<PAGE>

                                                                    EXHIBIT 3.1
                                    BY-LAWS
                                       OF
                             UNION BANKSHARES, INC.
                                   ARTICLE I
                                   ---------
                            ARTICLES OF ASSOCIATION
                            -----------------------

      The name, location of the registered office, the registered agent, and
the purposes and powers of the Corporation shall be as set forth in the
Articles of Association, and these By-laws; the purposes and powers of the
Corporation and of its directors and shareholders, and all matters concerning
the conduct and regulation of the business of the Corporation shall be subject
to such provisions in regard thereto, if any, as are set forth in the Articles
of Association; and the Articles of Association are hereby made a part of these
By-laws.

      All reference in these By-laws to the Articles of Association shall be
construed to mean the Articles of Association of the Corporation as from time
to time amended.

                                   ARTICLE II
                                   ----------
                                  SHAREHOLDERS
                                  ------------

Section 1.  Annual Meeting. The annual meeting of shareholders commencing with
the year 1982 shall be held no sooner than 30 days nor more than 150 days after
the end of the Corporation's fiscal year, on such date as may be set by the
Board of Directors. The annual meeting of shareholders shall be held at the
registered office of the corporation in Vermont, or at such other place either
within or without the State of Vermont, as shall be stated in the notice of the
meetings or in a duly executed waiver thereof. The hour of the meeting shall be
such hour as shall be stated in the notice of meeting, or in a duly executed
waiver thereof. The purpose of the annual meeting shall be to elect a Board of
Directors and to transact such other business as may properly be brought before
the meeting. Election of directors and of the Secretary need not be by written
ballot. Purposes for which an annual meeting is to be held, additional to those
prescribed by law, by the Articles of Association and by these By-laws, may be
specified by the President, the Board of Directors, the Secretary, or the
Secretary upon the written request of the holders of not less than one-tenth of
all of the shares entitled to vote at the meeting on such additional purposes.
Failure to hold the annual meeting at the designated time shall not work a
forfeiture or dissolution of the Corporation. If such annual meeting is omitted
on the day herein provided therefore, a special meeting may be held in place
thereof, and any business transacted or elections held at such meeting shall
have the same effect as if transacted or held at the annual meeting. Such
special meeting shall be called in the same manner and as provided for in
Article II, Section 2 hereof, relating to special meetings of shareholders.

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Section 2. Special Meetings. Special meetings of the shareholders may be called
by the President, the Board of Directors, the Secretary, or the Secretary upon
the written request of the holders of not less than one-tenth of all the shares
entitled to vote at the meeting, for any purpose. Special meetings shall be
held at the registered office of the Corporation in Vermont, or at such other
place either within or without the State of Vermont, and on such date and hour
as shall be fixed by the President, the Board of Directors, the Secretary, or
the Secretary upon written request of the holders of not less than one-tenth of
all the shares entitled to vote at the meeting and stated in the notice of the
meeting, or in a duly executed waiver thereof.

Section 3.  Notice of Meeting; Waiver. Written notice of the place, date and
hour at which an annual or special meeting is to be held shall be given
personally or put in the regular mails to each shareholder entitled to vote
thereat, not less than ten (10) nor more than fifty (50) days prior to the
meeting by or at the direction of the President, the Secretary, or the other
persons calling the meeting. Notice of a special meeting shall state, in
addition to the foregoing information, the purpose for which it is called. A
written Waiver of Notice of a meeting, signed before or after the meeting by
the person or persons entitled to notice, shall be deemed equivalent to notice,
provided that such Waiver of Notice is inserted in the corporate minute book.
Such a writing need not state the purpose of the meeting for which it waives
notice.

Section 4.  Quorum. A majority of the shares entitled to vote thereat, present
in person or represented by proxy, shall be necessary to and shall constitute a
quorum for the transaction of business at all meetings of the shareholders.
When a quorum is once present, it shall not be broken by the subsequent
withdrawal of any shareholders. If the required quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy and entitled to vote thereat shall have power to
adjourn the meeting from time to time, until a quorum shall be present or
represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed.

Section 5.  Voting and Proxies. At any meeting of the shareholders every
shareholder having the right to vote shall be entitled to vote in person, or by
proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Proxies shall be filed with the Secretary of the meeting, or
any adjournment thereof, before being voted. Unless otherwise provided therein,
no proxy shall be valid after eleven months from the date of its execution. A
proxy with respect to shares held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of the proxy
the Corporation receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a shareholder
shall be deemed valid unless challenged at or prior to its exercise. Except as
otherwise provided by law, or by the Articles of Association, each shareholder
of

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record on the record date for the meeting shall be entitled to one vote for
every share standing in his name on the books of the Corporation. All elections
of directors shall be determined by a plurality vote, and, except as otherwise
provided by the laws of Vermont, the Articles of Association, or by the
By-laws, all other matters shall be determined by vote of a majority of the
shares present or represented at such meeting and voting on such questions.

Section 6.  Notice and Record Date of Adjourned Meetings. When a meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken, except that if the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice in the standard form shall be given to each shareholder of
record entitled to vote at the adjourned meeting. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting, unless the Board of
Directors fixes a new record date for the adjourned meeting.

Section 7.  Record of Shareholders; Lists. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix a record date, which shall be
not more than fifty (50) nor less than ten (10) days before the date of such
meeting. If no record date is fixed for such purposes, the record date shall be
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, or, if notice of a meeting is waived, at the close of business on
the day next preceding the day on which the meeting is held. The Secretary of
the Corporation, or his delegate, shall prepare and make, at least ten (10)
days before every meeting of shareholders, a complete list of shareholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each shareholder and the number of shares registered in the name
of each shareholder. Such list shall be open to the examination of any
shareholder at the registered office of the Corporation, for any purpose
germane to the meeting, during ordinary business hours, for a period of ten
(10) days prior to the meeting. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present.

Section 8.  Stock Ledger. The stock ledger of the Corporation shall be the only
evidence as to who are the shareholders entitled to examine the stock ledger,
the list required by Section 7 of Article II of these By-laws, the books of the
Corporation, or to vote in person or by proxy at any meeting of shareholders.

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Section 9. Shareholders' Right of Inspection. Any shareholder, in person or by
attorney or other agent, shall upon written demand under oath stating the
purpose thereof, have the right during the usual hours of business to inspect
for any proper purpose the Corporation's stock ledger, a list of its
shareholders and its other books and records, and to make extracts therefrom. A
proper purpose shall mean a purpose reasonably related to such person's
interest as shareholder. In every instance where an attorney or other agent
shall be the person who seeks the right to inspection, the demand under oath
shall be accompanied by a power of attorney or such other writing which
authorized the attorney or other agent to so act on behalf of the shareholder.
The demand under oath shall be directed to the Corporation at it s registered
office. As used in this Section, "Shareholder" means a shareholder of record.

Section 10.  Action Without a Meeting. Any action required to be taken at a
meeting of the shareholders of the Corporation, or any action that may be taken
at a meeting of the shareholders may be taken without a meeting, if a consent
in writing setting forth the action so taken shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof,
provided that such waiver of notice is inserted in the Corporate minute book.
Such consent shall have the same force and effect as an unanimous vote of
shareholders and may be stated as such in any articles or documents filed with
the Secretary of State.

                                  ARTICLE III
                                  -----------
                                   DIRECTORS
                                   ---------

Section 1.  Board of Directors; Number, Terms and Quorum. The number of
directors which shall constitute the Board of Directors shall be no less than
three, the exact number to be determined by the shareholders at each annual
meeting prior to the election of Directors. Directors need not be residents of
the State of Vermont. The Board of Directors shall be elected annually by the
shareholders at the annual meeting thereof. Each director shall hold office
until his successor is elected and qualified or until his earlier resignation
or removal.

Section 2.  Quorum and Voting. A majority of the total number of directors shall
constitute a quorum for the transaction of business. The vote of the majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors except as these By-laws shall otherwise require.

Section 3.  Resignation. Any director may resign at any time upon delivery of
his resignation in writing to the President, the Treasurer or the Secretary or
to the Board of Directors. Such resignation shall be effective at the date set
forth in the notice, and if there is none, then upon receipt.

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Section 4. Committees. The Board of Directors may by resolution passed by
majority of the whole board, designate one or more committees, including an
executive committee from among the members of the whole board. The board may
designate one or more directors as alternate members of any such committee who
may replace any absent or disqualified member at any meeting of the committee.
If no such alternate members have been designated for such a committee, the
members thereof present at any meeting and not disqualified from voting whether
or not he or they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the whole board which establishes it and permitted by Vermont
law, shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to any papers which may require it. Any
director may be a member of more than one committee. The procedures to be
followed by such committees with respect to quorum, voting and other such
matters shall be the same as those specified for meetings and directors.

Section 5.  Telephone Meetings and Written Consents. Any action required or
permitted to be taken at any meeting of the Board of Directors or committees
thereof may be taken by telephone conference call, between at least a majority
of the directors, or may also be taken without a meeting if all members of the
board or committee, as the case may be, consent to such action in writing and
the writing or writings are filed in the minute book of the board or committee.

Section 6.  Vacancies and Newly-Created Directorships. If any vacancies occur on
the Board of Directors by reason of death, immediately effective resignation,
retirement or removal from office of any director, or increase in the number of
directors, all the directors then in office, although less than a quorum, may
by a majority vote choose a successor or successors. Unless sooner displaced,
the directors so chosen shall hold office until the election of their
successors at the next annual meeting of shareholders. If the directors
remaining in office after the occurrence of a vacancy shall be unable by
majority vote to fill such vacancy within thirty (30) days of the occurrence
thereof, the President or Secretary of the Corporation may call a special
meeting of the shareholders at which such vacancy shall be filled. In the event
that one or more directors tenders a resignation from the board effective at a
future date, the prospective vacancy or vacancies shall be filled by vote of a
majority of the directors then in office, although less than a quorum,
including those who have so resigned. Such vote shall take effect when such
resignation or resignations shall become effective and each director so chosen
shall, unless sooner displaced, hold office until the due election and
qualification of this successor.

Section 7.  Place, Time and Notice of Meetings. The directors may hold their
meeting in such place or places, within and without the State of Vermont, as
the Board of Directors may determine from time to time. The Board of Directors
shall meet each year immediately after the annual meeting of shareholders, for
the purpose of organization, election of officers, and consideration of any
other business that may

                                      44
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properly come before the meeting. No notice of any kind to either old or new
members of the Board of Directors for this annual meeting shall be necessary.
Other meetings of the directors shall be held at the call of the President or
of the Secretary or of any one director. Notice of the date, time and place of
directors' meetings except the annual organization meeting shall be given to
each director entitled thereto by letter, telegram, cable or radiogram,
delivered for transmission not later than during the third day immediately
preceding the day of the meeting, or by word of mouth, telephone or radiophone
received not later than during the second day immediately preceding the day of
the meeting. Such notice may be waived by a director in writing signed either
before or after the meeting for which such notice was required to be given,
provided that such waiver of notice is inserted in the minute book, and shall
be deemed waived by any director who attends the meeting for which such notice
was required to be given, unless such attendance is for the express purpose of
objecting to the holding of the meeting. Notice of a later meeting need not be
given to any director who attended a prior meeting at which such latter meeting
was duly called and the time, date and place thereof noticed.

Section 8.  Chairman of the Meeting. The President of the Corporation, if
present and acting, shall preside at all meetings; otherwise, a director chosen
by a majority of the board at the meeting shall preside.

Section 9.  Removal of Directors. Any and all directors may be removed with
cause by a vote of the majority of the shares issued and outstanding and
entitled to vote at any annual meeting or special meeting called for such
purposes. Notice of such meeting shall state the name or names of the director
or directors whose removal is proposed and the cause or causes assigned for his
removal and a concise statement in defense of the director or directors
prepared by or on behalf of him or them shall accompany or precede any
solicitation of proxies seeking authority to vote for or against the removal of
such director or directors; otherwise, such proxies may not be voted. The
director or directors to be removed must, in addition to being given sufficient
notice to prepare his or their concise statement of defense as aforementioned,
be given an opportunity to present evidence and arguments on his or their own
behalf at the meeting at which his or their removal is considered.

                                   ARTICLE IV
                                   ----------
                                    OFFICERS
                                    --------

Section 1.  Officers. The officers of the Corporation shall consist of a
President, a Treasurer, a Vice-President and a Secretary and such other
officers, including, without limitation, a Chairman of the Board of Directors,
one or more Vice-Presidents, Assistant Treasurers and Assistant Secretaries as
the directors at their annual meeting or thereafter from time to time may elect
or appoint. The President, Vice-President, Secretary and Treasurer shall be
elected annually by the directors at their annual meeting following the annual
meeting of the shareholders. Other officers may be chosen by the directors at
such

                                      45
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meeting or at any other time. Each officer shall hold his office until his
successor is elected and qualified or until his earlier death, resignation or
removal. Any officer may resign at any time upon delivering his resignation in
writing to the President, the Treasurer or the Secretary or to a meeting of the
directors. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Any officer elected by the Board of Directors
may be removed at any time for cause or without cause by majority vote of the
whole Board of Directors taken at a meeting duly called and held. Neither
notice nor a hearing need be given to any officer proposed to be so removed.
Any vacancy occurring in any office of the Corporation by reason of death,
resignation, removal of an officer or otherwise, shall be filled by the Board
of Directors in the same manner as provided for ordinary elections of officers
by directors, and an officer so chosen shall hold office until the next regular
election for that office, or until earlier death, resignation or removal. The
salaries of all officers shall be fixed from time to time by the Board of
Directors.

Section 2.  President. It shall be the duty of the President to preside at all
meetings of the shareholders and all meetings of the Board of Directors and to
have general authority over the ordinary course of the business of the
Corporation.

Section 3.  Vice-President. The Vice-President, or Vice-Presidents, shall have
such powers and duties as shall be assigned to them by the Board of Directors
or the President.

Section 4.  Treasurer and Assistant Treasurer. The Treasurer shall, subject to
the direction and under the supervision of the directors, have general charge
of the financial concerns of the Corporation; care and custody of the funds and
valuable papers of the Corporation, except his own bond; authority to endorse
for deposit or collection of all notes, checks, drafts and other obligations
for the payment of money payable to the Corporation or its orders, and to
accept drafts on behalf of the Corporation; authority to pay or cause to be
paid all dividends voted by the Board of Directors; and shall keep, or cause to
be kept, accurate books of account, which shall be the property of the
Corporation. If required by the Board of Directors, he shall give bond for the
faithful performance of his duty in such form, in such sum, and with such
sureties as the directors shall require. Any Assistant Treasurer shall have
such powers and duties as the directors or the President may delegate to him.

Section 5.  Secretary. The Secretary, shall, in addition to any duties imposed
upon him by virtue of his office pursuant to Vermont law, the Articles of
Association or these By-laws, keep an attested copy of the Articles of
Association and amendments thereto, and of these By-laws with a reference on
the margin of said By-laws to all amendments thereof, all of which documents
and books shall be kept at the registered office of the Corporation or at the
office of the Secretary. Unless a transfer agent is appointed, the Secretary
shall keep or cause to be kept, at the registered office of the Corporation or
at his office, the stock and transfer records of the Corporation, in which
shall be contained the names of all shareholders,

                                      46
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their record addresses, the number of shares held by each, the time when they
respectively acquired the shares and the time of any transfers thereof. The
Secretary shall also keep a record of the meetings of the directors. The
Secretary shall give or cause to be given such notice as may be required of all
meetings of shareholders and all meetings of the Board of Directors, and shall
keep the seal of the Corporation in safe custody and affix it to any instrument
when such action is incident to his office or is authorized by the Board of
Directors. Any Assistant Secretary shall have such powers and duties as the
directors or the President shall delegate to him.

Section 6.  Other Powers and Duties. Subject to these By-laws, each officer
shall have in addition to the duties and powers specifically set forth in these
By-laws, such duties and powers as the directors or the President may from time
to time delegate to him.

                                   ARTICLE V
                                   ---------
                                SHARES OF STOCK
                                ---------------

Section 1.  Amount Authorized. The amount of the authorized capital stock and
the par value, if any, of the shares authorized shall be fixed in the Articles
of Association, as amended from time to time.

Section 2.  Appointment of Transfer Agent. The Board of Directors may appoint a
transfer agent, registrar and dividend disbursing agent (the "transfer agent")
and may make or authorize such agent to make all such rules and regulations
deemed expedient concerning the issue, transfer and registration of shares of
stock, including uncertificated shares.

Section 3.  Certificated and Uncertificated Shares. Shares of the capital stock
of the Corporation may be certificated or uncertificated, as determined by the
Board of Directors in its discretion, and as permitted under the Vermont
Business Corporation Act, as amended from time to time. Notwithstanding the
foregoing, (i) no authorization of uncertificated shares shall apply to any
shares represented by a stock certificate until such certificate is surrendered
to the Corporation or its transfer agent, nor shall any such authorization
apply to a certificated share issued in exchange for an uncertificated share
unless requested by the holder thereof; and (ii) upon written request to the
Corporation or its transfer agent, any holder of uncertificated shares shall be
entitled to a certificate representing all or any portion of the shares of the
Corporation owned by him.

      Within a reasonable time after the issuance or transfer of uncertificated
shares, and at least annually thereafter, the Corporation shall send to the
registered owner thereof a written notice that shall set forth the name of the
Corporation, that the Corporation is organized under the laws of the State of
Vermont, the name of the shareholder, the number and class (and the designation
of the series, if any) of the shares represented, and any restrictions on the
transfer or registration of such shares of stock imposed under applicable law
(including federal and state securities laws), or imposed by the

                                      47
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Corporation's Articles of Association or these By-laws. If applicable, such
notice shall also contain the text of any preferences, voting powers,
qualifications and special and relative rights of the shares of such class or
series, or a statement that the Corporation will furnish a copy thereof to the
shareholder upon written request and without charge.

Section 4.  Stock Certificates. Any certificates representing the capital stock
of the Corporation shall be signed, manually or by facsimile, by the President
or a Vice President, and by the Treasurer or the Secretary or Assistant
Secretary, and may be countersigned by the Corporation's transfer agent, if one
has been appointed. In case any officer or transfer agent who has signed or
whose facsimile signature has been placed on such certificate shall have ceased
to be such officer or transfer agent before such certificate is issued, the
certificate may be issued by the Corporation with the same effect as if such
officer or transfer agent held such title or position at the time of its issue.

      Every certificate representing the Corporation's shares which are subject
to any restriction on transfer shall have the restriction noted conspicuously
on the face or back of the certificate, either with the full text of the
restriction or a statement of the existence of such restriction and a statement
that the Corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge. Every certificate
representing the Corporation's shares issued when the Corporation is authorized
to issue more than one class or series of shares shall set forth on its face or
back, if applicable, either the full text of the preferences, voting powers,
qualifications and special and relative rights of the shares of such class or
series, or a statement that the Corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.

Section 5.  Transfer. Subject to any applicable restrictions on transfer, shares
of the Corporation's capital stock may be transferred only on the books of the
Corporation or its transfer agent, (i) if such shares are certificated, by the
surrender to the Corporation or its transfer agent of the certificate therefore
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, with transfer stamps (if necessary) affixed, or (ii) if such
shares are uncertificated, upon properly authorized instructions from the
holder of such uncertificated shares; in each case with such proof of the
authenticity of signature or authorization, and compliance with such other
rules and requirements, as the Corporation or its transfer agent may reasonably
specify.

Section 6.  Record Holders. Except as may be otherwise required by law, by the
Articles of Association or by these By-laws, the Corporation shall be entitled
to treat the record holder of shares as shown on its books or the books of its
transfer agent as the owner of such shares for all purposes, including the
payment of dividends and the right to vote with respect thereto, regardless of
any transfer, pledge, or other disposition of such shares, until the shares
have been transferred on the books of the Corporation or the books of its
transfer agent in accordance with the requirements of these By-laws. It shall
be the duty of each shareholder to notify the Corporation of his mailing
address and any changes thereto.

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<PAGE>

Section 7.  Lost, Stolen or Destroyed Certificates. The Corporation or its
transfer agent shall issue a new certificate in the place of any certificate
theretofore issued which has been lost, stolen or destroyed, provided the
holder of record of the certificate satisfies the following requirements:

      (a)   Claim. The shareholder makes proof in affidavit form acceptable to
            the Corporation or its transfer agent that it has been lost,
            destroyed, or wrongfully taken;

      (b)   Timely Request. The Corporation has not received notice that the
            certificate has been acquired by a purchaser for value in good
            faith and without notice of any adverse claims;

      (c)   Bond. The shareholder gives a bond in such form, and with such
            surety or sureties, with fixed or open penalty, as the Corporation
            or its transfer agent may direct, to indemnify the Corporation and
            its transfer agent against any claims that may be made on account
            of the alleged loss, destruction or theft of the certificates; and

      (d)   Other Requirements. The shareholder satisfies any other reasonable
            requirements imposed by the Corporation or its transfer agent.

Section 8.  Fractional Shares. The Corporation shall be authorized to issue
fractional shares. Fractional shares may be issued certificated or
uncertificated, as determined by the Board of Directors in its discretion. No
holder of any fractional share shall be entitled to any vote with respect
thereto unless, and to the extent that, the holder or holders of fractional
shares aggregating one or more full shares unite for the purpose of voting at
any such meeting, in which case such holder or holders shall be entitled to one
vote at such meeting for each full share represented by the aggregate of such
fractional shares held by such holder or holders.

Section 9.  Payment for Shares. The consideration for the issuance of shares,
whether certificated or uncertificated, may be paid, in whole or in part, in
money, in other property, tangible or intangible, or in labor or services
actually performed for the Corporation. When payment of the consideration for
which shares are to be issued shall have been received by the Corporation such
shares shall be deemed to be fully paid and nonassessable. Neither promissory
notes nor future services shall constitute payment or part payment for the
issuance of shares of the Corporation. In the absence of fraud in the
transaction, the judgment of the Board of Directors as to the value of the
consideration received for shares shall be conclusive. No certificate shall be
issued for any shares, nor shall any registration of uncertificated shares be
made on the books of the Corporation or its transfer agent, until such shares
are fully paid.

                                   ARTICLE VI
                                   ----------
                            MISCELLANEOUS PROVISIONS
                            ------------------------

Section 1.  Fiscal Year. Except as from time to time determined by the
directors, the fiscal year of the Corporation shall end on the last day of
December in each year.

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<PAGE>

Section 2.  Seal. The seal of the Corporation shall, subject to alteration by
the directors, consist of a flathead, circular die with the words "Vermont,"
"Union Bankshares, Inc." and "1982" cut or engraved thereon.

Section 3.  Registered Office and Registered Agent. The address of the
registered agent shall be as set forth in the Articles of Association. The
books of the Corporation including its stock ledger, books of account, and
minute books, shall be kept at the registered office of the Corporation or its
Secretary.

Section 4.  Agents. The Board of Directors may appoint agents of the Corporation
possessing authority as broad as is not inconsistent with these By-laws or
applicable law.

Section 5.  Voting of Shares in Other Corporations. Except as the directors may
otherwise designate, the President or Treasurer may waive notice of, and
appoint any person or persons to act as proxy or attorney in fact for this
Corporation (with or without power of substitution), at any meeting of
shareholders of any other corporation or organization, the securities of which
may be held by this Corporation.

Section 6.  Amendments. These By-laws may at any time be repealed, altered or
amended by vote of the directors.

                                  ARTICLE VII
                                  -----------
                      NOTES, CHECKS, DRAFTS AND CONTRACTS
                      -----------------------------------

Section 1.  The Notes, Checks and Drafts. The notes, checks and drafts of the
Corporation shall be signed by such person or persons as the Board of Directors
may from time to time designate and in the absence of such designation by the
Treasurer. Manual signature or signatures shall be required on all notes and
drafts of the Corporation. In the case of checks of the Corporation, either
manual or facsimile signature or signatures may be used.

Section 2.  Contracts. Contracts of the Corporation shall be executed by such
person or persons as may be generally designated by the Board of Directors and,
in the absence of such designation, by the President, a Vice-President or the
Treasurer.

                                 ARTICLE VIII
                                 ------------
                         INDEMNIFICATION AND INSURANCE
                         -----------------------------

Section 1.  Indemnification Policy. The Corporation shall indemnify its
directors, and, by affirmative vote of a majority of its directors, may
indemnify its officers, employees and agents, against any liability incurred by
any of them in their capacity as such, to the full extent permitted by the laws
of Vermont, in accordance with the following provisions.

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<PAGE>

Section 2. Third Party Suits. The Corporation shall indemnify any director and
may indemnify any other person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than by action by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expense (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 3.  Derivative Actions. The Corporation shall indemnify any director and
may indemnify any other person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorney's fees)
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; provided, however,
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper.

Section 4.  Payment in Advance. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as authorized by
the Board of Directors in the specific case upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article VIII.

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<PAGE>

Section 5.  Non-exclusivity. The indemnification provided by this Article VIII
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall insure to the benefit of the heirs, executors and
administrators of such person.

Section 6.  Insurance. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VIII.

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