Exhibit 10.10

FS BANCORP, INC.

 

2018 EQUITY INCENTIVE PLAN

 

 

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TABLE OF CONTENTS

 

Page

ARTICLE I PURPOSE

1

 

 

SECTION 1.1

GENERAL PURPOSE OF THE PLAN.

1

 

 

 

ARTICLE II DEFINITIONS

1

 

 

ARTICLE III AVAILABLE SHARES

4

 

 

SECTION 3.1

SHARES AVAILABLE UNDER THE PLAN.

4

SECTION 3.2

SHARES AVAILABLE FOR OPTIONS.

4

SECTION 3.3

SHARES AVAILABLE FOR RESTRICTED STOCK AWARDS.

4

SECTION 3.4

COMPUTATION OF SHARES ISSUED.

4

 

 

 

ARTICLE IV ADMINISTRATION

4

 

 

SECTION 4.1

COMMITTEE.

4

SECTION 4.2

COMMITTEE POWERS.

5

 

 

 

ARTICLE V STOCK OPTIONS

5

 

 

SECTION 5.1

GRANT OF OPTIONS.

5

SECTION 5.2

SIZE OF OPTION.

6

SECTION 5.3

EXERCISE PRICE.

6

SECTION 5.4

EXERCISE PERIOD.

6

SECTION 5.5

VESTING DATE.

6

SECTION 5.6

ADDITIONAL RESTRICTIONS ON INCENTIVE STOCK OPTIONS.

7

SECTION 5.7

METHOD OF EXERCISE.

7

SECTION 5.8

LIMITATIONS ON OPTIONS.

8

SECTION 5.9

PROHIBITION AGAINST OPTION REPRICING.

9

 

 

 

ARTICLE VI RESTRICTED STOCK AWARDS

9

 

 

SECTION 6.1

IN GENERAL.

9

SECTION 6.2

VESTING DATE.

10

SECTION 6.3

DIVIDEND RIGHTS.

11

SECTION 6.4

VOTING RIGHTS.

11

SECTION 6.5

DESIGNATION OF BENEFICIARY.

11

SECTION 6.6

MANNER OF DISTRIBUTION OF AWARDS.

11

 

 

 

ARTICLE VII ADDITIONAL TAX PROVISION

11

 

 

SECTION 7.1

TAX WITHHOLDING RIGHTS.

11

 

 

 

ARTICLE VIII AMENDMENT AND TERMINATION

12

 

 

SECTION 8.1

TERMINATION

12

SECTION 8.2

AMENDMENT.

12

SECTION 8.3

ADJUSTMENTS IN THE EVENT OF BUSINESS REORGANIZATION.

12

 

 

 

ARTICLE IX MISCELLANEOUS

13

 

 

SECTION 9.1

STATUS AS AN EMPLOYEE BENEFIT PLAN; NON-APPLICATION OF SECTION 409A.

13

SECTION 9.2

NO RIGHT TO CONTINUED SERVICE.

13

SECTION 9.3

CONSTRUCTION OF LANGUAGE.

13

SECTION 9.4

SEVERABILITY.

13

SECTION 9.5

GOVERNING LAW.

13

SECTION 9.6

HEADINGS.

13

SECTION 9.7

NON-ALIENATION OF BENEFITS.

14

SECTION 9.8

NOTICES.

14

SECTION 9.9

APPROVAL OF SHAREHOLDERS

14

SECTION 9.10

CLAWBACK.

14

 

 

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FS Bancorp, Inc.

2018 Equity Incentive Plan

ARTICLE I

PURPOSE

Section 1.1           General Purpose of the Plan.

The purpose of the Plan is to promote the long-term growth and profitability of
FS Bancorp, Inc., to provide Plan Participants with an incentive to achieve
corporate objectives, to attract and retain individuals of outstanding
competence and to provide Plan Participants with incentives that are closely
linked to the interests of all shareholders of FS Bancorp, Inc.  The Plan is not
intended to expose the Company to imprudent risks.

The Plan was originally adopted effective as of March 22, 2018 by the Board, and
became effective on ___________ , 2018 (the “Effective Date”), the date the Plan
was approved by the Company’s shareholders.

As of the Effective Date, this Plan shall be treated as a new plan for purposes
of Section 422 of the Code (as herein defined), so that an Option granted
hereunder on a date that is not more than ten years after the Effective Date,
and that is intended to qualify as an Incentive Stock Option under Section 422
of the Code, complies with the requirements of Section 422(b)(2) of the Code and
the applicable regulations thereunder.

ARTICLE II

DEFINITIONS

The following definitions shall apply for the purposes of this Plan, unless a
different meaning is plainly indicated by the context:

Affiliate means any “parent corporation” or “subsidiary corporation” of the
Company, as those terms are defined in Section 424(e) and (f) respectively, of
the Code.

Award means the grant by the Committee of an Incentive Stock Option, a
Non-Qualified Stock Option, a Restricted Stock Award or any other benefit under
this Plan.

Award Agreement means a written instrument evidencing an Award under the Plan
and establishing the terms and conditions thereof.

Beneficiary means the Person designated by a Participant to receive any Shares
subject to a Restricted Stock Award made to such Participant that become
distributable, to have the right to exercise any Options granted to such
Participant that are exercisable or to receive any cash paid out under a Cash
Award to such Participant where such payout is made, following the Participant’s
death.

Board means the Board of Directors of FS Bancorp, Inc. and any successor
thereto.

Change in Control means any of the following events:

(a)        any third Person, including a "group" as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, becomes the beneficial owner of Shares
with respect to which 25% or more of the total number of votes that may be cast
for the election of the Board (other than a tax-qualified plan of the Company or
its Affiliate);

(b)        consummation of a plan of reorganization, merger, acquisition,
consolidation, sale of all or substantially all of the assets of the Company or
a similar transaction in which the Company is not the resulting entity;

(c)        as a result of, or in connection with, any cash tender offer, merger
or other business combination, sale of assets or contested election(s), or
combination of the foregoing, the individuals who were members of the

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Board of Directors on the date of adoption of this Plan (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date of adoption of this Plan
whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company’s shareholders was approved by the nominating committee serving
under an Incumbent Board, shall be considered a member of the Incumbent Board;
or

(d)        a tender offer or exchange offer for 25% or more of the total
outstanding Shares is completed (other than such an offer by the Company).

Code means the Internal Revenue Code of 1986, as amended from time to time.

Committee means the Committee described in Article IV.

Company means FS Bancorp, Inc., a Washington corporation, and any successor
thereto.

Disability means a total and permanent disability, within the meaning of Code
Section 22(e)(3), as determined by the Committee in good faith, upon receipt of
sufficient competent medical advice from one or more individuals, selected by
the Committee, who are qualified to give professional medical advice.

Domestic Relations Order means a domestic relations order that satisfies the
requirements of Section 414(p)(1)(B) of the Code, or any successor provision, as
if such section applied to the applicable Award.

Effective Date means the date on which the Plan is approved by the shareholders
of FS Bancorp, Inc.

Exchange Act  means the Securities Exchange Act of 1934, as amended.

Exercise Period means the period during which an Option may be exercised.

Exercise Price means the price per Share at which Shares subject to an Option
may be purchased upon exercise of the Option.  If the Fair Market Value for
Exercise Price purposes is determined to be less than fair market value of the
underlying Shares as determined under Section 409A (the "Section 409A Fair
Market Value"), then the Exercise Price shall automatically adjusted to be the
Section 409A Fair Market Value.  The Committee may take such actions as it
determines necessary to carry out the preceding sentence.

Fair Market Value means, with respect to a Share on a specified date:

(a)        If the Shares are listed on any U.S. national securities exchange
registered under the Securities Exchange Act of 1934 (“National Exchange”), the
closing sales price for such stock (or the closing bid, if no sales were
reported) as reported on that exchange on the applicable date, or if the
applicable date is not a trading day, on the trading day immediately preceding
the applicable date;

(b)        If the Shares are not listed on a National Exchange but are traded on
the over-the-counter market or other similar system, the mean between the
closing bid and the asked price for the Shares at the close of trading in the
over-the-counter market or other similar system on the applicable date, or if
the applicable date is not a trading day, on the trading day immediately
preceding the applicable date; and

(c)        In the absence of such markets for the Shares, the Fair Market Value
shall be determined in good faith by the Committee.

In no event shall the Fair Market Value for Exercise Price purposes be less than
fair market value of the underlying Shares as determined under Section 409A.

Family Member means with respect to any Participant, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the Participant’s

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household (other than a tenant or employee), a trust in which these persons have
more than fifty percent of the beneficial interest, a foundation in which these
persons (or the Participant) control the management of assets, and any other
entity in which these persons (or the Participant) own more than fifty percent
of the voting interests.

Incentive Stock Option means a right to purchase Shares that is granted to an
employee of the Company or any Affiliate that is designated by the Committee to
be an Incentive Stock Option and that is intended to satisfy the requirements of
Section 422 of the Code.

Involuntary Separation from Service means the first to occur of the following:

(a)          The Participant’s Service is unilaterally terminated by the Company
or an Affiliate;

(b)          The Participant voluntarily terminates Service after the Company or
the Affiliate reduces the Participant’s base salary to a rate that is lower than
the rate in effect immediately prior to the Change in Control, or as the same
may have been increased thereafter; or

(c)          The Participant voluntarily terminates Service after the Company or
an Affiliate requires the Participant to change the Participant's job location
or office, so that such Participant will be based at a location more than
thirty-five (35) miles from the location of the Participant's job or office
immediately prior to the Change in Control, provided that such new location is
not closer to Participant's home.

For the avoidance of doubt, an Involuntary Separation from Service does not
include a Termination for Cause.

Non-Qualified Stock Option means a right to purchase Shares that is not intended
to qualify as an Incentive Stock Option or does not satisfy the requirements of
Section 422 of the Code.

Option means either an Incentive Stock Option or a Non-Qualified Stock Option.

Option Holder means, at any relevant time with respect to an Option, the person
having the right to exercise the Option.

Participant means any director, emeritus director, officer, employee or advisory
director of the Company or any Affiliate who is selected by the Committee to
receive an Award.

Permitted Transferee means, with respect to any Participant, a Family Member of
the Participant to whom an Award has been transferred as permitted hereunder.

Person means an individual, a corporation, a partnership, a limited liability
company, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.

Plan means the FS Bancorp, Inc. 2018 Equity Incentive Plan, as amended from time
to time.

Restricted Stock Award means an award of Shares pursuant to Article VI.

Retirement means the termination of a Participant’s employment with the Company
and its Affiliates, other than a Termination for Cause, after the Participant
has attained age 59½.

Section 409A means Section 409A of the Code and any regulations or guidance of
general applicability thereunder.

Service means, unless the Committee provides otherwise in an Award Agreement,
service in any capacity as a director, emeritus director, officer, employee or
advisory director of the Company or any Affiliate.

Share means a share of common stock, par value $.01 per share, of FS Bancorp,
Inc.

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Termination for Cause means termination upon an intentional failure to perform
stated duties, a breach of a fiduciary duty involving personal dishonesty which
results in material loss to the Company or one of its Affiliates or a willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or a final cease-and-desist order which results in material
loss to the Company or one of its Affiliates.  No act or failure to act on
Participant’s part shall be considered willful unless done, or omitted to be
done, not in good faith and without reasonable belief that the action or
omission was in the best interest of the Company.  Notwithstanding the above, if
a Participant is subject to a different definition of termination for cause in
an employment or severance or similar agreement with the Company or any
Affiliate, such other definition shall control.

Vesting Date means the date or dates on which the grant of an Option is eligible
to be exercised or the date or dates on which a Restricted Stock Award ceases to
be forfeitable.

ARTICLE III

AVAILABLE SHARES

Section 3.1           Shares Available Under the Plan.

Subject to adjustment under Article VIII, the aggregate number of Shares
representing Awards shall not exceed 650,000 Shares.

Section 3.2           Shares Available for Options.

Subject to adjustment under Article XI, the maximum aggregate number of Shares
with respect to which Options may be granted under the Plan shall be 650,000
Shares. The maximum aggregate number of Shares with respect to which Incentive
Stock Options may be granted under the Plan shall be 650,000 Shares.

Section 3.3           Shares Available for Restricted Stock Awards.

Subject to adjustment under Article XI, the maximum aggregate number of Shares
with respect to which Restricted Stock Awards may be granted under the Plan
shall be 163,000 Shares

Section 3.4           Computation of Shares Issued.

For purposes of this Article III, Shares shall be considered issued pursuant to
the Plan only if actually issued upon the exercise of an Option or in connection
with a Restricted Stock Award.  Any Award subsequently forfeited, in whole or in
part, shall not be considered issued. If any Award granted under the Plan
terminates, expires, or lapses for any reason, any Shares subject to such Award
again shall be available for the grant of an Award under the Plan.  Shares used
to pay the Exercise Price of an Option and Shares used to satisfy tax
withholding obligations shall not be available for future Awards under the
Plan.  To the extent that Shares are delivered pursuant to the exercise of an
Option, the number of underlying Shares as to which the exercise related shall
be counted against the number of Shares available for Awards, as opposed to only
counting the Shares issued.

ARTICLE IV

ADMINISTRATION

Section 4.1           Committee.

(a)          The Plan shall be administered by a Committee appointed by the
Board for that purpose and consisting of not less than two (2) members of the
Board.  Each member of the Committee shall be a “Non-Employee Director” within
the meaning of Rule 16b-3(b)(3)(i) under the Exchange Act or a successor rule or
regulation and an “Independent Director,” and shall satisfy any other membership
requirements, under the corporate governance rules and regulations imposing
independence and other membership standards on committees performing similar
functions promulgated by any national securities exchange or quotation system on
which Shares are listed.

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(b)          The act of a majority of the members present at a meeting duly
called and held shall be the act of the Committee.  Any decision or
determination reduced to writing and signed by all members shall be as fully
effective as if made by unanimous vote at a meeting duly called and held.

(c)          The Committee’s decisions and determinations under the Plan need
not be uniform and may be made selectively among Participants, whether or not
such Participants are similarly situated.

Section 4.2           Committee Powers.

Subject to the terms and conditions of the Plan and such limitations as may be
imposed by the Board, the Committee shall be responsible for the overall
management and administration of the Plan and shall have such authority as shall
be necessary or appropriate in order to carry out its responsibilities,
including, without limitation, the authority:

(a)        to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for participation in the Plan,
and the number of Shares subject to Awards to be issued or granted;

(b)        with the consent of the Participant, to the extent deemed necessary
by the Committee, to amend or modify the terms of any outstanding Award or
accelerate or defer the Vesting Date thereof;

(c)        to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and

(d)     to take any other action not inconsistent with the provisions of the
Plan that it may deem necessary or appropriate.

All decisions, determinations and other actions of the Committee made or taken
in accordance with the terms of the Plan shall be final and conclusive and
binding upon all parties having an interest therein.

ARTICLE V

STOCK OPTIONS

Section 5.1           Grant of Options.

(a)          Subject to the limitations of the Plan, the Committee may, in its
discretion, grant to a Participant an Option to purchase Shares.  An Option must
be designated as either an Incentive Stock Option or a Non-Qualified Stock
Option and, if not designated as either, shall be a Non-Qualified Stock
Option.  Only employees of the Company or its Affiliates may receive Incentive
Stock Options.

(b)          Any Option granted shall be evidenced by an Award Agreement which
shall:

(i)           specify the number of Shares covered by the Option;

(ii)          specify the Exercise Price;

(iii)         specify the Exercise Period;

(iv)         specify the Vesting Date; and

(v)          contain such other terms and conditions not inconsistent with the
Plan as the Committee may, in its discretion, prescribe.

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Section 5.2           Size of Option.

Subject to the restrictions of the Plan, the number of Shares as to which a
Participant may be granted Options shall be determined by the Committee, in its
discretion.

Section 5.3           Exercise Price.

The price per Share at which an Option may be exercised shall be determined by
the Committee, in its discretion; provided, however, that the Exercise Price
shall not be less than the Fair Market Value of a Share on the date on which the
Option is granted.

Section 5.4           Exercise Period.

The Exercise Period during which an Option may be exercised shall commence on
the Vesting Date.  It shall expire on the earliest of:

(a)        the date specified by the Committee in the Award Agreement;

(b)        unless otherwise determined by the Committee and set forth in the
Award Agreement, the last day of the three-month period commencing on the date
of the Participant’s termination of Service, other than on account of death,
Disability, Retirement or a Termination for Cause;

(c)        unless otherwise determined by the Committee and set forth in the
Award Agreement, the last day of the one-year period commencing on the date of
the Participant’s termination of Service due to death, Disability or Retirement;

(d)        as of the time and on the date of the Participant’s termination of
Service due to a Termination for Cause; or

(e)        the last day of the ten-year period commencing on the date on which
the Option was granted.

An Option that remains unexercised at the close of business on the last day of
the Exercise Period shall be canceled without consideration at the close of
business on that date.

Section 5.5           Vesting Date.

(a)          Subject to any restrictions set forth in this Plan:

(i)           the Vesting Date for each Option Award shall be determined by the
Committee and specified in the Award Agreement; and

(ii)          notwithstanding Section 5.5(a)(i), no more than 32,500 Shares in
total may be awarded under the Plan, whether pursuant to an Option or a
Restricted Stock Award, with a Vesting Date that is earlier than the first
anniversary of the date the Award is granted (taking into account Shares whose
Vesting Date is accelerated by the Committee pursuant to Section 4.2(b) to a
date that is earlier than the first anniversary of the date the Award is
granted).

(b)          Unless otherwise determined by the Committee and specified in the
Award Agreement:

(i)           if the Participant of an Option Award terminates Service prior to
the Vesting Date for any reason other than death or Disability, or prior to a
Change in Control, any unvested Option shall be forfeited without consideration;

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(ii)          if the Participant of an Option Award terminates Service prior to
the Vesting Date on account of death or Disability, the Vesting Date shall be
accelerated to the date of the Participant’s termination of Service; and

(iii)         if a Change in Control occurs prior to the Vesting Date of an
Option Award that is outstanding on the date of the Change in Control, and the
Participant experiences an Involuntary Separation from Service other than a
Termination for Cause during the 365-day period following the date of such
Change in Control, then the Vesting Date for any non-vested Option Award shall
be accelerated to the date of the Participant’s Involuntary Separation from
Service.  Notwithstanding the preceding sentence, if at the effective time of
the Change in Control the successor to the Company’s business and/or assets does
not either assume the outstanding Option Award or replace the outstanding Option
Award with an award that is determined by the Committee to be at least
equivalent in value to such outstanding Option Award on the date of the Change
in Control, then the Vesting Date of such outstanding Option Award shall be
accelerated to the earliest date of the Change in Control.

Section 5.6           Additional Restrictions on Incentive Stock Options.

An Option designated by the Committee to be an Incentive Stock Option shall be
subject to the following provisions:

(a)        Notwithstanding any other provision of this Plan to the contrary, no
Participant may receive an Incentive Stock Option under the Plan if such
Participant, at the time the award is granted, owns (after application of the
rules contained in Section 424(d) of the Code) stock possessing more than ten
(10) percent of the total combined voting power of all classes of stock of the
Company or its Affiliates, unless (i) the option price for such Incentive Stock
Option is at least 110 percent of the Fair Market Value of the Shares subject to
such Incentive Stock Option on the date of grant and (ii) such Option is not
exercisable after the date five (5) years from the date such Incentive Stock
Option is granted.

(b)        Each Participant who receives Shares upon exercise of an Option that
is an Incentive Stock Option shall give the Company prompt notice of any sale of
Shares prior to a date which is two years from the date the Option was granted
or one year from the date the Option was exercised.  Such sale shall disqualify
the Option as an Incentive Stock Option.

(c)        The aggregate Fair Market Value (determined with respect to each
Incentive Stock Option at the time such Incentive Stock Option is granted) of
the Shares with respect to which Incentive Stock Options are exercisable for the
first time by a Participant during any calendar year (under this Plan or any
other plan of the Company or an Affiliate) shall not exceed $100,000 and the
term of the Incentive Stock Option shall not be more than ten years.

(d)        Any Option under this Plan which is designated by the Committee as an
Incentive Stock Option but fails, for any reason, to meet the foregoing
requirements shall be treated as a Non-Qualified Stock Option.

Section 5.7           Method of Exercise.

(a)          Subject to the limitations of the Plan and the Award Agreement, an
Option Holder may, at any time on or after the Vesting Date and during the
Exercise Period, exercise his or her right to purchase all or any part of the
Shares to which the Option relates; provided, however, that the minimum number
of Shares which may be purchased at any time shall be 100, or, if less, the
total number of Shares relating to the Option which remain un-purchased.  An
Option Holder shall exercise an Option to purchase Shares by:

(i)           giving written notice to the Committee, in such form and manner as
the Committee may prescribe, of his or her intent to exercise the Option;

(ii)          delivering to the Committee full payment for the Shares as to
which the Option is to be exercised; and

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(iii)         satisfying such other conditions as may be prescribed in the Award
Agreement.

(b)          The Exercise Price of Shares to be purchased upon exercise of any
Option shall be paid in full:

(i)           in cash (by certified or bank check or such other instrument as
the Company may accept); or

(ii)          if and to the extent permitted by the Committee, in the form of
Shares already owned by the Option Holder as of the exercise date and having an
aggregate Fair Market Value on the date the Option is exercised equal to the
aggregate Exercise Price to be paid; or

(iii)         if and to the extent permitted by the Committee, by the Company
withholding Shares otherwise issuable upon the exercise having an aggregate Fair
Market Value on the date the Option is exercised equal to the aggregate Exercise
Price to be paid; or

(iv)         by a combination thereof.

Payment for any Shares to be purchased upon exercise of an Option may also be
made by delivering a properly executed exercise notice to the Company, together
with a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the purchase price and
applicable tax withholding amounts (if any), in which event the Shares acquired
shall be delivered to the broker promptly following receipt of payment.

(c)          When the requirements of this Section have been satisfied, the
Committee shall take such action as is necessary to cause the issuance of a
stock certificate or cause Shares to be issued by book-entry procedures, in
either event evidencing the Option Holder's ownership of such Shares. The Person
exercising the Option shall have no right to vote or to receive dividends, nor
have any other rights with respect to the Shares, prior to the date the Shares
are transferred to such Person on the stock transfer records of the Company, and
no adjustments shall be made for any dividends or other rights for which the
record date is prior to the date as of which the transfer is effected.

Section 5.8           Limitations on Options.

(a)          An Option by its terms shall not be transferable by the Option
Holder other than by will or the laws of descent and distribution, or pursuant
to the terms of a Domestic Relations Order, and shall be exercisable, during the
life of the Option Holder, only by the Option Holder or an alternate payee
designated pursuant to such a Domestic Relations Order; provided, however, that
a Participant may, at any time at or after the grant of a Non-Qualified Stock
Option under the Plan, apply to the Committee for approval to transfer all or
any portion of such Non-Qualified Stock Option which is then unexercised to such
Participant’s Family Member. The Committee may approve or withhold approval of
such transfer in its sole and absolute discretion. If such transfer is approved,
it shall be effected by written notice to the Company given in such form and
manner as the Committee may prescribe and actually received by the Company prior
to the death of the person giving it. Thereafter, the transferee shall have,
with respect to such Non-Qualified Stock Option, all of the rights, privileges
and obligations which would attach thereunder to the Participant. If a privilege
of the Option depends on the life, Service or other status of the Participant,
such privilege of the Option for the transferee shall continue to depend upon
the life, Service or other status of the Participant. The Committee shall have
full and exclusive authority to interpret and apply the provisions of the Plan
to transferees to the extent not specifically addressed herein.

(b)          The Company's obligation to deliver Shares with respect to an
Option shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Option Holder to whom such
Shares are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of applicable federal,
state or local law. It may be provided that any such representation shall become
inoperative upon a registration of the Shares or upon the occurrence of any
other event eliminating the necessity of such representation. The Company shall
not be required to deliver any Shares under the Plan prior to:

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(i)           the admission of such Shares to listing on any stock exchange or
trading on any automated quotation system on which Shares may then be listed or
traded; or

(ii)          the completion of such registration or other qualification under
any state or federal law, rule or regulation as the Committee shall determine to
be necessary or advisable.

(c)          An Option Holder may designate a Beneficiary to receive any Options
that may be exercised after his death. Such designation and any change or
revocation of such designation shall be made in writing in the form and manner
prescribed by the Committee. In the event that the designated Beneficiary dies
prior to the Option Holder, or in the event that no Beneficiary has been
designated, any Options that may be exercised following the Option Holder's
death shall be transferred to the Option Holder's estate. If the Option Holder
and his or her Beneficiary shall die in circumstances that cause the Committee,
in its discretion, to be uncertain which shall have been the first to die, the
Option Holder shall be deemed to have survived the Beneficiary.

Section 5.9           Prohibition Against Option Repricing.

Except as provided in Section 8.3 and notwithstanding any other provision of
this Plan, neither the Committee nor the Board shall have the right or authority
following the grant of an Option pursuant to the Plan to amend or modify the
Exercise Price of any such Option, or to cancel the Option at a time when the
Exercise Price is greater than the Fair Market Value of the Shares in exchange
for another Option, Award or other form of compensation (e.g., a cash payment).

ARTICLE VI

RESTRICTED STOCK AWARDS

Section 6.1           In General.

(a)          Each Restricted Stock Award shall be evidenced by an Award
Agreement which shall specify:

(i)           the number of Shares covered by the Restricted Stock Award;

(ii)          the amount, if any, which the Participant shall be required to pay
to the Company in consideration for the issuance of such Shares;

(iii)         the date of grant of the Restricted Stock Award;

(iv)         the Vesting Date for the Restricted Stock Award and the performance
conditions, if any, which must be satisfied in order for the Vesting Date to
occur;

(v)          the rights of the Participant with respect to dividends, voting
rights and other rights and preferences associated with such Shares; and

such other terms and conditions not inconsistent with the Plan as the Committee
may, in its discretion, prescribe.

(b)          All Restricted Stock Awards shall be in the form of issued and
outstanding Shares that shall be registered in the name of the Participant,
subject to written transfer restriction instructions issued to the Company’s
stock transfer agent, together with an irrevocable stock power executed by the
Participant in favor of and held by the Committee or its designee, pending the
vesting or forfeiture of the Restricted Stock Award.  The Shares shall at all
times prior to the applicable Vesting Date be subject to the following
restriction, communicated in writing to the Company’s stock transfer agent:

These shares of common stock are subject to the terms of an Award Agreement
between FS Bancorp, Inc. and [Name of Participant] dated [Award Date] made
pursuant to the terms of the FS Bancorp, Inc. 2018 Equity Incentive Plan, copies
of which are on file at the executive

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offices of FS Bancorp, Inc. and may not be sold, encumbered, hypothecated or
otherwise transferred, except in accordance with the terms of such Plan and
Award Agreement.

or such other restrictive communication or legend as the Committee, in its
discretion, may specify.

(c)          Unless otherwise set forth in the Award Agreement, a Restricted
Stock Award by its terms shall not be transferable by the Participant other than
by will or by the laws of descent and distribution, or pursuant to the terms of
a Domestic Relations Order; provided, however, that a Participant may, at any
time at or after the grant of a Restricted Stock Award under the Plan, apply to
the Committee for approval to transfer all or any portion of such Restricted
Stock Award which is then unvested to such Participant’s Family Member.  The
Committee may approve or withhold approval of such transfer in its sole and
absolute discretion. If such transfer is approved, it shall be effected by
written notice to the Company given in such form and manner as the Committee may
prescribe and actually received by the Company prior to the death of the person
giving it. Thereafter, the transferee shall have, with respect to such
Restricted Stock Award, all of the rights, privileges and obligations which
would attach thereunder to the Participant. If a privilege of the Restricted
Stock Award depends on the life, Service or other status of the Participant,
such privilege of the Restricted Stock Award for the transferee shall continue
to depend upon the life, Service or other status of the Participant. The
Committee shall have full and exclusive authority to interpret and apply the
provisions of the Plan to transferees to the extent not specifically addressed
herein.

Section 6.2           Vesting Date.

(a)          Subject to any restrictions set forth in the Plan:

(i)           the Vesting Date for each Restricted Stock Award shall be
determined by the Committee and specified in the Award Agreement; and

(ii)          notwithstanding Section 6.2(a)(i), no more than 32,500 Shares in
total may be awarded under the Plan, whether pursuant to an Option or a
Restricted Stock Award, with a Vesting Date that is earlier than the first
anniversary of the date the Award is granted (taking into account Shares whose
Vesting Date is accelerated by the Committee pursuant to Section 4.2(b) to a
date that is earlier than the first anniversary of the date the Award is
granted).

(b)          Unless otherwise determined by the Committee and specified in the
Award Agreement:

(i)           if the Participant of a Restricted Stock Award terminates Service
prior to the Vesting Date for any reason other than death or Disability, or
prior to a Change in Control, any unvested Shares shall be forfeited without
consideration;

(ii)          if the Participant of a Restricted Stock Award terminates Service
prior to the Vesting Date on account of death or Disability, the Vesting Date
shall be accelerated to the date of termination of the Participant’s Service
with the Company; and

(iii)         if a Change in Control occurs prior to the Vesting Date of a
Restricted Stock Award that is outstanding on the date of the Change in Control,
and the Participant experiences an Involuntary Separation from Service other
than a Termination for Cause during the 365-day period following the date of
such Change in Control, then the Vesting Date for any non-vested Restricted
Stock Award shall be accelerated to the date of the Participant’s Involuntary
Separation from Service.  Notwithstanding the preceding sentence, if at the
effective time of the Change in Control the successor to the Company’s business
and/or assets does not either assume the outstanding Restricted Stock Award or
replace the outstanding Restricted Stock Award with an award that is determined
by the Committee to be at least equivalent in value to such outstanding
Restricted Stock Award on the date of the Change in Control, then the Vesting
Date of such outstanding Restricted Stock Award shall be accelerated to the
earliest date of the Change in Control.

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Section 6.3           Dividend Rights.

Any dividends or distributions (collectively referred to herein as “Dividends”)
declared and paid with respect to Shares subject to a Restricted Stock Award,
whether or not in cash, shall be held by the Company on behalf of the
Participant.  If the Participant becomes vested in his Shares that are subject
to the Restricted Stock Award, then the Company shall pay the Dividends related
to those Shares to the Participant or his Beneficiary in a lump sum, without
interest, no later than thirty (30) days following the Vesting Date of those
Shares.   The Participant and his Beneficiaries heirs, successors or assigns
shall have no legal or equitable rights, interests or claims in any property or
assets of the Company or an Affiliate with respect to held Dividends, and such
Dividends shall, until paid, remain general, unpledged and unrestricted assets
of the Company.  The Company’s obligation under the Plan with respect to held
Dividends shall be merely of an unfunded and unsecured promise to pay money in
the future.

Section 6.4           Voting Rights.

Unless otherwise specified in the Award Agreement, voting rights appurtenant to
the Shares subject to the Restricted Stock Award shall be exercised by the
Participant.

Section 6.5           Designation of Beneficiary.

A Participant who has received a Restricted Stock Award may designate a
Beneficiary to receive any unvested Shares that become vested on the date of the
Participant’s death.  Such designation (and any change or revocation of such
designation) shall be made in writing in the form and manner prescribed by the
Committee.  In the event that the Beneficiary designated by a Participant dies
prior to the Participant, or in the event that no Beneficiary has been
designated, any vested Shares that become available for distribution on the
Participant’s death shall be paid to the executor or administrator of the
Participant’s estate.

Section 6.6           Manner of Distribution of Awards.

The Company's obligation to deliver Shares with respect to a Restricted Stock
Award shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Participant or Beneficiary
to whom such Shares are to be delivered, in such form as the Committee shall
determine to be necessary or advisable to comply with the provisions of
applicable federal, state or local law. It may be provided that any such
representation shall become inoperative upon a registration of the Shares or
upon the occurrence of any other event eliminating the necessity of such
representation. The Company shall not be required to deliver any Shares under
the Plan prior to (i) the admission of such Shares to listing on any stock
exchange or trading on any automated quotation system on which Shares may then
be listed or traded, or (ii) the completion of such registration or other
qualification under any state or federal law, rule or regulation as the
Committee shall determine to be necessary or advisable.

ARTICLE VII

ADDITIONAL TAX PROVISION

Section 7.1           Tax Withholding Rights.

The Company shall have the power and the right to deduct or withhold, or require
a Person to remit to the Company, an amount sufficient to satisfy Federal, state
and local taxes (including the Participant’s FICA obligation) required by law to
be withheld with respect to any grant, exercise or payment made under or as a
result of the Plan.  In this regard, where any Person is entitled to receive
Shares, the Company shall have the right to require such Person to pay to the
Company the amount of any tax which the Company is required to withhold with
respect to such Shares, or, in lieu thereof, to retain, or to sell without
notice, a sufficient number of Shares to cover the minimum amount required to be
withheld, provided, however, that (a) no Shares are withheld with a value
exceeding the maximum amount of tax that may be required to be withheld by law
(or such other amount as may be permitted while still avoiding classification of
the Award as a liability for financial accounting purposes), and (b) with
respect to an Award held by any Participant who is subject to the filing
requirements of Section 16 of the

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Exchange Act, any such share withholding must be specifically approved by the
Compensation Committee as the applicable method that must be used to satisfy the
tax withholding obligation or such share withholding procedure must otherwise
satisfy the requirements for an exempt transaction under Section 16(b) of the
Exchange Act.

ARTICLE VIII

AMENDMENT AND TERMINATION

Section 8.1           Termination

The Board may suspend or terminate the Plan in whole or in part at any time
prior to the tenth anniversary of the Effective Date by giving written notice of
such suspension or termination to the Committee.  Unless sooner terminated, the
Plan shall terminate automatically on the tenth anniversary of the Effective
Date.  In the event of any suspension or termination of the Plan, all Awards
previously granted under the Plan that are outstanding on the date of such
suspension or termination of the Plan shall remain outstanding and exercisable
for the period and on the terms and conditions set forth in the Award Agreements
evidencing such Awards.

Section 8.2           Amendment.

The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that, to the extent required to avoid or comply with the
application of Section 409A, or the corporate governance standards imposed under
the listing or trading requirements imposed by any national securities exchange
or automated quotation system on which the Company lists or seeks to list or
trade Shares, no such amendment or revision shall be effective if it amends a
material term of the Plan unless approved by the holders of a majority of the
votes cast on a proposal to approve such amendment or revision.

Section 8.3           Adjustments in the Event of Business Reorganization.

In the event any recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, exchange of Shares or other
securities, stock dividend or other special and nonrecurring dividend or
distribution (whether in the form of cash, securities or other property),
liquidation, dissolution, or other similar corporate transaction or event,
affects the Shares such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of Participants under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of:

(i)           the number and kind of securities deemed to be available
thereafter for grants of Awards in the aggregate to all Participants;

(ii)          the number and kind of securities that may be delivered or
deliverable in respect of outstanding Awards; and

(iii)         the Exercise Price of Options.

In addition, the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including, without
limitation, cancellation of Awards in exchange for the in-the-money value, if
any, of the vested portion thereof, or substitution of Awards using stock of a
successor or other entity) in recognition of unusual or nonrecurring events
(including, without limitation, events described in the preceding sentence)
affecting the Company or any Affiliate or the financial statements of the
Company or any Affiliate, or in response to changes in applicable laws,
regulations, or accounting principles.

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ARTICLE IX

MISCELLANEOUS

Section 9.1           Status as an Employee Benefit Plan; Non-Application of
Section 409A.

This Plan is not intended to satisfy the requirements for qualification under
Section 401(a) of the Code or to satisfy the definitional requirements for an
"employee benefit plan" under Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation program that is exempt from the regulatory requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Plan shall be
construed and administered so as to effectuate this intent.  Since only Options
and Restricted Stock Awards that qualify for the exemption under Section 409A
may be awarded under the Plan, Section 409A shall not apply to Awards granted
hereunder.  Accordingly, no Award may granted hereunder that is subject to
Section 409A, and any Award so granted shall be void ab initio.  It is also
intended that Dividends that are held as described in Section 6.3 shall, if
payable, be paid promptly enough to cause such payment to qualify as a
“short-term deferral” that is exempt from the application of Section 409A.

Section 9.2           No Right to Continued Service.

Neither the establishment of the Plan nor any provisions of the Plan nor any
action of the Board or Committee with respect to the Plan shall be held or
construed to confer upon any Participant any right to a continuation of his or
her position as a director, emeritus director, officer, employee or advisory
director of the Company or any Affiliate.  The Company reserves the right to
remove any participating member of the Board or dismiss any Participant or
otherwise deal with any Participant to the same extent as though the Plan had
not been adopted.

Section 9.3           Construction of Language.

Whenever appropriate in the Plan, words used in the singular may be read in the
plural, words used in the plural may be read in the singular, and words
importing the masculine gender may be read as referring equally to the feminine
or the neuter. Any reference to an Article or Section number shall refer to an
Article or Section of this Plan unless otherwise indicated.

 

Section 9.4           Severability.

In the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

 

Section 9.5           Governing Law.

The Plan shall be construed, administered and enforced according to the laws of
the State of Washington without giving effect to the conflict of laws principles
thereof.  The federal and state courts located in the County or contiguous
counties in which the Company’s headquarters are located shall have exclusive
jurisdiction over any claim, action, complaint or lawsuit brought under the
terms of the Plan. By accepting any Award granted under this Plan, the
Participant, and any other person claiming any rights under the Plan, agrees to
submit himself, and any such legal action as he shall bring under the Plan, to
the sole jurisdiction of such courts for the adjudication and resolution of any
such disputes.

Section 9.6           Headings.

The headings of Articles and Sections are included solely for convenience of
reference.  If there is any conflict between such headings and the text of the
Plan, the text shall control.

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Section 9.7           Non-Alienation of Benefits.

The right to receive a benefit under the Plan shall not be subject in any manner
to anticipation, alienation or assignment, nor shall such right be liable for or
subject to debts, contracts, liabilities, engagements or torts.

Section 9.8           Notices.

Any communication required or permitted to be given under the Plan, including
any notice, direction, designation, comment, instruction, objection or waiver,
shall be in writing and shall be deemed to have been given at such time as it is
delivered personally or three (3) days after mailing if mailed, postage prepaid,
by registered or certified mail, return receipt requested, addressed to such
party at the address listed below, or at such other address as one such party
may by written notice specify to the other party:

(a)          If to the Committee:

FS Bancorp, Inc.

6920 220th Street, SW

Mountlake Terrace, Washington 98043

Attention:  Corporate Secretary

 

(b)          If to a Participant, to such person’s address as shown in the
Company’s records.

Section 9.9           Approval of Shareholders.

The Plan shall be subject to approval by the Company’s shareholders within
twelve (12) months before or after the date the Board adopts the Plan.

Section 9.10            Clawback.

All Awards (whether vested or unvested) shall be subject to such clawback
(recovery) as may be required to be made pursuant to law, rule, regulation or
stock exchange listing requirement or any policy of the Company adopted pursuant
to any such law, rule, regulation or stock exchange listing requirement.

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