Merchants Bancshares,Inc. (NASDAQ:MBVT) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Item 5.02 Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers

On December15, 2016, the Board of Directors of Merchants
Bancshares,Inc. (the Company) appointed Richard Donovan as
interim Principal Accounting Officer, interim Principal Financial
Officer and interim Treasurer of the Company, effective
immediately. Mr.Donovan, 51, joined the Company as its Interim
Controller in September2016. Mr.Donovan has over 25 years of
accounting experience, including 12 years in public accounting as
a practicing Certified Public Accountant. From February2007 to
December2014, Mr.Donovan was Vice President of Accounting and
Human Resources at Wave Systems Corp. Mr.Donovan is not party to
any transaction required to be disclosed to Item 404(a)of
Regulation S-K and has no family relationships that are required
to be disclosed to Item 401(d)of Regulation S-K.

On December16, 2016, the Company and its wholly-owned subsidiary,
Merchants Bank (the Bank), entered into an employment agreement
(the Employment Agreement) with Mr.Donovan. to the Employment
Agreement, Mr.Donovan will receive an annual salary of $225,000.
The Employment Agreement will automatically terminate on the
closing date (the Closing Date) of the merger contemplated by the
Agreement and Plan of Merger, dated as of October22, 2016,
between Community Bank System,Inc. and the Company. Should the
merger fail to close and the merger process be terminated, the
Employment Agreement will remain in effect. Should Mr.Donovans
employment be terminated without Cause (as defined in the
Employment Agreement), he shall receive the base salary he
otherwise would have received had he remained employed until the
earliest of (1)the end of the 90 day period following his
termination date, (2)the Closing Date, or (3)the date the Bank
determines to be the end of the merger process. The Bank will
also pay Mr.Donovan all reimbursable expenses and all earned but
unpaid vacation days accrued as of his termination date. Should
Mr.Donovan resign, the Bank will pay his compensation for the
period prior to the effective date of his resignation as well as
all reimbursable expenses and all earned but unpaid vacation
days. The foregoing description of the Employment Agreement is
qualified in its entirety by reference to the full text of the
Employment Agreement, which is attached hereto as Exhibit10.1 and
incorporated herein by reference.

On December21, 2016, the Company entered into letter agreements
with Marie Thresher, Executive Vice President and Chief Operating
Officer of the Bank, and certain other executives of the Bank. to
the terms of the letter agreements, the Company will accelerate
the vesting of shares of restricted stock held by the executives
on December27, 2016, provided that if an executives employment
with the Bank is terminated for any reason prior to the earlier
of the date of the Closing Date or the original vesting date in
the applicable restricted stock agreement between the executive
and the Bank, the executive will pay the Company, in cash, the
amount recognized by the executive in the merger with respect to
the accelerated shares, less applicable employment and income
taxes. The foregoing description of the letter agreements is
qualified in its entirety by reference to the full text of
Ms.Threshers letter agreement, which is attached hereto as
Exhibit10.2 and incorporated herein by reference.

Item 9.01. Financial Statements and
Exhibits

(d)Exhibits.

About Merchants Bancshares, Inc. (NASDAQ:MBVT)

Merchants Bancshares, Inc. is a bank holding company. The Company’s subsidiary, Merchants Bank (the Bank) is a commercial bank. The Bank offers a range of deposit, loan, cash management and trust services to meet the financial needs of individual consumers, businesses and municipalities. The Bank operates approximately 30 full-service banking offices and over 40 automated teller machines (ATMs) located across the state of Vermont, and a full-service banking office in Massachusetts. Merchants Bank’s trust division offers investment management, financial planning and trustee services. The Bank offers commercial, financial and agricultural loans, municipal loans, residential real estate loans, commercial real estate loans, construction real estate loans and consumer installment loans for various personal needs, including vehicle and boat financing. The Bank classifies certain of its investments in debt securities as securities available for sale and securities held to maturity.

Merchants Bancshares, Inc. (NASDAQ:MBVT) Recent Trading Information

Merchants Bancshares, Inc. (NASDAQ:MBVT) closed its last trading session up +0.25 at 53.85 with 6,702 shares trading hands.