EXHIBIT 10.7
EMPLOYMENT AGREEMENT
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THIS AGREEMENT is made effective as of the 1st day of January, 1997,
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 MICHAEL R. TUTTLE, residing at 17 Wealthy
Avenue, South Burlington, Vermont 05403 (hereinafter referred to as
"EMPLOYEE").
WITNESSETH
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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, 1997, and terminating on December 31, 1999 (the
"Initial Term").
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,
and the CORPORATION agrees to pay or provide as or when due all other
normal benefits and Accrued Incentive Payments, including the Accrued
Incentive Payments provided for in Section 9 of this Agreement, for
one year from the date of such discharge or for the balance of the
time remaining under the Term of this Agreement, whichever is greater.
"Accrued Incentive Payments" shall mean the payment of incentive
amounts, the precondition of which has occurred or will occur at or
upon the expiration of the relevant Fiscal Period to which such
incentive may be applicable. The EMPLOYEE may elect to receive the
payments over a five (5) year period, and if he does so, the net
present value of such payments shall be equal to the lump sum payment
if paid immediately.
"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.
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 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); (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; (iii)
fundamental disagreements over basic corporate philosophies and/or corporate
business plans; (iv) the CORPORATION having reduced the EMPLOYEE's salary,
incentive payments or other benefits provided for herein or having reduced
his title or position from those specified herein; or (v) Joseph L. Boutin
having been discharged by the Corporation without just cause from his
employment as President and Chief Executive Officer of the CORPORATION.
5. Offices and Duties: The EMPLOYEE shall be appointed, and shall
serve, as the Executive Vice President of the CORPORATION. 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.
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 $130,000.00
per annum, commencing January 1, 1997, 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 "CAMEL" rating of 2 or above, and
Merchants Bancshares, Inc. achieves a target ROE, set annually by the
CORPORATION's Board of Directors' Compensation Committee, equal to or
greater than the median "ROE" 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 65th percentile of the PEER GROUP. The maximum bonus
threshold will be the 90th percentile of the PEER GROUP. Bonus awards
between 35% and 75% 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, but
shall provide EMPLOYEE with five (5) weeks per year of vacation.
11. Long Term Incentive/Stock option Plan: Each year, the EMPLOYEE
will receive stock options with a "value" equal to 50% of his 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 his
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 his 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 his stock options, as provided above,
then his 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 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 EMPLOYEE
shall have the sole right to defend himself against any and all such
demands, claims or actions, using counsel of his 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 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 (i.e. [SECTION] 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 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
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 23, 1995, with the following
exception: The EMPLOYEE shall maintain all rights to incentive payments
under paragraph 9 of such Amended Employment Agreement through June 30,
1997.
IN WITNESS WHEREOF, the CORPORATION has caused this Agreement to be
executed by its officer 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
/s/ BRIAN W. GORMAN BY: /s/ JOSEPH L. BOUTIN
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EMPLOYEE:
/s/ JENNIFER L. VARIN /s/ MICHAEL R. TUTTLE
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MICHAEL R. TUTTLE