Chittenden to Acquire Merrill Merchants Bancshares, Inc.

BURLINGTON, Vt., Jan. 19 /PRNewswire-FirstCall/ -- Chittenden Corporation and Merrill Merchants Bancshares, Inc. ("Merrill"), announced today that they signed a definitive merger agreement whereby Chittenden will acquire Merrill and its subsidiary, Merrill Merchants Bank, for approximately $111.4 million in cash and stock. Consummation of the agreement is subject to the approval of the shareholders of Merrill, as well as various regulatory agencies. The acquisition is expected to close in the second quarter of 2007. Following the completion of the transaction, Merrill Merchants Bank will operate as a separate unit of Chittenden Corporation, maintaining its name and senior management team.

In announcing the agreement, Paul A. Perrault, Chittenden's Chairman, President and Chief Executive Officer, said, "I am delighted that Merrill Merchants will join the Chittenden family of banks. Their well-established history of relationship banking has resulted in strong growth and high performance, and therefore will blend into our culture and strategies very nicely. By using Chittenden's broad capabilities and products, they will be able to deepen their relationships and attract new ones. With a very strong and experienced management team remaining in place, this is a great strategic fit for both companies."

Edwin Clift, Chairman and Chief Executive Officer of Merrill Merchants Bancshares, Inc., commented, "Merrill has accomplished a great deal as an organization and has operated at a high level of performance. We have known the management group at Chittenden for a number of years, and in working together have found that our banking policies and philosophies are very similar. Chittenden understands community banking and the need to keep local bankers with authority in place. Our Board of Directors carefully considered the interests of our shareholders and employees and determined Chittenden to be an ideal merger partner for us. This transaction is good news for our communities, customers, and employees."

Under the terms of the merger agreement, shareholders of Merrill can elect to receive $31.00 per share in cash, with total cash consideration of approximately $44.57 million, or 1.02 shares of Chittenden common stock for each share of Merrill stock they own, with total stock consideration of approximately 2.20 million shares of Chittenden common stock. Elections will be subject to allocation procedures that are intended to ensure that 60% of the Merrill common stock outstanding immediately prior to consummation of the merger will be converted to Chittenden common stock. The transaction is intended to qualify as a reorganization for federal income tax purposes, and as a result, the shares of Merrill common stock exchanged for shares of Chittenden common stock are expected to be transferred on a tax-free exchange basis.

Chittenden was advised by its legal counsel, Goodwin Procter LLP. Merrill was advised by, Keefe, Bruyette & Woods, Inc., and its legal counsel was Thacher Proffitt & Wood LLP, Washington, D.C.