EXHIBIT 10.4 EMPLOYMENT AGREEMENT

Exhibit 10.4

EMPLOYMENT AGREEMENT

      THIS AGREEMENT is made effective as of the 1st day of January, 2003, 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 EMPLOYEE, 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 three-year term beginning on January 1, 2003, and terminating on December 31, 2005.

      On or before December 31, 2004, 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all or an essential part of his/her duties of employment, provided that, if such conviction is subsequently reversed, rescinded or expunged, EMPLOYEE's termination will be treated as if made without just cause.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 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 his/her employment with the CORPORATION provided he/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 his/her 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.   Offices and Duties :  The EMPLOYEE shall be appointed, and shall serve, as the _______________________ of the CORPORATION. Should the CORPORATION decide to alter his/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 full-time efforts and energies to the business and affairs of the CORPORATION and shall use 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 _____________ per annum, commencing January 1, 2003, 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.   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, 2003, the performance targets and the calculation of the annual bonus will be as follows:

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