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EXHIBIT 10.4  

 
  EMPLOYMENT AGREEMENT    
  

        THIS AGREEMENT is made this 31 day of May, 2000, by and between COAST NATIONAL
BANK (the "Bank"), having a principal place of business at 486 Marsh Street, San Luis Obispo, California 93401, and THOMAS J.
SHERMAN ("Executive"), whose residence address is 2855 El Cerrito, San Luis Obispo, California 93401. 

 
 

W I T N E S S E T H:    
  

        WHEREAS, the Bank is a national banking association, with power to own property and carry on its business as it is now being conducted; 

        WHEREAS,
the Bank desires to avail itself of the skill, knowledge and experience of Executive in order to insure the successful management of its business; and 

        WHEREAS,
the parties hereto desire to specify the terms and conditions of Executive's employment by the Bank; 

        NOW,
THEREFORE, in consideration of the mutual covenants hereinafter set forth, and intending to be legally bound, it is agreed that from and after June 1, 2000 (the "Effective
Date"), the following terms and conditions shall apply to Executive's said employment. 

        A.    TERM OF EMPLOYMENT

        The
Bank hereby employs Executive, and Executive hereby accepts employment with the Bank, for a term of three (3) years, commencing on June 1, 2000, and ending on
May 31, 2003, unless terminated sooner in accordance with Section F. below. Upon expiration of this Agreement, the respective rights and obligations of the Parties hereunder shall cease,
except for any term that is subject to an express survival provision (e.g., Subsection D.5). 

        B.    DUTIES OF EXECUTIVE

        1.    Duties.    Executive shall perform the duties of Executive Vice President and Chief
Credit Officer of the Bank, subject to the powers by law vested in the Board of Directors of the Bank and in the Bank's shareholders. During the Term, Executive shall perform exclusively the services
herein contemplated to be performed by Executive faithfully, diligently and to the best of Executive's ability, consistent with the highest and best standards of the banking industry and in compliance
with all applicable laws and the Bank's Articles of Association and Bylaws. 

        2.    Conflicts of Interest.    Except as permitted by the prior written consent of the Board
of Directors of the Bank, Executive shall devote Executive's entire productive time, ability and attention to the business of the Bank during the Term and Executive shall not directly or indirectly
render any services of a business, commercial or professional nature, to any other person, firm or corporation, whether for compensation or otherwise, which are in conflict with the Bank's interests.
Notwithstanding the foregoing, Executive may make investments of a passive nature in any business or venture. 

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        C.    COMPENSATION

        1.    Salary.    For Executive's services hereunder, the Bank shall pay or cause to be paid as
annual base salary to Executive in accordance with the following schedule during the term of this Agreement: 

	June 1, 2000 - May 31, 2001	 	$110,000.00 (gross);
	June 1, 2001 - May 31, 2002	 	$120,000.00 (gross); and
	June 1, 2002 - May 31, 2003	 	$130,000.00 (gross).

        Said salary shall be payable in equal installments in conformity with the Bank's normal payroll practice, and shall be paid less all applicable taxes,
withholdings, and deductions. 

        2.    Bonuses.    Executive may receive an annual bonus in an amount to be determined by the
Board of Directors in its sole discretion. 

        D.    EXECUTIVE BENEFITS

        1.    Vacation.    Executive shall be entitled to up to four (4) weeks of vacation each
year during the Term, which vacation shall be taken at such times as are agreed upon by Executive and the Board of Directors; provided, however, that during each year of the Term, Executive is
required to and shall take at least two (2) weeks of said vacation (the "Mandatory Vacation"), which shall be taken consecutively. Executive shall not be entitled to vacation pay in lieu of
vacation; provided, however, that any vacation days earned but not used in any year may be carried over to future years, subject to any cap or limitation on vacation benefit accrual that may be
contained in the Bank's Employee Policy Guide (which cap or limitation is hereby incorporated by reference). 

        2.    Automobile.    Commencing on the Effective Date and during the entire Term hereunder,
the Bank shall pay to Executive, as an automobile allowance, the sum of Four Hundred Dollars ($400) per month. 

        3.    Group Medical and Life Insurance Benefits.    The Bank, at its expense, shall provide
for Executive medical, dental, accident and health, and income continuation insurance benefits (including disability) equivalent to the normal and customary benefits available from time to time under
the California Banker's Association Group Insurance Program (or equivalent) for an employee of Executive's salary level. In addition, the Bank, at its expense, will provide Executive with permanent
life insurance benefits of Two Hundred Thousand Dollars ($200,000). Said coverage shall be in existence or shall take effect as of the Effective Date hereof and shall continue throughout the Term.
Executive shall be the individual owner of such life insurance policy with all associated benefits. The Bank's liability to Executive for any breach of this Subsection D.3 shall be limited to the
amount of premiums payable by the Bank to obtain the coverage contemplated herein. 

        4.    Stock Option.    In addition to those stock options that have already been granted to
the Executive prior to the commencement of this Agreement, during the term of this Agreement, the Bank may grant to Executive stock options to purchase the Bank's common stock in such amount as may be
determined in the sole discretion of the Board of Directors of the Bank and pursuant to such terms as are contained in the Stock Option Plan approved by the Bank's shareholders and as may be in effect
during the term of this Agreement. 

        5.    Club Membership.    During the Term of this Agreement, the Bank shall provide the
Executive with a membership to the San Luis Obispo Golf and Country Club ("SLOGCC") in San Luis Obispo, California, at no cost to the Executive. The Bank agrees to pay Executive's dues in SLOGCC, all
further assessments by SLOGCC, and all other expenses reasonably and necessarily 

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incurred by Executive in connection with the Executive's maintenance and use of the Membership for business-related purposes during the Term of this Agreement. 

        The
Parties acknowledge and agree that although the Membership shall be held in the Executive's name during the Term of this Agreement, the Membership shall remain an asset of the Bank
during the term of this Agreement, and the Executive may not sell, transfer, encumber or hypothecate in any manner the Membership without the Bank's prior written authorization. The Parties also agree
that upon the cessation of the Executive's employment with the Bank under this Agreement for any reason, including voluntary resignation or retirement, the Executive shall purchase the Membership from
the Bank. The purchase price to the Executive shall be $21,600.00, payable to the Bank in cash no later than ninety (90) days after the Executive's last day of active employment with the Bank.
The Executive hereby consents to the Bank's assignment of its rights hereunder in the event that the Bank is acquired by or is merged with another financial institution. 

        The
provisions of this Subsection D.5. shall be binding on and inure to the benefit of each Parties' successors and heirs, and shall survive the expiration or termination of this
Agreement. 

        E.    REIMBURSEMENT FOR BUSINESS EXPENSES

        Executive
shall be entitled to reimbursement by the Bank for any ordinary and necessary business expenses incurred by Executive in the performance of Executive's duties and in acting for
the Bank during the Term, which types of expenditures shall be determined by the Board of Directors, provided that: 

        1.    Each
such expenditure is of a nature qualifying it as a proper deduction on the federal and state income tax returns of the Bank as a business expense and not as
compensation to Executive; and 

        2.    Executive
furnishes to the Bank adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing
authorities for the substantiation of such expenditures as deductible business expenses of the Bank and not as compensation to Executive. 

        F.    TERMINATION

        1.    At-Will Employment.    Pursuant to the provisions of 12 U.S.C.
Section 24 (i.e., The National Bank Act) and notwithstanding any other provision to the contrary contained herein, it is agreed by the parties hereto that the Executive's employment hereunder
shall be at-will, and that the Bank may at any time elect to terminate this Agreement and Executive's employment by the Bank for any reason by action of its Board of Directors, which
action shall be deemed to have been taken upon the affirmative vote of at least a majority of the authorized number of Directors of the Bank. Any termination under this Subsection F. 1 shall be
effective immediately upon the Bank's giving of notice to Executive, and all liability or obligation by the Bank hereunder to Executive (except for severance benefits, as may be provided below) shall
thereupon cease. Such termination shall not prejudice any remedy which the Bank may have at law, in equity, or under this Agreement. 

        2.    Severance Upon Termination Without "Cause".    In the event that the Executive's
employment hereunder is terminated without "Cause" (as hereinafter defined below), the Bank shall provide Executive with severance benefits consisting of the following: (a) severance pay in a
sum equivalent to Executive's then existing base salary for a period of twelve (12) months next following Executive's termination (in lieu of any payments otherwise due for the balance of the
Term), which payment shall be payable to Executive in one lump sum payment on the effective date of termination of Executive's employment hereunder; and (b) continuation of insurance benefits
provided to Executive hereunder for a period not to exceed sixty (60) days after 

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termination. The parties agree that the provision of such severance benefits shall constitute full and complete performance by the Bank of its obligations hereunder. 

        For
purposes of this Subsection F.2., "Cause" shall be deemed to exist if: (a) Executive fails to perform or habitually neglects the duties which he is required to perform
hereunder, (b) Executive engages in illegal activity which materially adversely affects the Bank's reputation in the community or which evidences the lack of Executive's fitness or ability to
perform Executive's duties as determined by the Board of Directors in good faith, or (c) Executive commits any act which would cause termination of coverage under the Bank's Bankers' Blanket
Bond as to Executive (as distinguished from termination of coverage as to the Bank as a whole). 

        3.    Death or Disability.    In the event of Executive's death, or if Executive is found to
be physically or mentally disabled (as hereinafter defined) as determined by the Board of Directors in good faith, this
Agreement shall terminate without any further liability or obligation to Executive, including any obligation to provide severance benefits pursuant to Subsection F.2. above. 

        For
purposes of this Agreement only, "physically or mentally disabled" shall be defined as Executive being unable to fully perform under this Agreement for a continuous period of ninety
(90) days or a cumulative period of one hundred twenty (120) days in any one calendar year. If there should be a dispute between the Bank and Executive as to Executive's physical or
mental disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician or psychiatrist agreed upon by the parties or their representatives,
or if the parties cannot agree within ten (10) days after a request for designation of such party, then by a physician or psychiatrist designated by the Los Angeles County Medical Association.
The certification of such physician or psychiatrist as to the question in dispute shall be final and binding upon the parties hereto. 

        4.    Action by Supervisory Authority.    If the Bank is closed or taken over by the
Comptroller of the Currency or other supervisory authority, including the Federal Deposit Insurance Corporation, or if such supervisory authority should exercise its enforcement powers to remove
Executive from office or suggest such removal, the Bank may immediately terminate this Agreement without further liability or obligation to Executive, including any obligation to provide severance
benefits pursuant to Subsection F.2. above. 

        5.    Merger or Corporate Dissolution.    In the event of (a) a merger where the Bank
is not the surviving entity, (b) a consolidation, (c) a transfer of all or substantially all of the assets of the Bank, (d) any other corporate reorganization where there is a
change in ownership of at least forty-five percent (45%) except as may result from a transfer of shares to another corporation in exchange for at least eighty percent (80%) control of that
corporation, or (e) the dissolution of the Bank, this Agreement may be terminated without further liability or obligation to Executive (including any obligation to provide severance benefits
pursuant to Subsection F.2. above) by the Bank or the surviving bank, in the event of a merger, or the transferee of assets, in the event of a purchase or sale; provided, however, that if Executive's
employment is terminated as a result thereof, then the Bank, the surviving bank or the transferee of assets, as the case may be, shall pay to Executive a sum equivalent to Executive's then existing
base salary for a period of twelve (12) months next following Executive's termination (in lieu of any payments otherwise due for the balance of the Term). Such payment shall be payable to
Executive in one lump sum payment on the effective date of termination of Executive's employment hereunder. Such action shall not be construed as a breach of this Agreement, as the payment of such sum
shall constitute full and complete performance by the Bank (or any successor-in-interest) of its obligations hereunder. Notwithstanding any provision to the contrary in this
Subsection F.5, no severance benefits shall be payable to Executive hereunder if Executive's employment is terminated for any of the reasons delineated in Subparagraph F.2 hereof. 

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        6.    Effect of Termination.    In the event of the termination of this Agreement prior to the
completion of the Term specified herein, Executive shall be entitled to the salary earned by Executive prior to the date of termination as provided for in this Agreement, computed  pro rata up to and
including that date; but
Executive shall be entitled to no further compensation for services rendered after the date of termination, except as provided in Subsections F.2 and F.5 above in the event that if
Executive's employment is terminated pursuant to either Subsection F.2 or F.5 hereof. 

        G.    GENERAL PROVISIONS

        1.    Trade Secrets.    During the Term, Executive will have access to and become acquainted
with what Executive and the Bank acknowledge are trade secrets, to wit, knowledge or data concerning the Bank, including its operations and business, and the identity of customers of the Bank,
including knowledge of their financial condition, their financial needs, as well as their methods of doing business. Executive shall not disclose any of the aforesaid trade secrets, directly or
indirectly, or use them in any way, either during the Term or for a period of one (1) year after the termination of this Agreement, except as required in the course of Executive's employment
with the Bank. The provisions of this Subsection G.1. shall survive the expiration or termination of this Agreement. 

        2.    Covenant Not to Compete.    Executive hereby covenants and agrees that, for a period of
one (1) year after termination of this Agreement and for any period during which Executive receives any compensation from the Bank, Executive shall not engage in the business of banking
anywhere within the County of San Luis Obispo. The provisions of this Subsection G.2. shall survive the termination of this Agreement, but shall not survive the expiration of this Agreement pursuant
to Section 1 above. 

        3.    Indemnification.    To the maximum extent permitted by applicable law, the Articles of
Association, Bylaws and/or resolutions of the Bank in effect from time to time, the Bank shall indemnify Executive against liability or loss arising out of Executive's actual or asserted misfeasance
or non-feasance in the performance of Executive's duties or out of any actual or asserted wrongful act against, or by, the Bank including but not limited to judgments, fines, settlements
and expenses incurred in the defense of actions, proceedings and appeals therefrom. The provisions of this Subsection G.3 shall apply to the estate, executor, administrator, heirs, legatees or
devisees of Executive. 

        4.    Return of Documents.    Executive expressly agrees that all manuals, documents, files,
reports, studies, instruments or other materials used and/or developed by Executive during the Term are solely the property of the Bank, and that Executive has no right, title or interest therein.
Upon termination of this Agreement, Executive or Executive's representative shall promptly deliver possession of all of said property to the Bank in good condition. 

        5    Notices.    Any notice, request, demand or other communication required or permitted
hereunder shall be in writing and shall be deemed to be duly given upon personal delivery (professional courier acceptable); three (3) calendar days following deposit in the United States mail
by either certified or registered mail, with return receipt requested, postage prepaid; or upon receipt of written confirmation of transmission if delivered by facsimile, addressed to the party at the
address appearing at the
beginning of this Agreement. Either party may change its address by written notice in accordance with this Subsection G.5. 

        6.    Applicable Law.    This Agreement is to be governed by and construed in accordance with
the laws of the State of California. 

        7.    Captions and Section Headings.    Captions and section headings used herein are for
convenience only and are not a part of this Agreement and shall not be used in construing it. 

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        8.    Invalid Provisions.    Should any provision of this Agreement for any reason be declared
invalid, void, or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall
remain in full force and effect as if this Agreement had been executed with said provision eliminated. 

        9.    Entire Agreement.    This Agreement contains the entire agreement of the parties. It
supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of Executive by the Bank. Notwithstanding the foregoing, the Parties'
Employment Agreement dated May 13, 1997, shall remain in full force and effect until the Effective Date of this Agreement. Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or
promise not contained in this Agreement shall be valid or binding. This Agreement may not be modified or amended by oral agreement, but only by an agreement in writing signed by the Bank and
Executive. 

        10.    Receipt of Agreement.    Executive hereby acknowledges that he has read this Agreement
in its entirety and does hereby acknowledge receipt of a fully executed copy thereof. A fully executed copy shall be an original for all purposes, and is a duplicate original. 

        11.    Review by Counsel.    Executive represents and warrants to the Bank that he has had
this Agreement reviewed by independent legal counsel of his choice, or if he has not, that he has had the opportunity to do so, and hereby waives any claim, objection or defense on the grounds that
this Agreement has not been reviewed by legal counsel of his choice. 

[The remainder of this page has been intentionally left blank.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. 

	 	 	COAST NATIONAL BANK
	

 	
 	
BY:	

/s/  JOHN F. GUHRING      

	

 	
 	

BY:	

/s/  [ILLEGIBLE]      

	

/s/  THOMAS J. SHERMAN      
 Thomas J. Sherman
 ("Executive")	
 	

 	

 

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QuickLinks

EMPLOYMENT AGREEMENT

W I T N E S S E T HFORM OF

RESTRICTED STOCK AWARD AGREEMENT
  under the

VAIL BANKS, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN  

        THIS AGREEMENT, made and entered into as of the            day
of                        , 20    , by and between VAIL
BANKS, INC. ("the "Company") and                        ("Grantee"). 

WITNESSETH THAT:  

        WHEREAS, the Company maintains the Vail Banks, Inc. Amended and Restated Stock Incentive Plan (the "Plan"), and the Grantee has been selected by the
Committee to receive a Restricted Stock Award under the Plan; 

        NOW,
THEREFORE, IT IS AGREED, by and between the Company and the Grantee, as follows: 

1.    Award of Restricted Stock  

        1.1  The Company hereby grants to the Grantee an award
of                        shares of restricted stock ("Restricted Stock"),
subject to, and in accordance with, the restrictions, terms and conditions set forth in this Agreement. The grant date of this award of Restricted Stock
is                ,
20    ("Grant Date"). 

        1.2  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. 

2.    Restrictions  

        2.1  Subject to Sections 2.2, 2.3, and 2.4 below, if the Grantee remains employed by the Company, the Grantee shall
become vested in the Restricted Stock as follows: 10% of the Shares of Restricted Stock (rounded down to the next whole share) shall vest on each anniversary (each such date shall be a "Vesting Date")
of the Grant Date, such that on                        , 20    ("Final Vesting Date") all of the Shares of
Restricted Stock shall be fully vested. On each Vesting Date, Grantee shall own the Vested
Shares of Restricted Stock free and clear of all restrictions imposed by this Agreement (except those imposed by Section 3.4 below). For purposes of this Agreement, employment with any
Subsidiary of the Company, or service as a Director of the Company or any Subsidiary of the Company, shall be considered employment with the Company. 

        2.2  In the event, prior to the Final Vesting Date, (i) Grantee dies while actively employed by the Company,
(ii) Grantee has his employment terminated by reason of Disability, (iii) Grantee's employment is terminated by the Company other than for Cause (as defined in
Section 2(e) of the Plan),or (iv) Grantee terminates his employment for Good Reason (as defined in Section 2.5 below), the Restricted Stock shall become fully vested and
nonforfeitable as of the date of Grantee's death, Disability or termination of employment. The Company shall deliver certificate(s) for the Restricted Stock, free and clear of any restrictions imposed
by this Agreement (except for Section 3.4) to Grantee (or, in the event of death, his surviving spouse or, if none, to his estate) as soon as practical after his date of death or termination
for Disability, termination without Cause, or termination for Good Reason. If Grantee terminates his employment without Good Reason or if the Company terminates Grantee for Cause, the Restricted Stock
shall cease to vest further and Grantee shall only be entitled to the Restricted Stock that is vested as of his date of termination. 

        2.3  Notwithstanding the other provisions of this Agreement, in the event of a Change in Control prior to Grantee's Final
Vesting Date, the Restricted Stock shall become fully vested and nonforfeitable as of the date of the Change in Control. On the date of the Change in Control, the Company shall 

 

deliver to Grantee a certificate(s) for the Restricted Stock, free and clear of any restrictions imposed by this Agreement. 

        2.4  The Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date Grantee
becomes vested in the Restricted Stock. 

        2.5  For purposes of this Section 2, "Good Reason" shall mean 

          (i)  the
assignment to the Executive of any duties inconsistent with his positions, duties, responsibilities and status with the Company, its subsidiaries and affiliates
immediately prior to a Change in Control, or a change in his reporting responsibilities, titles or offices which were in effect immediately prior to a Change in Control, or any removal of him from, or
any failure to re-elect him to, any of such positions, except in connection with the termination of his employment by the Company for Cause or as a result of his death or Disability or
termination by him other than for Good Reason; 

        (ii)  a
reduction by the Company in the Executive's base salary as in effect on the date hereof or as the same may be increased from time to time, or failure to give him
annual salary increases consistent with performance review ratings as compared with other employees of the same or similar rank; 

        (iii)  a
failure by the Company to continue giving the Executive bonuses comparable to the amount of bonuses given to him prior to the Change in Control; 

        (iv)  the
Company's requiring that the Executive be based anywhere other than the Company's principal executive offices in the Vail, Colorado area, except for required travel
on Company business to an extent substantially consistent with his present business travel obligations, or in the event that the Executive consents to any such relocations, the failure by the Company
to pay (or reimburse him for) all reasonable moving expenses incurred by him; or 

        (v)  the
failure by the Company to continue in full force and effect any benefit, retirement, savings or compensation plan or any employee life, accident, disability,
medical, dental, vision or other employee welfare benefit plan in which the Executive is participating at the time of a Change in Control of the Company, the taking of any action by the Company which
would adversely affect his participation in or materially reduce his benefits under any of such plans or deprive him of any material fringe benefit or perquisite (including but not limited to the
provision of an automobile and the payment of club dues) enjoyed by him at the time of the Change in Control, or the failure by the Company to provide him with the number of paid vacation days
to which he is then entitled in accordance with the normal vacation policy in effect on the date hereof. 

3.    Stock; Dividends; Voting  

        3.1  Upon delivery to the Company of the executed Stock Powers attached hereto, the Company shall register on the Company
books stock certificate(s) evidencing the shares of Restricted Stock in the name of the Grantee. Physical possession or custody of such stock certificate(s) shall be retained by the Company until such
time as the shares of Restricted Stock are fully vested in accordance with Section 2. While in its possession, the Company reserves the right to place a legend on the stock certificate(s)
restricting the transferability of such certificates and referring to the terms and conditions (including forfeiture) of this Agreement and the Plan. Upon forfeiture of all or a portion of the shares
of Restricted Stock, the stock certificate(s) held on behalf of the Grantee shall be transferred to the Company pursuant to the executed Stock Power described above. 

2

 

        3.2  During the period the Restricted Stock is not vested, the Grantee shall be entitled to receive dividends and/or other
distributions declared on such Restricted Stock and Grantee shall be entitled to vote such Restricted Stock. 

        3.3  In the event of a change in capitalization, the number and class of shares of Restricted Stock or other securities that
Grantee shall be entitled to, and shall hold, pursuant to this Agreement shall be appropriately adjusted or changed to reflect the change in capitalization, provided that any such additional shares of
Restricted Stock or additional or different shares or securities shall remain subject to the restrictions in this Agreement. If additional shares of common stock of the Company or another corporation,
or other consideration is issued in connection with the Restricted Stock at a time at which the restrictions specified in this Agreement have not lapsed, the Grantee shall execute and deliver to the
Committee additional Stock Power(s) of Attorney with respect to any such shares of stock, deliver to the Committee the stock certificates representing such shares, and forward to the Committee any
such other consideration. Such stock certificates and/or other consideration shall be retained by the Company and shall be credited to the account of the Grantee and shall be distributed to the
Grantee, subject to forfeiture and the other terms and conditions of this Agreement and the Plan, at the same time as the shares of Restricted Stock are to be distributed free of all restrictions. 

        3.4  The Grantee represents and warrants that he is acquiring the Restricted Stock for investment purposes only, and not with
a view to distribution thereof. The Grantee is aware that the Restricted Stock may not be registered under the federal or any state securities laws and that, in addition to the other restrictions on
the Restricted Stock, the shares will not be able to be transferred unless an exemption from registration is available. By making this award of Restricted Stock, the Company is not undertaking any
obligation to register the Restricted Stock under any federal or state securities laws. 

4.    No Right to Continued Employment  

        Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Grantee any right with respect to continuance of employment by the
Company or a subsidiary, nor shall this
Agreement or the Plan interfere in any way with the right of the Company or a Subsidiary to terminate the Grantee's employment at any time, subject to Grantee's rights under this Agreement. 

5.    Taxes and Withholding  

        The Grantee shall be responsible for all federal, state and local income taxes payable with respect to this award of Restricted Stock and any employment taxes
payable by Grantee as an employee. The Grantee shall have the right to make such elections under the Internal Revenue Code of 1986, as amended, as are available in connection with this award of
Restricted Stock, including a Section 83(b) election. The Company and Grantee agree to report the value of the Restricted Stock in a consistent manner for federal income tax purposes.
The Company shall have the right to retain and withhold from any payment of Restricted Stock the amount of taxes required by any government to be withheld or otherwise deducted and paid with respect
to such payment. At its discretion, the Company may require Grantee to reimburse the Company for any such taxes required to be withheld and may withhold any distribution in whole or in part until the
Company is so reimbursed. In lieu thereof, the Company shall have the right to withhold from any other cash amounts due to Grantee an amount equal to such taxes required to be withheld or withhold and
cancel (in whole or in part) a number of shares of Restricted Stock having a market value not less than the amount of such taxes. 

6.    Grantee Bound By The Plan  

        The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. 

3

 

7.    Modification of Agreement  

        This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the
parties hereto. 

8.    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. 

9.    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. 

10.  Successors in Interest  

        This Agreement shall inure to the benefit of, and be binding upon, 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 Grantee's
legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon the Grantee's heirs, executors,
administrators and successors. 

11.  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 Grantee and the Company for all purposes. 

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

	 	 	VAIL BANKS, INC.
	

 	
 	

By:	
 	

	

 	
 	
GRANTEE:
	

 	
 	

4

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