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EXHIBIT 10.3
CHANGE IN CONTROL
SEVERANCE PAYMENT AGREEMENT
This Agreement, made and entered into as of the 19th day of November,
1999, by and between VAIL BANKS, INC., an Colorado corporation (the "Company"),
and X.X. XXXXXXX (hereinafter called the "Executive"),
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Company and certain
of its subsidiaries in various capacities and is rendering valuable services to
the Company and such subsidiaries; and
WHEREAS, the Company desires to retain the Executive and is aware that
the possibility of a Change in Control of the Company (as defined in Section 3)
might impede the accomplishment of this end; and
WHEREAS, the Company wishes to induce the Executive to remain in his
present employment and believes that the execution of this Agreement will
further its aim in retaining the Executive during an actual or attempted Change
in Control and will tend to assure fair treatment of executives in the event of
a Change in Control;
NOW, THEREFORE, for and in consideration of the premises and of the
Executive's continuation in his present employment with the Company, the parties
hereto agree as follows:
1. Duties and Status of Executive.
The Executive shall continue to perform such duties and
responsibilities as shall be assigned to him by the Board of Directors of the
Company. The Executive shall devote his working time and attention to the
discharge of his duties with the Company and its subsidiaries. In addition to
the compensation and other benefits provided the Executive by the Company, the
Executive shall have the additional benefits provided by this Agreement.
2. Term.
(a) Initial Term. The term of this Agreement shall
initially be a fixed period of two years that expires on the second
anniversary of the date of this Agreement and may be extended as
provided in subsection (b) below.
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(b) Extension. The term of this Agreement shall be
extended automatically on the first anniversary and on each subsequent
anniversary of the date of this Agreement (each such anniversary being
referred to as an "Extension Date") for an additional one year period
so that the Agreement then expires on the second anniversary of the
applicable Extension Date; provided that
(i) the then current term of this Agreement will
not be extended on any Extension Date if,
(A) not later than 90 days before such
Extension Date the Company gives the Executive
written notice that it does not wish to extend the
term, or
(B) before such Extension Date the
Company terminates the employment of the Executive
for Cause (as defined in Section 4(b), and
(ii) whether or not the Company has given notice
to the Executive pursuant to clause (i) (A) above that it does
not wish to extend the term of this Agreement, if a Change in
Control occurs during the initial term of this Agreement, or
any extension thereof, the term of this Agreement shall not
expire sooner than the third anniversary of the date of such
Change in Control.
3. Change in Control. For the purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred in the event of:
(a) an acquisition by any Person of Beneficial Ownership
of the Shares of the Company then outstanding (the "Company Common
Stock Outstanding") or the voting securities of the Company then
outstanding entitled to vote generally in the election of directors
(the "Company Voting Securities Outstanding"), if such acquisition of
Beneficial Ownership results in the Person beneficially owning (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
twenty-five percent (25%) or more of the Company Common Stock
Outstanding or twenty-five percent (25%) or more of the combined voting
power of the Company Voting Securities Outstanding; provided, that
immediately prior to such acquisition such Person was not a direct or
indirect Beneficial Owner of twenty-five percent (25%) or more of the
Company Common Stock Outstanding or twenty-five percent (25%) or more
of the combined voting power of Company Voting Securities Outstanding,
as the case may be; or
(b) the approval by the shareholders of the Company of a
reorganization, merger, consolidation, complete liquidation or
dissolution of the Company, the sale or disposition of all or
substantially all of the assets of the Company or similar corporate
transaction (in each case referred to in this Section 3 as a "Corporate
Transaction")
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or, if consummation of such Corporate Transaction is subject, at the
time of such approval by shareholders, to the consent of any government
or governmental agency, the obtaining of such consent (either
explicitly or implicitly); or
(c) a change in the composition of the Board such that
the individuals who, as of the date of this Agreement, constitute the
Board (such Board shall be hereinafter referred to as the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; provided, however, for purposes of this Section 3 that any
individual who becomes a member of the Board subsequent to the date of
this Agreement whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this
proviso) shall be considered as though such individual were a member of
the Incumbent Board; but, provided, further, that any such individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, including
any successor to such Rule), or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the
Board, shall not be so considered as a member of the Incumbent Board.
(d) Notwithstanding the provisions set forth in
subsections (a) and (b), the following shall not constitute a Change in
Control for purposes of this Agreement: (1) any acquisition of Shares
by, or consummation of a Corporate Transaction with, any Subsidiary or
any employee benefit plan (or related trust) sponsored or maintained by
the Company or an affiliate; or (2) any acquisition of Shares, or
consummation of a Corporate Transaction, following which more than
fifty percent (50%) of, respectively, the shares then outstanding of
common stock of the corporation resulting from such acquisition or
Corporate Transaction and the combined voting power of the voting
securities then outstanding of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were Beneficial Owners, respectively, of the Company
Common Stock Outstanding and Company Voting Securities Outstanding
immediately prior to such acquisition or Corporate Transaction in
substantially the same proportions as their ownership, immediately
prior to such acquisition or Corporate Transaction, of the Company
Common Stock Outstanding and Company Voting Securities Outstanding, as
the case may be.
4. Change in Control Payments And Severance Payments.
(a) If a Change in Control of the Company occurs, the
Company shall pay or provide to Executive (subject to withholding of
applicable taxes) within ten (10) days after the date of the Change in
Control:
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(i) a lump sum amount equal to the sum of (A)
200% of his full base annual salary at the rate in effect on
the date prior to the date of the Change in Control, plus (B)
200% of the incentive payment Executive would have received
for the year during which the Change in Control occurs under
the Company's annual incentive plan, assuming the target level
of performance had been met for such year;
(ii) an amount equal to the product of (aa) the
annual incentive bonus that would be paid or payable to the
Executive for the year of termination under the Company's
annual incentive plan, assuming the target level of
performance had been met for such year, multiplied by (bb) a
fraction of which the numerator is the number of weeks that
have elapsed in the then current year through the date of the
Change in Control and the denominator is 52 (and Executive's
participation in such annual incentive plan for the year of
the Change in Control shall be terminated);
(iii) the amount of any annual or long-term bonus
with respect to any year that has then ended which has or
would have been earned and been paid to the Executive under
any annual or long-term bonus plan then in effect but which
has not yet been paid to him;
(iv) an additional contribution to any deferred
compensation or savings plan (whether qualified or
non-qualified) in which the Executive is participating, the
maximum amount which the Company is permitted to contribute,
based on the payments made pursuant to paragraphs (i), (ii)
and (iii) above, provided that if the contributions on the
Executive's behalf to the plans covered by this paragraph (iv)
are not permitted under the terms of one or more of such
plans, the Company shall pay Executive in a lump sum, within
10 days, the present value of the benefits that cannot be
provided pursuant to such plan; and
(v) accelerate to the date of the Change in
Control the vesting, exercisability, transferability and
payment date of all outstanding stock options, restricted
stock and any other share awards held by Executive.
(b) If a Change in Control of the Company occurs and,
subsequently on or before the third anniversary of such Change in
Control, the Executive's employment with the Company is terminated (i)
by the Company for any reason whatsoever other than for Cause (as
defined in subsection (c) below) or the Executive's death or Disability
(as defined in subsection (d) below), or (ii) by the Executive for Good
Reason (as defined in subsection (e) below), the Company shall:
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(A) pay to the Executive within 30 days after
the date of termination, an amount equal to the sum of:
(I) his full base salary through the
date of termination at the rate in effect at the time
notice of termination (as provided for in Section 5
below) is given, plus
(II) an amount equal to the product of
(aa) the number of unused vacation days accrued by
the Executive through the date of termination
multiplied by (bb) a fraction the numerator of which
is the Executive's base salary and the denominator of
which is 250;
(B) maintain in full force and effect for the
benefit of the Executive and his dependents for a period of
two years from the date of termination (or, if shorter, the
period until Executive obtains other employment and becomes
actually covered by a plan providing the specific benefit
hereinafter described) all employee life, medical, dental, and
vision coverages in which the Executive is participating at
the time of the Executive's termination; provided, that if the
Executive's continued participation is not permitted under the
general terms of such plans, the Company shall arrange to
provide him with substantially similar benefits and the
Company shall pay the cost of such benefits; provided further,
Executive will be required to pay the "employee portion" of
any costs of such coverages in the same amount as required for
active executive employees of the Company;
(c) For the purposes of this Section 4, "Cause" means:
(i) the conviction of the Executive of, or a plea of
guilty or nolo contendere by the Executive to, any felony
involving conduct on the part of the Executive that renders
him unfit for the performance of his duties to the Company, or
its subsidiaries and affiliates, or
(ii) any willful misconduct on the part of the
Executive 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 subsection (c), no act, or failure to
act, on the Executive'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 Executive shall not be
deemed to have been terminated for Cause unless and until there shall
have
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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 the 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 (i) or (ii) above
and specifying the particulars thereof in detail.
(d) For the purpose of this Section 4, "Disability" shall
be deemed to exist if, as a result of the Executive's incapacity due to
physical or mental illness, he shall have been absent from his duties
with the Company on a full-time basis for 150 consecutive calendar days
and within 30 days after he has received notice of termination pursuant
to Section 5 he has not returned to the performance of his duties on a
full-time basis.
(e) For the purposes of this Section 4, "Good Reason"
shall be deemed to exist under any of the following circumstances, but
only to the extent that they occur within the thirty-six month period
immediately after a Change in Control:
(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.
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(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.
(vi) Any breach by the Company of its obligations
under this Agreement or any purported termination by the
Company of his employment which is not effected pursuant to a
notice of termination satisfying the requirements of Section 5
(and if applicable Section 4(c)); and for purposes of this
Agreement, no such purported termination shall be effective.
(f) The Company agrees that if the Executive's employment
is terminated and he is entitled to benefits under Section 4(a) and/or
Section 4(b), he shall not be required to mitigate damages by seeking
other employment, nor shall any amount he earns after his termination
of employment reduce the amount payable by the Company under this
Agreement (except as provided in paragraph (B) above relating to
benefit changes upon subsequent employment).
(g)
(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 Executive, 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
Executive 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 Executive of any Excise
Tax and all federal, state and other taxes (including any
interest or
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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.
(ii) An initial determination as to whether a
Gross-Up Payment is required pursuant to this subsection (g)
and the amount of such Gross-Up Payment shall be made by an
accounting firm selected by the Company and reasonably
acceptable to the Executive 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 Executive as promptly as practicable after such
calculation is requested by the Company or by the Executive,
and if the Accounting Firm determines that no Excise Tax is
payable by the Executive with respect to a Payment or
Payments, it shall furnish the Executive with an opinion
reasonably acceptable to the Executive 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 Executive, the Executive shall have the right to
dispute the Determination (the "Dispute"). The Gross-Up
Payment, if any, as determined pursuant to this Section 4
shall be paid by the Company to the Executive 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 Executive 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 Executive subject to the
application of subsection (iii) 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 Executive from any governmental
taxing authority that the tax liability of the Executive
(whether in respect of the then current taxable year of the
Executive or in respect of any prior taxable year of the
Executive) 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
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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 Executive of the Dispute. If any
Underpayment occurs, the Executive shall promptly notify the
Company and the Company shall pay to the Executive 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 Executive had
previously received a Gross-Up Payment. A Final Determination
shall be deemed to have occurred when the Executive 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 Executive 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 Executive'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 Executive and the Executive 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 Executive 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
(g).
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(v) The Executive 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
Executive, 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 (ii) hereof.
(vi) The fees and expenses of the Accounting Firm
for its services in connection with the determinations and
calculations contemplated by subsection (ii) shall be paid by
the Company.
5. Notice of Termination. Any termination by the Company or by
the Executive of the Executive's employment by the Company shall he communicated
by a written notice of termination to the other party, and shall specify the
provision of this Agreement relied upon and shall set forth in reasonable detail
the circumstances claimed to provide a basis for termination. The date of
termination shall be the date on which the notice of termination is delivered if
by the Executive or 30 days after the date of the notice of termination if given
by the Company.
6. Litigation Expenses; Indemnification and Insurance.
(a) The Company shall pay all reasonable legal fees and
expenses incurred by the Executive as a result of his seeking to obtain
or enforce any right or benefit provided by this Agreement, promptly
and from time to time at his request as such fees and expenses are
incurred, regardless of whether such rights are pursued through
settlement discussions, mediation, arbitration, litigation or
otherwise.
(b) Unless the Executive is terminated for Cause, at all
times after a Change of Control the Company shall continue to provide
for Executive the indemnification provisions contained in the Company's
by-laws and shall continue to maintain for the benefit of the Executive
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 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.
Unless the Executive is terminated for Cause, neither the insurance nor
the Executive's right to indemnification thereunder may be canceled by
the Company without his permission for a period of five years following
the date of termination under this Agreement; provided, however, that
the Company may obtain a substitute insurance policy as long as the
rights of indemnity to the Executive are at least equivalent to the
most favorable rights provided under the policies in effect immediately
prior to the date of a Change of Control.
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7. Assignment; Successors in Interest.
(a) General. Except with the prior written consent of the
Executive, 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 a 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 Executive 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 Executive 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 Executive 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.
8. 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 Agreement shall be invalid,
illegal or unenforceable in any respect
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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 and 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 Executive has executed this
Agreement as of the date and year first written above.
VAIL BANKS, INC.
By: /s/ Xxxx X. Xxxxxx
------------------------
EXECUTIVE
/s/ X.X. Xxxxxxx
-----------------------------
Name: X. X. XXXXXXX
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