EXHIBIT 10.16
AGREEMENT
This Agreement is between THE MERCHANTS BANK, a Vermont banking
corporation with a principal place of business in Burlington, Vermont (the
"Bank") and XXXXXX X. XXXXX, of Burlington, Vermont ("Xxxxx") and is
effective as of the date specified on the execution page of this Agreement
(the "Effective Date").
Background
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1. The Bank and Xxxxx are parties to a Salary Continuation Agreement
dated June 1, 1989 (the "Salary Continuation Agreement").
2. The Bank desires to amend the Salary Continuation Agreement and
the benefits payable thereunder, and Xxxxx is willing to agree to such
amendments.
3. Xxxxx 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 Xxxxx thereunder, and the
Bank and Xxxxx 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 Variable Trust established and
maintained under and pursuant to this Agreement and referred to in Section
1, above; provided, however, that to the extent the balance in the Variable
Trust has been reduced as a result of any withdrawals from the Variable
Trust for any purpose other than a payment to or for the benefit of Xxxxx or
his designated beneficiary, the amount credited to such Variable Account
shall be adjusted to take into account both such withdrawal(s) and the
earnings (or losses) that would have been credited to such bookkeeping
account if such withdrawal(s) had not occurred; and provided, further, that
to the extent the Bank makes payments of amounts due under this Agreement
directly to Xxxxx or his beneficiary, or causes them to be made, from
sources other than the Variable Trust, corresponding adjustments also shall
be made to the Variable Account.
Section 3. Nature of Accounts.
(a) Except as provided in the Trusts: all amounts credited to or
held in the Trusts shall remain the sole property of the Bank
and shall be usable by it as a part of its general funds for any
legal purpose whatever; the bookkeeping account referred to
herein shall exist only for the purpose of facilitating the
computation of payments hereunder; nothing contained in this
Agreement and no action taken pursuant to the provisions of this
Agreement shall create or be construed to create a trust or
escrow of any kind, or a fiduciary relationship between the Bank
and Xxxxx or his designated beneficiary or any other person; and
to the extent that any person acquires a right to receive
payments from the Bank under this Agreement, such right shall be
no greater than the right of any unsecured general creditor of
the Bank.
(b) It is the intention of all parties that Xxxxx' rights under this
Agreement be unfunded for purposes of the Internal Revenue Code
of 1986, as amended, and Title I of the Employee Retirement
Income Security Act of 1974, as amended.
Section 4. Variable Trust Investments. The Bank has provided to
Xxxxx a copy of a letter of instructions of even date that the Bank has
given to the Trustee under the Variable Trust. Pursuant to its sole
authority to direct the manner in which the Variable Trust assets will be
invested, the Bank has instructed that the assets be invested as provided in
that letter. The Bank agrees that it will not change the investment
instructions without Xxxxx' prior written approval, which Xxxxx agrees not
to unreasonably withhold.
Section 5. Distribution of Shares of Merchants Bancshares, Inc. On
January 2, 1997 and on January 2, 1998, the Bank shall distribute or cause
to be distributed to Xxxxx: (i) 7,079.5 shares of Merchants Bancshares,
Inc. (an aggregate of 14,159 shares); plus (ii) all dividends, distributions
or other consideration paid on, on account of, or in exchange for such
shares prior to their distribution as herein provided, however, if Xxxxx
dies before he has received all of such payments and distributions, the Bank
shall pay and distribute to Xxxxx' designated beneficiary, not later than 90
days after the date of his death, the entire amount remaining for payment
and distribution pursuant to the foregoing subsections (i) and (ii).
Notwithstanding the provisions of the immediately-preceding sentence: (y)
in the event of a merger, consolidation or reorganization of Merchants
Bancshares, Inc., the Bank shall be obligated to distribute, in lieu of the
shares of Merchants Bancshares, Inc. referred to above, such shares or other
property as shall have been exchanged for said Merchants Bancshares, Inc.
stock, or into which said Merchants Bancshares, Inc. shares shall have been
converted pursuant to such merger, consolidation or reorganization; and (z)
in the event of a Change of Control (as defined below), the Bank shall have
the option, to be exercised (if at all) not earlier than sixty days prior to
such Change of Control nor later than sixty days thereafter, and to be
effective not earlier than the time when such Change of Control occurs nor
later than one hundred eighty days thereafter, to provide that in lieu of
any obligation thereafter to distribute shares of Merchants Bancshares,
Inc., the Bank thereafter shall be required to pay or distribute to Xxxxx,
in cash or in securities, a variable amount that equals the value from time
to time of the balance posted to the bookkeeping account maintained for
Xxxxx in the Fixed Trust referred to in Section 3, above, provided, however,
that to the extent the balance posted to the credit of Xxxxx in the Fixed
Trust has been reduced as a result of any withdrawals from the Fixed Trust
for any purpose other than a payment to or for the benefit of Xxxxx or
Xxxxx' designated beneficiary (see Section 8, below), the amount to be paid
or distributed to Xxxxx shall be adjusted to take into account both such
withdrawal(s) and the earnings (or losses) that would have been credited to
Xxxxx' account under the Fixed Trust if such withdrawal(s) had not occurred.
A "Change of Control" shall occur upon the earliest of the following:
(A) any "person," as such term is used in Sections 3(a)(9) and 13(d)
of the Securities Exchange Act of 1934 (a "Person"), becomes a
"beneficial owner," as such term is used in Rule 13D-3
promulgated under such Act (an "Owner") of twenty-five percent
(25%) or more of the Voting Stock, as defined below, of
Merchants Bancshares, Inc.; or
(B) the majority of the Board of Merchants Bancshares, Inc. consists
of individuals other than the Incumbent Directors;
(C) Merchants Bancshares, Inc., or the Bank, adopts any plan of
liquidation providing for the distribution of all or
substantially all of its assets;
(D) all or substantially all of the business of Merchants Bancshares,
Inc. is disposed of pursuant to a merger, consolidation, or
other transaction in which Merchants Bancshares, Inc. is not the
surviving corporation or is substantially or completely
liquidated (unless the shareholders of Merchants Bancshares,
Inc. immediately prior to such merger, consolidation, or other
transaction beneficially own, directly or indirectly, in
substantially the same proportion as they owned the Voting Stock
of Merchants Bancshares, Inc., all of the Voting Stock, or
correlative ownership interests, of the entity or entities, if
any, that succeed to the business of Merchants Bancshares,
Inc.); or
(E) Merchants Bancshares, Inc. combines with another company and is
the surviving corporation but, immediately after the
combination, the shareholders of Merchants Bancshares, Inc.
immediately prior to the combination (other than shareholders
who, immediately prior to the combination, were "affiliates" of
such other company, as such term is defined in the rules of the
Securities and Exchange Commission) do not beneficially own,
directly or indirectly, fifty percent (50%) or more of the
Voting Stock of the combined company; or
(F) Merchants Bancshares, Inc. transfers to any Person or Persons not
controlled by Merchants Bancshares, Inc.: (1) fifty percent
(50%) of the Voting Stock of the Bank; or (2) forty percent
(40%) or more of the assets of the Bank.
Notwithstanding the occurrence of any of the events described in
clauses (A), (D) or (E), above, no "Change of Control" shall be deemed to
have occurred if:
(1) immediately following such event, members of the Board or
employees of Merchants Bancshares, Inc. and its subsidiaries who
file or are required to file (or immediately prior to such
event, filed or were required to file) reports under Section
16(a) of the 0000 Xxx) are beneficial owners, directly or
indirectly, of twenty-five percent (25%) or more of the Voting
Stock of Merchants Bancshares, Inc. or its successor, as the
case may be; or
(2) such Change of Control event occurs as a result of a proposal
initiated by the Board of Merchants Bancshares, Inc. (and not as
a result of prior actions taken by the Person or Persons
effecting the Change of Control), and if at the time of making
the proposal, the Board of Directors notifies the Fixed Growth
Plan Participants that any such Change of Control event
resulting from the proposal shall not constitute a Change of
Control. For this purpose, a Change of Control event shall be
considered to result from a proposal if the event occurs because
of the acquisition of stock or assets of Merchants Bancshares,
Inc., directly or indirectly, by Persons, or a group of some of
whose members are Persons, identified in the written notice
described above.
"Incumbent Director(s)" shall mean the members of the Board of
Merchants Bancshares, Inc. on the date of this Amended Plan, provided that
any person becoming a director subsequent to the date of this Amended Plan
whose election or nomination for election was approved by two-thirds (but in
no event less than two) of the directors who at the time of such election or
nomination comprise the Incumbent Directors shall be considered to be an
Incumbent Director.
"Voting Stock" of any corporation shall mean the capital stock of any
class or classes having general voting power under ordinary circumstances,
in the absence of contingencies, to elect directors of such corporation.
Section 6. Distributions Relating to Variable Account.
(a) On or promptly following January 2, 1999 and each January 2
thereafter through and including January 2, 2008, the Bank shall
distribute or cause to be distributed to Xxxxx or his designated
beneficiary a fraction of the value of the Variable Account as
of the last business day of the immediately-preceding calendar
year, as such value is determined in good faith by the Bank,
where the fraction has (a) a numerator of 1; and (b) a
denominator equal to ten (10) minus the aggregate number of
distributions previously made to Xxxxx or his designated
beneficiary pursuant to this subsection 6(a). All such
valuations in each case shall include all credits (or debits)
required to be made pursuant to Section 2 of this Agreement.
Distributions may be made in cash or in the form of securities
held by the Trust (distributed securities shall be valued at
their fair market value as of the date of distribution as
reasonably determined by the Bank).
(b) Notwithstanding the provisions of subsection 6(a), above, if
Xxxxx dies before he has received all of the payments referred
to above, the Bank shall pay to Xxxxx' designated beneficiary,
not later than ninety (90) days after the date of his death, a
lump sum in an amount equal to the value of the Account as of
the date of his death.
(c) Notwithstanding the provisions of subsection 6(a) and 6(b),
above, Xxxxx may request, and the Bank may approve, a
distribution due to hardship by submitting a written request to
the Board of Directors of the Bank, accompanied by evidence to
demonstrate that the circumstances being experienced qualify as
a hardship. If a hardship is found by the Bank, the
distribution shall be limited to an amount sufficient to meet
the hardship.
(d) For purposes of subsection 6(c), "hardship" means a severe
financial hardship to Xxxxx resulting from a sudden and
unexpected illness or accident of Xxxxx or a dependent of Xxxxx,
loss of Xxxxx' property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of Xxxxx. The circumstances
that will constitute a hardship will depend on the facts of each
case.
However, in no event shall payment be made if such purported
hardship is or may be relieved:
(i) through reimbursement or compensation by insurance or
otherwise; or
(ii) by liquidation of Xxxxx' assets, to the extent that such
liquidation would not itself cause severe financial
hardship.
In no case shall the need to send a child to college or the
desire to purchase a home be considered a hardship.
Section 7. No Reductions. The amounts to be paid to Xxxxx hereunder,
and the dates on which such payments shall be due, shall under no
circumstances and in no event be subject to reduction, curtailment or
deferral.
Section 8. Beneficiary Designation. Xxxxx may designate one or more
beneficiaries to receive, in the event of his death, all amounts which are
then and thereafter payable under this Agreement. Such designation and any
subsequent changes thereto shall be made in writing and filed with the
Treasurer of the Bank. In the event of Xxxxx' death prior to receipt of the
total amount due to him hereunder and without a then-effective beneficiary
designation, the balance shall be paid to Xxxxx' spouse, if then living, and
otherwise to his estate.
Section 9. Nontransferability. No right to payment under this
Agreement shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate,
sell, assign, pledge, encumber or charge the same shall be void. No right
to payment shall, in any manner, be liable for or subject to the debts,
contracts, liabilities or torts of the person entitled thereto. If, at the
time when payments are to be made hereunder, Xxxxx or any beneficiary is
indebted to the Bank, then any payments remaining to be made hereunder may,
at the discretion of the Bank, be reduced by the amount of such
indebtedness. An election by the Bank not to reduce such payments shall not
constitute a waiver of its claim for such indebtedness.
Section 10. Full Release. The provisions of this Agreement are in
full and final satisfaction of any and all claims which Xxxxx has or may
have against the Bank under or on account of the Salary Continuation
Agreement and/or under on account of any act or omission of the Bank or any
of its affiliates or their respective officers, directors or employees to
the date of this Agreement with respect to its so-called 401(k) Plan and the
untimely payment of amounts due to Xxxxx thereunder.
Section 11. Successors and Assigns. This Plan shall be binding upon
and inure to the benefit of the Bank, its successors and assigns, and Xxxxx
and his heirs, executors, administrators and legal representatives.
Section 12. Governing Law. This Plan shall be governed by and
construed in accordance with the laws of the State of Vermont, without
giving effect to such jurisdiction's principles of conflict of laws.
IN WITNESS WHEREOF, the Bank and Xxxxx have executed this Agreement as
of the 20th day of December, 1995.
THE MERCHANTS BANK
/s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxx Its President and
Chief Executive Officer
