Exhibit 10.19

 

**PROPOSED**

**AMENDED PACIFICNORTHWEST BANCORP**

 

**1996 OUTSIDEDIRECTORS STOCK OPTIONS-FOR-FEES PLAN**

 

**(Effective January 1,2002)**

 

1.             **Purposeof Plan**.  The purpose ofthe Amended Pacific Northwest Bancorp 1996 Outside Directors StockOptions-for-Fees Plan is to provide non-employee directors of the Corporationwith an increased incentive to make significant and extraordinary contributionsto the long-term performance and growth of the Corporation and its Affiliates,to join the interests of non-employee directors with the interests of thestockholders of the Corporation, and to facilitate attracting and retainingnon-employee directors of exceptional ability.

 

2.             **Definitions**.  As used herein, the following definitionsshall apply:

 

"Affiliate"shall mean any corporation in which the Corporation owns, directly orindirectly, stock possessing more than fifty percent of the combined votingpower of all classes of stock.

 

"Board ofDirectors" shall mean the board of directors of the Corporation.

 

"Committee" shall mean a committee of the Board of Directorsdesignated by the Board to administer the Plan.

 

"Common Stock" shall mean the common stock, no par value pershare, of the Corporation.

 

"Corporation" shall mean Pacific Northwest Bancorp, aWashington corporation, or any successor thereof.

 

"Director Notice" shall mean a written notice setting forththe Participant's election under Section 4(b) of the Plan and delivered by aParticipant to the Corporation prior to the first day of the calendar year, tobe effective for such year or years as are specified in such notice. A DirectorNotice shall be irrevocable for the current calendar year but may be modifiedby a Participant with respect to a future year(s).

 

“Fair MarketValue" shall mean, as of any date, the closing price of the Corporation'sCommon Stock on the Nasdaq National Market System. If the Common Stock is nottraded on a national securities exchange or quoted on the Nasdaq Stock Market,and there are not at least two brokerage companies reporting a bid price pershare on the Option Grant Date, then the Fair Market Value shall be that valuedetermined in good faith by the Committee in such manner as it deemsappropriate.

 

"NonqualifiedOption" shall mean an option to purchase Common Stock which meets therequirements set forth in the Plan but does not meet the definition of anincentive stock option set forth in Section 422 of the Internal Revenue Code of1986, as amended (the "Code").

 

"Option Grant Date" shall mean the firstbusiness day of each calendar year following the effective date of thePlan.

 

"Option Price" shall mean the price at which a NonqualifiedOption may be exercised which shall be the Fair Market Value on the OptionGrant Date of such Nonqualified Option.

 

"Participant" shall mean a member of the Board of Directorswho is not an employee of the Corporation or an Affiliate.

 

"Plan" shall mean this Amended Pacific Northwest Bancorp 1996Outside Directors Stock Options-for-Fees Plan.

 

"Total Director Fees" shall mean, with respect to anycalendar year, $10,000, as the retainer fee payable to an outside Director forservice on the Board of Directors of the Corporation.

 

3.             **Administration**.  The Plan shall be administered by theCommittee. Subject to the provisions of the Plan, the Committee is authorizedto interpret the Plan, to promulgate, amend and rescind rules and regulationsrelating to the Plan and to make all other determinations necessary oradvisable for its administration. Interpretation and construction of anyprovision of the Plan by the Committee shall be final and conclusive. Actsapproved by a majority of the members present at any meeting at which a quorumis present, or acts unanimously approved in writing by the Committee, shall bethe acts of the Committee.

 

4.             **AnnualGrants**.

 

(a)            Each Participant shall deliver aDirector Notice to the Corporation on or before the date specified in the Plan.During the term of this Plan, on the first business day of each calendar yearfollowing the effective date of the Plan, each Participant shall receive aNonqualified Option to the extent of the Participant's election in his or herDirector Notice in effect for such year. The option exercise price for eachsuch Nonqualified Option shall be the Option Price. If, with respect to any calendaryear, a Director Notice is not received from a Participant, the Participant'sTotal Director Fees shall be payable in cash.

 

(b)           Each Participant may specify one ofthe following elections in a Director Notice:

 

(i)            Option 1.  Receive Total Director Fees in cash, payable quarterly;

 

(ii)           Option 2.  Convert the right to receive fifty percent(50%) of the retainer (currently $5,000) for an option to purchase three timesthe dollar amount of the converted retainer (currently $15,000) worth of CommonStock at the fair market value on the date of grant, or

 

(iii)          Option 3.  Convert the right to receive the entireannual retainer (currently $10,000) for an option to purchase three times thedollar amount of the converted retainer (currently $30,000) worth of CommonStock at the fair market value on the date of grant.

 

5.             **Vesting**.  Each Nonqualified Option issued pursuant tothis Plan shall be conditioned on the Participant continuing to serve as amember of the Board for a period of one (1) year following the Option GrantDate. The Nonqualified Option may not be exercised during said one (1) yearperiod. If a Participant ceases to be a member of the Board prior to theexpiration of the one (1) year period, all unexercisable Nonqualified Optionsheld by the Participant shall be cancelled as of the Participant's last day ofservice.

 

6.             **Indemnification of Committee Members**.  In addition to such other rights ofindemnification as they may have, the members of the Committee shall beindemnified by the Corporation against the reasonable expenses, includingattorneys' fees, actually and necessarily incurred in connection with thedefense of any action, suit or proceeding, or in connection with any appealtherein, to which they or any of them may be a party by reason of any actiontaken or failure to act under or in connection with the Plan or any optiongranted hereunder, and against all amounts paid by them in settlement thereof(provided such settlement is approved by independent legal counsel selected bythe Corporation) or paid by them in satisfaction of a judgment in any suchaction, suit or proceeding, except in relation to matters as to which it shallbe adjudged in such action, suit or proceeding that such Committee member hasacted in bad faith; provided, however, that within sixty (60) days afterreceipt of notice of institution of any such action, suit or proceeding aCommittee member shall offer the Corporation in writing the opportunity, at itsown cost, to handle and defend the same.

 

7.             **MaximumNumber of Shares Subject to Plan**.  The maximum number of shares with respect to which stock optionsmay be granted under the Plan shall be 25,000 shares in the aggregate of CommonStock of the Corporation, which may consist in whole or in part of theauthorized and unissued or reacquired Common Stock of the Corporation. If astock option expires or terminates for any reason without having been fullyexercised, the number of shares with respect to which the stock option was notexercised at the time of its expiration or termination shall again becomeavailable for the grant of stock options under the Plan, unless the Plan shallhave been terminated.

 

The number of shares subject to each outstanding stock option, theoption price with respect to outstanding stock options, and the aggregatenumber of shares remaining available under the Plan shall be subject to suchadjustment as the Committee, in its discretion, deems appropriate to reflectsuch events as stock dividends, stock splits, recapitalization, mergers, consolidationsor reorganizations of or by the Corporation; provided, however, that nofractional shares shall be issued pursuant to the Plan, no rights may begranted under the Plan with respect to fractional shares, and any fractionalshares resulting from such adjustments shall be eliminated from any outstandingstock option.

 

8.             **WrittenAgreement**.  Each stockoption shall be evidenced by a written agreement and shall contain suchprovisions as may be approved by the Committee. Such agreements shall constitutebinding contracts between the Corporation and the Participant, and everyParticipant, upon acceptance of such agreement, shall be bound by the terms andrestrictions of the Plan and of such agreement. The terms of each suchagreement shall be in accordance with the Plan, but the agreements may includesuch additional provisions and restrictions determined by the Committee,provided that such additional provisions and restrictions are not inconsistentwith the terms of the Plan.

 

9.             **Paymentof Stock Option Price**. To exercise in whole or in part any stock option granted hereunder,payment of the option price in full in cash shall be made by the Participantfor all shares so purchased. No Participant shall have any of the rights of astockholder of the Corporation under any stock option until the actual issuanceof shares to said Participant, and prior to such issuance no adjustment shallbe made for dividends, distributions or other rights in respect of such shares,except as provided in Paragraph 7.

 

10.           **Exercise of Stock Options**.  A Participant may exercise a stock option,in whole or in part, by delivery to the Corporation of written notice of theexercise, in such form as the Committee may prescribe, accompanied by (i) fullpayment for the shares with respect to which the stock option is exercised, incash, or (ii) in the sole discretion of the Committee, irrevocable instructionsto a stock broker to promptly deliver to the Corporation full payment for theshares with respect to which the stock option is exercised from the proceeds ofthe stock broker's sale of or loan against the shares. Successive stock optionsmay be granted to the same Participant, whether or not the stock option(s)previously granted to such Participant remain unexercised. A Participant mayexercise a stock option, if then exercisable, notwithstanding that stockoptions previously granted to such Participant remain unexercised.

 

11.           **Nontransferability of Stock Options**.  Except to the extent authorized by theCommittee, no stock option granted under the Plan to a Participant shall betransferable by such Participant otherwise than by will, or by the laws ofdescent and distribution, and stock options shall be exercisable, during thelifetime of the Participant, only by the Participant.

 

12.           **Term of Stock Options**.  If not sooner terminated, each stock optiongranted hereunder shall expire upon the earlier to occur of the date five (5)years from Option Grant Date or the date ninety (90) days (three (3) years inthe event a director attains the Board's mandatory retirement age or, withCommittee approval, upon termination of service for any other reason, otherthan voluntary resignation or termination for cause) following the date uponwhich the Participant ceases to be a member of the Board of Directors.Notwithstanding the foregoing, all outstanding options held by a Participantshall expire immediately upon the Participant's termination for cause. Forpurposes of this plan, "termination for cause" shall mean terminationbecause of a Participant's personal dishonesty, incompetence, willfulmisconduct, breach of fiduciary duty involving personal profit, intentionalfailure to perform stated duties, or willful violation of any law, rule, orregulation (other than traffic violations or similar offenses).

 

13.           **Investment Purpose**.  If the Committee in its discretiondetermines that as a matter of law such procedure is or may be desirable, itmay require a Participant, upon any acquisition of stock hereunder and as acondition to the Corporation's obligation to deliver certificates representingsuch shares, to execute and deliver to the Corporation a written statement, inform satisfactory to the Committee, representing and warranting that theParticipant's acquisition of shares of stock shall be for such person's ownaccount, for investment and not with a view to the resale or distributionthereof and that any subsequent offer for sale or sale of any such shares shallbe made either pursuant to (a) a Registration Statement on an appropriate formunder the Securities Act of 1933, as amended (the "Securities Act"),which Registration Statement has become effective and is current with respectto the shares being offered and sold, or (b) a specific exemption from theregistration requirements of the Securities Act, but in claiming such exemptionthe Participant shall, prior to any offer for sale or sale of such shares,obtain either the Corporation's approval or a favorable written opinion fromcounsel for or approved by the Corporation as to the availability of suchexemption. The Corporation may endorse an appropriate legend referring to theforegoing restriction upon the certificate or certificates representing anyshares issued or transferred to the Participant under this Plan.

 

14.           **No Right to Continued Service as aDirector**.  Nothingcontained in the Plan or in any stock option granted pursuant to the Plan, norany action taken by the Committee hereunder, shall confer upon any Participantany right with respect to continuation of service as a director of theCorporation or an Affiliate nor interfere in any way with the right of theCorporation, any Affiliate, or their stockholders to terminate suchParticipant's service as a director at any time.

 

15.           **Withholding Payments**.  If upon the exercise of an option thereshall be payable by the Corporation any amount for income tax withholding, thenin the Committee's sole discretion, either the Corporation shall appropriatelyreduce the amount of stock to be paid to the Participant or the Participantshall pay such amount to the Corporation to reimburse it for such income taxwithholding. The Committee may, in its sole discretion permit Participants tosatisfy such withholding obligations, in whole or in part, by electing to havethe amount of Common Stock delivered or deliverable upon exercise of a stockoption appropriately reduced, or by electing to tender Common Stock back to theCorporation subsequent to exercise of a stock option, to reimburse theCorporation for such income tax withholding, subject to such rules andregulations as the Committee may adopt. The Committee may make such otherarrangements with respect to income tax withholding as it shall determine.

 

16.           **Termination, Duration, and Amendmentof Plan**.

 

(a)            The Plan may beterminated at any time by the Board of Directors of the Corporation. Unlesssooner terminated, the Plan shall terminate on December 31, 2005, and nostock options may be granted thereafter. The termination of the Plan shall not affect the validity of any stockoption outstanding on the date of termination.

 

(b)           The Board ofDirectors may amend, alter, suspend, discontinue, or terminate the Plan or anyportion thereof at any time; provided that no such amendment, alteration,suspension, discontinuation or termination shall be made without shareholderapproval if such approval is necessary to comply with any tax or regulatoryrequirement.

 

17.           **Section 16 Compliance**.  With respect to persons subject to Section16 of the Exchange Act, transactions under this Plan are intended to complywith all applicable terms and conditions of Rule 16b-3 and any successorprovisions. To the extent that any provision of the Plan or action by theCommittee or the Board of Directors fails to so comply, it shall be deemed nulland void, to the extent permitted by law and deemed advisable by the Committee.

 

18.           **Governing Law**.  The validity, construction, and effect ofthe Plan and any rules and regulations relating to the Plan shall be determinedin accordance with the laws of the State of Washington, without giving effectto the choice of law principles thereof.