Exhibit 10.4

 

[merc-logo.gif]

 

December 21, 2006

 

<Merchants Bank Executive Officer>

 

      Re:    Employment Agreement

 

Dear _______:

 

I, as the Chair of the Board of Directors of Merchants Bank, a Vermont chartered
bank ("the Corporation"), am pleased to provide you with the following letter
agreement to confirm the terms of your employment with the Corporation. We have
been authorized by the Corporation's Board of Directors to negotiate and execute
this letter agreement, and will furnish the certificates of the Resolutions
granting such authority upon request.

 

      1.  Employment.

 

      (a)  Term and Renewal. The term of this letter agreement shall be January
1, 2007 until December 31, 2009 (the "Original Term"), unless your employment is
terminated sooner in accordance with Section 4 below. On or before December 31,
2008, the Corporation shall notify you in writing if the Corporation does not
intend to renew this letter agreement for a one-year term following the Original
Term. If the Corporation does not provide such notice, then this letter
agreement shall renew for a one-year term (January 1, 2010 until December 31,
2010) following the Original Term. Similarly, on or before December 31, 2009,
and on or before each December 31st thereafter, the Corporation shall notify you
in writing if the Corporation does not intend to renew this letter agreement for
an additional one-year term. If the Corporation does not provide such notice,
then this letter agreement shall automatically renew for an additional one-year
term following the term then applicable.

 

      (b)  Appointment and Duties. You shall be appointed, and shall serve, as
________________ of the Corporation for the term of your employment hereunder.
You shall devote your full-time efforts and energies to the business and affairs
of the Corporation, you shall use your best efforts, skill and abilities to
promote the Corporation's interests, and you shall perform those duties
customary associated with the position of __________.

 

      2.  Compensation.

 

      (a)  Salary. You will receive an annual salary of $__________, payable in
equal installments on the Corporation's regularly scheduled paydays. This salary
may be reviewed annually and adjusted at the discretion of the Corporation's
Board of Directors.

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      (b)  Incentive Payments. You will be eligible to receive an annual bonus
in an amount and manner to be determined solely at the discretion of the
Corporation's Board of Directors.

 

      (c)  Expenses. You will be promptly reimbursed for all reasonable travel
and other business expenses that you may incur in connection with your
responsibilities hereunder, upon submission of appropriate supporting
documentation and in accordance with current corporate policy.

 

      3.  Benefit Plans. You will receive all such other benefits as the
Corporation generally provides to their senior executive employees, including
without limitation, life, health and disability insurance, vacation and sick
pay, and retirement benefits, except that you will receive five (5) weeks of
paid vacation time per year.

 

      4.  Termination of Employment.

 

      (a)  Events Causing Termination. Your employment hereunder shall continue
until the end of the Original Term, as such term may be extended herein, unless
terminated earlier as follows: (i) by your death; (ii) by the Corporation, at
their option, upon written notice to you, upon your physical or mental
incapacity or inability to perform services as contemplated hereby (as
reasonably determined by the Corporation's Boards of Directors) for a period of
at least 180 days; (iii) by the Corporation, at their option, upon written
notice to you, for Cause (as defined in Section 4(b) below); (iv) by the
Corporation, at their option, without Cause, upon thirty (30) days prior written
notice to you; (v) by you, at your option, for Good Reason (as defined in
Section 4(b) below), upon written notice to the Chair of the Corporation's
Boards of Directors; or (vi) by you, without Good Reason, upon thirty (30) days
prior written notice to the Chair of the Corporation's Boards of Directors.

 

      (b)  Cause and Good Reason Defined. For purposes of this letter agreement,
the terms "Cause" and "Good Reason" have the following meanings:

   

      (i)  "Cause" means (a) fraud, embezzlement or other misappropriation by
you of funds, property or rights of the Corporation; (b) your conviction, by
plea or otherwise, of any felony, or of any misdemeanor, if such misdemeanor
involves a crime of theft, trust, or dishonesty; (c) any gross misconduct by you
that is injurious in any material respect to the Corporation; (d) your failure
to perform in any material respect any of your material obligations under this
letter agreement; or (e) a breach of your fiduciary duties as an employee of the
Corporation; but, "Cause" shall not be deemed to exist under clauses (c), (d) or
(e) unless the Corporation shall have given notice to you specifying in
reasonable detail your acts or omissions that the Corporation alleges would
constitute Cause and you fail to rescind any such act or cure any such omission
within fifteen (15) days after delivery of the notice.

     

      (ii)  "Good Reason" means (a) a material reduction of your title,
authority, duties or responsibilities as stated in this agreement; (b) your
salary is reduced for any

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reason other than in connection with the termination of your employment
hereunder; (c) the Corporation's requiring you to be based in any specific
location more than 50 miles from 275 Kennedy Drive, South Burlington, Vermont;
or (d) the Corporation otherwise materially breaches, or is unable to perform,
its obligations under this letter agreement. "Good Reason" shall not be deemed
to exist unless you shall have given notice to the Chair of the Corporation's
Board of Directors specifying in reasonable detail the acts or omissions that
you allege would constitute Good Reason and the Corporation shall have failed to
rescind any such act or cure any such omission within fifteen (15) days after
delivery of the notice.

 

      (c)  Adjustments Upon Early Termination.

   

      (i)  If your employment is terminated by the Corporation for Cause, or
because of death, disability or incapacity, or because you quit without Good
Reason, then all further compensation and benefits provided to you under this
letter agreement will cease as of the date of such termination, and the
Corporation will pay you (or your beneficiary) the portion of your salary that
is accrued but unpaid, any vacation that is accrued but is unused, and any
business expenses that are unreimbursed, in each case determined as of the date
of termination and payable as soon as administratively possible.

     

      (ii)  If your employment is terminated by the Corporation without Cause,
or if you quit for Good Reason before the expiration of the term of this letter
agreement, then all further compensation and benefits provided to you under this
agreement will cease as of the date of such termination, and the Corporation
will pay you a lump sum amount equal to one year of your then current salary,
with the dollar amount "grossed-up" so that you will effectively receive such
amount without the effect of local, state or federal income taxation. Prior to
payment of this lump sum amount, you will execute and deliver to the Corporation
a release in form and substance reasonably satisfactory to the Corporation under
which you release the Corporation, any of their affiliated entities, and their
directors, officers, employees and agents for any claims or causes of action
relating to or arising from your employment with the Corporation or your
termination of employment with the Corporation, excluding any claims related to
the Corporation's obligation to make payments pursuant to the express terms of
this letter agreement.

   

      (d)  No Duty to Mitigate. You will not be required to mitigate the amount
of any compensation provided for in Section 4(c), by seeking other employment or
otherwise.

 

      5.  Confidentiality.

 

      (a)  As used in this letter agreement, the term "Confidential Information"
means all confidential and proprietary information of the Corporation disclosed
to you by the Corporation in the course of your employment, except information
that: (i) was previously known to you prior to such disclosure; (ii) was public
knowledge at the time of such disclosure; or thereafter becomes public knowledge
other than through your fault; or (iii) is lawfully disclosed or made available
to you by a third-party having no obligation to the Corporation to maintain the
confidentiality of such information.

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      (b)  You will maintain the confidentiality of all Confidential
Information, which will remain the exclusive property of the Corporation and
will be used by you exclusively for purposes of performing your responsibilities
hereunder. Unless previously authorized by the Corporation in writing, you will
not disclose or use Confidential Information for any other purpose.

 

      (c)  You will promptly deliver to the Corporation, upon termination of
your employment, or at the Corporation's earlier request, (i) all documents and
other tangible media in your possession or control that contain or reflect
Confidential Information, and (ii) all other documents or items belonging to the
Corporation.

 

      6.  Non-Solicitation. During the term of this letter agreement and for a
period of twelve (12) months after your employment is terminated for any reason,
whether by you or by the Corporation, you will not, directly or indirectly,
solicit any employee to leave his or her employment with the Corporation.

 

      7.  Equitable Relief. You acknowledge that any breach by you of your
obligations under Sections 5 and 6 of this letter agreement would cause
substantial and irreparable damage to the Corporation, and that money damages
would be an inadequate remedy thereafter. Accordingly, you acknowledge and agree
that the Corporation will be entitled to an injunction, specific performance,
and/or other equitable relief to prevent the violation of such obligations,
without any bond or other security being required and without the necessity of
showing actual damages. If either party commences suit against the other, the
unsuccessful party shall be liable to pay the costs of such action, including
reasonable attorney's fees and costs. If any of the restrictive covenants set
forth in this letter agreement are found by a court to be unreasonable because
overly broad as to scope of restriction for industry description, time period,
geographic area or otherwise, then and in that case such restrictions shall
nevertheless remain effective but shall be considered amended in such manner so
as to make the restriction reasonable as determined by such court and as so
amended shall be enforced.

 

      8.  Indemnification. In accordance with the limits set forth in the
Vermont Business Corporations Law, as applicable, the Corporation shall
indemnify you as provided by the Articles of Association and Bylaws.

 

      9.  Entire Agreement. This letter agreement shall embody the entire
agreement and understanding between the parties, and supercedes any prior
agreements, including without limitation that certain Employment Agreement dated
January 1, 2006, entered into by the parties. This letter agreement may not be
amended, waived or discharged except by an instrument in writing executed by the
party against whom such amendment, waiver or discharge is to be enforced.

 

      If this letter agreement accurately sets forth our agreement with respect
to the terms of your employment, please confirm your agreement by countersigning
the enclosed duplicate original of this letter agreement and returning it to the
attention of the

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undersigned. This letter agreement will then constitute an agreement under seal,
governed by the internal laws of the State of Vermont.

 

      We all look forward to a mutually rewarding relationship.

   

Very truly yours,

     

Merchants Bank

     

By:_____________________________

 

Chair, Board of Directors
Merchants Bank

     

Accepted and Agreed
This 1st day of January, 2007:

         

_____________________________

 

<Merchants Bank Executive Officer>

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