Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

      THIS AGREEMENT is made effective as of the 1st day of January, 2006, by
and between MERCHANTS BANK, a state chartered bank with its principal office at
275 Kennedy Drive, South Burlington, Vermont, (hereinafter referred to as
"CORPORATION") and _______________, residing at __________________ (hereinafter
referred to as "EMPLOYEE").

 

WITNESSETH

 

      In consideration of the mutual covenants herein contained, the parties
agree as follows:

 

      1.  Employment:  The CORPORATION hereby employs the EMPLOYEE, and the
EMPLOYEE hereby accepts employment.

 

      2.  Terms and Renewal:  This Agreement shall be for a two-year term
beginning on January 1, 2006, and terminating on December 31, 2007.

 

      On or before December 31, 2006, the CORPORATION shall notify the EMPLOYEE
in writing if the CORPORATION does not intend to renew the Agreement for a
one-year term following its original term. In the event that the CORPORATION
does not so notify the EMPLOYEE, the Agreement shall renew for a one-year term
following its original term. Similarly, on each anniversary date thereafter, the
CORPORATION shall notify the EMPLOYEE in writing if the CORPORATION does not
intend to renew the Agreement. In the event that the CORPORATION does not so
notify the EMPLOYEE, the Agreement shall automatically renew for an additional
one-year term following the then applicable term.

 

      3.  Termination:

   

      3.1  Discharge:  The CORPORATION has the right to discharge the EMPLOYEE
at any time with or without just cause, as herein defined. If the EMPLOYEE is
discharged without just cause, the CORPORATION agrees to pay in one lump sum
upon discharge the EMPLOYEE's salary for one year.

     

      "Just cause" shall mean (a) misconduct connected with EMPLOYEE's work, if
and as defined in any written policy of the CORPORATION covering all of the
CORPORATION's officers which is now, or subsequently, in effect; or (b) the
conviction of a felony which precludes EMPLOYEE from performing all or an
essential part of his duties of employment, provided that, if such conviction is
subsequently reversed, rescinded or expunged, EMPLOYEE's termination will be
treated as if made without just cause.

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      3.2  Disability:  In cases of disability, either party may elect to
terminate the employment, subject to the following conditions: (i) the EMPLOYEE
shall receive the greater of: (a) the salary and other normal benefits plus
incentive payments which the EMPLOYEE would have received had he been terminated
without just cause; or (b) the benefits payable to, and actually paid to, the
EMPLOYEE arising out of any disability insurance policy covering the EMPLOYEE
and paid for by the CORPORATION (if said policy benefits are paid other than in
a lump sum payment, the value of the benefits, for purposes of this Agreement,
shall be calculated by using a present value of all payments to be made); and
(ii) EMPLOYEE has suffered a disability as defined below.

     

      "Disability" shall mean mental or physical incapacity which shall continue
for six (6) months or longer after exhaustion of all sick leave benefits, or a
permanent mental or physical incapacity, either of which makes the performance
of substantially all of the EMPLOYEE's duties impossible, as certified in
writing by the EMPLOYEE's physician. The CORPORATION, in the event of
disagreement, may seek the opinion of a qualified physician to determine if such
disability exists; provided, however, that such physician is Board Certified in
the area of specialty pertinent to the nature and extent of such disability. In
the event of further disagreement, the two physicians shall choose a third
physician, qualified as above, who shall make the determination, which shall be
binding upon the parties.

   

      4.  Resignation by the EMPLOYEE:  The EMPLOYEE shall have the option of
terminating his employment with the CORPORATION provided he gives at least 60
days advance written notice to the CORPORATION. The EMPLOYEE shall not be deemed
to have resigned and, instead, shall be deemed to have been discharged by the
CORPORATION, without just cause, if the EMPLOYEE resigns as a result of: (i)
immoral, unethical or illegal acts or omissions committed by, or which
reasonably appear will be committed by, any director, officer, employee, agent,
or independent contractors of the CORPORATION (and the CORPORATION's Board of
Directors shall not act, after his recommendation, to terminate the offending
party(s) or to cease and desist such offending activity); or (ii) acts or
omissions of any director, officer, employee, agent, or independent contractors
of the CORPORATION which could reasonably subject the EMPLOYEE to personal
liability from any Federal, State or local government or agency, or any banking
authority, including, but not limited to, the Federal Deposit Insurance
Corporation, the Internal Revenue Service, or the Securities and Exchange
Commission.

 

      5.  Office and Duties:  The EMPLOYEE shall be appointed and/or elected,
and shall serve, as the ___________________ of the CORPORATION and as a
_______________ of the CORPORATION for the term of his employment hereunder.
Should the CORPORATION decide to alter his title and/or position, it must
provide the EMPLOYEE with an essentially equivalent or better position, with
equivalent or better salary and benefits.

 

      6.  Efforts:  The EMPLOYEE shall devote his full-time efforts and energies
to the business and affairs of the CORPORATION and shall use his best efforts,
skill and abilities to promote the CORPORATION's interests.

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      7.  Evaluation:  The EMPLOYEE shall be evaluated annually by the
CORPORATION'S Board of Directors and shall receive a written copy of said
evaluation. Nothing herein shall allow the CORPORATION to reduce the salary,
incentive payments and other benefits provided for herein, nor shall this
provision be deemed to allow for the alteration of EMPLOYEE's duties and
authority otherwise set forth in this Agreement; provided, however, that the
performance of a condition within any regulatory order, memorandum of
understanding or requirement shall not be affected by this provision.

 

      8.  Salary and Increases:  The CORPORATION shall pay the EMPLOYEE for all
services rendered to the CORPORATION an initial salary of $_________ per annum,
commencing January 1, 2006 and payable on a bi-weekly basis. The salary will be
reviewed annually by the CORPORATION's Board of Directors and may be increased
but not decreased at the discretion of the CORPORATION's Board of Directors. The
CORPORATION may also grant the EMPLOYEE such other compensation, bonuses,
benefits, etc., as it may deem proper from time to time.

 

      9.  Incentive Payments:  An annual bonus will be paid to the Employee
provided that: (a) Merchants Bank maintains a "CAMELS" rating of 2 or better;
and (b) certain performance targets are met. The method of calculating the
amount of the bonus and the parameters of the performance targets shall be
established annually by the CORPORATION's Board of Directors' Compensation
Committee. For the first year of this Agreement, 2006, the performance targets
and the calculation of the annual bonus will be the same as apply to the other
senior officers of the CORPORATION.

 

      10.  Benefits:  The CORPORATION shall provide the EMPLOYEE with all fringe
benefits (including but not limited to health, life, disability, workers
compensation insurance; vacation and sick pay; pension benefits) offered to
other employees of the CORPORATION in subordinate positions, but shall provide
EMPLOYEE with five (5) weeks per year of vacation.

 

      11.  [Intentionally Omitted]

 

      12.  Expenses:  The EMPLOYEE shall be reimbursed for documented business
expense incurred or paid by the EMPLOYEE in connection with the performance of
his duties, in the manner currently required by corporate policy.

 

      13.  Indemnification:  The CORPORATION agrees that, within the limits set
forth in the Vermont Business Corporations Law, it shall hold the EMPLOYEE
harmless for any actions taken by the EMPLOYEE or omissions to act, which, in
either case, he reasonably believes to be in the CORPORATION's interests, or for
his negligence in connection with such employment. This indemnity shall include
the EMPLOYEE's reasonable attorneys' fees and costs incurred in defending any
such demands, claims, or actions. The indemnity herein provided shall also
include, but in no way be limited to, claims of liability arising for or on
account of those acts or omissions of others described in Paragraph 4 of this
Agreement.

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      Notwithstanding the foregoing and except to the extent insurance provides
such indemnity, the CORPORATION shall have no obligation to hold the EMPLOYEE
harmless from (i) any liability he may have to any governmental entity with
respect to personal taxes, interest or penalties, unless that liability resulted
from a liability of the CORPORATION; (ii) any claims arising out of, based upon
or attributable to the gaining in fact of any personal profit or advantage to
which the EMPLOYEE is not legally entitled; or (iii) any claim arising out of,
based upon or attributable to the committing of any criminal or deliberately
fraudulent act. Prior to receiving any purported personal profit or advantage,
EMPLOYEE is entitled to receive, at the CORPORATION's expense, an opinion of
counsel that he is legally entitled to receive it.

 

      This Paragraph 13 shall not limit any immunity or indemnity provided
EMPLOYEE by law or by the Articles of Association or Bylaws of the CORPORATION.

 

      14.  Binding Effect:  This Agreement shall inure to the benefit of and be
binding upon the EMPLOYEE, his legal representatives, heirs, and distributee(s),
and upon the CORPORATION, its successors and assigns, and also any subsidiary or
affiliate corporation.

 

      15.  No Waiver:  The waiver of any term or condition of this Agreement
shall not be deemed to constitute the waiver of any other term or condition.

 

      16.  Notices:  All notices, elections hereunder and similar
communication(s) shall be in writing and shall be sufficient if addressed to the
EMPLOYEE at his address shown above (or at any new address of which he shall
advise the CORPORATION in writing) and mailed by certified return receipt with
postage fully paid. All notices to the CORPORATION shall be given to the
presiding officer of the Board of Directors.

 

      17.  Controlling Law and Attorneys' Fees:  Notwithstanding the actual
place of execution, or the state of incorporation of the CORPORATION, this
Agreement shall be governed by the laws of the State of Vermont and the parties
hereto consent to the jurisdiction of the Courts of the State of Vermont.

 

      In the event of a breach of this Agreement, the non-breaching party shall
be entitled to recover its costs and attorneys' fees from the breaching party.

 

      18.  Corporate Authority:  The Board of Directors of the CORPORATION has
authorized the President of the CORPORATION to negotiate and execute this
Agreement on behalf of the CORPORATION, and upon request of the EMPLOYEE the
CORPORATION shall furnish its certificate of the Resolution granting such
authority.

 

      19.  Compliance with Law:  Any and all provisions of this Agreement shall
be consistent and comply with applicable laws or regulations enacted or
promulgated both before and after the execution date of this Agreement, and to
the extent that any provision is inconsistent or does not comply with applicable
laws or regulations, that part which is inconsistent or does not

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comply shall be modified to comply with the applicable law or regulation.

 

      20.  Prior Agreement Superseded:  This Employment Agreement replaces and
supersedes an Amended Employment Agreement between the CORPORATION and the
EMPLOYEE dated effective as of January 1, 2005.

 

      IN WITNESS WHEREOF, the CORPORATION has caused this Agreement to be
executed by its director thereunto duly authorized, and the EMPLOYEE has
hereunto set his hand and seal, all as of the day and year first above written.

 

IN PRESENCE OF

:  

CORPORATION:

         

MERCHANTS BANK

         

By:  

 

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Name: Michael G. Furlong

     

Title: Chair, Board of Directors

         

EMPLOYEE:

     

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