elect, prior to such Change in Control, to waive his or her right to receive such Change in Control distribution. If such waiver election is timely made, the Participant shall receive his or her vested Account Balance as previously elected by the Participant. ARTICLE 6 BENEFICIARY DESIGNATION 6.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of the Company in which the Participant participates. 6.2 BENEFICIARY DESIGNATION/CHANGE. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death. 14 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 6.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent. 6.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a Beneficiary as provided in Sections 6.1, 6.2 and 6.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. 6.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Company to withhold such payments until this matter is resolved to the Committee's satisfaction. 6.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a person believed in good faith by the Committee to be a valid Beneficiary shall fully and completely discharge the Company and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. Neither the Committee nor the Company shall be obliged to search for any Participant or Beneficiary beyond the sending of a registered letter to such last known address. If the Committee notifies any Participant or Beneficiary that he or she is entitled to an amount under the Plan and the Participant or Beneficiary fails to claim such amount or make his or her location known to the Committee within three (3) years thereafter, then, except as otherwise required by law, if the location of one or more of the next of kin of the Participant is known to the Committee, the Committee may direct distribution of such amount to any one or more or all of such next of kin, and in such proportions as the Committee determines. If the location of none of the foregoing persons can be determined, the Committee shall have the right to direct that the amount payable shall be deemed to be a forfeiture and paid to the Company, except that the dollar amount of the forfeiture, unadjusted for deemed gains or losses in the interim, shall be paid by the Company if a claim for the benefit subsequently is made by the Participant or the Beneficiary to whom it was payable. If a benefit payable to an unlocated Participant or Beneficiary is subject to escheat pursuant to applicable state law, neither the Committee nor the Company shall be liable to any person for any payment made in accordance with such law. ARTICLE 7 LEAVE OF ABSENCE 7.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the Company for any reason to take a paid leave of absence from the service of the Company, the Participant shall continue to be considered in the service of the Company and the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.5. 15 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 7.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the Company for any reason to take an unpaid leave of absence from the service of the Company, the Participant shall continue to be considered in the service of the Company and the Participant shall be excused from making deferrals until the earlier of the date the leave of absence expires or the Participant returns to a paid employment status. Upon such expiration or return, deferrals shall resume for the remaining portion of the Plan Year in which the expiration or return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld. ARTICLE 8 TERMINATION/AMENDMENT/MODIFICATION 8.1 TERMINATION. Although the Company anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that the Company will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, the Company reserves the right to discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to any or all of its participating Key Employees or Non-Employee Directors, by action of the Board. Upon a complete or partial termination of the Plan, the Plan Agreements of the affected Participants shall terminate and their vested Account Balances, determined as if they had experienced a Termination of Service on the date of Plan termination shall be paid to the Participants in accordance with their distribution elections in effect at the time of the Plan termination; provided that, if the Participant requests and the Committee, in its sole discretion, permits, payment may be made as soon as practicable following Plan termination in a lump sum. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination. 8.2 AMENDMENT. The Company may, at any time, amend or modify the Plan in whole or in part by the action of the Sponsor's Board; provided, however, that no amendment or modification shall be effective to decrease or restrict the value of a Participant's vested Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Service as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Company shall have the right to accelerate installment payments by paying the vested Account Balance in a lump sum or pursuant to a Yearly Installment Method using fewer years. 8.3 ACCELERATION. Anything to the contrary hereunder notwithstanding, the Committee shall have the right, at any time, and whether or not in connection with a Termination of the Plan, to accelerate the payment of any amounts deferred 16 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... hereunder on behalf of any one or more Participants. Participants shall not be deemed to have any vested right at any time to enjoy further deferrals, or the tax advantages of ongoing deferral. 8.4 EFFECT OF PAYMENT. The full payment of the applicable benefit under Articles 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant's participation shall terminate. 8.5 AMENDMENT TO ENSURE PROPER CHARACTERIZATION OF THE PLAN. Notwithstanding the previous Sections of this Article 11, the Plan may be amended at any time, retroactively if required, if found necessary, in the opinion of the Company, in order to ensure that the Plan is characterized as a non-tax-qualified "top hat" plan of deferred compensation maintained for a select group of management or highly compensated employees, as described under ERISA Sections 201(2), 301(a)(3) and 401(a)(1), to ensure that amounts under the Plan are not considered to be taxed to a Participant under the Federal income tax laws prior to the Participant's receipt of the amounts or to conform the Plan and the Trust to the provisions and requirements of any applicable law (including ERISA and the Code). 8.6 CHANGES IN LAW AFFECTING TAXABILITY. (a) OPERATION. This Section shall become operative upon the enactment of any change in applicable statutory law or the promulgation by the Internal Revenue Service of a final regulation or other pronouncement having the force of law, which statutory law, as changed, or final regulation or pronouncement, as promulgated, would cause any Participant to include in his or her federal gross income amounts accrued by the Participant under the Plan on a date (an "Early Taxation Event") prior to the date on which such amounts are made available to him or her hereunder. (b) COMMITTEE DISCRETION. Upon the occurrence of an Early Taxation Event, the Committee may either (i) elect to put Section 8.6(c) below into effect, (ii) otherwise modify or amend any affected participant's rights with respect to amounts deferred hereunder as the Committee shall determine in order to avoid the effect of the Early Taxation Event, provided that no such modification or amendment shall be made without the Participant's consent if such modification or amendment would reduce or limit the Participant's rights hereunder, or (ii) to cause the immediate payment of the Participant's Account Balance. (c) AFFECTED RIGHT OR FEATURE NULLIFIED. If (but only if) so elected by the Committee pursuant to Section 8.6(b) above, then: (i) Notwithstanding any other Section of this Plan to the contrary (but subject to subsection (iv), below), as of an Early Taxation Event, the feature or features of this Plan that would cause the Early Taxation Event shall be null and void, to the extent, and only to the extent, required to prevent the Participant from being required to include in his or her federal gross income amounts accrued by 17 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... the Participant under the Plan prior to the date on which such amounts are made available to him or her hereunder. (ii) If only a portion of a Participant's Account Balance is impacted by the change in the law, then only such portion shall be subject to this Section, with the remainder of the Account Balance not so affected being subject to such rights and features as if the law were not changed. (iii) If the law only impacts Participants who have a certain status with respect to the Company, then only such Participants shall be subject to this Section. (iv) If an Early Taxation Event is earlier than the date on which the statute, regulation or pronouncement giving rise to the Early Taxation Event is enacted or promulgated, as applicable (i.e., if the change in the law is retroactive), there shall be distributed to each Participant, as soon as practicable following such date of enactment or promulgation, the amounts that became taxable on the Early Taxation Event. ARTICLE 9 ADMINISTRATION 9.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee of the Sponsor's Board which the Sponsor's Board shall designate or appoint from time to time or, in the absence of such designation or appointment, by the Sponsor's Board itself. The Committee shall have full discretion and authority to (i) interpret and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company. 9.2 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as they see fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to the Company. 9.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan. 9.4 INDEMNITY OF COMMITTEE. The Company shall indemnify and hold harmless the members of the Committee, and any Key Employee to whom the duties of the Committee may be delegated, against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful 18 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... misconduct by the Committee or any of its members or any such Key Employee. This indemnification shall be in addition to, and not in limitation of, any other indemnification protections of the Committee. 9.5 COMPANY INFORMATION. To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the compensation of the Participants, the date and circumstances of the Retirement, Disability, death or Termination of Service of the Participants, and such other pertinent information as the Committee may reasonably require. ARTICLE 10 OTHER BENEFITS AND AGREEMENTS 10.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a Participant or a Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for Key Employees or Non-Employee Directors of the Company. The Plan shall supplement and shall not supersede, modify or amend any other plan or program except as may otherwise be expressly provided. ARTICLE 11 CLAIMS PROCEDURES 11.1 SCOPE OF CLAIMS PROCEDURES. This Article 14 is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at 29 C.F.R. '2560.503-1. If any provision of this Article 14 conflicts with the requirements of those regulations, the requirements of those regulations will prevail. For purposes of this Article 14, references to disability benefit claims are intended to describe claims made by Participants for Disability Benefits payable pursuant to Article 8, but only if and to the extent that such claims require an independent determination by the Committee that the Participant is or is not suffering from a Disability, within the meaning of 1.21. If the Committee's determination is based entirely on a disability determination made by another party, such as the Social Security Administration or another federal or state agency or an insurer with respect to a disability insurance policy covering the Participant, the Participant's claim shall not be treated as a disability claim for purposes of the special provisions of this Article 14 that apply to claims for which an independent determination of disability is required. 11.2 INITIAL CLAIM. A Participant or Beneficiary who believes he or she is entitled to any benefit under the Plan (a "Claimant") may file a claim with the Committee. The Committee shall review the claim itself or appoint an individual or an entity to review the claim. (a) BENEFIT CLAIMS THAT DO NOT REQUIRE A DETERMINATION OF DISABILITY. If the claim is for a benefit other than a Disability Benefit, the Claimant shall be notified within ninety (90) days after the claim is filed whether 19 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... the claim is allowed or denied, unless the Claimant receives written notice from the Committee or appointee of the Committee prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed. (b) DISABILITY BENEFIT CLAIMS. In the case of a benefits claim that requires an independent determination by the Committee of a Participant's Disability status, the Committee shall notify the Claimant of the Plan's adverse benefit determination within a reasonable period of time, but not later than forty-five (45) days after receipt of the claim. If, due to matters beyond the control of the Plan, the Committee needs additional time to process a claim, the Claimant will be notified, within forty-five (45) days after the Committee receives the claim, of those circumstances and of when the Committee expects to make its decision but not beyond seventy-five (75) days. If, prior to the end of the extension period, due to matters beyond the control of the Plan, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to one hundred five (105) days, provided that the Committee notifies the Claimant of the circumstances requiring the extension and the date as of which the Plan expects to render a decision. The extension notice shall specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information. (c) MANNER AND CONTENT OF DENIAL OF INITIAL CLAIMS. If the Committee denies a claim, it must provide to the Claimant, in writing or by electronic communication: (i) The specific reasons for the denial; (ii) A reference to the Plan provision or insurance contract provision upon which the denial is based; (iii) A description of any additional information or material that the Claimant must provide in order to perfect the claim; (iv) An explanation of why such additional material or information is necessary; (v) Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and (vi) A statement of the participant's right to bring a civil action under ERISA Section 502(a) following a denial on review of the initial denial. In addition, in the case of a denial of Disability Benefits on the basis of the Committee's independent determination of the Participant's disability status, the Committee will provide a copy of any rule, guideline, 20 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... protocol, or other similar criterion relied upon in making the adverse determination (or a statement that the same will be provided upon request by the Claimant and without charge). 11.3 REVIEW PROCEDURES. (a) BENEFIT CLAIMS THAT DO NOT REQUIRE A DETERMINATION OF DISABILITY. Except for claims requiring an independent determination of a Participant's disability status, a request for review of a denied claim must be made in writing to the Committee within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Committee's receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision. The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Committee. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination. (b) DISABILITY BENEFIT CLAIMS. In addition to having the right to review documents and submit comments as described in (a) above, a Claimant whose claim for disability benefits requires an independent determination by the Committee of the Participant's disability status has at least one hundred eighty (180) days following receipt of a notification of an adverse benefit determination within which to request a review of the initial determination. In such cases, the review will meet the following requirements: (i) The Plan will provide a review that does not afford deference to the initial adverse benefit determination and that is conducted by an appropriate named fiduciary of the Plan who did not make the initial determination that is the subject of the appeal, nor by a subordinate of the individual who made the determination. (ii) The appropriate named fiduciary of the Plan will consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment before making a decision on review of any adverse initial determination based in whole or in part on a medical judgment. The professional engaged for purposes of a consultation in the preceding sentence shall not be an individual who was consulted in connection with the initial determination that is the subject of the appeal or the subordinate of any such individual. 21 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... (iii) The Plan will identify to the Claimant the medical or vocational experts whose advice was obtained on behalf of the Plan in connection with the review, without regard to whether the advice was relied upon in making the benefit review determination. (iv) The decision on review will be made within forty-five (45) days after the Committee's receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than ninety (90) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial forty-five (45) day period and must explain the special circumstances and provide an expected date of decision. (c) MANNER AND CONTENT OF NOTICE OF DECISION ON REVIEW. Upon completion of its review of an adverse initial claim determination, the Committee will give the Claimant, in writing or by electronic notification, a notice containing: (i) its decision; (ii) the specific reasons for the decision; (iii) the relevant Plan provisions or insurance contract provisions on which its decision is based; (iv) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Plan's files which is relevant to the Claimant's claim for benefits; (v) a statement describing the Claimant's right to bring an action for judicial review under ERISA Section 502(a); and (vi) if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request. 11.4 CALCULATION OF TIME PERIODS. For purposes of the time periods specified in this Article, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the Plan procedures without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant's failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds. 11.5 LEGAL ACTION. If the Plan fails to follow the claims procedures required by this Article, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under ERISA Section 502(a) on the basis that the Plan has failed to provide a reasonable claims procedure that 22 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... would yield a decision on the merits of the claim. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claims for benefits under the Plan. ARTICLE 12 TRUST 12.1 ESTABLISHMENT OF THE TRUST. The Company may establish a Trust, and the Company may, but is not required, to transfer over to the Trust at least annually such assets as the Company determines, in its sole discretion, are necessary to provide for its respective future liabilities created with respect to the Annual Deferral Amounts, Company Discretionary Amounts and Annual Company Matching Amounts for the Participants. 12.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Company, Participants and the creditors of the Company to the assets transferred to the Trust. The Company shall at all times remain liable to carry out its obligations under the Plan. 12.3 INVESTMENT OF TRUST ASSETS. If a Trust is created or adopted for purposes of this Plan the trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust agreement, including the reinvestment of the proceeds in one or more investment vehicles designated by the Committee. 12.4 DISTRIBUTIONS FROM THE TRUST. The Company's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Company's obligations under this Plan. ARTICLE 13 MISCELLANEOUS 13.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. 13.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company. For purposes of the payment of benefits under this Plan, any and all of the Company's assets shall be, and remain, the general, unpledged unrestricted 23 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 13.3 COMPANY'S LIABILITY. The Company's liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Company and a Participant. The Company shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement. 13.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 13.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Company and a Participant. Such employment is hereby acknowledged, subject to applicable state law, to be an "at will" employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give any Participant the right to be retained in the service of the Company either as a Key Employee or a Non-Employee Director, or to interfere with the right of the Company to discipline or discharge the Participant at any time. 13.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including, but not limited to, taking such physical examinations as the Committee may deem necessary. 13.7 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 13.8 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 24 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... 13.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of Maine without regard to its conflicts of laws principles. 13.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Compensation Manager Banknorth Group, Inc. One Portland Square P.O. Box 9540 M/S ME058-42 Portland, Maine 04112-9540 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 13.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns and the Participant and the Participant's designated Beneficiaries. 13.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 13.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 13.14 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount. 13.15 COURT ORDER. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a 25 BANKNORTH GROUP, INC. PLAN DOCUMENT continued... Participant has an interest in the Participant's benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse's or former spouse's interest in the Participant's benefits under the Plan to that spouse or former spouse. 13.16 DISTRIBUTION IN THE EVENT OF TAXATION. (a) IN GENERAL. If, for any reason, all or any portion of a Participant's benefits under this Plan becomes taxable to the Participant prior to receipt, the Participant may petition the Committee for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), the Company shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant's unpaid vested Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within ninety (90) days of the date when the Participant's petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan. (b) TRUST. If the Trust terminates in accordance with the provisions of the Trust and benefits are distributed from the Trust to a Participant in accordance with such provisions, the Participant's benefits under this Plan shall be reduced to the extent of such distributions. 13.17 INSURANCE. The Company, on its own behalf or on behalf of the trustee of the Trust, and, in its sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Company or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Company shall supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for insurance. IN WITNESS WHEREOF, the Company has signed this amended and restated Plan document as of January 1, 2003. BANKNORTH GROUP, INC. By: -------------------------------- Title: ----------------------------- 26 Schedule A Measurement Funds Pursuant to Section 3.10(c), the Participant may elect one or more of the following Measurement Funds:
- ---------------------------------------------------------------------------------------------------------------------- Fund Class Measurement Fund - ---------------------------------------------------------------------------------------------------------------------- Money Market Federated Prime Obligations Fund - ---------------------------------------------------------------------------------------------------------------------- Short Term Govt. Bonds Federated U.S. Govt. 2-5 Years Fund - ---------------------------------------------------------------------------------------------------------------------- Intermediate Bonds PIMCO Total Return Fund - ---------------------------------------------------------------------------------------------------------------------- Large Cap Balanced Fidelity Puritan Fund - ---------------------------------------------------------------------------------------------------------------------- Large Cap Balanced Janus Balanced Fund - ---------------------------------------------------------------------------------------------------------------------- Large Cap Blend Banknorth Large Cap Core Fund - ---------------------------------------------------------------------------------------------------------------------- Large Cap Blend Federated Max-Cap Fund - ---------------------------------------------------------------------------------------------------------------------- Small Cap Blend Dreyfus Small Cap Stock Index Fund - ---------------------------------------------------------------------------------------------------------------------- International Value Stocks Tweedy Browne Global Value Fund - ---------------------------------------------------------------------------------------------------------------------- Common Stock Fund (Individual Equity) Stock Units (Deemed invested in Banknorth Group, Inc. Common Stock) - ----------------------------------------------------------------------------------------------------------------------
EX-10.(L)(2) 9 b45642bgexv10wxlyx2y.txt EX-10(L)(2) FORM OF 1ST AMEND TO 401(K) PLAN EXHIBIT 10(l)(2) FIRST AMENDMENT TO THE BANKNORTH GROUP, INC. 401(k) PLAN The Banknorth Group, Inc. 401(k) Plan (the "Plan") was last amended and restated effective generally January 1, 2001. The Plan shall be further amended as set forth herein. 1. The terms used in this First Amendment shall have the meanings set forth in the Plan unless the context indicates otherwise. 2. The table appearing in Section 1.61(c) shall be amended by adding the following entry at the end thereof:
Organization Acquisition Date Effective Date ------------ ---------------- -------------- ~~IpswichBank July 26, 2002 August 1, 2002 Community Insurance July 1, 2002 October 1, 2002 Agencies, Inc.~~
3. Section 2.03 shall be amended to read in its entirety as follows: 2.03 Special Participation Rules. (a) If an Eligible Employee was previously employed by CFX Corporation or any of its subsidiaries (collectively, "CFX") immediately prior to the date on which CFX was acquired by the Company and: (i) is both employed by any former CFX subsidiary except Safety Fund National Bank on June 30, 1998, and a participant receiving elective deferrals under the CFX Corporation 401(k) Plan ("CFX Plan") or the Concord Savings Bank 401(k) Plan on such date, then his or her deferral election in effect under the applicable plan on such date shall constitute his or her initial Participation Agreement under this Plan, provided that any terms of such deferral election that are not consistent with the provisions of this Plan shall be of no effect hereunder, and provided further that the Employee may file a new Participation Agreement by June 15, 1998. (ii) is both employed by Safety Fund National Bank on May 22, 1998, and a participant receiving elective deferrals under the CFX Plan on such date, then such Employee shall be eligible to participate in this Plan as of May 22, 1998, and his or her deferral election in effect under the CFX Plan on such date shall constitute his or her initial Participation Agreement under this Plan, provided that any terms of such deferral election that are not consistent with the provisions of this Plan shall be of no effect hereunder. (b) If an Eligible Employee was previously employed by ALLTEL Information Services immediately prior to the commencement of his or her em- ployment with a Participating Employer, and commenced such eligible employment as of July 1, 2002, then: (i) he or she may commence participation with respect to Salary Reduction Contributions on July 1, 2002, provided a timely Participation Agreement has been filed with the Plan Administrator; and (ii) effective July 1, 2002, his or her years of service with ALLTEL Information Services shall be credited for purposes of participation with respect to Company Contributions. 4. Section 3.06 shall be amended by the addition of the following paragraph at the end thereof: Effective August 1, 2002, with respect to an Eligible Employee who was a participant in the SBERA 401(k) Plan as Adopted by IpswichBank ("IpswichBank Plan"), if the Employee elects a direct rollover to this Plan of his or her vested interest in the IpswichBank Plan, and his or her vested interest in such plan includes any outstanding loans that are not in default, then he or she may transfer such unpaid loans to this Plan. The promissory note(s) evidencing such loan(s) shall be assigned to this Plan, and the Participant's obligation thereunder shall be as set forth in Section 8.03. 5. Items 2 and 4 of this First Amendment shall be effective August 1, 2002, and item 3 shall be effective July 1, 2002. IN WITNESS WHEREOF, to record the adoption of this First Amendment, Banknorth Group, Inc. has caused this instrument to be executed by its duly authorized officer this ________ day of ______________________, 2002. BANKNORTH GROUP, INC. By ------------------------------------------- Its 2 EX-10.(L)(3) 10 b45642bgexv10wxlyx3y.txt EX-10(L)(3) FORM OF 2ND AMEND TO 401(K) PLAN EXHIBIT 10(l)(3) SECOND AMENDMENT TO THE BANKNORTH GROUP, INC. 401(k) PLAN The Banknorth Group, Inc. 401(k) Plan (the "Plan") was last amended and restated effective generally January 1, 2001, and further amended by a First Amendment effective as of the dates stated therein. The Plan shall be further amended as set forth herein. This Second Amendment is adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") and for other purposes. Item 2 of this amendment is intended as good faith compliance with the requirements of EGTRRA and are to be construed in accordance with EGTRRA and the guidance issued thereunder. This Second Amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with this amendment. 1. The terms used in this Second Amendment shall have the meanings set forth in the Plan unless the context indicates otherwise. EGTRRA AMENDMENT 2. Article XIX shall be amended by adding the following sections at the end thereof: 19.05 Maximum Annual Addition. Effective for Limitation Years beginning after December 31, 2001, and except to the extent permitted under Section 19.04 and Code Section 414(v), the Annual Addition that may be contributed or allocated to a Participant's Aggregate Account under the Plan for any Limitation Year shall not exceed the lesser of (a) $40,000, as adjusted for increases in the cost-of-living under Code Section 415(d), or (b) 100% of the Participant's Section 415 Compensation for the Limitation Year. The compensation limit referred to in (b) shall not apply to any contribution for medical benefits after severance from employment (within the meaning of Code Sections 401(h) or 419A(f)(2)) which is otherwise treated as an Annual Addition. 19.06 Modification of Top-Heavy Rules. (a) Effective Date. This Section shall apply for purposes of determining whether the Plan is a top-heavy plan under Code Section 416(g) for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Code Section 416(c) for such years. This Section amends Article XVII. (b) Determination Of Top-Heavy Status. (i) Key Employee. Key employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Employer having annual Section 415 Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the employer having annual Section 415 Compensation of more than $150,000. The determination of who is a key employee will be made in accordance with Code Section 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder. (ii) Determination Of Present Values And Amounts. This clause (ii) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the determination date. (A) Distributions During Year Ending On The Determination Date. The present values of accrued benefits and the amounts of account balances of an employee as of the determination date shall be increased by the distributions made with respect to the employee under the plan and any plan aggregated with the plan under Code Section 416(g)(2) during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting 5-year period for 1-year period. (B) Employees Not Performing Services During Year Ending On The Determination Date. The accrued benefits and accounts of any individual who has not performed services for the employer during the 1-year period ending on the determination date shall not be taken into account. (c) Minimum Benefits. (i) Matching Contributions. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of Code Section 401(m). (ii) Contributions Under Other Plans; Minimum Benefits for Employees Also Covered Under Another Plan. Notwithstanding the foregoing, the provisions of Section 17.03(b) regarding a Participant who is a participant in another defined contribution plan sponsored by the Company or an Affiliate and/or who is a Participant in a defined benefit plan 2 sponsored by the Company or an Affiliate are incorporated herein by reference. 19.07 Direct Rollover of Plan Distributions. Effective for distributions made after December 31, 2001: (a) Modification Of Definition Of Eligible Retirement Plan. For purposes of the direct rollover provisions in Section 10.10, an "eligible retirement plan" shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in Code Section 414(p). (b) Modification of Definition of Eligible Rollover Distribution To Exclude Hardship Distributions. For purposes of the direct rollover provisions in Section 10.10, any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the distributee may not elect to have any portion of such a distribution paid directly to an eligible retirement plan. (c) Modification Of Definition Of Eligible Rollover Distribution To Include After-Tax Employee Contributions. For purposes of the direct rollover provisions in Section 10.10, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. 19.08 Repeal of Multiple Use Test. The multiple use test described in Treasury Regulation Section 1.401(m)-2 and Sections 3.04 and 4.03 of the Plan shall not apply for Plan Years beginning after December 31, 2001. SAFE HARBOR PLAN DESIGN 3. The Plan shall be amended by adding the following Article XX thereto. ARTICLE XX SAFE HARBOR PLAN DESIGN 20.01 Effective Date. This Article shall be effective for Plan Years beginning on or after January 1, 2003, and, on and after such date, shall supercede 3 any other provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Article. 20.02 Current Year Testing Method. Pursuant to IRS Notice 98-1, the Company shall apply Sections 3.04 and 4.03 by substituting the phrase "such Plan Year" for the phrase "the preceding Plan Year" in order to use the current year-testing method under Code Sections 401(k)(3)(A) and 401(m)(2)(A) for Plan Years beginning after December 31, 2002. 20.03 Rules for Salary Deferral Contributions. For purposes of Section 3.04 and Code Sections 401(a)(4) and 410(b), the Salary Deferral Contributions portion of the Plan benefiting Participants who have completed one Year of Service ("Safe Harbor Deferral Portion) shall be disaggregated from the Salary Deferral Contributions portion of the Plan benefiting Participants who have not completed one Year of Service ("Early Participant Deferral Portion"). The Safe Harbor Deferral Portion of the Plan shall be treated as meeting the requirements of Section 3.04(a) with respect to any Plan Year for which such portion of the Plan meets the requirements of Code Section 401(k)(12). In the event Section 4.01(a) is amended to reduce or eliminate Matching Contributions during a Plan Year such that the contribution requirements of Code Section 401(k)(12)(B) cease to be satisfied, Section 3.04(a) and Section 4.03(a) shall apply to the Safe Harbor Deferral Portion of the Plan with respect to the entire Plan Year. Notwithstanding Section 1.02, for purposes of determining whether the Early Participant Deferral Portion of the Plan meets the requirements of Section 3.04(a) with respect to any Plan Year, the Actual Deferral Percentage shall be calculated by taking into account only Participants who have not completed one Year of Service for the part of the Plan Year during which they benefited under the Early Participant Deferral Portion and by excluding (a) the Salary Deferral Contributions (plus, at the election of the Company, any Qualified Nonelective Contributions) made on behalf of such Participants for any part of the Plan Year during which they benefited under the Safe Harbor Deferral Portion of the Plan and (b) such Participants' Earnings for any part of the Plan Year during which they benefited under the Safe Harbor Deferral Portion of the Plan. 20.04 Rules for Matching Contributions. For purposes of Section 4.03 and Code Sections 401(a)(4) and 410(b), the Matching Contributions portion of the Plan benefiting Participants who have completed one Year of Service ("Safe Harbor Match Portion) shall be disaggregated from the Matching Contributions portion of the Plan benefiting Participants who have not completed one Year of Service ("Early Participant Match Portion"). The Safe Harbor Match Portion of the Plan shall be treated as meeting the requirements of Section 4.03(a) with respect to any Plan Year for which such portion of the Plan meets the requirements of Code Section 401(m)(11). In the event 4 Section 4.01(a) is amended to reduce or eliminate Matching Contributions during a Plan Year such that the contribution requirements of Code Sections 401(k)(12)(B) and 401(m)(11) cease to be satisfied, Section 4.03(a) shall apply to the Safe Harbor Portion of the Plan with respect to the entire Plan Year. Notwithstanding Section 1.06, for purposes of determining whether the Early Participant Match Portion of the Plan meets the requirements of Section 4.03(a) with respect to any Plan Year, the Average Contribution Percentage shall be calculated by taking into account only Participants who have not completed one Year of Service for the part of the Plan Year during which they benefited under the Early Participant Match Portion and by excluding (a) the Matching Contributions (plus, at the election of the Company, any Salary Deferral or Discretionary Contributions that may be taken into account) made on behalf of such Participants for any part of the Plan Year during which they benefited under the Safe Harbor Match Portion of the Plan and (b) such Participants' Earnings for any part of the Plan Year during which they benefited under the Safe Harbor Match Portion of the Plan. If the Plan is amended to reduce or eliminate Company Matching Contributions during the Plan Year, such reduction or elimination shall be effective no earlier than the later of 30 days after the date the supplemental notice described in Section 20.05 is provided to Eligible Employees and the date such amendment is adopted. 20.05 Notice of Rights and Obligations. No earlier than 90 days and no later than 30 days before the beginning of each Plan Year, the Plan Administrator shall provide each Eligible Employee who meets the participation requirements of Section 2.01(a) with a written notice of his or her rights and obligations under the Plan. Notwithstanding the foregoing to the contrary, with respect to an Eligible Employee who does not receive the notice within the period described in the preceding sentence because he or she becomes eligible to participate in the Plan after the 90th day before the beginning of the Plan Year, the Plan Administrator shall provide such notice during the 90-day period ending on the date such Employee meets the participation requirements of Section 2.01(a). The notice shall meet the content requirement of Section V.C. of IRS Notice 98-52, as modified by Q&A-8 of Section III of IRS Notice 2000-3 and any subsequent guidance. In the event Section 4.01(a) is amended to reduce or eliminate Matching Contributions during a Plan Year, the Plan Administrator shall provide each Eligible Employee who meets the participation requirements of Section 2.01(a) with a supplemental notice that (a) explains the consequences of the amendment, (b) discloses the effective date of the reduction or elimination of Matching Contributions and (c) discloses that he or she has a reasonable opportunity (including a reasonable period) prior to the reduction or elimination of Matching Contributions to change his or her Salary Deferral election. 5 In lieu of providing any notice described in this Section to an Eligible Employee on a written paper document, the Plan Administrator may provide such notice through an electronic medium that is reasonably accessible to the Eligible Employee, provided the system under which the electronic notice is provided satisfies the requirements of Q&A-7 of Section III of IRS Notice 2000-3. 20.06 Safe Harbor Matching Contribution Account. Effective for Plan Years to which this Article applies, the Trustee shall assure that each Participant's Aggregate Account separately reflects the balance of such account attributable to Matching Contributions paid for such years. 20.07 Limitation on Hardship Withdrawals. Notwithstanding Section 8.02, a Participant's Safe Harbor Matching Contributions Account shall be excluded from the accounts available for a hardship withdrawal distribution. MISCELLANEOUS 4. The first sentence of Section 1.18 shall be corrected to read as follows: "'Earnings' means the total compensation paid by the Company to the Employee for services rendered that constitutes wages as defined in Section 3401(a) of the Code and all other payments made by the Company to an Employee for services rendered for which the Company is required to furnish the Employee a written statement under Sections 6041(d), 6051(a)(3) and 6052 of the Code, without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or service performed." 5. The table appearing in Section 1.61(c) shall be amended by the addition of the following entry at the end thereof:
Organization Acquisition Date Effective Date ------------ ---------------- -------------- ~~Arthur A. Watson & Company, Inc. September 30, 2000 January 1, 2003~~
6. Section 2.01(b) shall be amended to read in its entirety as follows: (b) Company Contributions. Each Eligible Employee shall become a Participant with respect to Company Contributions on the first day of the Calendar Quarter coincident with or next following his or her completion of one Year of Service. Notwithstanding the foregoing to the contrary, the following special rule shall be effective for the Plan Year beginning January 1, 2003 ("2003 Plan Year"). Each Eligible Employee who (i) was an eligible employee under either the Morse Payson & Noyes Incentive Savings Plan or the Arthur A. Watson & Company, Inc. Employees' Master Retirement Plan on the day immediately preceding such plan's Plan Affiliation Date; (ii) is credited with less than one Year of Service as of the Plan Affiliation Date; and (iii) is not a Highly Compensated Employee for the 2003 Plan Year, shall become a Participant with respect to Company Contributions on the first day of the Calendar Quarter coincident with 6 or next following his or her completion of six months of service. This special rule shall apply only for the 2003 Plan Year, and shall be of no force or effect on and after January 1, 2004. 7. Section 3.01(a) shall be amended to read in its entirety as follows: (a) A Participant may elect to defer between one percent (1%) and fifty percent (50%) of his or her Earnings while a Participant, in increments of one percent (1%). 8. Section 3.01(c) shall be amended to read in its entirety as follows: (c) A Participant may increase or decrease the amount of his or her Salary Deferrals during the Plan Year. If a request for change is received by the Plan Administrator between the first day of a Calendar Quarter and the 15th day of the month immediately preceding the first day of the next Calendar Quarter, then the change in deferral percentage shall be effective as of the first day of the Calendar Quarter immediately following its receipt. If the request for change is received by the Plan Administrator after the 15th day of the month immediately preceding the first day of a Calendar Quarter, and on or before the 15th day of the month immediately preceding the first day of the next Calendar Quarter, then the change in deferral percentage shall be effective as of the first day of such next Calendar Quarter. 9. The Appendix to the Plan shall be amended by inserting the following text before the first paragraph thereof: The following table identifies Predecessor Plans that were merged into this Plan after January 1, 2001. The provisions of each Predecessor Plan remaining in effect solely with respect to a Participant's Predecessor Plan Account in accordance with Article XIV hereof shall be the provisions of each such plan as of the Plan Affiliation Date set forth below, except as is otherwise specifically provided in this Plan to the contrary.
Predecessor Plan Plan Affiliation Date - ---------------- --------------------- ~~Morse Payson & Noyes Incentive Savings Plan December 31, 2002 Arthur A. Watson & Company, Inc. Employees' Master Retirement Plan December 31, 2002~~
10. Item 2 of this Second Amendment shall be effective as of the dates stated therein. Item 3 shall be effective January 1, 2003. Item 4 shall be effective January 1, 2001, as if originally included in the amendment and restatement of the Plan as of such date. Items 5 through 9 shall be effective January 1, 2003. 7 IN WITNESS WHEREOF, to record the adoption of this Second Amendment, Banknorth Group, Inc. has caused this instrument to be executed by its duly authorized officer this day of _______________________, 2002. BANKNORTH GROUP, INC. By ----------------------------------------- Its 8 EX-10.(M) 11 b45642bgexv10wxmy.txt EX-10(M) 1996 EQUITY INCENTIVE PLAN, AS AMENDED EXHIBIT 10(m) BANKNORTH GROUP, INC. 1996 EQUITY INCENTIVE PLAN (AS AMENDED AS OF OCTOBER 22, 2002 AND AS ADJUSTED TO REFLECT A 2 FOR 1 SPLIT OF THE SHARES EFFECTIVE MAY 18, 1998) SECTION 1. Purpose. The purposes of the Banknorth Group, Inc. 1996 Equity Incentive Plan are to promote the interests of Banknorth Group, Inc. and its stockholders by (i) attracting and retaining exceptional executive personnel and other key employees of the Company and its Affiliates; (ii) motivating such employees by means of performance-related incentives to achieve long-range performance goals; and (iii) enabling such employees to participate in the long-term growth and financial success of the Company. SECTION 2. Definitions. As used in the Plan, the following terms shall have the meanings set forth below: "Affiliate" shall mean (i) any entity that, directly or indirectly, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee. "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award or Other Stock-Based Award. "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant. "Board" shall mean the Board of Directors of the Company. "Change in Control" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act or any successor thereto, provided that, without limiting the foregoing, a change in control also shall mean the occurrence of any of the following events: (i) any "person" (as defined in Section 3(a)(9) of the Exchange Act) or "group" of persons (as provided under Rule 13d-3 under the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Exchange Act), directly or indirectly (including as provided in Rule 13d-3(d)(1) under the Exchange Act), of capital stock of the Company the holders of which are entitled to vote for the election of directors ("voting stock") representing that percentage of the Company's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) the Exchange Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than twenty-five percent (25%) of all such voting stock; (ii) during any period of twenty four consecutive months, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board (excluding any Board seat that is vacant or otherwise unoccupied); and (iii) there shall be consummated any consolidation, merger, stock for stock exchange or similar transaction (collectively, "Merger Transactions") involving securities of the Company in which holders of voting stock of the Company immediately prior to such consummation own, as a group, immediately after such consummation, voting stock of the Company (or, if the Company does not survive the Merger Transaction, voting securities of the corporation surviving such transaction) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation). "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Committee" shall mean a committee of the Board designated by the Board to administer the Plan and composed of not less than the minimum number of persons from time to time required by Rule 16b-3, each of whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-employee director" within the meaning of Rule 16b-3, as from time to time amended. Until otherwise determined by the Board, the Human Resources Committee designated by the Board shall be the Committee under the Plan. "Company" shall mean Banknorth Group, Inc. and any successor thereto. "Employee" shall mean an employee of the Company or of any Affiliate. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean the fair market value of the property or other item being valued, as determined by the Committee in its sole discretion, provided that, unless otherwise determined by the Committee in order to satisfy the requirements relating to Incentive Stock Options under applicable laws and regulations, the "Fair Market Value" of a Share shall be (i) if the Shares are listed or admitted to trading on any securities exchange or national market system in the United States, the closing price, regular way, on such day on the principal securities exchange or national market system in the United States on which Shares are traded, (ii) if the Shares are not then listed or admitted to trading on any such day, or if no sale takes place on such day, the average of the closing bid and asked prices in the United States on such day, as reported by a reputable quotation source designated by the Committee, and (iii) if the Shares are not then listed or admitted to trading on any such securities exchange or national market system and no such reported sale price or bid and asked prices are available, the average of the reported high bid and low asked prices in the United States on such day, as reported in The Wall Street Journal (Eastern edition) or other newspaper designated by the Committee. 2 "Incentive Stock Option" shall mean a right to purchase Shares from the Company that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provisions thereto. "Nonqualified Stock Option" shall mean a right to purchase Shares from the Company that is granted under Section 6 of the Plan and that is not intended to be an Incentive Stock Option. "Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option. "Other Stock-Based Award" shall mean any right granted under Section 10 of the Plan. "Participant" shall mean any Employee selected by the Committee to receive an Award under the Plan. "Performance Award" shall mean any right granted under Section 9 of the Plan. "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. "Plan" shall mean this Banknorth Group, Inc. 1996 Equity Incentive Plan, as amended. "QDRO" shall mean a domestic relations order meeting such requirements as the Committee shall determine, in its sole discretion. "Restricted Stock Award" shall mean any Award granted under Section 8 of the Plan. "Restricted Stock" shall mean any Share granted under Section 8 of the Plan. "Restricted Stock Unit" shall mean any unit granted under Section 8 of the Plan. "Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time. "SEC" shall mean the Securities and Exchange Commission or any successor thereto and shall include the staff thereof. "Shares" shall mean shares of the common stock, $.01 par value, of the Company, or such other securities of the Company as may be designated by the Committee from time to time. "Stock Appreciation Right" shall mean any right granted under Section 7 of the Plan. 3 SECTION 3. Administration. (a) Authority of Committee. The Plan shall be administered by the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to an eligible Employee; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vi) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. (b) Committee Discretion Binding. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any stockholder and any Employee. (c) Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers of the Company or any Affiliate, or to a committee of such officers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend or terminate Awards held by, Employees who are not officers or directors of the Company for purposes of Section 16 of the Exchange Act, or any successor section thereto, or who are otherwise not subject to such Section. (d) Authority of Board. Notwithstanding anything to the contrary contained in the Plan, the Plan also may be administered by the Board to the extent permitted by Rule 16b-3, as amended from time to time. In the event of such administration by the Board, all references to the Committee in the Plan shall be deemed to refer to the Board and any officer or employee-director of the Company or any Affiliate shall be eligible to be designated a Participant. 4 SECTION 4. Shares Available for Awards. (a) Shares Available. Subject to adjustment as provided in Section 4(b), the number of Shares with respect to which Awards may be granted under the Plan shall be equal to 13,000,000. If, after the effective date of the Plan, any Shares covered by an Award granted under the Plan, or to which such an Award relates, are forfeited, or if such an Award is settled for cash or otherwise terminates or is canceled without the delivery of Shares, then the Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such settlement, forfeiture, termination or cancellation, shall again become Shares with respect to which Awards may be granted. In the event that any Option or other Award granted hereunder is exercised through the delivery of Shares or in the event that withholding tax liabilities arising from such Award are satisfied by the withholding of Shares by the Company, the number of Shares available for Awards under the Plan shall be increased by the number of Shares so surrendered or withheld. Notwithstanding the foregoing and subject to adjustment as provided in Section 4(b), no Participant may receive Awards under the Plan in any calendar year that relate to more than 300,000 Shares. (b) Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted, (ii) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards and (iii) the grant or exercise price with respect to any Award, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided, in each case, that (A) with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code, as from time to time amended, and (B) with respect to any Award no such adjustment shall be authorized to the extent that such authority would be inconsistent with the Plan's meeting the requirements of Section 162(m) of the Code, as from time to time amended, or Rule 16b-3, as from time to time amended. (c) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares. SECTION 5. Eligibility. Any Employee, including any officer or employee-director of the Company or any Affiliate, who is not a member of the Committee, shall be eligible to be designated a Participant. 5 SECTION 6. Stock Options. (a) Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Options shall be granted, the number of Shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The Committee shall have the authority to grant Incentive Stock Options, or to grant Nonqualified Stock Options, or to grant both types of options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code, as from time to time amended, and any regulations implementing such statute. (b) Exercise Price. The Committee in its sole discretion shall establish the exercise price at the time each Option is granted, provided that the per share price at which Shares may be purchased upon exercise of an Option shall be no less than one hundred percent (100%) of the Fair Market Value of a Share at the time such Option is granted. (c) Exercise. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including without limitation any conditions relating to the application of federal or state securities laws, as it may deem necessary or advisable. (d) Payment. No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company. Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by exchanging Shares owned by the optionee (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender is at least equal to such option price. SECTION 7. Stock Appreciation Rights. (a) Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Stock Appreciation Right, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Stock Appreciation Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to another Award. Stock Appreciation Rights granted in tandem with or in addition to an Award may be granted either at the same time as the Award or at a later time. Stock Appreciation Rights shall have a grant price as determined by the Committee on the date of grant. (b) Exercise and Payment. A Stock Appreciation Right shall entitle the Participant to receive an amount equal to the excess of the Fair Market Value of a Share on the date of exercise of the Stock Appreciation Right over the grant price thereof, provided that the Committee may 6 for administrative convenience determine that, with respect to any Stock Appreciation Right that is not related to an Incentive Stock Option and that can only be exercised for cash during limited periods of time in order to satisfy the conditions of Rule 16b-3, the exercise of such Stock Appreciation Right for cash during such limited period shall be deemed to occur for all purposes hereunder on the day during such limited period on which the Fair Market Value of the Shares is the highest. Any such determination by the Committee may be changed by the Committee from time to time and may govern the exercise of Stock Appreciation Rights granted prior to such determination as well as Stock Appreciation Rights granted thereafter. The Committee shall determine whether a Stock Appreciation Right shall be settled in cash, Shares or a combination of cash and Shares. (c) Other Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine, at or after the grant of a Stock Appreciation Right, the term, methods of exercise, methods and form of settlement and any other terms and conditions of any Stock Appreciation Right. Any such determination by the Committee may be changed by the Committee from time to time and may govern the exercise of Stock Appreciation Rights granted prior to such determination as well as Stock Appreciation Rights granted thereafter. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it shall deem appropriate. SECTION 8. Restricted Stock and Restricted Stock Units. (a) Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Shares of Restricted Stock and Restricted Stock Units shall be granted, the number of Shares of Restricted Stock and/or the number of Restricted Stock Units to be granted to each Participant, the duration of the period during which, and the conditions under which, the Restricted Stock and Restricted Stock Units may be forfeited to the Company and the other terms and conditions of such Awards. Notwithstanding any other provision of the Plan to the contrary, Restricted Stock and Restricted Stock Units shall have a minimum vesting period of three years from the date of grant, except (i) as provided in Section 12 hereof and (ii) in the Committee's sole discretion, in the event of the Participant's retirement, permanent and total disability or death. The meaning of the terms "retirement" and "permanent and total disability" for purposes of this Section 8(a) and the other provisions of the Plan shall be determined by the Committee. (b) Transfer Restrictions. Shares of Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged or otherwise encumbered, except, in the case of Restricted Stock, as provided in the Plan or the applicable Award Agreements. Certificates issued in respect of Shares of Restricted Stock shall be registered in the name of the Participant and deposited by such Participant, together with a stock power endorsed in blank, with the Company. Upon the lapse of the restrictions applicable to such Shares of Restricted Stock, the Company shall deliver such certificates to the Participant or the Participant's legal representative. (c) Payment. Each Restricted Stock Unit shall have a value equal to the Fair Market Value of a Share. Restricted Stock Units shall be paid in cash, Shares, other securities or other 7 property, as determined in the sole discretion of the Committee, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement. (d) Dividends and Distributions. Dividends and other distributions paid on or in respect of any Shares of Restricted Stock may be paid directly to the Participant, or may be reinvested in additional Shares of Restricted Stock or in additional Restricted Stock Units, as determined by the Committee in its sole discretion. (e) Voting of Restricted Stock. Unless otherwise determined by the Committee at the time of grant, an Employee to whom Shares of Restricted Stock shall be granted shall be entitled to vote such Shares. SECTION 9. Performance Awards. (a) Grant. The Committee shall have sole and complete authority to determine the Employees who shall receive a Performance Award, which shall consist of a right that is (i) denominated in cash or Shares, (ii) valued, as determined by the Committee, in accordance with the achievement of such performance goals during such performance periods as the Committee shall establish and (iii) payable at such time and in such form as the Committee shall determine. Notwithstanding any other provision of the Plan to the contrary, a Performance Award shall have a minimum vesting period of one year from the date of grant, except (i) as provided in Section 12 hereof and (ii) in the Committee's sole discretion, in the event of the Participant's retirement, permanent and total disability or death. (b) Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award and the amount and kind of any payment or transfer to be made pursuant to any Performance Award. (c) Payment of Performance Awards. Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with procedures established by the Committee, on a deferred basis. SECTION 10. Other Stock-Based Awards. The Committee shall have authority to grant to eligible Employees an Other Stock-Based Award, which shall consist of any right that is (i) not an Award described in Sections 6 through 9 above and (ii) an Award of Shares or an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as deemed by the Committee to be consistent with the purposes of the Plan; provided that any such rights must comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock-Based Award. Notwithstanding any other provision of the Plan to the contrary, an Other Stock-Based Award which is not granted in lieu of base salary or bonuses shall have a minimum vesting period of three years from the date 8 of grant, except (i) as provided in Section 12 hereof and (ii) in the Committee's sole discretion, in the event of the Participant's retirement, permanent and total disability or death. SECTION 11. Termination or Suspension of Employment. The following provisions shall apply in the event of the Participant's termination of employment unless the Committee shall have provided otherwise, either at the time of the grant of the Award or thereafter. (a) Nonqualified Stock Options and Stock Appreciation Rights. (i) Termination of Employment. If the Participant's employment with the Company or its Affiliates is terminated for any reason other than death, permanent and total disability or retirement, the Participant's right to exercise any Nonqualified Stock Option or Stock Appreciation Right shall terminate, and such Option or Stock Appreciation Right shall expire, on the earlier of (A) the first anniversary of such termination of employment or (B) the date such Option or Stock Appreciation Right would have expired had it not been for the termination of employment. The Participant shall have the right to exercise such Option or Stock Appreciation Right prior to such expiration to the extent it was exercisable at the date of such termination of employment and shall not have been exercised. (ii) Death, Disability or Retirement. If the Participant's employment with the Company or its Affiliates is terminated by death, permanent and total disability or retirement, the Participant or his successor (if employment is terminated by death) shall have the right to exercise any Nonqualified Stock Option or Stock Appreciation Right to the extent it was exercisable at the date of such termination of employment and shall not have been exercised, but in no event shall such Option or Stock Appreciation Right be exercisable later than the date the Option or Stock Appreciation Right would have expired had it not been for the termination of such employment. (iii) Acceleration and Extension of Exercisability. Notwithstanding the foregoing, the Committee may, in its discretion, provide (A) that an Option granted to a Participant may terminate at a date earlier than that set forth above, including without limitation the date of termination of employment, (B) that an Option granted to a Participant may terminate at a date later than that set forth above, provided such date shall not be beyond the date the Option would have expired had it not been for the termination of the Participant's employment, and (C) that an Option or Stock Appreciation Right may become immediately exercisable when it finds that such acceleration would be in the best interests of the Company. (b) Incentive Stock Options. Except as otherwise determined by the Committee at the time of grant, if the Participant's employment with the Company is terminated for any reason, the Participant shall have the right to exercise any Incentive Stock Option and any related Stock Appreciation Right during the 90 days after such termination of employment to the extent it was exercisable at the date of such termination, but in no event later than the date the Option would have expired had it not been for the termination of such employment. If the Participant does not exercise such Option or related Stock Appreciation Right to the full extent permitted by 9 the preceding sentence, the remaining exercisable portion of such Option automatically will be deemed a Nonqualified Stock Option, and such Option and any related Stock Appreciation Right will be exercisable during the period set forth in Section 11(a) of the Plan, provided that in the event that employment is terminated because of death or the Participant dies during such 90-day period, the Option will continue to be an Incentive Stock Option to the extent provided by Section 421 or Section 422 of the Code, or any successor provisions, and any regulations promulgated thereunder. (c) Restricted Stock. Except as otherwise determined by the Committee at the time of grant, upon termination of employment for any reason during the restriction period, all shares of Restricted Stock still subject to restriction shall be forfeited by the Participant and reacquired by the Company at the price (if any) paid by the Participant for such Restricted Stock, provided that in the event of a Participant's retirement, permanent and total disability or death, or in cases of special circumstances, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to such Participant's shares of Restricted Stock. SECTION 12. Change in Control. Notwithstanding any other provision of the Plan to the contrary, upon a Change in Control all outstanding Awards shall vest, become immediately exercisable or payable or have all restrictions lifted as may apply to the type of Award. SECTION 13. Amendment and Termination. (a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is (i) necessary to comply with any tax or regulatory requirement, including for these purposes any approval requirement that is a prerequisite for exemptive relief from Section 16(b) of the Exchange Act, for which or with which the Board deems it necessary or desirable to qualify or comply or (ii) otherwise required by applicable law. (b) Amendments to Awards. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding any other provision of the Plan to the contrary, the Committee may not amend more than 10% of outstanding Options at any particular time to reduce the per share exercise price thereof and, to the extent permitted by the foregoing, may not amend outstanding Options to reduce the per share exercise price thereof to lower than 85% of the Fair Market Value of a Share on the date of repricing. (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, 10 without limitation, the events described in Section 4(b) hereof) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan; provided that no such adjustment shall be authorized to the extent that such authority would be inconsistent with the Plan's meeting the requirements of Section 162(m) of the Code, as from time to time amended, or Rule 16b-3, as from time to time amended. SECTION 14. General Provisions. (a) Dividend Equivalents. In the sole and complete discretion of the Committee, an Award, whether made as an Other Stock-Based Award under Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof, may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities or other property on a current or deferred basis. (b) Nontransferability. No Award shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant, except by will or the laws of descent and distribution or pursuant to a QDRO, provided, however, that an Award may be transferable, to the extent determined by the Committee and set forth in the applicable Award Agreement, (i) if such Award Agreement provisions do not disqualify such Award for exemption under Rule 16b-3, as from time to time amended, (ii) if such Award is not intended to qualify for exemption under such rule or (iii) with respect to Awards which are Incentive Stock Options, if such Award Agreement provisions do not prevent the Incentive Stock Options from qualifying as such under Section 422 of the Code, as from time to time amended. (c) No Rights to Awards. No Employee, Participant or other Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Employees, Participants or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each recipient. (d) Share Certificates. All certificates for Shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the SEC, any stock exchange or national market quotation system upon which such Shares or other securities are then listed or quoted, respectively, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (e) Withholding. A Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in 11 respect of any Award, its exercise or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee may provide for additional cash payments to holders of Awards to defray or offset any tax arising from the grant, vesting, exercise or payments of any Award. (f) Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement that shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto. (g) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, restricted stock, Shares and other types of Awards provided for hereunder (subject to stockholder approval if such approval is required), and such arrangements may be either generally applicable or applicable only in specific cases. (h) No Right to Employment. Neither the Plan nor the grant of any Awards hereunder nor any action taken by the Committee or the Board in connection with the Plan shall create any right on the part of any Employee to continue in the employ of the Company or any Affiliate. (i) No Rights as Stockholder. Subject to the provisions of the applicable Award and the Plan, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until he or she has become the holder of such Shares. (j) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Maine. (k) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. (l) Other Laws. The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or 12 beneficiary. Without limiting the generality of the foregoing, no Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Committee in its sole discretion has determined that any such offer, if made, would be in compliance with all applicable requirements of the U.S. federal securities laws and any other laws to which such offer, if made, would be subject. (m) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (n) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (o) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. (p) Successors and Assigns. The Plan and any Award Agreement shall be binding upon the successors and assigns of the Company and upon each Participant and such Participant's heirs, executors, administrators, personal representatives, permitted assignees and successors in interest. SECTION 15. Effective Date; Term of the Plan. (a) Effective Date. The Plan shall be effective as of February 13, 1996, subject to approval by the stockholders of the Company within one year thereafter. The amendment to Section 4(a) of the Plan adopted by the Board of Directors of the Company on March 3, 1998 shall be effective as of such date, subject to approval by the stockholders of the Company within one year thereafter. The amendments to the Plan adopted by the Committee on May 26, 1998 shall be effective as of such date. The amendment to Section 4(a) of the Plan adopted by the Board of Directors on January 23, 2001 shall be effective as of such date, subject to approval by the stockholders of the Company within one year thereafter. (b) Term of the Plan. Unless sooner terminated, the Plan shall remain in effect for a period of ten years ending on the tenth anniversary of the Effective Date. Termination of the Plan shall not affect any Awards previously granted and such Awards shall remain valid and in effect until they have been fully exercised or earned, are surrendered or by their terms expire or are forfeited. 13 EX-10.(N) 12 b45642bgexv10wxny.txt EX-10(N) EXECUTIVE INCENTIVE PLAN EXHIBIT 10(n) BANKNORTH GROUP, INC. EXECUTIVE INCENTIVE PLAN (Amended as of October 22, 2002) SECTION 1. PURPOSE. The purpose of the Banknorth Group, Inc. Executive Incentive Plan is to promote and advance the interests of Banknorth Group, Inc. (the "Company") and its shareholders by enabling the Company to attract, retain and reward key employees of the Company and its Affiliates, and to qualify incentive compensation paid to Participants who are Covered Employees as performance-based compensation within the meaning of Section 162(m) of the Code. SECTION 2. DEFINITIONS. The terms below shall have the following meanings: "Affiliate" means (i) any entity that is controlled by the Company, whether directly or indirectly, and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. "Board" means the Board of Directors of the Company. "Cause" shall have the meaning set forth in the Company's Executive Severance Agreements. "Change-in-Control of the Company" shall have the meaning set forth in the Company's Executive Severance Agreements. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the committee appointed by the Board to administer the Plan as provided herein. "Company" means Banknorth Group, Inc., a Maine corporation, and its successors and assigns. "Covered Employee" means a "covered employee" within the meaning of Section 162(m) of the Code. "Incentive Award" means, with respect to each Participant, the amount he or she may receive for the applicable Performance Period as established by the Committee pursuant to the provisions of the Plan. "Participant" means any employee of the Company or an Affiliate who is designated by the Committee as eligible to receive an Incentive Award under the Plan. "Performance Goals" means objective criteria based on one or more of the following: net income, net income before taxes, operating earnings, cash earnings, operating cash earnings, cash flow, financial return ratios (including, but not limited to, return on average total assets, return on tangible total assets, return on average stockholders' equity, return on average tangible stockholders' equity, average stockholders' equity to average total assets, risk-adjusted return on capital, return on investment, economic value added, efficiency ratio, expense ratio, revenue growth, noninterest income to total revenue ratio and net interest margin), total stockholder return, earnings per share, operating earnings per share, cash earnings per share, other balance sheet or income statement items, stock price, market share or project completion. Performance Goals with respect to awards to Participants who are not Covered Employees also may be based on any other objective performance goals as may be established by the Committee for a Performance Period. Performance goals may be measured (i) solely on a corporate, subsidiary or business unit basis or a combination thereof and/or (ii) on actual or targeted growth factors. Performance Goals may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected Performance Goals. A Performance Goal may include or exclude items that measure specific objectives, such as the cumulative effect of changes in generally accepted accounting principles, losses resulting from discontinued operations, securities gains and losses, restructuring, merger-related and other nonrecurring costs, amortization of goodwill and other intangible assets, extraordinary gains or losses and any unusual, nonrecurring gain or loss that is separately quantified in the Company's financial statements. Any Performance Goal expressed on a per-share basis shall, in case of a recapitalization, stock dividend, stock split or reverse stock split affecting the number of outstanding shares, be mathematically adjusted by the Committee so that the change in outstanding shares does not cause a substantive change in the relevant goal. The Committee may adjust Performance Goals for any other objective events or occurrences which occur during a Performance Period, including, but not limited to, acquisitions by the Company and changes in applicable tax laws or accounting principles, provided that the Committee shall not have the discretion to increase the amount of compensation that would otherwise be due upon attainment of the Performance Goals to any Participant who is a Covered Employee except to the extent permitted under Section 162(m) of the Code and regulations thereunder. "Performance Period" means, with respect to any Incentive Award, the period specified by the Committee, including, but not limited to, the calendar year or any part thereof and periods of more than one consecutive calendar year. "Performance Targets" mean the specific measures which must be satisfied in connection with any Performance Goal prior to funding of any incentive pool. "Plan" means the Banknorth Group, Inc. Executive Incentive Plan. 2 SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have exclusive authority to interpret the Plan, to promulgate, amend and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable in connection with the administration of the Plan, including, but not limited to, determinations relating to eligibility, whether to make Incentive Awards, the terms of any such payments, the time or times at which Performance Goals are established, the Performance Periods to which Incentive Awards relate, and the actual dollar amount of any Incentive Award. The determinations of the Committee pursuant to this authority shall be conclusive and binding. The Committee may, in its discretion, authorize the Chief Executive Officer of the Company to act on its behalf, except with respect to matters relating to such Chief Executive Officer or which are required to be certified by a majority of the Committee under the Plan, or which are required to be handled exclusively by the Committee under Section 162(m) of the Code or the regulations promulgated thereunder. SECTION 4. ESTABLISHMENT OF PERFORMANCE GOALS AND INCENTIVE AWARDS. A. Establishment of Performance Goals. Prior to the earliest time required by Section 162(m) of the Code or the regulations thereunder, the Committee shall, in its sole discretion, for each Performance Period, determine and establish in writing the following: 1. The Performance Goals applicable to the Performance Period; and 2. The Performance Targets pursuant to which the amount which may be available for payment to Participants as Incentive Awards based upon the relative level of attainment of the Performance Goals may be calculated. B. Certification and Payment. After the end of each Performance Period, the Committee shall: 1. Certify in writing, prior to the unconditional payment of any Incentive Award, the level of attainment of the Performance Goals for the Performance Period; and 2. Determine the amount, if any, to be paid to each Participant as that Participant's Incentive Award, and authorize payment of such amount, provided that in the case of a Participant who is a Covered Employee, the Committee shall not be authorized to increase the amount of the Incentive Award for any Performance Period determined with respect to any such individual by reference to the applicable Performance Targets except to the extent permitted under Section 162(m) of the Code and regulations thereunder. C. Conditional Payments. The Committee may authorize a conditional payment of a Participant's Incentive Award prior to the end of a Performance Period based upon the 3 Committee's good faith determination of the projected size of (i) the total amount which will become available for payment as Incentive Awards for the Performance Period and (ii) the amount determined with respect to any such Participant by reference to the Performance Targets, provided that in the case of a Participant who is a Covered Employee, the Committee shall not be authorized to authorize such a conditional payment except to the extent permitted under Section 162(m) of the Code and regulations thereunder. D. Other Applicable Rules. 1. Unless otherwise determined by the Committee with respect to any Covered Employee or by the Committee or the Company's Chief Executive Officer with respect to any other Participant (unless otherwise required by applicable law), and except as expressly provided in Section 5 hereof, no payment pursuant to this Plan shall be made to a Participant unless the Participant is employed by the Company or an Affiliate as of the date of payment; provided, however, in the event of the Participant's (i) retirement in accordance with the policies of the Company or an Affiliate which employs the Participant, (ii) death or (iii) disability (within the meaning of such term as set forth in the Long-Term Disability Plan of the Company or its successor, the provisions of which are incorporated herein by reference, or as the Committee shall determine based on information provided to it), the Company shall pay the Participant an Incentive Award for the applicable Performance Period, which Incentive Award shall be prorated based on the number of months the Participant was employed by the Corporation or an Affiliate during the applicable Performance Period in which the Participant's retirement, death or disability occurred. In the case of the Participant's retirement, death or disability, such payment shall be made as soon as practicable after the completion of the Performance Period during which the Participant retired in the normal course of payments made to all other Participants. 2. Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation will revoke all prior designations by the same Participant, will be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death will be paid to the Participant's estate. 3. Incentive Awards shall be subject to applicable federal, state and local withholding taxes and other applicable withholding in accordance with the Company's payroll practices as from time-to-time in effect. 4 4. The maximum amount which may become payable to any Covered Employee in any calendar year as an Incentive Award with respect to all Performance Periods completed during such calendar year shall be $10,000,000. 5. Incentive Awards calculated by reference to any Performance Periods shall be payable in cash. In each case, Incentive Awards shall be paid as soon as practicable after the completion of the Performance Period. 6. A Participant shall have the right to defer any or all of any Incentive Award as permitted under the provisions of any deferred compensation plan maintained by the Company. The Committee, in its sole discretion, may impose limitations on the percentage or dollar amount of any Participant election to defer any Incentive Award and may impose rules prohibiting the deferral of less than 100% of any Incentive Award. Notwithstanding anything in this Section 4(D)(6) to the contrary, in the event a Participant defers receipt of all or any portion of an Incentive Award under the provisions of any deferred compensation plan maintained by the Company, the provisions of the Plan (including this Section 4(D)(6) regarding the timing and form of payment of Incentive Awards) shall cease to apply to such deferred amounts and the provisions of the applicable deferred compensation plan shall govern the timing and form of payment of such deferred amounts. 7. Until paid to a Participant, Incentive Awards shall not be subject to the claims of creditors and may not be assigned, alienated, transferred or encumbered in any way other than by will or pursuant to laws of intestacy. SECTION 5. CHANGE-IN-CONTROL OF THE COMPANY. Notwithstanding any other provision of the Plan, in the event of a Change-in-Control of the Company or the employment of a Participant by the Company is terminated without Cause by the Company in anticipation of a Change-in-Control of the Company, then the Participant shall receive a pro rata Incentive Award (i) with respect to any Performance Period then in effect which had an original term of a year or less, based on the amount required to be paid pursuant to any Executive Severence Agreement between the Participant and the Company and (ii) with respect to any Performance Period then in effect which had an original term of greater than a year, based on the greater of (x) the actual attainment by the Company of the Performance Goals and (y) the assumed attainment by the Company of the maximum of the Performance Goals for the Performance Periods (in each case in clauses (i) and (ii) annualized to the extent appropriate). Any such pro rata Incentive Award shall be calculated based on the number of weeks, including partial weeks, in a Performance Period elapsed through the date of the Change-in-Control of the Company. Payments of the amount(s) to which a Participant is entitled hereunder shall be made by the Company or the acquiror of the Company, as applicable, within thirty (30) days after the date of the Change-in-Control of the Company. 5 SECTION 6. AMENDMENT OR TERMINATION. A. Except as provided in Section 6(B) hereof, the Board may amend, modify or terminate the Plan in any respect at any time without the consent of any Participant, provided that any such amendment or modification shall be subject to the approval of the stockholders of the Company to the extent necessary to retain the benefits of Section 162(m) and regulations thereunder for performance-based compensation. Any such action may be taken without the approval of the Company's shareholders unless shareholder approval is required by applicable law. Termination of the Plan shall not affect any Incentive Awards earned prior to, but payable on or after, the date of termination, and any such payments shall continue to be subject to the terms of the Plan notwithstanding its termination. B. Notwithstanding any provision hereof to the contrary, the provisions of Sections 5 and 6(B) hereof may not be amended or terminated for a period of twenty-four (24) months following a Change-in-Control of the Company, or in connection with or in anticipation of a Change-in-Control of the Company, if any such amendment or termination would adversely affect any outstanding Incentive Award of a Participant under the Plan. SECTION 7. EFFECTIVE DATE OF THE PLAN. The Banknorth Group, Inc. Executive Incentive Plan shall be effective as of May 22, 2001, subject to approval of the shareholders of the Company, and thereafter shall remain in effect until terminated in accordance with Section 6 hereof. SECTION 8. GENERAL PROVISIONS. A. The establishment of the Plan shall not confer upon any Participant any legal or equitable right against the Company or any Affiliate, except as expressly provided in the Plan. Without limiting the foregoing, no Participant shall have the right to be selected to receive an Incentive Award under the Plan, or, having been so selected, to be selected to receive another Incentive Award under the Plan in the future. B. The Plan does not constitute an inducement or consideration for the employment of any Participant, nor is it a contract between the Company, or any Affiliate, and any Participant. Participation in the Plan shall not give a Participant any right to be retained in the employ of the Company or any Affiliate. C. Nothing contained in the Plan shall prevent the Board or the Committee from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases. D. The Plan shall be governed, construed and administered in accordance with the laws of the State of Maine, except to the extent such laws may be superseded by federal law. 6 E. The Plan is intended to comply in all aspects with applicable laws and regulations, including, with respect to those Participants who are Covered Employees, Section 162(m) of the Code. In case any one or more of the provisions of the Plan shall be held invalid, illegal or unenforceable in any respect under applicable laws or regulations, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provision shall be deemed null and void; however, to the extent permissible by law, any provision which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit the Plan to be construed in compliance with all applicable laws and regulations, including, without limitation, Section 162(m) of the Code and the regulations thereunder, so as to carry out the intent of the Plan. F. The Plan and any outstanding Incentive Awards thereunder shall be binding upon the successors and assigns of the Company and each Participant's heirs, executors, administrators, personal representatives and successors in interest. Compensation Committee Approved: May 22, 2001 Board Ratified: July 24, 2001 Shareholders Approved: April 23, 2002 Board Approved Amendment: October 22, 2002 7 EX-21 13 b45642bgexv21.txt EX-21 SUBSIDIARIES EXHIBIT 21 Information relating to certain of the subsidiaries of Banknorth Group, Inc. as of December 31, 2002 is set forth below. All of the indicated subsidiaries are directly or indirectly wholly-owned by Banknorth Group, Inc., except as indicated below. Direct Subsidiaries:
Jurisdiction of Incorporation ----------------------------- Name ---- Banknorth, NA United States Peoples Heritage Capital Trust I Delaware Banknorth Capital Trust I Delaware Banknorth Capital Trust II Delaware Ipswich Statutory Trust I Connecticut Northgroup Captive Insurance, Inc. Vermont Northgroup Realty, Inc. Vermont
Indirect Subsidiaries:
Jurisdiction of Incorporation ----------------------------- Name ---- Bancnorth Investment Planning Group, Inc. (1)(2) Maine Banknorth Leasing Corp. (1) Maine Banknorth Insurance Group, Inc. (1)(3) Maine Northgroup (FM) Investment Company (1)(4) Maine
- --------------------- (1) Subsidiary of Banknorth, NA. (2) Holds as a subsidiary Bancnorth Investment and Insurance Agency, Inc., a Massachusetts corporation. (3) Holds as subsidiaries Morse, Payson & Noyes Insurance, a Maine corporation, Catalano Insurance Agency, Inc., a Massachusetts corporation, and Arthur A. Watson & Co., Inc., a Connecticut corporation. (4) Owns 100% of the common securities of Northgroup Preferred Capital Corp., a Maine corporation which has qualified as a real estate investment trust under the Internal Revenue code. Banknorth, NA owns 87% of the preferred securities of Northgroup Preferred Capital Corp. EX-23 14 b45642bgexv23.txt EX-23 CONSENT OF KPMG LLP EXHIBIT 23 Independent Auditors' Consent The Board of Directors Banknorth Group, Inc.: We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-22205, 33-22206, 33-80310, 333-17467, 333-46367, 333-49999, 333-70095, 333-72909, 333-36834, 333-61436, 333-72692, 333-97311, 333-102331 and 333-103312), on Form S-3 (No. 333-81980) and on Form S-4 (No. 333-61757) of Banknorth Group, Inc. of our report, dated January 13, 2003, with respect to the consolidated balance sheets of Banknorth Group, Inc. as of December 31, 2002 and 2001, 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, 2002, which report appears in the December 31, 2002 annual report on Form 10-K of Banknorth Group, Inc. Our report refers to the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," and SFAS No. 147, "Acquisitions of Certain Financial Institutions." /s/ KPMG LLP Boston, Massachusetts March 7, 2003 EX-99.(A) 15 b45642bgexv99wxay.txt EX-99(A) CERTIFICATION OF CEO EXHIBIT 99(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Sec. 1350) The undersigned executive officer of Banknorth Group, Inc. (the "Registrant") hereby certifies that the Registrant's Form 10-K for the year ended December 31, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ William J. Ryan ------------------------------------ Name: William J. Ryan Title: Chairman, President and Chief Executive Officer Date: March 10, 2003 EX-99.(B) 16 b45642bgexv99wxby.txt EX-99(B) CERTIFICATION OF CFO EXHIBIT 99(b) CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Sec. 1350) The undersigned executive officer of Banknorth Group, Inc. (the "Registrant") hereby certifies that the Registrant's Form 10-K for the year ended December 31, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ Peter J. Verrill ------------------------------ Name: Peter J. 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Maine (State or other jurisdiction of incorporation or organization)		01-0437984 (I.R.S. Employer Identification Number)
P.O. Box 9540 Two Portland Square Portland, Maine (Address of principal executive offices)		04112-9540 (Zip Code)


Title of Class		Name of Each Exchange on Which Registered

Common Stock, $.01 par value Preferred Stock Purchase Rights		New York Stock Exchange, Inc. New York Stock Exchange, Inc.


	Item 1. Business
	General
	Business
	Acquisitions
	Subsidiaries and Other Equity Investments
	Competition
	Employees
	Supervision and Regulation
	Taxation
	Statistical Disclosure by Bank Holding Companies
	Availability of Information
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	PART III.
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Controls and Procedures
	PART IV.
	Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
Ex-10(a) Form of Severance Agreement - Ryan
Ex-10(b) Form of Severance Agreement - Exec Off...
Ex-10(c) Amended Supplemental Retirement - Ryan
Ex-10(e)(2) Amended Supplemental Retirement Agmnt
Ex-10(f) Supplemental Retirement Plan
Ex-10(g) Amended Deferred Compensation Plan
Ex-10(l)(2) Form of 1st Amend to 401(k) Plan
Ex-10(l)(3) Form of 2nd Amend to 401(k) Plan
Ex-10(m) 1996 Equity Incentive Plan, as Amended
Ex-10(n) Executive Incentive Plan
Ex-21 Subsidiaries
Ex-23 Consent of KPMG LLP
Ex-99(a) Certification of CEO
Ex-99(b) Certification of CFO


		Page

PART I

Item 1.	BUSINESS		1
	General		1
	Business		1
	Acquisitions		2
	Subsidiaries and Other Equity Investments		2
	Competition		3
	Employees		3
	Supervision and Regulation		3
	Taxation		8
	Statistical Disclosure by Bank Holding Companies		8
	Availability of Information		9
Item 2.	PROPERTIES		9
Item 3.	LEGAL PROCEEDINGS		9
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		10
PART II

Item 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS		10
Item 6.	SELECTED CONSOLIDATED FINANCIAL DATA		11
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		13
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		44
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		45
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		91
PART III

Item 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		91
Item 11.	EXECUTIVE COMPENSATION		91
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		91
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		91
Item 14.	CONTROLS AND PROCEDURES		91
PART IV

Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K		92
	SIGNATURES		95



	Market Price
					Dividends Declared
2002	High		Low		Per Share

First Quarter	$	26.80		22.25	$	0.135
Second Quarter		27.45		24.96		0.145
Third Quarter		27.40		20.70		0.150
Fourth Quarter		24.58		20.68		0.150


þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]


		Number of
State		Banking Offices		Deposits

				(Dollars in Thousands)
Maine			61	$	2,634,355
New Hampshire			76		3,795,324
Massachusetts			114		5,684,484
Vermont			36		1,676,863
New York			27		1,123,447
Connecticut			12		750,128

	Total		326	$	15,664,601


Item 4.	*Submission of Matters to a Vote of Security Holders*


Item 5.	*Market for Registrant’s Common Stock and Related Stockholder Matters*


2001

First Quarter	$	21.06	$	18.13	$	0.130
Second Quarter		22.93		19.38		0.130
Third Quarter		24.39		18.93		0.130
Fourth Quarter		22.92		19.78		0.135


		2002			2001			2000			1999			1998


		(In thousands, except per share data)
Condensed Income Statement(1)
Net interest income		$	796,517		$	679,890		$	603,550		$	614,395		$	578,300
Provision for loan and lease losses			44,314			41,889			23,819			23,575			23,775
Noninterest income (excluding securities transactions)			267,226			239,176			226,644			191,140			161,124
Securities gains (losses)			7,282			1,329			(15,456	)		655			6,423
Noninterest expenses (excluding special charges)			564,701			501,708			459,385			460,306			446,110
Special charges(2)			14,691			7,614			43,007			28,002			61,140
Net income			298,638			238,795			191,734			196,958			141,744

Per Common Share
Basic earnings per share		$	2.01		$	1.70		$	1.33		$	1.35		$	0.97
Diluted earnings per share			1.99			1.68			1.32			1.34			0.95
Dividends per share			0.58			0.53			0.50			0.47			0.44
Book value per share at year end			13.70			11.83			9.42			8.22			8.37
Tangible book value per share at year end			9.09			8.75			8.11			6.95			6.97
Stock price:
	High		27.22			24.39			21.13			20.25			26.75
	Low		20.44			18.13			10.38			14.31			12.81
	Close		22.60			22.52			19.94			15.06			20.00
Period end common shares outstanding			150,579			151,221			141,245			144,974			146,105
Weighted average shares outstanding — Diluted			149,829			141,802			145,194			147,428			148,965

Financial Ratios
Return on average assets			1.39	%		1.29	%		1.05	%		1.12	%		0.90	%
Return on average equity			16.25			16.48			15.69			16.42			11.96
Net interest margin(3)			4.07			3.99			3.60			3.80			4.02
Average equity to average assets			8.56			7.82			6.66			6.81			7.55
Efficiency ratio			54.10			55.34			61.67			60.57			68.01
Noninterest income as a percent of total income			25.63			26.13			25.92			23.79			22.46
Tier 1 leverage capital ratio			7.14			7.14			7.02			6.75			7.22
Dividend payout ratio(4)			28.76			30.27			36.91			33.19			40.38

Average Balance Sheet
Assets		$	21,460,719		$	18,545,709		$	18,343,226		$	17,607,344		$	15,696,234
Loans and leases, gross			13,236,803			11,246,007			10,485,289			9,908,177			10,679,544
Deposits			14,566,644			12,529,630			11,891,481			11,784,103			11,435,942
Shareholders’ equity			1,838,064			1,449,353			1,222,378			1,199,496			1,184,770

Year End Balance Sheet
Assets		$	23,418,941		$	21,076,586		$	18,233,810		$	18,508,264		$	16,453,120
Loans and leases, gross			14,056,008			12,715,330			10,845,662			9,854,656			9,925,137
Securities			6,947,876			6,156,861			5,880,658			6,873,182			4,379,774
Goodwill and identifiable intangible assets			695,158			466,633			185,520			184,381			204,587
Deposits			15,664,601			14,221,049			12,107,256			11,710,501			12,016,212
Borrowings			5,432,581			4,602,388			4,659,390			5,466,253			3,040,173
Shareholders’ equity			2,063,485			1,789,115			1,330,857			1,192,274			1,222,390
Nonperforming assets(5)			68,891			81,227			67,132			69,192			89,021


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*



							Transaction Related Items
			Balance at
			Acquisition Date						Other						Total
	Acquisition								Identifiable		Cash		Shares		Purchase
	Date		Assets		Equity		Goodwill		Intangibles		Paid		Issued		Price


	(Dollars and shares in millions)
Warren Bancorp, Inc.(1)		12/31/2002	$	466.1	$	45.3	$	88.8	$	4.9	$	59.8		2.7	$	136.6
Bancorp Connecticut, Inc.(1)		8/31/2002		661.7		61.4		98.2		8.7		161.2		—		154.2
Ipswich Bancshares, Inc.(1)		7/26/2002		318.0		13.9		23.1		4.8		19.9		0.9		40.1
Andover Bancorp, Inc.(1)		10/31/2001		1,796.0		162.9		187.7		13.2		—		16.5		340.0
Metrowest Bank(1)		10/31/2001		907.7		62.0		97.1		5.0		164.8		—		164.8
Banknorth Group, Inc. (Burlington, VT)(2)		5/10/2000		4,633.8		343.2		—		—		—		42.9		579.6
Insurance agency acquisitions(1)		2000 – 2002		16.3		1.2		29.1		2.2		23.7		0.3		32.3


(1)	Accounted for as a purchase.

(2)	Accounted for as a pooling.



				Payments Due By Period

				Less than						After
Contractual Obligations(1)		Total		1 Year		1-3 Years		4-5 Years		5 Years


		(Dollars in thousands)
Long-term debt		$	2,683,892	$	386,846	$	936,783	$	513,573	$	846,690
Capital lease obligations			6,117		82		140		415		5,480
Repurchase agreements — wholesale			1,171,049		100,000		771,049		200,000		100,000

	Total Long-term debt		3,861,058		486,928		1,707,972		713,988		952,170
Capital trust securities			295,056		—		—		—		295,056
Operating lease obligations			120,692		20,384		33,863		25,002		41,443

Total contractual obligations		$	4,276,806	$	507,312	$	1,741,835	$	738,990	$	1,288,669


Item 1.	*Business*


Item 6.	*Selected Consolidated Financial Data*


	*Business Strategy*


	*Outlook*



				Amount of Commitment Expiration — Per Period
		Total
		Amounts		Less than						After
Other Commitments		Committed		1 Year		1-3 Years		4-5 Years		5 Years


		(Dollars in thousands)
Lines of credit		$	3,785,433	$	463,722	$	272,027	$	128,893	$	2,920,791
Standby letter of credit			272,476		122,105		98,048		45,003		7,320
Other commitments			1,519,635		990,977		227,961		66,679		234,018
Forward commitments to sell loans			234,651		234,651		—		—		—
Interest rate swaps (notional amount):
	Interest rate swaps with borrowers		60,325		—		—		12,304		48,021
	Interest rate swaps with third parties		60,325		—		—		12,304		48,021

Total commitments		$	5,932,845	$	1,811,455	$	598,036	$	265,183	$	3,258,171



	December 31,


	2002					2001

			% of					% of
	Amount		Total			Amount		Total


	(Dollars in thousands)
Home equity loans	$	1,554,264		39.72	%	$	1,292,724		36.61	%
Automobile and other vehicle loans and leases		1,478,228		37.77			1,287,731		36.47
Mobile home loans		171,715		4.39			161,521		4.57
Vision, dental, and orthodontia fee plan loans		172,861		4.42			153,035		4.33
Education loans		135,386		3.46			148,653		4.21
Other		400,834		10.24			487,849		13.81

Total	$	3,913,288		100.00	%	$	3,531,513		100.00	%



	Year Ended December 31,

	2002		2001


	(Dollars in thousands)
Residential mortgage loans held for sale	$	85,337	$	110,186
Rate-locked loan commitments		94,397		88,206
Forward sales contracts		158,092		143,609
Purchased mortgage-backed security/ treasury options		13,333		24,167


	200 Basis Point		100 Basis Point		100 Basis Point			200 Basis Point
	Rate Increase		Rate Increase		Rate Decrease			Rate Decrease

December 31, 2002		3.40%		2.15%		(2.64	)%		(6.22	)%

December 31, 2001		2.73%		1.71%		(2.45	)%		(5.37	)%


	Issuance				Stated			Maturity
Name	Date		Amount		Rate			Date

Peoples Heritage Capital Trust I		1/31/1997	$	61,556		9.06	%		2/1/2027
Banknorth Capital Trust I		5/1/1997		30,000		10.52	%		5/1/2027
Ipswich Statutory Trust I		2/22/2001		3,500		10.20	%		2/22/2031
Banknorth Capital Trust II		2/22/2002		200,000		8.00	%		4/1/2032

			$	295,056



		Year Ended December 31, 2002 vs. 2001												Year Ended December 31, 2001 vs. 2000
		Increase (Decrease) Due to												Increase (Decrease) Due to

								Rate and			Total									Rate and			Total
		Volume (1)			Rate			Volume (2)			Change			Volume (1)			Rate			Volume (2)			Change


		(Dollars in thousands)
Interest income:
Loans and leases		$	158,666		$	(143,949	)	$	(25,364	)	$	(10,647	)	$	65,194		$	(62,912	)	$	(4,602	)	$	(2,320	)
Investment securities			30,180			(45,615	)		(3,777	)		(19,212	)		(32,640	)		(31,387	)		2,590			(61,437	)
Federal funds sold and other short-term investments			864			(554	)		(414	)		(104	)		(1,684	)		(1,521	)		696			(2,509	)

Total interest income			189,710			(190,118	)		(29,555	)		(29,963	)		30,870			(95,820	)		(1,316	)		(66,266	)

Interest expense:
Interest-bearing deposits
	Regular savings		3,982			(6,046	)		(1,413	)		(3,477	)		(1,167	)		(10,188	)		526			(10,829	)
	NOW and money market accounts		31,108			(48,109	)		(13,613	)		(30,614	)		15,085			(30,489	)		(3,509	)		(18,913	)
	Certificates of deposit		9,098			(83,026	)		(3,481	)		(77,409	)		(484	)		(18,085	)		21			(18,548	)
	Brokered deposits		(6,162	)		(5,836	)		4,172			(7,826	)		2,124			(867	)		(243	)		1,014

Total interest-bearing deposits			38,026			(143,017	)		(14,335	)		(119,326	)		15,558			(59,629	)		(3,205	)		(47,276	)
Borrowed funds			23,192			(44,501	)		(4,664	)		(25,973	)		(43,138	)		(60,738	)		8,314			(95,562	)

Total interest expense			61,218			(187,518	)		(18,999	)		(145,299	)		(27,580	)		(120,367	)		5,109			(142,838	)

Net interest income (fully taxable equivalent)		$	128,492		$	(2,600	)	$	(10,556	)	$	115,336		$	58,450		$	24,547		$	(6,425	)	$	76,572



	At or For the Year Ended December 31,

	2002			2001			2000


	(In thousands)
Residential mortgages serviced for investors	$	701,274		$	964,027		$	1,618,610

Residential mortgage sales income	$	11,404		$	9,122		$	2,811
Residential mortgage servicing income, net		(15	)		1,364			8,414
Change in impairment reserve for mortgage servicing rights		—			—			2,895
Valuation adjustment of mortgage servicing rights		(2,850	)		(62	)		(197	)
Gain on sale of mortgage servicing rights		—			706			8,040

Mortgage banking services income	$	8,539		$	11,130		$	21,963



	Amortized Cost Maturing in


	Less Than 1										More than 5					More than 10
	Year					1 to 5 Years					to 10 Years					Years					Total

	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield


	(Dollars in thousands)
Available for Sale:
U.S. Government and federal agencies	$	62,581		2.71	%	$	1,202,902		3.72	%	$	273,964		4.33	%	$	—		—		$	1,539,447		3.78	%
Tax-exempt bonds and notes		72,111		3.10	%		8,031		4.47	%		5,204		4.56	%		9,986		5.51	%		95,332		3.55	%
Other bonds and notes		9,710		5.35	%		136,351		5.46	%		28,104		6.87	%		182,386		6.18	%		356,551		5.94	%
Mortgage-backed securities		4,348		4.88	%		20,514		5.62	%		1,007,355		5.50	%		2,627,117		5.68	%		3,659,334		5.63	%
Collateralized mortgage obligations		3,951		6.64	%		802		7.54	%		236,445		5.02	%		340,159		5.81	%		581,357		5.50	%

Total	$	152,701		3.23	%	$	1,368,600		3.93	%	$	1,551,072		5.24	%	$	3,159,648		5.72	%	$	6,232,021		5.15	%

Held to Maturity:
Collateralized mortgage obligations		—		—			—		—			—		—		$	221,571		7.09	%	$	221,571		7.09	%


		Real Estate
		Construction		Commercial
		and Development		Business Loans
		Loans		and Leases		Total


		(Dollars in thousands)
Amounts due:
	Within one year	$	187,304	$	1,490,205	$	1,677,509
	After one year through five years		281,424		1,186,866		1,468,290
	Beyond five years		171,647		291,403		463,050

	Total	$	640,375	$	2,968,474	$	3,608,849

Interest rate terms on amounts due after one year:
	Fixed	$	175,724	$	674,124	$	849,848
	Adjustable		277,347		804,145		1,081,492



		Commercial Real Estate				Commercial Business				Total Commercial Loans
		December 31,				December 31,				December 31,

		2002		2001		2002		2001		2002		2001


		(Dollars in thousands)
Massachusetts		$	2,174,534	$	1,811,387	$	982,078	$	877,183	$	3,156,612	$	2,688,570
Maine			868,091		781,191		640,258		533,392		1,508,349		1,314,583
New Hampshire			703,743		634,032		461,079		403,056		1,164,822		1,037,088
Vermont			594,849		562,482		419,291		412,454		1,014,140		974,936
Connecticut			286,658		145,816		265,503		94,460		552,161		240,276
New York			164,174		159,131		200,265		142,108		364,439		301,239

	Total	$	4,792,049	$	4,094,039	$	2,968,474	$	2,462,653	$	7,760,523	$	6,556,692



		December 31,						2002-2001 Change

		2002		2001		2000		Amount			Percent


		(Dollars in thousands)
Demand deposits		$	2,974,199	$	2,603,339	$	2,114,600	$	370,860			14.25	%
Money market access/ NOW accounts			6,091,429		5,129,626		3,975,318		961,803			18.75	%
Savings accounts			1,940,195		1,604,556		1,386,286		335,639			20.92	%
Certificates of deposit			4,658,778		4,811,357		4,461,983		(152,579	)		(3.17	%)
Brokered deposits			—		72,171		169,069		(72,171	)		(100.00	%)

	Total deposits	$	15,664,601	$	14,221,049	$	12,107,256	$	1,443,552			10.15	%



	December 31, 2002

	Balance		Percent


	(Dollars in thousands)
3 months or less	$	328,467		30	%
Over 3 to 6 months		269,627		25	%
Over 6 to 12 months		190,495		17	%
More than 12 months		302,142		28	%

	$	1,090,731		100	%


Table 13 —	Allocation of the Allowance for Loan and Lease Losses — Five Year Schedule


Table 14 —	Net Charge-offs as a Percent of Average Loans and Leases Outstanding



	Net Charge-offs to Average
	Loans and Leases Outstanding

	2002		2001		2000

Residential real estate mortgages		-0.01%		0.02%		0.08%
Commercial real estate mortgages		0.03%		0.06%		0.04%
Commercial business loans and leases		0.58%		0.69%		0.26%
Consumer loans and leases		0.61%		0.54%		0.54%
Total		0.29%		0.33%		0.24%


	Community		Insurance			Investment			Investment
	Banking		Brokerage			Planning			Management		Total


	(Dollars in thousands)
Net interest income (expense)	$	796,859	($	341	)	($	12	)	$	11	$	796,517
Provision for loan and lease losses		44,314		—			—			—		44,314

Net interest income (expense) after provision for loan and lease losses		752,545		(341	)		(12	)		11		752,203

Noninterest income		184,802		44,840			11,571			33,295		274,508

Salaries and benefits		260,948		27,285			8,021			15,131		311,385
Occupancy and equipment		87,727		3,587			494			1,547		93,355
Data processing/affiliate charges		35,039		635			742			4,286		40,702
Advertising and marketing		16,436		287			200			316		17,239
Special charges		14,691		—			—			—		14,691
Other		87,158		4,861			917			2,592		95,528

Total non-interest expense		501,999		36,655			10,374			23,872		572,900

Income before taxes and amortization of intangibles		435,348		7,844			1,185			9,434		453,811
Amortization of intangibles		6,360		132			—			—		6,492

Pre-tax income	$	428,988	$	7,712		$	1,185		$	9,434	$	447,319



			Three Months Ended December 31,

			2002			2001


			(Dollars in thousands,
			except per share data)
Condensed Income Statement
Net interest income			$	199,563		$	188,458
Provision for loan and lease losses				10,829			13,378

Net interest income after loan and lease loss provision				188,734			175,080
Noninterest income (excluding securities transactions)				77,736			63,560
Net securities gains				6,705			39
Noninterest expenses (excluding special charges)				154,868			136,016
Special charges (1)				3,258			2,007

Income before income taxes				115,049			100,656
Income tax expense				37,911			35,152

Net income before extraordinary item				77,138			65,504
Extraordinary item-early extinguishment of debt, net of tax				—			3,897

Net income			$	77,138		$	61,607

Per Common Share
Basic earnings per share:
	Net income before extraordinary item		$	0.52		$	0.45
		Extraordinary item-early extinguishment of debt, net of tax		—			(0.03	)

			$	0.52		$	0.42

Diluted earnings per share:
	Net income before extraordinary item		$	0.52		$	0.45
		Extraordinary item-early extinguishment of debt, net of tax		—			(0.03	)

			$	0.52		$	0.42

Financial Ratios
Return on average assets (2)				1.35	%		1.23	%
Return on average equity (2)				15.75	%		14.45	%
Net interest margin (fully-taxable equivalent) (2)				3.86	%		4.13	%
Noninterest income as a percent of total income				29.73	%		25.23	%
Efficiency ratio (3)				55.68	%		54.76	%


Item 8.	*Consolidated Financial Statements and Notes to Consolidated Financial Statements December 31, 2002 and 2001*


											Unearned						Accumulated Other
		Par			Paid-in			Retained			Compen-			Treasury			Comprehensive
		Value			Capital			Earnings			sation			Stock			Income (Loss)			Total


		(In thousands)
Balances at December 31, 1999		$	1,496		$	617,523		$	787,238		$	(2,751	)	$	(85,838	)	$	(125,394	)	$	1,192,274
Net income			—			—			191,734			—			—			—			191,734
Unrealized gains on securities, net of reclassification adjustment and taxes			—			—			—			—			—			90,657			90,657
Minimum pension liability, net of tax			—			—			—			—			—			250			250

	Comprehensive income																				282,641

Cancellation of treasury shares at acquisition			(1	)		(2,206	)		—			—			2,207			—			—
Treasury stock issued for employee benefit plans			—			—			(10,790	)		—			30,486			—			19,696
Treasury stock purchased			—			—			—			—			(96,585	)		—			(96,585	)
Issuance and distribution of restricted stock			—			(119	)		(195	)		—			484			—			170
Amortization of employee restricted stock			—			(390	)		—			992			—			—			602
Common stock issued for acquisitions			1			1,324			—			—			—			—			1,325
Decrease in unearned compensation — ESOP			—			1,122			—			405			—			—			1,527
Payment of fractional shares			—			(20	)		—			—			—			—			(20	)
Cash dividends paid			—			—			(70,773	)		—			—			—			(70,773	)

Balances at December 31, 2000			1,496			617,234			897,214			(1,354	)		(149,246	)		(34,487	)		1,330,857
Net income			—			—			238,795			—			—			—			238,795
Unrealized gains on securities, net of reclassification adjustment and taxes			—			—			—			—			—			74,781			74,781
Unrealized gains on cash flow hedges, net of reclassification adjustment and taxes			—			—			—			—			—			274			274

	Comprehensive income																				313,850

Premium on repurchase of trust preferred securities			—			(71	)		—			—			—			—			(71	)
Treasury stock issued for employee benefit plans			—			297			(6,811	)		—			32,662			—			26,148
Treasury stock purchased			—			—			—			—			(151,546	)		—			(151,546	)
Issuance and distribution of restricted stock			—			(161	)		(243	)		—			601			—			197
Common stock issued for acquisitions			155			339,804			—			—			—			—			339,959
Decrease in unearned compensation — ESOP			—			1,668			—			337			—			—			2,005
Payment of fractional shares			—			(7	)		—			—			—			—			(7	)
Cash dividends			—			—			(72,277	)		—			—			—			(72,277	)

Balances at December 31, 2001			1,651			958,764			1,056,678			(1,017	)		(267,529	)		40,568			1,789,115
Net income			—			—			298,638			—			—			—			298,638
Unrealized gains on securities, net of reclassification adjustment net of tax			—			—			—			—			—			77,257			77,257
Unrealized losses on cash flow hedges, net of reclassification adjustment net of tax			—			—			—			—			—			(2,054	)		(2,054	)
Minimum pension liability, net of tax			—			—			—			—			—			(825	)		(825	)

	Comprehensive income																				373,016

Treasury stock issued for employee benefit plans			—			(6,989	)		—			—			37,395			—			30,406
Treasury stock purchased			—			—			—			—			(154,054	)		—			(154,054	)
Issuance and distribution of restricted stock			—			(963	)		—			—			1,838			—			875
Common stock issued for acquisitions			38			102,829			—			—			—			—			102,867
Decrease in unearned compensation — ESOP			—			6,137			—			1,017			—			—			7,154
Cash dividends			—			—			(85,894	)		—			—			—			(85,894	)

Balances at December 31, 2002		$	1,689		$	1,059,778		$	1,269,422		$	—		$	(382,350	)	$	114,946		$	2,063,485


Core deposit intangibles			7 – 10 years
Noncompete agreements			1 – 3 years
Customer lists			1 – 8 years