This Agreement is between THE MERCHANTS BANK, a Vermont banking corporation with a principal place
of business in Burlington, Vermont (the "Bank") and DUDLEY H. DAVIS, of Burlington, Vermont ("Davis") and
is effective as of the date specified on the execution page of this Agreement (the "Effective Date").
1. The Bank and Davis are parties to a Salary Continuation Agreement dated June 1, 1989 (the "Salary
2. The Bank desires to amend the Salary Continuation Agreement and the benefits payable thereunder, and Davis
is willing to agree to such amendments.
3. Davis has or may have claims on account of the Bank's administration of its so-called 401(k) Plan, particularly
with respect to the timing of distributions made by the Bank to Davis thereunder, and the Bank and Davis desire
forever to resolve and settle any such claims.
N O W , T H E R E F O R E ,
In consideration of the premises and the mutual covenants and agreements herein set forth, the parties hereby
agree as follows:
Section 1. Bank to Establish Trust. The Bank shall establish, on the Effective Date, and thereafter shall maintain in
accordance with this Agreement: (a) a so-called rabbi trust in the form attached hereto as Exhibit "A" (the
"Variable Trust"); and (b) a second so-called rabbi trust in the form attached hereto as Exhibit "B" (the "Fixed
Trust"); the Variable Trust and the Fixed Trust are collectively sometimes referred to in this Agreement as the
"Trusts". The Bank shall contribute to the Variable Trust, on the Effective Date, the sum of $700,000, and shall
contribute to the Fixed Trust, on the Effective Date, the sum of $200,000.
Section 2. Bookkeeping Account. The Bank shall establish and maintain a bookkeeping account (the "Variable
Account"), and not less frequently than the end of each calendar year shall credit (or debit) to such Variable
Account, that amount which causes the balance in such Variable Account to equal precisely the balance in the