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EXHIBIT 10.6
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1998 EMPLOYEE STOCK OPTION PLAN
OF
VALLEY COMMUNITY BANCSHARES, INC.
RECITALS
1. On April 23, 1998, the shareholders of Puyallup Valley Bank adopted
the 1998 Employee Stock Option Plan of Puyallup Valley Bank. On the same
date, the shareholders approved a Plan of Reorganization ("Reorganization")
whereby Puyallup Valley Bank became a wholly-owned subsidiary of Valley
Community Bancshares, Inc. In approving the Reorganization, the shareholders
approved the conversion of the 1998 Employee Stock Option Plan of Puyallup
Valley Bank to the 1998 Employee Stock Option Plan of Valley Community
Bancshares, Inc.
2. The 1998 Employee Stock Option Plan has been modified to reflect
this change in name but has not been otherwise altered as a result of the
Reorganization. In particular, employees have not been granted additional
benefits, and the fair market value of granted stock options has not been
changed as a result of the Reorganization.
PLAN
1. PURPOSE OF THE PLAN. The purpose of this Plan is to provide
additional incentives to Employees of Valley Community Bancshares, Inc. and
its present and future subsidiaries, thereby helping to attract and retain
the best available personnel for positions of responsibility with the
Corporation and otherwise promoting the success of the business activities of
the Corporation. It is intended that Options issued pursuant to this Plan
shall constitute either "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code or nonqualified stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Common Stock" shall mean the Corporation's common stock.
(c) "Committee" shall mean the Board or the Committee appointed by
the Board in accordance with subsection 4(a) of the Plan
(d) "Continuous Status as an Employee" shall mean the absence of
any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case of
sick leave, military leave, or any other approved leave of absence.
(e) "Corporation" shall mean Valley Community Bancshares, Inc., a
bank holding company.
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(f) "Employee" shall mean any person employed by the Corporation,
or any Subsidiary which now exist or are hereafter organized or are
acquired by the Corporation.
(g) "Nonqualified Stock Option" shall mean an Option other than
an Incentive Stock Option.
(h) "Option" shall mean a stock option granted pursuant to the
Plan. Options shall include both Incentive Stock Options under Section 422
of the Internal Revenue Code and Nonqualified Stock Options, as the context
requires.
(i) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(j) "Optionee" shall mean an Employee who receives an Option.
(k) "Plan" shall mean this 1998 Employee Stock Option Plan.
(l) "Parent" shall mean any corporation having a relationship
with the Corporation as described in Section 424(e) of the Internal
Revenue Code.
(m) "Shareholder-Employee" shall mean an Employee who owns stock
representing more than 10 percent of the total combined voting power of
all classes of stock of the Corporation. For this purpose, the
attribution of stock ownership rules provided in Section 424(d) of the
Internal Revenue Code shall apply.
(n) "Subsidiary" shall mean any corporation having a relationship
with the Corporation as described in Section 424(f) of the Internal Revenue
Code.
3. STOCK SUBJECT TO OPTIONS.
(a) NUMBER OF SHARES RESERVED. The maximum number of shares
available pursuant to the Plan is 100,000 shares of the Common Stock of
the Corporation (subject to adjustment as provided in subsection 6(i) of
the Plan). During the term of this Plan, the Corporation will at all
times reserve and keep available a sufficient number of shares of its
Common Stock to satisfy the requirements of the Plan.
(b) EXPIRED OPTIONS. If any outstanding Option expires or
becomes unexercisable for any reason without having been exercised in
full, the shares of Common Stock allocable to the unexercised portion of
such Option shall again become available for other Options.
4. ADMINISTRATION OF THE PLAN.
(a) THE COMMITTEE. The Plan shall be administered by the Board
directly, acting as a Committee of the whole, or if the Board elects, by
a separate Committee appointed by the Board for that purpose and
consisting of at least three Board members. All references in the Plan
to the "Committee" shall refer to such separate committee, if any is
established, or if none is then in existence, shall refer to the Board
as a whole.
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Once appointed, any such Committee shall continue to serve until
otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause), appoint new members in
substitution therefor, and fill vacancies however caused.
(1) The Committee shall select one of its members as chairman,
and shall hold meetings at such times and places as the chairman or a
majority of the Committee may determine.
(2) At least annually, the Committee shall present a written
report to the Board indicating the persons to whom Options have been
granted since the date of the last such report, and in each case the
date or dates of Options granted, the number of shares optioned, and
the Option price per share.
(3) At all times, the Board shall have the power to remove all
members of the Committee and thereafter to directly administer the Plan
as a Committee of the whole.
(b) POWERS OF THE COMMITTEE. Except for the terms and conditions
explicitly set forth in the Plan, the Committee shall have the authority
and discretion:
(1) To determine the persons to whom Options are to
be granted, the times of grant and the number of shares to be
represented by each Option;
(2) To determine the Option price for the shares of
Common Stock to be issued pursuant to each Option, subject to the
provisions of subsection 6(b) of the Plan;
(3) To determine all other terms and conditions of each
Option granted under the Plan, which need not be identical;
(4) To modify or amend the terms of any Option previously
granted, or to grant substitute Options, subject to the provisions of
subsections 6(l) and 6(m) of the Plan;
(5) To interpret the Plan;
(6) To authorize any person or persons to execute and
deliver Option agreements or to take any other actions deemed by the
Committee to be necessary or appropriate to effectuate the grant of
Options;
(7) To make all other determinations and take all other
actions which the Committee deems necessary or appropriate to
administer the Plan in accordance with its terms and conditions.
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All actions of the Committee shall be either by (i) a majority
vote of the members of the full Committee at a meeting of the
Committee, or (ii) by unanimous written consent of all members of the
full Committee without a meeting thereof.
All decisions, determinations and interpretations of the
Committee shall be final and binding upon all persons, including all
Optionees and any other holders or persons interested in any Options,
unless otherwise expressly determined by a vote of the majority of the
entire Board. No member of the Committee or of the Board shall be
liable for any action or determination made in good faith with respect
to the Plan or any Option.
5. ELIGIBILITY. Options may be granted only to Employees who the
Committee, in its discretion, from time to time selects.
Granting of Options pursuant to the Plan shall be entirely discretionary
with the Committee, and the adoption of this Plan shall not confer upon any
person any right to receive any Option or Options pursuant to the Plan unless
and until said Options are granted by the Committee, in its sole discretion.
Neither the adoption of the Plan nor the granting of any Options pursuant to
the Plan shall confer upon any Employee any right with respect to
continuation of employment, nor shall the same interfere in any way with the
Employee's right or with the right of the Corporation or any Subsidiary to
terminate the employment relationship at any time.
6. TERMS AND CONDITIONS OF OPTIONS. All Options granted pursuant to
the Plan must be authorized by the Committee, and must be documented in
written agreements in such form as the Committee shall from time to time
approve, which agreements shall comply with and be subject to all of the
following terms and conditions, unless waived or modified by the Committee.
(a) NUMBER OF SHARES; ANNUAL LIMITATION. Each Option agreement
shall state whether the Option is an Incentive Stock Option or a
Nonqualified Stock Option and the number of shares subject to Option.
Any number of Options may be granted to a single eligible person at any
time and from time to time, except that in the case of Incentive Stock
Options, the aggregate fair market value (determined as of the time each
Option is granted) of all shares of Common Stock with respect to which
Incentive Stock Options become exercisable for the first time by an
Employee in any one calendar year (under all incentive stock option
plans of the Corporation shall not exceed $100,000.
(b) OPTION PRICE AND CONSIDERATION. The Option price for the
shares of Common Stock to be issued pursuant to the Option shall be such
price as is determined by the Committee, but shall in no event be less
than the fair market value of the Common Stock on the date of grant of
the Option. In the case of an Incentive Stock Option granted to an
Employee who, immediately before the grant of such Incentive Stock
Option, is a Shareholder-Employee, the Incentive Stock Option price
shall be at least 110 percent of the fair market value of the Common
Stock on the date of grant of the Incentive Stock Option. The fair
market value shall be determined by the Committee in its discretion;
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PROVIDED, HOWEVER, that in the event there is a public market for the
Common Stock, the fair market value shall be the mean of the bid and
asked prices of the Common Stock as of the date of grant as reported on
the National Association of Securities Dealers Automatic Quotation
System (NASDAQ), or, in the event the Common Stock is listed on a stock
exchange, the fair market value shall be the closing price on the
exchange as of the date of grant of the Option.
The Option price shall be payable either (i) in United States
dollars upon exercise of the Option, or (ii) such other consideration of
comparable value deemed to be acceptable by the Committee, including
without limitation Common Stock of the Corporation, services or other
property.
(c) TERM OF OPTION. No Incentive Stock Option granted pursuant
to the Plan shall in any event be exercisable after the expiration of 10
years from the date such Option is granted, except that the term of an
Incentive Stock Option granted to an Employee who, immediately before
such Incentive Stock Option is granted, is a Shareholder-Employee shall
be for not more than 5 years from the date of grant thereof. Subject to
the foregoing and other applicable provisions of the Plan including but
not limited to subsection 6(e) herein, the term of each Option shall be
determined by the Committee in its discretion.
(d) MANNER OF EXERCISE. An Option shall be deemed to be
exercised when written notice of exercise has been given to the
Corporation in accordance with the terms of the Option by the person
entitled to exercise the Option, together with full payment for the
shares of Common Stock subject to said notice.
(e) DEATH OF OPTIONEE. In the event of the death of an
Optionee who at the time of his death was an Employee and who had been
in Continuous Status as an Employee since the date of grant of the
Option, the Option shall terminate on the earlier of (i) one year after
the date of death of the Optionee or such later date as may be set in
the discretion of the Committee; or (ii) the expiration date otherwise
provided in the Option Agreement, except that if the expiration date of
an Option should occur during the 90-day period immediately following
the Optionee's death, such Option shall terminate at the end of such
90-day period. The Option shall be exercisable at any time prior to such
termination by the Optionee's estate, or by such person or persons who
have acquired the right to exercise the Option by bequest or by
inheritance or by reason of the death of the Optionee.
(f) DISABILITY OF OPTIONEE. If an Optionee's status as an
Employee is terminated at any time during the Option period by reason of
a disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) and if said Optionee had been in Continuous Status as an
Employee at all times between the date of grant of the Option and the
termination of his status as an Employee, his Incentive Stock Option
shall terminate on the earlier of (i) one year after the date of
termination of his status as an Employee, or (ii) the expiration date
otherwise provided in his Option Agreement.
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(g) TERMINATION OF STATUS AS AN EMPLOYEE. If an Optionee's
status as an Employee is terminated at any time after the grant of his
Option for any reason other than death or disability, as provided in
subparagraphs (e) and (f), above, and not by reason of fraud or willful
misconduct, as provided below:
(1) His Incentive Stock Option shall terminate on the
earlier of (i) the same day of the third month after the date of
termination of his status as an Employee, or (ii) the expiration
date otherwise provided in his Option Agreement.
(2) If an Optionee's status as an Employee is terminated
at any time after the grant of his Option by reason of fraud or
willful misconduct, then his Option shall terminate on the date of
termination of his status as an Employee.
(h) NON-TRANSFERABILITY OF OPTIONS. No Option granted pursuant
to the Plan may be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised during the lifetime of the
Optionee, only by the Optionee.
(i) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any
required action by the shareholders of the Corporation, the number of
shares of Common Stock covered by each outstanding Option, the number of
shares of Common Stock available for grant of additional Options, and
the price per share of Common Stock specified in each outstanding
Option, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from any stock
split or other subdivision or consolidation of shares, the payment of
any stock dividend (but only on the Common Stock) or any other increase
or decrease in the number of such shares of Common Stock effected
without receipt of consideration by the Corporation; PROVIDED, HOWEVER,
that conversion of any convertible securities of the Corporation shall
not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Committee, whose determination in
that respect shall be final, binding and conclusive.
No Incentive Stock Option shall be adjusted by the Committee
pursuant to this subparagraph 6(i) in a manner which causes the
Incentive Stock Option to fail to continue to qualify as an incentive
stock option within the meaning of Section 422 of the Internal Revenue
Code.
Except as otherwise expressly provided in this subsection 6(i), no
Optionee shall have any rights by reason of any stock split or the
payment of any stock dividend or any other increase or decrease in the
number of shares of Common Stock. Except as otherwise expressly provided
in this subsection 6(i), any issue by the Corporation of shares of stock
of any class, or securities convertible into shares of stock of any
class, shall not affect the number of shares or price of Common Stock
subject to any Options, and no adjustments in Options shall be made by
reason thereof. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Corporation to
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make adjustments, reclassifications, reorganizations or changes of its
capital or business structure.
(j) DATE OF GRANT OF OPTION. The date of grant of an Option
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Said date of grant shall be
specified in the Option Agreement.
(k) CONDITIONS UPON ISSUANCE OF SHARES. Shares of Common Stock
shall not be issued with respect to an Option granted under the Plan
unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of
law, including applicable federal and state securities laws.
As a condition to the exercise of an Option, the Corporation may
require the person exercising such Option to represent and warrant at
the time of exercise that the shares of Common Stock are being purchased
only for investment and without any present intention to sell or
distribute such Common Stock if, in the opinion of counsel for the
Corporation, such a representation is required by any of the
aforementioned relevant provisions of law.
(l) MERGER, SALE OF ASSETS, ETC. In the event of the merger or
other reorganization of the Corporation with or into any other
corporation, or in the event of a proposed sale of substantially all of
the assets of the Corporation, or in the event of a proposed dissolution
or liquidation of the Corporation, (i) all outstanding and unexercised
Options shall become immediately exercisable, and (ii) such Options
shall either be assumed by the successor corporation, or parent thereof,
in the reorganization transaction described above or be replaced with a
comparable award for the purchase of shares of the capital stock of the
successor corporation, except that if such Options are not so assumed or
replaced, then (iii) the Committee may, in the exercise of its sole
discretion, terminate all outstanding Options as of a date fixed by the
Committee which may be sooner than the originally stated option term.
The Committee shall notify each Optionee of such action in writing not
less than 60 days prior to the termination date fixed by the Committee,
and each Optionee shall have the right to exercise his Option to and
including said termination date.
(m) SUBSTITUTE STOCK OPTIONS. In connection with the
acquisition or proposed acquisition by the Corporation or any
Subsidiary, whether by merger, acquisition of stock or assets, or other
reorganization transaction, of a business, any employees of which have
been granted Incentive Stock Options, the Committee is authorized to
issue, in substitution of any such unexercised stock option, a new
Option under this Plan which confers upon the Optionee substantially the
same benefits as the old option; PROVIDED, HOWEVER, that the issuance of
any new Option for an old Incentive Stock Option shall satisfy the
requirements of Section 424(a) of the Internal Revenue Code.
(n) TAX COMPLIANCE. The Corporation, in its sole discretion,
may take any actions reasonable believed by it to be required to comply
with any local, state or federal tax laws relating to the reporting or
withholding of taxes attributable to the grant or
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exercise of any Option or the disposition of any shares of Common Stock
issued upon exercise of an Option, including, but not limited to, (i)
withholding from any person exercising an Option a number of shares of
Common Stock having a fair market value equal to the amount required to
be withhold by the Corporation under applicable tax laws, and (ii)
withholding from any form of compensation or other amount due an
Optionee or holder of shares of Common Stock issued upon exercise of an
Option any amount required to be withheld by the Corporation under
applicable tax laws. Withholding or reporting shall be considered
required for purposes of this subparagraph if any tax deduction or other
favorable tax treatment available to the Corporation is conditioned upon
such reporting or withholding.
(o) OTHER PROVISIONS. Option Agreements exercised pursuant to
the Plan may contain such other provisions as the Committee shall deem
advisable, provided in the case of Incentive Stock Options the
provisions are not inconsistent with the provisions of Section 422(b) of
the Internal Revenue Code or with any of the other terms and conditions
of this Plan.
7. TERM OF THE PLAN. The Plan shall become effective on the earlier of
(a) the date of adoption of the Plan by the Board; or (b) the date of
shareholder approval of the Plan as provided in section 9 of the Plan. Unless
sooner terminated as provided in subsection 8(a) of the Plan, the Plan shall
terminate on the tenth anniversary of its effective date. Options may be granted
at any time after the effective date and prior to the date of termination of
the Plan.
8. AMENDMENT OR EARLY TERMINATION OF THE PLAN.
(a) AMENDMENT OR EARLY TERMINATION. The Board may terminate
the Plan at any time. The Board may amend the Plan at any time and from
time to time in such respects as the Board may deem advisable, except
that, without approval of the holders of a majority of the outstanding
shares of the Common Stock, no such revision or amendment shall:
(1) Increase the number of shares of Common Stock subject
to the Plan other than in connection with an adjustment under
subsection 6(i) of the Plan; or
(2) Change the designation of the class of persons eligible
to be granted Options, as provided in section 5 of the Plan; or
(3) Make any amendments to the Plan which would require
shareholder approval under any applicable law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall affect Options granted prior to such
amendment or termination, and all such Options shall remain in full force
and effect notwithstanding such amendment or termination.
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9. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the outstanding shares of Common Stock of the Corporation present
and entitled to vote at a duly convened meeting of the shareholders of the
Corporation.
CERTIFICATE OF ADOPTION
I certify that the foregoing Plan was approved by the shareholders of
Valley Community Bancshares, Inc., on April 23, 1998.
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Secretary
