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Exhibit 10.1

Vail Banks, Inc.
 
May 31, 2006
E. B. Chester
Vail Banks, Inc.
0015 Benchmark Road, Suite 300
P.O. Box 6580
Avon, Colorado 81620
 

Dear E. B.:
 
This letter agreement (this “Agreement”) is to confirm the agreements,
arrangements and understandings relating to the payments that you will become
entitled to receive in connection with the transactions contemplated by the
Agreement and Plan of Merger (the “Merger Agreement”) by and among U.S. Bancorp,
Powder Acquisition Corp., and Vail Banks, Inc. (the “Company”), dated May 31,
2006. The agreements, arrangement and understandings contained herein supersede
in their entirety each of the Change in Control Severance Payment Agreement
between you and the Company, dated as of November 19, 1999 (the “CIC Agreement”)
and the Compensation Agreement between you and the Company, dated as of January
1, 2004 (the “Compensation Agreement”). The commitments set forth in this letter
agreement are subject to the consummation of the Merger (as defined in the
Merger Agreement). All terms not otherwise defined herein shall have the meaning
given to them in the Merger Agreement.
 
1.
CIC Agreement Payment. Subject to your execution and non-revocation of a release
of claims against the Company and its affiliates in a form mutually agreed upon
between you and the Company, immediately following the occurrence of the
Closing, the Company shall make a lump sum cash payment to you equal to $463,500
pursuant to Sections 4(a)(i) and 4(a)(iv) of the CIC Agreement and in full
satisfaction of the Company’s obligations under the CIC Agreement.

2.
Compensation Agreement Payment. Subject to your execution and non-revocation of
a release of claims against the Company and its affiliates in a form mutually
agreed upon between you and the Company, and subject to the occurrence of the
Closing, as of January 2, 2007 or such earlier date that complies with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the
regulations promulgated thereunder, the Company shall make a lump sum cash
payment to the Executive in an amount equal to $712,737 pursuant to Sections
8(a), (c), (d), (i) and (j) of the Compensation Agreement.

3.
Benefits. While you are employed by the Company and its affiliates and for three
years (or such shorter period of time necessary to comply with Section 409A of
the Code) following your involuntary termination of employment by the Company
without “Cause” (as defined in Section 11 of the Compensation Agreement), you
will be entitled to receive the benefits described in Sections 8(b), (e) and (f)
of the Compensation Agreement. The payments set forth in paragraph 2 above and
the benefits set forth in this paragraph 3 shall be in full satisfaction of the
Company’s obligations under the Compensation Agreement.

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4.
Section 280G Gross-Up Payment. Notwithstanding anything to the contrary
contained herein, the provisions of Section 10 (“Tax Gross Up Payment”) of the
Compensation Agreement shall be incorporated herein by reference, as if restated
herein in their entirety. Section 10 of the Compensation Agreement will apply to
all payments received by you pursuant to this Agreement. The provisions of this
Section 4 shall survive the termination of the Compensation Agreement. The
aggregate amount of all Severance Tax Payments and Gross-Up Payments (each as
defined in the Compensation Agreement) payable under Section 10 of the
Compensation Agreement are currently expected to be approximately $1,873,000.

5.
Entire Agreement. This Agreement contains the entire understanding of the
parties in respect of their subject matter and supersedes upon its effectiveness
all other prior plans, arrangements, agreements and understandings, including,
without limitation, the CIC Agreement and the Compensation Agreement (the “Prior
Agreements”). The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

In the event that the Merger Agreement is terminated, this Agreement shall be
void ab initio and of no further force and effect and the Prior Agreements shall
remain fully in effect. This Agreement may not be amended without the prior
written consent of U.S. Bancorp.

Please sign below to indicate your acknowledgment and acceptance of the
agreements set forth herein.
 

 
Very truly yours,
     
VAIL BANKS, INC.
 
     
By: /s/ Lisa M. Dillon
 
Name:Lisa M. Dillon
 
Title:Vice Chairman

 

Acknowledged and Accepted:
 

 
/s/ E.B. Chester
E. B. Chester