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Corporate Governance Guidelines

Corporate Governance | Committee Composition | Corporate Governance Guidelines | Code of Conduct and Ethics

Independence Standards for the Board of Directors of TD Banknorth Inc. And Its Banking Subsidiaries

(A) Independence of Members of the Boards.

The Boards of Directors of TD Banknorth Inc. and its banking subsidiaries (collectively, "TD Banknorth") must consist of a majority of "independent" directors, as determined by the Boards of Directors.

(B) Independence of Members of Committees of the Board.

Each of the Audit Committee and the Human Resources and Compensation Committee of the Board of Directors of TD Banknorth Inc., and the Audit Committee(s) of its banking subsidiaries, if any, must have only "independent" directors, as set forth herein. The Audit Committee(s) are subject to additional independence standards and determination, as set forth below in Section (F).

(C) Determination of Independence.

At least annually, each Board shall make an affirmative determination for each director whether the director is "independent" under these standards. No director qualifies as "independent" unless the Board affirmatively determines that the director has no Material Relationship with TD Banknorth or its Affiliates.

Additionally, the Board(s) shall make an affirmative determination that the Audit Committee(s) have met the additional "independence" standards set forth in Section (F) below.

When making an "independence" determination, a Board shall broadly consider all relevant facts and circumstances surrounding the director's affiliation with TD Banknorth. Accordingly, a Board should consider the issue not merely from the standpoint of the director, but also from that of the person(s) or the Company or Companies with which the director has other affiliations. It is not possible to anticipate, or explicitly provide for, all circumstances that might indicate potential conflicts of interest, or that might bear on the materiality of a director's relationship with TD Banknorth. Hence, determining "independence" must be accomplished on a case-by-case basis through an in-depth analysis of each director, his or her Affiliates, the members of his or her Immediate Family and all of his or her relevant affiliations with TD Banknorth, subject to the requirements of applicable laws and regulations and the TD Banknorth standards set forth in Section (E) below.

Directors have an affirmative obligation to inform their Board(s) of any material changes in their circumstances or relationships that may impact their designation by the Board(s) as independent.

(D) Definitions.

  1. (a) "Affiliate" of, or "Affiliated" with, a specified person or Company, means a person or Company that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with the specified person or Company. Two persons or Companies are deemed to be affiliates with one another if, by reason of the foregoing definition, they are affiliates of the same person or Company at the same time. "Affiliate" includes a subsidiary, commonly-owned Company, predecessor Company, parent Company or former parent Company.

    (b) A person will be deemed not to be in Control of a specified Company for purposes of this section if the person:

    1. is not the beneficial owner, directly or indirectly, of more than 10% of any class of voting equity securities of the specified Company; and
    2. is not an Executive Officer of the specified Company.

    The safe harbor position that a person does not control a specified Company in paragraph (b) above shall not create a presumption that a person exceeding the ownership requirement in clause (i) of paragraph (b) Controls or is otherwise an Affiliate of a specified Company, which determination shall be made by the Committee.

    (c) The following will be deemed to be Affiliates:

    1. an Executive Officer of an Affiliate;
    2. a director who also is an employee of an Affiliate;
    3. a general partner of an Affiliate; and
    4. a managing member of an Affiliate.

  2. "Company" means any listed and unlisted corporation, partnership, trust (business or otherwise), association, joint venture, sole proprietorship, unincorporated organization or any other form of business entity not specifically listed herein.

  3. "Control" (including the terms "Controlling," "Controlled By" and under "Common Control" with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Company, whether through the ownership of voting securities, by contrast or otherwise.

  4. "Default" means a delinquency in payment, and any other default or event of default defined in the documents and agreements authorizing the extension of credit between TD Banknorth and the borrower.

  5. "Direct Compensation" means payment of money of any kind for services rendered.

  6. "Executive Officer" means a company's president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of the issuer in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the company.

  7. "Immediate Family" means a person's spouse, civil union partner, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone (other than employees) who shares such person's home, but excludes any person who is no longer an Immediate Family member as a result of legal separation or divorce or death or incapacitation.

  8. "Material Relationship" means any commercial, industrial, banking, consulting, legal, accounting, charitable or familiar relationship (among others) that exists between TD Banknorth or an Affiliate and the director, or an Affiliate or an Immediate Family member of the director, which the Committee determines to be material.

  9. "Officer" means any person appointed as such by TD Banknorth's Board of Directors

  10. "TD Banknorth" means TD Banknorth Inc. and its banking subsidiaries.

(E) TD Banknorth Standards.

In addition to a case-by-case assessment of each director, the following standards shall be used by a Board to establish a director's independence:

  1. A director who is, or has been within the last three years, an employee of TD Banknorth or an Affiliate, or whose Immediate Family member is, or has been within the last three years an Executive Officer of TD Banknorth or an Affiliate, may not be deemed independent. Employment as an interim Chairman or Chief Executive Officer or other Executive Officer will not disqualify a director from being considered independent following that employment.

  2. A director who has received, or who has an Immediate Family member who has received, during any twelve-month period within the last three years, more than $100,000 in Direct Compensation from TD Banknorth or an Affiliate, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), may not be deemed independent. Compensation received by a director for former service as an interim Chairman or Chief Executive Officer or other Executive Officer and compensation received by an Immediate Family member for service as a non-executive employee of TD Banknorth or an Affiliate need not be considered in determining independence under this test.

  3. (A) A director who is, or whose Immediate Family member is, a current partner of a firm that is TD Banknorth's external auditor; (B) a director who is a current employee of such a firm; (C) a director who has an Immediate Family member who is a current employee of such a firm and who participates in the firm's audit, assurance or tax compliance (but not tax planning) practice; or (D) a director who was, or whose Immediate Family member was, within the last three years (but is no longer) a partner or employee of such a firm and personally worked on TD Banknorth's or an Affiliate's audit within that time may not be deemed independent.

  4. A director who is, or whose Immediate Family member is, or has been within the last three years, employed as an Executive Officer of another Company where any of TD Banknorth's or an Affiliate's present Executive Officers at the time serves or served on that Company's compensation committee may not be deemed independent.

  5. A director who is a current employee, or whose Immediate Family member is a current Executive Officer, of a Company that has made payments to, or received payments from, TD Banknorth or an Affiliate for property or services in an amount which, in any of the last three fiscal years of such Company, exceeded the greater of $1 million or 2% of such other Company's consolidated gross revenues, may not be deemed independent.

  6. A director who is a director or an Executive Officer, or whose Immediate Family member is a director or an Executive Officer, of a tax-exempt entity that received contributions from TD Banknorth or an Affiliate within the last three years in an amount which, in any single fiscal year of such entity, exceeded the greater of 2% of the consolidated gross revenue of the entity or $250,000, may not be deemed independent.

  7. A director of TD Banknorth is presumed to be independent despite the existence of one or more extensions of credit between TD Banknorth and the director, or any of the director's related interests (as defined in the Federal Reserve Board's Regulation O) ("related interests") if, in each such case:
    1. the extension of credit was made in the ordinary course of business of TD Banknorth, on substantially the same terms, including interest rates and collateral, as those previously at the time for comparable transactions with non-affiliated persons and did not involve more than the normal risk of collectibility or present other unfavorable features;

    2. the extension of credit was made in compliance with applicable laws and regulations, including but not limited to Regulations O and W of the Federal Reserve Board and Sections 23A, 23B and 23(h) of the Federal Reserve Act;

    3. the aggregate amount of the extensions of credit to the director and all of his or her related interests does not exceed 1% of TD Banknorth's consolidated assets; and

    4. TD Banknorth concludes, based on a review of the extension(s) of credit, including without limitation the amount of the extension(s) of credit in relation to the net worth of the borrower and its performance, as well as representations of the borrower to the following effect, as follows: (i) if the borrower is a Company, that a failure to make a proposed extension of credit or the termination of an extension of credit in the ordinary course of business would not reasonably be expected to have a material and adverse effect on the financial condition, results of operations or business of the borrower or (ii) if the borrower is an individual, that a failure to make a proposed extension of credit or the termination of the extension of credit in the ordinary course of business would not reasonably be expected to have a material and adverse effect on the financial condition of the borrower.
    A Board shall review any extension of credit by TD Banknorth to a director or his or her related interests in which a Default has occurred or that has become criticized in order to determine the impact that such Default or classification has on the director's independence.

  8. A director of TD Banknorth is presumed to be independent despite the existence of one or more banking or other commercial relationships (other than extensions of credit, but including, without limitation, depository, private banking, fiduciary, securities brokerage and insurance relationships) between TD Banknorth or an Affiliate, on the one hand, and the director, an Immediate Family member of the director or a Company with which the director or an Immediate Family member of the director is affiliated by reason of being a director, executive officer or significant shareholder thereof, on the other hand, if in each such case the transaction was entered into in the ordinary course of business of TD Banknorth on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated persons.

(F) Additional Independence Standards for Audit Committee(s).

In determining whether a member of an Audit Committee is independent, a Board should also consider whether the director:

  1. has previously been an officer of TD Banknorth or an Affiliate;

  2. serves or served as a consultant, advisor, promoter, underwriter, legal counsel, or trustee of or to TD Banknorth or an Affiliate;

  3. is a relative of an officer or other employee of TD Banknorth or an Affiliate;

  4. holds or controls, or has held or controlled, a direct or indirect financial interest in TD Banknorth or an Affiliate;

  5. has outstanding extensions of credit from TD Banknorth or an Affiliate;

  6. owns or controls, or has owned or controlled within the preceding fiscal year, assets representing ten (10) percent or more of any outstanding class of voting securities of TD Banknorth or an Affiliate.