<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(6)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
VAIL BANKS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[Vail Banks, Inc. LOGO]
108 SOUTH FRONTAGE ROAD WEST, NO. 101
VAIL, CO 81657
970-476-2002
970-476-0200/FACSIMILE
April 14, 2000
Dear Fellow Shareholders:
It is my pleasure to invite you to attend the 2000 Annual Meeting of
Shareholders of Vail Banks, Inc. which will be held Tuesday, May 16, 2000 at
10:00 a.m. at the Sonnenalp Resort of Vail, 82 East Meadow Drive, Vail,
Colorado. The accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement describe the items of business that will be discussed during the
meeting. A copy of Vail Banks' Form 10-KSB, which contains audited financial
statements and certain other information about the Vail Banks' business, is also
enclosed.
TO BE SURE THAT YOUR VOTE IS COUNTED, WE URGE YOU TO CAREFULLY REVIEW THE
PROXY STATEMENT AND VOTE YOUR CHOICES ON THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE. If you wish to attend the meeting, any ballot that you submit at the
meeting will override your proxy.
On behalf of the management, associates and directors of Vail Banks, Inc.,
I want to thank you for your continued support.
Sincerely,
/s/ LISA M. DILLON
Lisa M. Dillon
President and Chief Executive Officer
<PAGE> 3
VAIL BANKS, INC.
108 SOUTH FRONTAGE ROAD WEST
VAIL, COLORADO 81657
------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------------------------------------------------------------
TO BE HELD ON MAY 16, 2000
The annual meeting of shareholders of Vail Banks, Inc. ("Vail Banks") will
be held on Tuesday, May 16, 2000 at 10:00 a.m. at the Sonnenalp Resort of Vail,
82 East Meadow Drive, Vail, Colorado, for the purposes of considering and voting
upon:
1. The election of four directors whose terms will expire in 2003; and
2. Such other matters as may properly come before the meeting or any
adjournment or postponement thereof.
Only shareholders of record at the close of business on March 31, 2000 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
A Proxy Statement and a Proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date, and return the Proxy promptly in the
enclosed business reply envelope. If you attend the meeting you may, if you
wish, withdraw your Proxy and vote in person.
By Order of the Board of Directors,
/s/ LISA M. DILLON
Lisa M. Dillon
President and Chief Executive
Officer
April 14, 2000
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN,
DATE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED BUSINESS
REPLY ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT
THE ANNUAL MEETING, YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
<PAGE> 4
VAIL BANKS, INC.
108 SOUTH FRONTAGE ROAD WEST
VAIL, COLORADO 81657
------------------------------
PROXY STATEMENT
------------------------------
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Vail Banks, Inc. ("Vail Banks") for use at
the Annual Meeting of Shareholders ("Annual Meeting") of Vail Banks to be held
on May 16, 2000, and any postponement, adjournments, or adjournment thereof, for
the purposes set forth in the accompanying notice of the meeting. The expenses
of this solicitation, including the cost of preparing and mailing this Proxy
Statement, will be paid by Vail Banks. Copies of solicitation materials may be
furnished to banks, brokerage houses and other custodians, nominees and
fiduciaries for forwarding to beneficial owners of shares of Vail Banks' Common
Stock, and normal handling charges may be paid for such forwarding services. In
addition to solicitations by mail, directors and regular employees of Vail Banks
may solicit Proxies in person or by telephone. It is anticipated that this Proxy
Statement and the accompanying Proxy will first be mailed to shareholders on
April 17, 2000.
The record of shareholders entitled to vote at the Annual Meeting was taken
as of the close of business on March 31, 2000. On that date, Vail Banks had
outstanding and entitled to vote 6,081,180 shares of common stock, par value
$1.00 per share (the "Common Stock"). Holders of Common Stock are entitled to
one vote per share on all matters voted on by shareholders, including elections
of directors.
Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his or her election
to vote in person, without compliance with any other formalities. In addition,
any Proxy given pursuant to this solicitation may be revoked prior to the
meeting by delivering an instrument revoking it or a duly executed Proxy bearing
a later date to the Secretary of Vail Banks. If the Proxy is properly completed
and returned by the shareholder and is not revoked, it will be voted at the
meeting in the manner specified thereon. If the Proxy is returned but no choice
is specified thereon, it will be voted for all the persons named below under the
caption "Information About Nominees For Director and Continuing Director."
A copy of the Vail Banks' 1999 Annual Report to shareholders (including the
Vail Banks' Annual Report on Form 10-KSB) is being furnished herewith to each
shareholder of record as of the close of business on March 31, 2000. Additional
copies of the 1999 Annual Report to shareholders will be provided free of charge
upon written request to:
LISA M. DILLON
VAIL BANKS, INC.
108 SOUTH FRONTAGE ROAD WEST
VAIL, COLORADO 81657
If the person requesting the Annual Report was not a shareholder of record
on March 31, 2000, the record date, the request must include a representation
that the person was a beneficial owner of Common Stock on that date. Copies of
any exhibits to Vail Banks' Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1999 will also be furnished on request and upon payment of
Vail Banks' expenses in furnishing the exhibits.
1
<PAGE> 5
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of March 8, 2000 by (1) each person known to
Vail Banks to be the beneficial owner of more than 5% of the outstanding shares
of Common Stock; (2) each director of Vail Banks; (3) each Named Executive
Officer; and (4) all directors and executive officers of Vail Banks as a group.
Unless otherwise indicated, each of the shareholders listed below has sole
voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-------------------
BENEFICIAL OWNER NUMBER PERCENT
- ---------------- --------- -------
<S> <C> <C>
E.B. Chester, Jr.(2)(3)..................................... 1,273,466 20.5%
Kay H. Chester(3)(4)........................................ 1,213,888 19.5%
Byron A. Rose(5)............................................ 269,701 4.3%
Donald L. Vanderhoof(6)..................................... 186,985 3.0%
James M. Griffin(7)......................................... 129,447 2.1%
Lisa M. Dillon(8)........................................... 143,034 2.3%
Martin T. Hart(9)........................................... 82,465 1.3%
Garner F. Hill, II(10)...................................... 54,875 *
Kent Myers(11).............................................. 18,595 *
S. David Gorsuch(12)........................................ 14,607 *
James G. Flaum(13).......................................... 12,401 *
Robert L. Knous, Jr.(14).................................... 11,836 *
E. William Wilto(15)........................................ 4,807 *
Dennis R. Devor(16)......................................... 1,375 *
All directors and executive officers as a group (14
persons).................................................. 2,206,469 35%
</TABLE>
- ---------------
* Denotes less than 1%
(1) The percentages shown are based on 6,219,620 shares of Common Stock
outstanding on March 8, 2000 which includes, as to each person and group
listed, the number of shares of Common Stock deemed owned by such holder
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), assuming the exercise of options held by such
holder that are exercisable within 60 days of March 1, 2000.
(2) Includes (i) 431,627 shares owned by Mr. Chester's wife, Kay H. Chester, as
to which he disclaims beneficial ownership, (ii) currently exercisable
options for 62,453 shares, and (iii) 18,286 shares of restricted stock
which have not vested, but which Mr. Chester holds the power to vote.
(3) Mr. and Mrs. Chester's address is care of Vail Banks, Inc., 108 South
Frontage Road West, Suite 101, Vail, Colorado 81657.
(4) Includes (i) 761,100 shares beneficially owned by Mrs. Chester's husband,
E.B. Chester, Jr. and 18,286 shares of restricted stock which have not
vested, but which Mr. Chester holds the power to vote, as to which she
disclaims beneficial ownership and (ii) currently exercisable options for
2,875 shares.
(5) Includes currently exercisable options for 2,875 shares.
(6) Includes (i) currently exercisable options for 375 shares and (ii) 25,570
shares owned by Mr. Vanderhoof's wife, Eddie Vanderhoof, as to which he
disclaims beneficial ownership.
(7) Includes currently exercisable options for 2,875 shares.
(8) Includes (i) currently exercisable options for 49,362 shares, and (ii)
10,476 shares of restricted stock which have not vested, but which Ms.
Dillon holds the power to vote.
(9) Includes currently exercisable options for 2,875 shares.
(10) Includes currently exercisable options for 375 shares.
(11) Includes currently exercisable options for 2,875 shares and 1,500 shares
held by Mr. Myers as custodian for his daughter, Allison Myers, and 1,500
shares held by Mr. Myers as custodian for his son, Brad Myers.
2
<PAGE> 6
(12) Includes currently exercisable options for 2,875 shares.
(13) Includes currently exercisable options for 2,875 shares and 4,260 shares
owned jointly with Mr. Flaum's wife, Ronna J. Flaum.
(14) Includes currently exercisable options for 2,875 shares.
(15) Includes currently exercisable options for 2,875 shares.
(16) Includes currently exercisable options for 375 shares.
NOMINATION AND ELECTION OF DIRECTORS
The Amended and Restated Articles of Incorporation of Vail Banks provide
that the Board of Directors shall consist of not less than ten but no more than
eighteen directors. Currently, there are 14 directors, 10 of whom are
independent directors. Upon the initial public offering, the Board of Directors
was divided into three classes of directors serving staggered three-year terms:
Four directors are to be elected at the annual meeting for a three-year term
expiring at the annual meeting in 2003 and until his or her successor is elected
and qualified. The Board has nominated Dennis R. Devor, Lisa M. Dillon, Kent
Myers, and E. William Wilto, constituting Class 1, for re-election to a
three-year term. After the re-election at the meeting, the Vail Banks will have
14 directors, including the 10 directors whose present terms currently extend
beyond the meeting. Information on the nominees and the continuing directors is
set forth below.
Each Proxy executed and returned by a shareholder will be voted as
specified thereon by the shareholder. If no specification is made, the Proxy
will be voted for the re-election of the nominees. In the event that any nominee
withdraws or for any reason is not able to serve as a director, the Proxy will
be voted for such other person as may be designated by the Board of Directors as
a substitute nominee, but in no event will the Proxy be voted for more than four
nominees. Management of Vail Banks has no reason to believe that the nominees
will not serve if elected.
Directors are elected by a plurality of the votes cast by the holders of
the shares entitled to vote in an election at a meeting at which a quorum is
present. A majority of the votes entitled to be cast on a matter by a class of
stock which votes as a separate class "a voting group" constitutes a quorum. An
abstention and a broker non-vote would be included in determining whether a
quorum is present at a meeting, but would not have an effect on the outcome of a
vote.
3
<PAGE> 7
INFORMATION ABOUT NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS
The following information as of February 28, 2000 has been furnished by the
nominees for director and the continuing directors. Except as otherwise
indicated, the nominees and the continuing directors have been or were engaged
in their present or last principal employment, in the same or a similar
position, for more than five years.
<TABLE>
<CAPTION>
NAME (AGE) INFORMATION ABOUT THE NOMINEE AND THE CONTINUING DIRECTORS
- ---------- ----------------------------------------------------------
<S> <C>
Nominees for Directors Whose Terms Expire in 2003
Dennis R. Devor (49)........... Mr. Devor became a director in February 1999, following the
merger with Telluride Bancorp, Ltd. ("Telluride"). Mr. Devor
is an attorney in Montrose, Colorado and has previously
served on other bank boards.
Lisa M. Dillon (46)............ Ms. Dillon has served as the President and Chief Executive
Officer and director of Vail Banks since 1993. Ms. Dillon,
who started her career with WestStar Bank ("WestStar") in
1979, served as President of WestStar from 1989 to 1999, and
has served as Chief Executive Officer and a director of
WestStar since 1989.
Kent Myers (50)................ Mr. Myers has been a director of Vail Banks and WestStar
since 1997. Mr. Myers is Managing Partner of The Klein Group
LLC, a local mortgage bank. He previously served as Senior
Vice President and Chief Operating Officer of Vail Resorts,
a resort management company, where he worked from 1988 to
1997.
E. William Wilto (53).......... Mr. Wilto has been a director of Vail Banks since 1993 and a
director of WestStar since 1985. He is a Realtor and has
owned RE/MAX Vail, Inc., a real estate firm, since 1991.
Directors Whose Term Will Expire in 2002
Kay H. Chester (53)............ Mrs. Chester has been a director of Vail Banks since 1993
and a director of WestStar since 1992. She has been active
in investing since 1989.
James G. Flaum (55)............ Mr. Flaum has been a director of Vail Banks and WestStar
since 1996. Mr. Flaum has been the President of Slifer,
Smith & Frampton/Vail Associates Real Estate, a real estate
firm, since 1997. He started his career with Slifer, Smith &
Frampton/Vail Associates Real Estate in 1987.
Robert L. Knous, Jr. (52)...... Mr. Knous has been a director of Vail Banks and WestStar
since 1997. He is a partner of East West Partners, a real
estate development company, where he has worked since 1993.
Byron A. Rose (58)............. Mr. Rose has been a director of Vail Banks since 1993 and a
director of WestStar since 1989. Mr. Rose, who retired in
1987, served as a Managing Director of Morgan Stanley & Co.
from 1978 to 1987.
Donald L. Vanderhoof (68)...... Mr. Vanderhoof has served as a director of Vail Banks since
August 1998 and an Executive Vice President of WestStar
since August 1998. He was formerly the Chairman of Glenwood
Independent Bank, where he had been employed since 1956.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME (AGE) INFORMATION ABOUT THE NOMINEE AND THE CONTINUING DIRECTORS
- ---------- ----------------------------------------------------------
<S> <C>
Directors Whose Terms Expire in 2001
E.B. Chester, Jr. (57)......... Mr. Chester, who formed Vail Banks through a series of
acquisitions, has served as Chairman of the Board of
Directors of Vail Banks since 1993 and the Chairman of the
Board of Directors of WestStar since 1989. Mr. Chester is
also currently Manager of King Creek Ranch LLC, a ranching
business. From 1986 to 1997, Mr. Chester served as the Chief
Executive Officer of First Carolina Cable TV, LP, a cable
television company, and from 1987 to 1997 served as the
Chief Executive Officer of the corporate general partner of
Outdoor East, LP, an outdoor advertising firm.
S. David Gorsuch (61).......... Mr. Gorsuch has been a director of Vail Banks since 1993 and
has been a director of WestStar since 1977. Mr. Gorsuch is
the President of Gorsuch Ltd., a retail clothing and ski
equipment business.
James M. Griffin (53).......... Mr. Griffin has been a director of Vail Banks since 1993.
Mr. Griffin was employed by the Estee Lauder Companies
beginning in 1979. Before leaving the company in 1996, he
served as Executive Vice President and Chief Operating
Officer of Lauder Investments Inc., an investment company
affiliated with the Estee Lauder Companies. Mr. Griffin also
served as Senior Vice President and Chief Operating Officer
of First Spring Corporation during 1996. Since 1996 he has
been an independent investor.
Martin T. Hart (64)............ Mr. Hart has been a director of Vail Banks since 1997. Since
1969, Mr. Hart has been an independent investor. Mr. Hart is
also a director of T. Netix, PJ America, MassMutual
Corporate Investors, MassMutual Participation Investors,
Schuler Homes, Inc., and Ardent Software.
Garner F. Hill, II (62)........ Mr. Hill became a director of Vail Banks in January 1999,
following the merger with Telluride. Mr. Hill is currently a
self-employed investor and the Vice President of Ferris
Corporation, a company involved in real estate. Mr. Hill
served as the Chairman of the Board of Telluride and the
Bank of Telluride from 1988 through 1998 and served as the
Chairman of the Board of Western Colorado Bank from 1991
through 1998.
</TABLE>
Mr. and Mrs. Chester are husband and wife.
5
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- --------------------------------------
SECURITIES
SALARY AND ALL OTHER RESTRICTED UNDERLYING
NAME AND DIRECTORS ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR FEES BONUS COMPENSATION AWARDS(3) SAR COMPENSATION
- ------------------ ---- ---------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
E.B. Chester, Jr.,... 1999 $208,400 0 * 18,256 23,810 $3,472(4)
Chairman 1998 150,700 0 * 0 113,000 2,876(5)
1997 123,700 $30,000(1) $10,770(2) 0 N/A 2,972
Lisa M. Dillon,...... 1999 $158,400 0 * 10,476 23,810 $2,898(4)
President and Chief 1998 140,900 0 * 0 87,000 2,740(5)
Executive Officer 1997 121,700 $30,000(1) $10,770(2) 0 N/A 2,078
</TABLE>
- ---------------
* Does not meet the Securities and Exchange Commission's threshold for
disclosure.
(1) Reflects fair market value at time of award of stock awarded as a bonus.
(2) Reflects cash paid for the payment of taxes.
(3) Vest at 10% per year for ten years.
(4) Reflects 401(k) matching contributions ($2,500 for Mr. Chester and $2,250
for Ms. Dillon) and term life insurance premiums ($972 for Mr. Chester and
$648 for Ms. Dillon).
(5) Reflects 401(k) matching contributions ($1,955 for Mr. Chester and $1,869
for Ms. Dillon) and term life insurance premiums ($921 for Mr. Chester and
$871 for Ms. Dillon).
The following table sets forth further information on grants of stock
options during 1999 to each of the Named Executive Officers, if any were
granted. No stock appreciation rights ("SARs") were granted during 1999.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES UNDERLYING OPTIONS/SARS GRANTED
OPTIONS/SARS TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(1) FISCAL YEAR(2) PRICE DATE
- ---- --------------------- -------------------- -------- ----------
<S> <C> <C> <C> <C>
E.B. Chester, Jr. .................. 23,810 19.5% $10.50 2009
Lisa M. Dillon...................... 23,810 19.5% $10.50 2009
</TABLE>
- ---------------
(1) The options vest in 25% increments annually, commencing on November 19,
2000.
(2) Based upon 122,120 options granted in 1999.
No options were exercised during 1999.
6
<PAGE> 10
The following chart shows the value of unexercised options held by the
Named Executive Officers:
FY-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END
(EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)(1)
--------------------------- ------------------------------
<S> <C> <C>
E.B. Chester, Jr. ........................... 28,250/108,560 $27,795/$83,386
Lisa M. Dillon............................... 21,750/88,960 $29,102/$87,171
</TABLE>
- ---------------
(1) Based on the closing sale price of the Common Stock on The Nasdaq Stock
Market on December 31, 1999 -- $9.875.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Vail Banks and its bank subsidiaries have had, and expect to have in the
future, banking transactions in the ordinary course of business with, directors
and officers of Vail Banks and its bank subsidiaries and their associates,
including corporations in which such officers or directors are shareholders,
directors and/or officers, on the same terms (including interest rates and
collateral) as then prevailing at the time for comparable transactions with
other persons. Such transactions have not involved more than the normal risk of
collectibility or presented other unfavorable features.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Vail Banks Board of Directors held six meetings during 1999. Martin T.
Hart and Byron A. Rose attended less than seventy-five percent (75%) of the
meetings of the Board and committees of the Board on which they sat that were
held during their tenure as directors.
Vail Banks' Board of Directors has established three committees, an Audit
Committee, a Compensation Committee and an Executive Committee.
The Audit Committee presently consists of three directors, Martin T. Hart,
Byron A. Rose and E. William Wilto, all of which are independent directors. The
Audit Committee is responsible for reviewing and monitoring Vail Banks'
financial reports and accounting practices. The Audit Committee is also
responsible for reviewing related party transactions and potential conflicts of
interest involving officers, directors, employees or affiliates of Vail Banks.
The Audit Committee held two meeting during 1999.
The Compensation Committee presently consists of five directors, E.B.
Chester, Lisa M. Dillon, S. David Gorsuch, Martin T. Hart, and Robert L. Knous,
Jr., of whom three are independent directors. The Compensation Committee is
responsible for determining the compensation of Vail Banks' executive officers.
The Compensation Committee is also authorized to administer Vail Banks' Stock
Incentive Plan. The Compensation Committee held two meetings during 1999.
The Executive Committee presently consists of three directors, E.B.
Chester, Lisa M. Dillon, and Byron A. Rose, of whom one is an independent
director. The Executive Committee is authorized to consider any matter that may
be brought before a meeting of the full Board of Directors, subject to
restrictions under Colorado law. The Executive Committee held two meetings
during 1999.
7
<PAGE> 11
DIRECTOR COMPENSATION
Each member of the Board of Directors is paid a $2,500 annual retainer,
$200 per board meeting at which such member is in attendance, and each member,
other than Mr. Chester and Ms. Dillon, receive $100 per committee meeting at
which such member is in attendance. On January 25, 1999, options for 1,500
shares of Common Stock, of which a quarter become exercisable on January 1 of
each year until 2003, were granted to Kay H. Chester, James G. Flaum, S. David
Gorsuch, James M. Griffin, Martin T. Hart, Robert L. Knous, Jr., Kent Myers,
Byron A. Rose, Donald L. Vanderhoof, and E. William Wilto, all of the directors
at such time, except for E.B. Chester and Lisa M. Dillon.
CHANGE IN CONTROL AGREEMENTS
In November 1999, each of the named executive officers of the Company
entered into "change in control agreements" with the Company. The agreements
provide for the payment of compensation and benefits in the event of a "Change
in Control" (as defined in the agreements) of the Company and the provision for
additional benefits if the executive's employment is terminated under certain
circumstances in connection with a Change in Control.
If a Change in Control of the Company occurs, the named executive officers
will be entitled to receive the following benefits: (i) 200% of the executive's
then-current salary, paid in a lump sum; (ii) 200% of the incentive payment the
executives 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; (iii) a pro rated incentive bonus for
the year of the Change in Control; (iv) the amount of any annual or long-term
bonus with respect to any year that has then ended which has not yet been paid;
(v) an additional contribution to any deferred compensation plan, based on the
payments made pursuant to paragraphs (i), (ii), (iii), and (iv) above. In
addition, the executive will immediately vest in all unvested employee stock
options and restricted stock awards in the event of a Change in Control. After a
Change in Control, if the Company terminates the executive's employment without
"cause" (as defined in the agreement) or if the executive resigns for "Good
Reason" (as defined in the agreement), the executive shall be entitled to
receive the following benefits: (vi) the executive's full base salary through
the date of termination at the rate in effect at the time notice of termination
is given, (vii) payment for unused vacation days, and (viii) continuation of
health and life insurance coverage for 2 years from the date of termination. If
the payment of any such benefits would result in the imposition of an excise tax
under Section 4999 of the Internal Revenue Code, the executive is entitled to
receive a "gross-up" payment to cover the amount of the excise taxes and any
related taxes on the gross-up payment.
The agreements run for an initial term of two years and renew annually for
an additional year, such that the remaining term is always two years. The
Company generally may terminate the agreements upon two years' notice, except
that if a Change in Control occurs during the term, the Agreement will not
expire sooner than 3 years after the date of the Change in Control, such notice
may only be given after the third anniversary of the date of the agreement.
INFORMATION CONCERNING VAIL BANKS' ACCOUNTANTS
On January 15, 1999, the Audit Committee of the Board of Directors of Vail
Banks (the "Company") approved the dismissal of Fortner Bayens Levkulich & Co.,
P.C. and the hiring of KPMG LLP. The decision to dismiss Fortner Bayens
Levkulich & Co., P.C. by the Audit Committee was based on the need to hire a
larger accounting firm to meet the Company's needs after the public offering in
December 1998.
The report of Fortner, Bayens, Levkulich & Co., P.C. on the Company's
financial statements for the fiscal year ended on December 31, 1997 did not
contain an adverse opinion or a disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope, or accounting principles.
In connection with the audit of the Company's financial statements for the
year ended December 31, 1997, and in the subsequent interim period, there were
no disagreements with Fortner, Bayens, Levkulich & Co., P.C. on any matters of
accounting principles or practices, financial statement disclosure or auditing
scope and
8
<PAGE> 12
procedures which, if not resolved to the satisfaction of Fortner, Bayens,
Levkulich & Co., P.C., would have caused Fortner, Bayens, Levkulich & Co., P.C.
to make reference to the matter in their report.
During the fiscal year ended on December 31, 1997 and through January 15,
1999, the Company did not consult with KPMG LLP on matters (i) regarding the
application of accounting principles to a specified transaction or the type of
audit opinion that might be rendered on the Company's financial statements, or
(ii) which concerned the subject matter of a disagreement or event identified in
response to paragraph (a)(1)(iv) of Item 304 of Regulation S-B with the former
auditor.
Representatives of KPMG LLP are expected to be present at the annual
meeting and will have the opportunity to make a statement if they desire to do
so and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any proposals by shareholders intended for presentation at the 2001 annual
meeting must be received by Vail Banks at its principal executive offices,
attention of the Secretary, no later than December 15, 2000, in order to be
included in the proxy material for that meeting. Vail Banks must be notified of
any other shareholder proposal intended to be presented for action at the
meeting not later than 45 days before the Vail Banks 2001 annual meeting, or
else proxies may be voted on such proposal at the discretion of the person or
persons holding those proxies.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, each executive officer, director and beneficial owner of 10% or more of
Vail Banks' Common Stock is required to file certain forms with the Securities
and Exchange Commission ("SEC"). A report of beneficial ownership of Vail Banks'
Common Stock on Form 3 is due at the time such person becomes subject to the
reporting requirement and a report on Form 4 or 5 must be filed to reflect
changes in beneficial ownership occurring thereafter. Form 5, Annual Statements
of Beneficial Ownership, reporting options and restricted stock granted in 1999,
for E.B. Chester, James E. Flaum, S. David Gorsuch, James M. Griffin, Martin T.
Hart, Robert L. Knous, Jr., Kent Myers, Byron A. Rose, Donald L. Vanderhoof,
Lisa M. Dillon, and Kay H. Chester were inadvertently filed late.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
Management of Vail Banks knows of no matters other than those stated above
that are to be brought before the meeting. If any other matters should be
presented for consideration and voting, however, it is the intention of the
persons named as proxies in the enclosed Proxy to vote in accordance with their
judgment as to what is in the best interest of Vail Banks.
By Order of the Board of Directors,
/s/ LISA M. DILLON
Lisa M. Dillon
President and Chief Executive
Officer
9
<PAGE> 13
COMMON STOCK
OF VAIL BANKS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS FOR THE 2000 ANNUAL MEETING OF SHAREHOLDERS.
This undersigned hereby appoints E.B. Chester, Jr. or Lisa M. Dillon the
proxy of the undersigned to vote the Common Stock of the undersigned at the
Annual Meeting of Shareholders of VAIL BANKS, INC. to be held on May 16, 2000,
and any adjournment thereof.
1. [ ] FOR all nominees for director listed below (except as indicated to the
contrary):
Dennis R. Devor
Lisa M. Dillon
Kent Myers
E. William Wilto
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW)
- --------------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all nominees listed hereon.
2. In accordance with their best judgment with respect to any other matters that
may properly come before the meeting.
(Continued on reverse side.)
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ELECTION AS DIRECTORS OF THE
PERSONS NAMED IN THE PROXY AND UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED
IN THE SPACE PROVIDED, THIS PROXY WILL BE SO VOTED.
-----------------------------------
Please sign this Proxy exactly as
name appears on the Proxy.
Note: When signing as an attorney,
trustee, administrator or guardian,
please give your title as such. In
the case of joint tenants, each
joint owner must sign.
Date:
-----------------------------------
