EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of the 1st day of January, 1998,
by and between MERCHANTS BANK, a state chartered Bank with its principal
office at 000 Xxxxxxx Xxxxx, Xxxxx Xxxxxxxxxx, Xxxxxxx, (hereinafter
referred to as "CORPORATION") and XXXXX X. XXXXXXX, residing at 00 Xxxxxxx
Xxxxx, Xxxxxxxxx, Xxxxxxx 00000 (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 an initial
term beginning on January 1, 1998, and terminating on December 31,
1999.
On December 31, 1998, the CORPORATION shall notify the EMPLOYEE in
writing if the CORPORATION does not intend to renew the Agreement for a one-
year term following the Initial Term. In the event that the CORPORATION
does not so notify the EMPLOYEE, the Agreement shall renew for a one-year
term following the Initial Term. Similarly, on each successive December 31
of a then applicable Term, 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 her 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such conviction is subsequently reversed, rescinded or expunged,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.
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 Accrued Incentive
Payments which the EMPLOYEE would have received had she 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 her employment with the CORPORATION provided she
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 her recommendation, to
terminate the offending party(s) or to cease and desist such offending
activity); (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. Offices and Duties: The EMPLOYEE shall be appointed, and
shall serve, as the Chief Financial Officer and Treasurer of the
CORPORATION. Should the CORPORATION decide to alter her 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 her full-time efforts
and energies to the business and affairs of the CORPORATION and shall
use her best efforts, skill and abilities to promote the CORPORATION's
interests.
7. Evaluation: The EMPLOYEE shall be evaluated in writing
annually by the President of the CORPORATION and shall receive a 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 $85,000.00 per annum, commencing January 1, 1998, and
payable on a bi-weekly basis. The salary will be reviewed annually by
the President and may be increased but not decreased at the discretion
of the President. The CORPORATION may also grant the EMPLOYEE such
other compensation, bonuses, benefits, etc., as it may deem proper
from time to time.
9. Annual Bonus: An annual bonus will be paid to the EMPLOYEE
provided the CORPORATION maintains a "CAMELS" rating of 2 or above,
and Merchants Bancshares, Inc. achieves a target XXX, set annually by
the CORPORATION's Board of Directors' Compensation Committee, equal to
or greater than the median XXX of a defined group of bank holding
companies and banks ("PEER GROUP"). The PEER GROUP will be comprised
of bank holding companies and independent commercial banks located in
the Northeast (New England, New York, Pennsylvania and New Jersey),
which have assets at least 50% but not more than 200% of the assets of
Merchants Bancshares, Inc. If the targets are met, the EMPLOYEE will
receive a minimum bonus equal to 35% of base salary for the
performance year. The maximum bonus will not exceed 75% of base
salary.
For the first year of this Agreement the minimum bonus threshold
shall be set at the ____ percentile of the PEER GROUP. The maximum
bonus threshold will be the ____ percentile of the PEER GROUP. Bonus
awards between ____ and ____ will be interpolated (using linear
progression).
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.
11. Long Term Incentive/Stock Option Plan: Each year, the
EMPLOYEE will receive stock options with a "value" equal to 50% of her
salary. The stock value is determined by calculating the "Black-
Scholes" value. The exercise price will be determined annually by the
CORPORATION's Board of Directors' Compensation Committee. It is
intended that the Committee will set the exercise price slightly above
the then current market price for the stock of Merchants Bancshares,
Inc.
Options are exercisable at any time after two (2) years from
their original issue date. The term of the options will expire on the
earlier of (a) ten years from the issue date while EMPLOYEE remains
employed by the CORPORATION, or (b) if EMPLOYEE's employment is
terminated, then twelve months after termination of employment.
If the EMPLOYEE is terminated without just cause or due to her
disability, or in the event that any transaction occurs which results
in a change of control of either the CORPORATION or Merchants
Bancshares, Inc. from that existing on the date of this Agreement, the
EMPLOYEE may exercise this option immediately upon the occurrence of
any such event or at any other time permitted in the preceding sub-
paragraph. In the event that there is a split of Merchants
Bancshares, Inc. stock, EMPLOYEE's stock options and option price
shall be adjusted accordingly, so as to leave EMPLOYEE in the same
relative position as at the time of commencement of this Agreement
with regard to the issued and outstanding shares of Merchants
Bancshares, Inc. on the date such action is taken. In the event there
is a public offering of the stock of Merchants Bancshares, Inc. other
than pursuant to a stock option or an employee stock ownership plan,
at any time before the options granted hereby have been fully
exercised, then the number of shares subject to the options granted
herein shall be increased so that the total number of shares purchased
and purchasable under these options as increased will bear the same
relationship to the fully-diluted capitalization of the Corporation
immediately after giving effect to completion of the public offering
as the original number of shares purchasable under these options does
to the fully-diluted capitalization of the Corporation at the
effective date hereof. The purchase price for additional shares
covered by these options as provided in the preceding sentence shall
be the greater of the purchase price provided for herein or the
purchase price paid by third parties purchasing stock in the public
offering.
If the CORPORATION is unable to cause to be delivered the shares
upon which the EMPLOYEE seeks to exercise her options, for any reason,
then the CORPORATION shall pay to the EMPLOYEE, on the date of
exercise, the difference between the exercise price and the trading
price of Merchants Bancshares, Inc. shares on that day, as traded on
the exchange on which said shares are listed.
In the event that the EMPLOYEE shall become deceased during the
period in which the EMPLOYEE may exercise her stock options, as
provided above, then her Estate may exercise said options in the
manner provided above; provided, however, that said options are
exercised within six (6) months after EMPLOYEE'S demise.
12. Expenses: The EMPLOYEE shall be reimbursed for documented
business expense incurred or paid by the EMPLOYEE in connection with
the performance of her 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, she reasonably believes to be
in the CORPORATION's interests, or for her 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 EMPLOYEE shall have the sole right
to defend herself against any and all such demands, claims or actions,
using counsel of her choosing. 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
Section 4 of this Agreement.
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 she may have to any
governmental entity with respect to personal taxes, interest or
penalties, unless that liability resulted from a liability of the
CORPORATION (i.e. [Section Sign] 941 Withholding taxes, interest and
penalties, assessed against the EMPLOYEE through a 100% assessment by
the IRS); (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 she 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, her 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 her 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 comply shall be modified
to comply with the applicable law or regulation.
IN WITNESS WHEREOF, the CORPORATION has caused this Agreement to be
executed by its officer thereunto duly authorized, and the EMPLOYEE has
hereunto set her hand and seal, all as of the day and year first above
written.
IN PRESENCE OF: CORPORATION:
MERCHANTS BANK
/s/ Xxxxxx X. Xxxxxxx BY: /s/ Xxxxxx X. Xxxxxx
/s/ Xxxxxxxx X. Xxxxx NAME: Xxxxxx X. Xxxxxx
TITLE: President
EMPLOYEE:
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxxx
/s/ Xxxxxxxx X. Xxxxx XXXXX X. XXXXXXX
