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Exhibit 10.1
 

VAIL BANKS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT
(Incentive Stock Option)

Employee/Optionee:
Brady Burt
       
Number of Shares:
10,000 Shares
       
Option Exercise Price:
$14.74
       
Grant Date:
August 22, 2005
       
Vesting Schedule:
No. Shares
Date
 
2,500
August 22, 2006
 
2,500
August 22, 2007
 
2,500
August 22, 2008
 
2,500
August 22, 2009

THIS OPTION AGREEMENT (the “Agreement”) is entered into effective as of the 22nd
day of August, 2005 by and between VAIL BANKS, INC., a Colorado bank holding
company (the “Company”), and the employee designated above (the “Optionee”).

W I T N E S S E T H:

WHEREAS, the Vail Banks, Inc. Amended and Restated Stock Incentive Plan (the
“Plan”) was adopted by the Company, effective April 20, 1998; and

WHEREAS, as of the date hereof, the Committee responsible for administration of
the Plan granted the Option as provided herein;

NOW, THEREFORE, the parties agree as follows:

1.          Grant of Option.

1.1          Option. An option to purchase shares of the Company’s Common Stock,
par value $.01 per share, (the “Shares”) is hereby granted to the Optionee (the
“Option”).
 
1.2          Number of Shares. The number of Shares that the Optionee can
purchase upon exercise of the Option and the dates upon which the Option can
first be exercised are set forth above.
 
1.3          Option Exercise Price. The price the Optionee must pay to exercise
the Option (the “Option Exercise Price”) is set forth above.
 

 
 

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1.4          Date of Grant. The date the Option is granted (the “Grant Date”) is
set forth above.
 
1.5          Type of Option. The Option is intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended from time to time, or any successor provision thereto, and
shall be so construed; provided, however, that nothing in this Agreement shall
be interpreted as a representation, guarantee or other undertaking on the part
of the Company that the Option is or will be determined to be an Incentive Stock
Option within the meaning of Section 422 of the Code. To the extent this Option
is not treated as an Incentive Stock Option, it will be treated as a
Nonqualified Stock Option.
 
1.6           Construction. This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan (the provisions of
which are incorporated herein by reference) and, except as otherwise expressly
set forth herein, the capitalized terms used in this Agreement shall have the
same definitions as set forth in the Plan.

1.7          Condition. The Option is conditioned on the Optionee’s execution of
this Agreement. If this Agreement is not executed by the Optionee it may be
canceled by the Committee.
 
2.          Duration.

The Option shall be exercisable to the extent and in the manner provided herein
for a period of ten (10) years from the Grant Date (the “Exercise Term”);
provided, however, that the Option may be earlier terminated as provided in
Section 1.7 and Section 5 hereof.
 
3.          Vesting.

Subject to earlier termination of the Option as provided in Section 1.7 and
Section 5 hereof or in the Plan, if the Optionee remains employed by the
Company, the Optionee shall become vested in the Option, and the Option may be
exercised with respect to the Shares, based upon the Company’s achievement of
the performance targets and other performance goals set forth on Schedule A
attached hereto and made a part hereof (as such Schedule A may be supplemented
or amended from time to time), as follows: 25% of the Option shall vest on each
anniversary of the Grant Date (each such date shall be a “Vesting Date” and
August 22, 2009 shall be the “Final Vesting Date”) if the performance targets or
other goals with respect to such Vesting Date have been satisfied on or before
the Vesting Date. On each Vesting Date (if the performance targets and other
performance goals have been met), Optionee shall have the right to purchase the
Shares that have become vested. If the performance targets and other performance
goals for a Vesting Date are not met, unless the Company otherwise, determines
the portion of the Option that would vest on such Vesting Date shall be
forfeited and cancelled as of such Vesting Date. The right to purchase the
Shares as they become vested shall be cumulative and shall continue during the
Exercise Term unless sooner terminated as provided herein.

4.          Manner of Exercise and Payment. 

4.1          To exercise the Option, the Optionee must deliver a completed copy
of the Option Exercise Form, attached hereto as Exhibit A, to the address
indicated on such Form or such other
 

 
 

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address designated by the Company from time to time. The Option may be exercised
in whole or in part with respect to the vested Shares; provided, however, the
Committee may establish a minimum number of Shares (e.g., 100) for which an
Option may be exercised at a particular time. Within thirty (30) days of
delivery of the Option Exercise Form, the Company shall deliver certificates
evidencing the Shares to the Optionee, duly endorsed for transfer to the
Optionee, free and clear of all liens, security interests, pledges or other
claims or charges. Contemporaneously with the delivery of the Option Exercise
Form, Optionee shall tender the Option Exercise Price to the Company, by cash,
check, wire transfer or such other method of payment (e.g., by delivery, or
attestation to ownership, of Shares already owned) as may be acceptable to the
Committee pursuant to the Plan.
 
4.2          The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to any Shares subject to the Option
until (i) the Option shall have been exercised pursuant to the terms of this
Agreement and the Optionee shall have paid the full purchase price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
shall have issued and delivered the Shares to the Optionee, and (iii) the
Optionee’s name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such Shares.
 
5.          Termination of Employment.

5.1          Termination by Death. In the event the Optionee dies while actively
employed, all outstanding unvested Options granted to the Optionee shall
immediately vest, and thereafter all vested Options shall remain exercisable at
any time prior to the end of the Exercise Term, or for one (1) year after the
date of death, whichever period is shorter, (i) by such person(s) who have
acquired Optionee’s rights by will or the laws of descent and distribution, or
(ii) if no such person in (i) exists, by the executor or representative of the
Optionee’s estate.
 
5.2          Termination by Disability. In the event the employment of the
Optionee is terminated by reason of Disability, all outstanding unvested Options
granted to the Optionee shall immediately vest as of the date the Committee
determines the definition of Disability to have been satisfied by the Optionee,
and thereafter all vested Options shall remain exercisable at any time prior to
the end of the Exercise Term, or for one (1) year after the date that the
Committee determines the definition of Disability to have been satisfied,
whichever period is shorter.
 
5.3          Termination for Cause. If the Optionee’s employment is terminated
by the Company for Cause, all outstanding unvested Options granted to the
Optionee shall expire, and Optionee’s right to exercise any then outstanding
Options (whether or not vested) shall terminate immediately upon the date that
the Committee determines is the Optionee’s date of termination of employment.
 
5.4          Termination of Employment for Other Reasons. If the Optionee’s
employment is terminated by the Company without Cause, or the Optionee
voluntarily terminates his employment (including upon Retirement), all
outstanding unvested Options shall expire, and any Options vested as of his date
of termination shall remain exercisable at any time prior to the end of the
Exercise Term or for three (3) months after his date of termination of
employment, whichever period is shorter.
 

 
 

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5.5          Employment by Subsidiary. For purposes of this Section and Section
8, employment with the Company includes employment with any Subsidiary of the
Company and service as a Director of the Company or any Subsidiary shall be
considered employment with the Company. A change of employment between the
Company and any Subsidiary or between Subsidiaries is not a termination of
employment under this Agreement.
 
5.6          Change In Control. In the event a Change in Control occurs while
the Optionee is employed by the Company, all outstanding unvested Options
granted to the Optionee shall immediately vest and become immediately
exercisable. The Company, in its discretion, may terminate the Option upon a
Change in Control; provided, however, that at least 30 days prior to the Change
in Control, the Company notifies the Optionee that the Option will be terminated
and provides the Optionee, either, at the election of the Company, (i) a cash
payment equal to the difference between the Fair Market Value of the vested
Options (including Options that would become vested upon the Change in Control
as provided above) and the Exercise Price for such Options, computed as of the
date of the Change in Control and to be paid no later than 3 business days after
the Change in Control, or (ii) the right to exercise all vested Options
(including Options that would become vested upon the Change in Control as
provided above) immediately prior to the Change in Control. If the Options
remain outstanding after the Change in Control (including any substituted
Options), the Options shall remain exercisable in accordance with the other
provisions of this Section 5, provided that, notwithstanding the other
provisions of this Agreement, the Options shall remain exercisable for a period
of at least one year after the date of the Change in Control.
 
6.          Nontransferability.

The Option shall not be transferable other than by will or by the laws of
descent and distribution. During the lifetime of the Optionee, the Option shall
be exercisable only by the Optionee.
 
7.          Securities Laws Restrictions.

The Option may not be exercised at any time unless, in the opinion of counsel
for the Company, the issuance and sale of the Shares issued upon such exercise
is exempt from registration under the Securities Act of 1933, as amended, or any
other applicable federal or state securities law, rule or regulation, or the
Shares have been duly registered under such laws. The Company shall not be
required to register the Shares issuable upon the exercise of the Option under
any such laws. Unless the Shares have been registered under all applicable laws,
the Optionee shall represent, warrant and agree, as a condition to the exercise
of the Option, that the Shares are being purchased for investment only and
without a view to any sale or distribution of such Shares and that such Shares
shall not be transferred or disposed of in any manner without registration under
such laws, unless it is the opinion of counsel for the Company that such a
disposition is exempt from such registration. The Optionee acknowledges that an
appropriate legend giving notice of the foregoing restrictions may appear
conspicuously on all certificates evidencing the Shares issued upon the exercise
of the Option.
 

 
 

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8.          No Right to Continued Employment.
 
Nothing in this Agreement or the Plan shall be interpreted or construed to
confer upon the Optionee any right with respect to continuance of employment by
the Company or any Subsidiary, nor shall this Agreement or the Plan interfere in
any way with the right of the Company or a Subsidiary to terminate the
Optionee’s employment at any time.
 
9.          Adjustments.
 
In the event of a change in capitalization or corporate transaction, the
Committee shall make appropriate adjustments to the number and class of Shares
or other stock or securities subject to the Option and the purchase price for
such Shares or other stock or securities. The Committee’s adjustment shall be
made in accordance with the provisions of Section 4.3 of the Plan and shall be
effective and final, binding and conclusive for all purposes of the Plan and
this Agreement.
 
10.          Withholding of Taxes.
 
10.1          The Company shall have the right to deduct from any distribution
of cash to the Optionee an amount equal to the federal, state and local income
taxes, any employment taxes payable by Optionee as an employee, and other
amounts as may be required by law to be withheld (the “Withholding Taxes”) with
respect to the Option. If the Optionee is entitled to receive Shares upon
exercise of the Option, the Optionee shall pay the Withholding Taxes (if any) to
the Company in cash prior to the issuance of such Shares. In satisfaction of the
Withholding Taxes, the Optionee may make a written election (the “Tax
Election”), to have withheld a portion of the Shares issuable to him or her upon
exercise of the Option, having an aggregate Fair Market Value equal to the
required Withholding Taxes (but not in excess of such amount), provided that, if
the Optionee may be subject to liability under Section 16(b) of the Exchange
Act, the election must comply with the requirements applicable to Share
transactions by such Optionees.
 
10.2          If the Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to him pursuant to his exercise of the Option within the two-year
period commencing on the day after the Grant Date or within the one-year period
commencing on the day after the date of transfer of such Share or Shares to the
Optionee pursuant to such exercise, the Optionee shall, within ten (10) days of
such disposition, notify the Company thereof, by delivery of written notice to
the Company at its principal executive office, and immediately deliver to the
Company the amount of Withholding Taxes.
 
11.          Modification of Agreement.
 
This Agreement may be modified, amended, suspended or terminated, and any terms
or conditions may be waived, only by a written instrument executed by the
parties hereto.
 

 
 

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12.          Severability.
 
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holding and shall
continue in full force in accordance with their terms.
 
13.          Governing Law.
 
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Colorado without giving effect to
the conflicts of laws principles thereof.
 
14.          Successors in Interest.
 
This Agreement shall be binding upon, and inure to the benefit of, the Company
and its successors and assigns, and upon any person acquiring, whether by
merger, consolidation, reorganization, purchase of stock or assets, or
otherwise, all or substantially all of the Company’s assets and business. This
Agreement shall inure to the benefit of the Optionee’s heirs and legal
representatives. All obligations imposed upon the Optionee and all rights
granted to the Company under this Agreement shall be final, binding and
conclusive upon the Optionee’s heirs, executors, administrators and successors.
 
15.          Resolution of Disputes.
 
Any dispute or disagreement which may arise under, or as a result of, or in any
way relate to, the interpretation, construction or application of this Agreement
shall be determined by the Committee. Any determination made hereunder shall be
final, binding and conclusive on the Optionee and the Company for all purposes.
 

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.
 

 
VAIL BANKS, INC.
         
By:______________________________
 
Name:____________________________
 
Title:_____________________________
   

By signing below, Optionee hereby accepts the Option subject to all its terms
and provisions and agrees to be bound by the terms and provisions of the Plan.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board of Directors of the Company, or the Compensation
Committee, upon any questions arising under the Plan. Optionee authorizes the
Company to withhold, in accordance with applicable law, from any

 
 

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compensation payable to him or her, any taxes required to be withheld by
federal, state or local law as a result of the grant, existence or exercise of
the Option.

   
OPTIONEE
             
Signature:
/s/ Brady Burt   
Name:
Brady Burt

[EXHIBIT FOLLOWS]

 
 

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EXHIBIT A

OPTION EXERCISE FORM

I, _____________________________, do hereby exercise the Option with a Date of
Grant of ___________________, ______ granted to me pursuant to the Option
Agreement. The Shares being purchased and the Total Option Exercise Price are
set forth below:

   
Number of Shares:
________________ Shares
 
Option Exercise Price Per Share
 
x $ ____________ per Share
 
Total Option Exercise Price:
 
= $ ____________.

The Total Option Exercise Price is included with this Form.

____________________________________
Signature
Date: ___________________

Send or deliver this Form with an original signature to

Vail Banks, Inc.
Attn: Lisa M. Dillon
0015 Benchmark Road, Suite 300
Avon, CO 81620

 
 

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SCHEDULE A

Vesting Date
Performance Targets and Goals
   
August 22, 2006
1. The Finance and Accounting cost centers of the Company achieving a net
contribution of $2.1 million for 2005 (excluding intercompany charges)
2. CAMELS rating of “2” or better for Vail Banks, Inc. and WestStar Bank on the
then most recent regulatory safety and soundness examination report
   
August 22, 2007 and later years
Performance Targets and other goals will be established at the beginning of the
Company’s fiscal year.

The determination of whether a Performance Target has been met will be based
upon the Company’s financial statements, adjusted by the Company as it deems
appropriate to take into account changes to the business or its operations,
acquisitions or dispositions, tax law changes, accounting changes or similar
unusual events or items.