Exhibit 10.15


 


COMPENSATION
AGREEMENT


 


THIS AGREEMENT is made and
entered into as of this 1st day of January, 2004, by and between
VAIL BANKS, INC., a Colorado corporation (the “Company”), and E.B. CHESTER
(“Employee”).


 


WITNESSETH:


 


WHEREAS, Employee is currently rendering
valuable services to the Company and the Company wishes to assure itself of
Employee’s continued participation in the business and affairs of the Company;
and


 


WHEREAS, the Company desires to assure itself
of an orderly transition of certain of Employee’s duties to other employees of
the Company; and


 


WHEREAS, the parties desire to set forth
Employee’s continuing duties and responsibilities and to provide for Employee’s
compensation and benefits for performing such services; and


 


NOW, THEREFORE, for and in consideration of
the premises and the mutual covenants and agreements contained herein, the
parties hereby agree as follows:


 


1.                                       Position.


 


Subject to the terms and conditions of this
Agreement, the Company hereby employs Employee, and Employee hereby accepts
employment, as Chairman of the Board of Directors (“Board”) of the Company, and
the Chairman of the Executive Committee of the Board. Employee shall also serve
as Chairman of the Board of WestStar Bank (“WestStar”) and as a member of the
Compensation Committee of the Board of the Company and the Board of WestStar.


 


2.                                       Duties.


 


Employee shall have the following
responsibilities, duties and authority in connection with such employment:  (i) operation of the Board and the Board
of WestStar; (ii) oversight of regulatory matters; (iii) corporate
governance matters; (iv) strategic planning and direction for the Company
and WestStar; and (v) interfacing with the capital markets.


 


 

















 


3.                                       Reporting.


 


Employee will report to the Board. Initially,
the Chief Executive Officer of the Company and the Vice Chairman of the Company
will report to Employee. Changes to the positions reporting to Employee may be
made by the Board from time to time.


 


4.                                       Additional
Positions.


 


Employee may serve as owner or a
director on the board of directors or trustees of additional companies or
educational or charitable organizations.


 


5.                                       Term.


 


Unless earlier terminated as provided herein,
Employee’s employment under this Agreement shall be for an initial one (1) year
term (the “Initial Term”) commencing as of January 1, 2004 (the “Effective
Date”), and shall extend automatically, without further action by either the
Company or Employee, for an additional year at the end of the first year of the
Term and at the end of each subsequent year. This Initial Term and any
extension of such Initial Term shall be referred to in this Agreement as the “Term”.


 


6.                                       Non-Renewal.


 


No less than ninety (90) days prior to the
end of any year during which this agreement is effective, the Company may give
notice to Employee and cause this Agreement not to automatically extend for an
additional year. Upon giving such notice of non-renewal to Employee, the
Employee shall continue to receive all compensation and other benefits payable
under this agreement for a three-year period beginning at the expiration of the
then Term of this Agreement.


 


7.                                       Change of
Control Agreement.


 


The Company and Employee have previously
entered into a Change In Control Severance Payment Agreement, dated as of November 19,
1999 (the “CIC Severance Agreement”). All terms and conditions of the CIC
Severance Agreement shall remain in full force and effect in according to its
terms and shall remain in full force and effect during the Term of this
Agreement. If, as a result of Employee’s termination of employment, Employee
becomes entitled to compensation and benefits under this Agreement and under
the CIC Severance Agreement, Employee shall be entitled to receive benefits
under whichever agreement provides Employee the greater aggregate compensation
and benefits (and not under the other agreement) and there shall be no
duplication of benefits.


 


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8.                                       Compensation
and Benefits.


 


As compensation for Employee’s services
during the Term of this Agreement, Employee shall be paid and receive the
compensation and benefits set forth in subsections (a) through (k) below


 


(a)                                  An initial annual
base salary (“Base Salary”) of Two Hundred Twenty-Five Thousand and No/100
Dollars ($225,000). Employee’s Base Salary shall be subject to annual review
and adjustment when the Company conducts salary reviews for its employees
generally, but in no event shall the Base Salary be less than $225,000. Employee’s
Base Salary shall be payable in accordance with the Company’s regular payroll
practices in effect from time to time for employees of the Company.


 


(b)                                 During the Term,
Employee will be entitled to be considered for an annual bonus by the
Compensation Committee. Employee recognizes and agrees that the Company may in
its sole discretion and with reasonable notice to Employee determine that any
bonus may be paid in whole or in part in the Company’s Common Stock
or other equity securities, including restricted stock and stock options.


 


(c)                                  Employee shall be
entitled to participate in, and receive benefits under, any “Employee Benefit Plan”
(as defined in Section 3(3) of ERISA) or employee benefit arrangement
made available by the Company to its employees, including plans providing
401(k) and profit sharing benefits, healthcare, dental care, vision care, life
insurance, disability, travel accident insurance, and similar benefits, with
the level of coverage provided to Employee being comparable to that of the
highest-paid employees.


 


(d)                                 Employee will be provided
a vehicle and reimbursement for expenses related to the operation and
maintenance of such vehicle in accordance with the Company’s automobile policy
as in effect with respect to Employee on the Effective Date. Employee will be
paid a tax gross-up amount by the Company to cover any additional federal or
state income taxes he incurs as a result of being required to include in income
the amount of the costs for, or personal usage of, such vehicle.


 


(e)                                  Employee will be
promptly reimbursed by the Company for all reasonable business expenses
Employee incurs and properly reports in carrying out Employee’s duties and
responsibilities under this Agreement.


 


(f)                                    The Board in its
sole discretion may award options or other equity-based compensation to
Employee on terms, in amounts and subject to such performance goals (if any) as
determined by the Board (any such options also being referred to hereinafter as
“Options” and any such equity-based compensation being referred to herein as “Other
Equity Compensation”).


 


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(g)                                 For each calendar year
during the Term in which Employee beneficially owns fifteen percent (15%) or
more of the Company’s outstanding voting stock on January 1 of such year,
the Company will cause Employee to be nominated to the Board of Directors of
the Company and shall recommend to the shareholders of the Company Employee’s
election to the Board.


 


(h)                                 For
each calendar year during the Term in which Employee beneficially owns fifteen
percent (15%) or more of the Company’s outstanding voting stock on January 1
of such year, Employee may in his discretion designate a related or
unrelated individual for election to the Board and the Company shall recommend
to the shareholders of the Company such individual’s election to the Board.


 


(i)                                     During
the Term hereof, Employee shall be provided, at the Company’s expense with a
fully-equipped office equivalent to the office Employee occupied on January 1,
2004.


 


(j)                                     During
the Term hereof, Employee shall be provided, at the Company’s expense with a
dedicated secretary/administrative assistant (including payment by the Company
of all salary and benefits for such individual) working solely for and
reporting to, Employee.


 


(k)                                  The
Company agrees to enter into a separate agreement relating to the Company’s use
of an aircraft owned by an entity controlled by Employee, which agreement shall
provide for the Company to utilize such aircraft for no less than one hundred
(100) hours of flight time each year and for the Company to employ and provide
a pilot for such aircraft acceptable to Employee. The Company shall pay to
Employee an amount for each flight hour, equal to the direct operating cost of
such aircraft, not including the cost of capital required to own such aircraft.
The Company shall pay all employment costs of such pilot who shall report to
Employee. Employee may utilize such pilot for non-Company duties from time
to time. Employee and Company shall pay all incidental costs of subsistence of
such pilot associated with their respective use of such aircraft. Employee is
not required to own or furnish such aircraft and should Employee cease to
furnish such aircraft, the Company’s lease obligation shall cease as of the
date such aircraft is no longer available.


 


9.                                       Termination.


 


This Agreement and the Employee’s employment
hereunder may only be terminated during the Term by the Company for Cause
(as defined in Section 11 below), or by notice of non-renewal pursuant to
the terms of Section 6 above. If Employee is terminated for Cause, no
further consideration or benefits will be furnished to Employee pursuant to
this Agreement, provided that Employee shall have the rights under the Company’s
benefit plans and programs in which Employee otherwise has nonforfeitable
rights under the terms of such plans or programs.


 


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This agreement and the Employee’s employment
hereunder shall be terminated should Employee voluntarily resign during the
Term hereof.


 


10.                                 Tax
Gross Up Payment.


 


Upon the giving by the Company of any notice
under Section 6 of this Agreement not to renew this Agreement on a yearly
basis, any and all consideration received by Employee which is income to
Employee following the end of the year within which notice of non-renewal was
given shall be subject to the payment by the company of a tax gross-up payment.
The Company shall pay to Employee, or directly to the appropriate taxing
authorities, the following tax gross-up payments:


 


(a)                                  With
respect to payments or benefits made or provided to Employee during the
three-year extension of the Term following the end of the year within which the
notice of non-renewal was given which result in taxable income to Employee
(hereinafter referred to as the “Taxable Severance Amount”), the Company shall
make a payment (“Severance Tax Payment”) to Employee in an amount sufficient to
pay all federal, state, and other taxes imposed upon Employee with respect to
the Taxable Severance Amount. The determination of the amount of the Severance
Tax Payment shall be made in good faith by the Company’s independent
accountants based upon reasonable assumptions.


 


(b)                                 With
respect to any portion of the Taxable Severance Amount of any other payments or
benefits provided to Employee that may be deemed to be subject to the
excise tax imposed by Section 4999 of the Code, the following provisions
shall apply:


 


(i)                                     Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined (as hereafter provided) that any payment or distribution to or for
the Employee, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or pursuant to or by reason of any other
agreement, policy, plan, program or arrangement (including, without limitation,
any employment agreement, stock plan or salary continuation agreement), or
similar right (a “Payment”), would be subject to the excise tax imposed by Section 4999
of the Code (or any successor provisions thereto), or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereafter collectively referred to as the “Excise
Tax”), then the Employee shall be entitled to receive an additional payment or
payments (a “Gross-Up Payment”) from the Company. The total amount of the
Gross-Up Payment shall be an amount such that, after payment by (or on behalf
of) the Employee of any Excise Tax and all federal, state and other taxes (including
any interest or penalties imposed with respect to such taxes) imposed upon the
Gross-Up Payment, the remaining amount of the Gross-Up Payment is equal to the
Excise Tax imposed upon the Payments. For purposes of clarity, the amount of
the Gross-Up Payment shall be that amount necessary to pay the Excise Tax in
full and all taxes assessed upon the Gross-Up Payment. The Gross-Up Payment
under this subsection (b) shall be in addition to any amounts payable
under subsection (a).


 


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(ii)                                  An
initial determination as to whether a Gross-Up Payment is required pursuant to
this subsection (b)(ii) and the amount of such Gross-Up Payment shall
be made by an accounting firm selected by the Company and reasonably acceptable
to the Employee which is then designated as one of the five largest accounting
firms in the United States (the “Accounting Firm”). The Accounting Firm shall
provide its determination (the “Determination”), together with detailed
supporting calculations and documentation to the Company and the Employee as
promptly as practicable after such calculation is requested by the Company or
by the Employee, and if the Accounting Firm determines that no Excise Tax is
payable by the Employee with respect to a Payment or Payments, it shall furnish
the Employee with an opinion reasonably acceptable to the Employee that no
Excise Tax will be imposed with respect to any such  Payment or Payments. Within fifteen (15) days
of the delivery of the Determination to the Employee, the Employee shall have
the right to dispute the Determination (the ‘Dispute”). The Gross-Up Payment,
if any, as determined pursuant to this subsection (b)(ii) shall be
paid by the Company to the Employee within fifteen (15) days of the receipt of
the Accounting Firm’s Determination. The existence of the Dispute shall not in
any way affect the right of the Employee to receive the Gross-Up Payment in
accordance with the Determination. If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and the Employee
subject to the application of subsection (b)(ii) below.


 


(iii)                               As
a result of the uncertainty in the application of Sections 4999 and 280G of the
Code, it is possible that a Gross-Up Payment (or a portion thereof) will be
paid which should not have been paid (an “Excess Payment”) or a Gross-Up
Payment (or a portion thereof) which should have been paid will not have been
paid (an “Underpayment”). An Underpayment shall be deemed to have occurred upon
the earliest to occur of the following events: 
(1) upon notice (formal or informal) to the Employee from any
governmental taxing authority that the tax liability of the Employee (whether
in respect of the then current taxable year of the Employee or in respect of
any prior taxable year of the Employee) may be increased by reason of the
imposition of the Excise Tax on a Payment or Payments with respect to which the
Company has failed to make a sufficient Gross-Up Payment, (2) upon a
determination by a court, (3) by reason of a determination by the Company
(which shall include the position taken by the Company, or its consolidated
group, on its federal income tax return), or (4) upon the resolution to
the satisfaction of the Employee of the Dispute. If any Underpayment occurs,
the Employee shall promptly notify the Company and the Company shall pay to the
Employee within fifteen (15) days of the date the Underpayment is deemed to
have occurred under (1), (2), (3) or (4) above, but in no event less
than five days prior to the date on which the applicable government taxing
authority has requested payment, an additional Gross-Up Payment equal to the
amount of the Underpayment plus any interest and penalties imposed on the
Underpayment


 


An Excess
Payment shall be deemed to have occurred upon a “Final Determination” (as
hereinafter defined) that the Excise Tax shall not be imposed upon a Payment or
Payments (or portion of a Payment) with respect to which the Employee had


 


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previously received a Gross-Up Payment. A
Final Determination shall be deemed to have occurred when the Employee has
received from the applicable government taxing authority a refund of taxes or
other reduction in his tax liability by reason of the Excess Payment and upon
either (1) the date a determination is made by, or an agreement is entered
into with, the applicable governmental taxable authority which finally and
conclusively binds the Employee and such taxing authority, or in the event that
a claim is brought before a court of  competent jurisdiction, the date upon which a
final determination has been made by such court and either all appeals have
been taken and finally resolved or the time for all appeals has expired, or (2) the
statute of limitations with respect to the Employee’s applicable tax return has
expired. If an Excess Payment is determined to have been made, the amount of
the Excess Payment shall be treated as a loan by the Company to the Employee
and the Employee shall pay to the Company within 15 days following demand (but
not less than 30 days after the determination of such Excess Payment) the
amount of the Excess Payment plus interest at an annual rate equal to the rate
provided for in Section 1274(b)(2)(B) of the Code from the date the
Gross-Up Payment (to which the Excess Payment relates) was paid to the Employee
until the date of repayment to the Company.


 


(iv)                              Notwithstanding
anything contained in this Agreement to the contrary, in the event that,
according to the Determination, an Excise Tax will be imposed on any Payment or
Payments, the Company shall pay to the applicable government taxing authorities
as Excise Tax withholding, the amount of any Excise Tax that the Company has
actually withheld from the Payment or Payments; provided that the Company’s
payment of withheld Excise Tax shall not change the Company’s obligation to pay
the Gross-Up Payment required under this subsection (b).


 


(v)                                 The
Employee and the Company shall each provide the Accounting Firm access to and
copies of any books, records and documents in the possession of the Company or
the Employee, as the case may be, reasonably requested by the Accounting
Firm, and otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the Determination contemplated by subsection (B) hereof


 


(vi)                              The
fees and expenses of the Accounting Firm for its services in connection with
the determinations and calculations contemplated by subsection (B) shall
be paid by the Company.


 


11.                                 Definitions.


 


For purposes of this Agreement, the following
definition shall apply:


 


“Cause” means


 


(a)                                  the
conviction of the Employee of, or a plea of guilty or nolo contendere by the
Employee to, any felony involving conduct on the part of the Employee that
renders him unfit for the performance of his duties to the Company, or its
subsidiaries and affiliates, or


 


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(b)                                 any
willful misconduct on the part of the Employee in the performance of his
duties that is materially harmful to the Company or its subsidiaries or
affiliates, monetarily or otherwise.


 


For the purpose of this Section 11, no
act, or failure to act, on the Employee’s part shall be considered “willful”
unless done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Employee shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to him a copy of a resolution duly adopted by the affirmative vote of not less
than three quarters of the entire membership of the Board of Directors of the
Company at a meeting of the Board called and held for that  purpose (after reasonable notice to him and
an opportunity for him, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board he was guilty of conduct
set forth above in clauses (a) or (b) above and specifying the particulars
thereof in detail.


 


12.                                 Litigation
Expenses;  Indemnification  and  Insurance


 


(a)                                  The
Company shall reimburse Employee, on a current basis, for all reasonable legal
fees and related expenses incurred by Employee in connection with this
Agreement, including without limitation, all such fees and expenses, if any,
incurred (i) by Employee in contesting or disputing any termination of
Employee’s employment, or (ii) Employee’s seeking to obtain or enforce any
right or benefit provided by this Agreement, in each case, regardless of whether
or not Employee’s claim is upheld by an arbitrator or a court of competent
jurisdiction; provided, however, Employee shall be required to repay to the
Company any such amounts to the extent that an arbitrator or a court issues a
final and non-appealable order, judgment, decree or award setting forth the
determination that the position taken by Employee was frivolous or advanced by
Employee in bad faith. In addition, Employee shall be entitled to be paid all
reasonable legal fees and expenses, if any, incurred in connection with any tax
audit or proceeding to the extent attributable to the application of Section 4999
of the Code to any payment or benefit hereunder. All such payments shall be
made within five business days after delivery of Employee’s respective written
requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.


 


(b)                                 During the Term and
for a period of three (3) years after the end of the Term, the Company
shall continue to provide for Employee the indemnification provisions contained
in the Company’s by-laws and shall continue to maintain for the benefit of the
Employee such policies of liability insurance, providing protection to him as
an officer, director, agent or employee of the Company and its subsidiaries, as
may from time to time be


 


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purchased by the Company for officers and directors generally as
authorized by or in furtherance of the indemnification provisions contained in
the Company’s by-laws.


 


13.                                 Assignment;  Successors
in  Interest


 


(a)                                  General.
Except with the prior written consent of the Employee, no assignment by
operation of law or otherwise by the Company of any of its rights and
obligations under this Agreement may be made other than to an entity which
is successor to all or a substantial portion of the business of the Company
(but then only if such entity assumes by operation of law or by specific
assumption executed by the transferee and delivered to the Employee all
obligations and liabilities of the Company under this Agreement); no transfer
by operation of law or otherwise by the Company of all or a substantial part of
its business or assets shall be made unless the obligations and liabilities of
the Company under this Agreement are assumed in connection with such transfer
either by operation of law or by specific assumption executed by the
transferee. In such event, the Company shall remain liable for the performance
of all of its obligations under this Agreement (which liability shall be a
primary obligation for full and prompt performance rather than a secondary
guarantee of collectibility of damages). Except for any transfer or assignment
of rights under this Agreement, in whole or in part, upon the death of the
Employee to his heirs, devisees, legatees, or beneficiaries or except with the
prior written consent of the Company, no assignment or transfer by operation of
law or otherwise may be made by the Employee of any of his rights under
this Agreement


 


(b)                                 Binding Nature.
This Agreement shall be binding upon the parties to this Agreement and their
respective legal representatives, heirs, devisees, legatees, beneficiaries and
successors and assigns; shall inure to the benefit of the parties to this
Agreement and their respective permitted legal representatives, heirs devisees,
legatees, beneficiaries and other permitted successors and assigns (and to or
for the benefit of no other person or entity, whether an employee or otherwise,
whatsoever); and any reference to a party to this Agreement shall also be a
reference to a permitted successor or assign.


 


14.                                 Miscellaneous


 


(a)                                  The Failure of any
party to this Agreement at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right to enforce the
same. No waiver by any party to this Agreement of any provision (or of a breach
of any provision) of this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed or construed either as a further or
continuing waiver of any such provision or breach or as a waiver of any other
provision (or of a breach of any other provision) of this Agreement.


 


(b)                                 Wherever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid but if any one or more of the provisions of this 


 


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Agreement shall be invalid, illegal or unenforceable in any respect for
any reason, the validity, legality or enforceability of any such provisions in
every other respect and of the remaining provisions of this Agreement shall not
be impaired.


 


(c)                                  This Agreement shall
be governed by the interpreted in accordance with the laws of the State of
Colorado (without giving effect to any choice of law provisions).


 


(d)                                 This Agreement may only
be amended by a written instrument signed by the parties hereto which makes
specific reference to the Agreement.


 


IN WITNESS WHEREOF, the Company has caused
this Agreement to be executed by its duly authorized officer and the Employee
has executed this Agreement as of the date and year first written above.


 


	
   

  	
  VAIL BANKS, INC.

  
	
   

  	
  As authorized by its Board of Directors

  by resolution on April 19, 2004

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert L. Knous, Jr.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its

  	
  Compensation Committee Chairman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ E.B. Chester, Jr.

  	
   

  
	
   

  	
  E.B. CHESTER

  
					



 


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