Document:

Exhibit
10.7

 

THE
WASHINGTON SAVINGS BANK, F.S.B.

1999
STOCK OPTION AND INCENTIVE PLAN

STOCK
OPTION AGREEMENT

 

This Stock Option
Agreement is made as of «GrantDate» by and between The Washington Savings Bank,
F.S.B., a federally chartered, federally insured stock savings bank (the “Company”),
and «Name», an individual
(the “Optionee”) who is employed by, or providing services to, the Company or
one of its affiliates.

 

WHEREAS, the Board of Directors have duly adopted and
the stockholders of the Company have approved the Washington Savings Bank,
F.S.B. 1999 Stock Option and Incentive Plan (the “Plan”), which Plan authorizes
the Company to grant to eligible individuals options for the purchase of shares
of the Company’s Common Stock, par value $1.00 per share (the “Stock”); and

 

WHEREAS, the Company has
determined that it is desirable and in its best interests to grant to the
Optionee, pursuant to the Plan, an option to purchase a certain number of
shares of Stock in order to provide the Optionee with an incentive to advance
the interests of the Company or one of its affiliates.

 

NOW, THEREFORE, in
consideration of the mutual promises and covenants contained herein, the
parties hereto do hereby agree as follows:

 

1.                                      GRANT OF OPTION

 

Subject to the terms of
the Plan, the Company hereby grants to the Optionee the right and option (the “Option”)
to purchase from the Company, on the terms and subject to the conditions set
forth in the Plan and in this Option Agreement, «Shares» shares of Stock. This Option shall constitute a
non-qualified stock option. The date of grant of this Option is «GrantDate».

 

2.                                      OPTION PRICE

 

The purchase price (the “Option
Price”) for each share of Stock subject to the Option granted by this Stock
Option Agreement is «Optionsprice».

 

3.                                      TERMS OF PLAN

 

The Option granted
pursuant to this Stock Option Agreement is granted subject to the terms and
conditions set forth in the Plan. All terms and

 

 

conditions of the Plan are hereby incorporated into this Stock Option
Agreement by reference and shall be deemed to be part of this Stock Option
Agreement, without regard to whether such terms and conditions are not
otherwise set forth in this Stock Option Agreement. To the extent any
capitalized words used in this Stock Option Agreement are not defined, they
shall have the definitions stated for them in the Plan. In the event that there
is any inconsistency between the provisions of this Stock Option Agreement and
of the Plan, the provisions of the Plan shall govern.

 

4.                                      EXERCISE OF
OPTION

 

4.1.                            Term

 

The Option shall
terminate and all rights to purchase the shares thereunder shall cease upon the
expiration of ten years after the Grant Date, unless terminated earlier
pursuant to another provision of this Stock Option Agreement.

 

4.2.                            Option Period and Limitations on
Exercise

 

The Optionee may exercise
the Option (subject to the limitations on exercise set forth in this Stock
Option Agreement and in the Plan), to the extent the Option is vested and has
not terminated. Any limitation on the exercise of an Option may be rescinded,
modified or waived by the Washington Savings Bank, F.S.B. Option Committee (the
“Committee”), in its sole discretion, at any time and from time to time after
the Grant Date of the Option, so as to accelerate the time at which the Option
may be exercised.

 

4.3.                            Limitations on Exercise of Option

 

Notwithstanding the
foregoing Sections, in no event may the Option be exercised in whole or in
part:  (i) after ten years following the
Grant Date, as set forth in Section 1 above, (ii) following termination of
services for Cause (as defined below) or, if earlier, upon the Optionee’s
receipt of notice that the Company has terminated the Optionee’s employment or
other relationship for Cause, (iii) after an occurrence of an event referred to
in Section 9 hereof which results in
termination of the Option or (iv) following termination of employment or other
relationship except as provided in Sections 5.1, 5.2, and 5.3 below.

 

For purposes of this
Stock Option Agreement, “Cause” means (i) gross negligence or willful
misconduct in connection with the performance of duties; (ii) conviction of a
criminal offense (other than minor traffic offenses); or (iii) material breach
of any term of any employment, consulting or other services, confidentiality, intellectual
property or non-competition agreements, if any, between Optionee and the
Company or any of its affiliates.

 

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4.4.                            Vesting in Options and Definition of
Termination of Service

 

The Option becomes vested
as to fifty percent (50%) of the shares purchasable pursuant to the Option on
the one year anniversary of the Grant Date (the “Anniversary Date”), if the
Optionee has been providing services to the Company or any of its affiliates
continuously from the Grant Date to the Anniversary Date. Thereafter, so long
as continuous service has not been interrupted, the Option becomes vested as to
the remaining fifty percent (50%) of the shares subject to the Option one year
from the Anniversary Date. Service for this purpose includes service as an
employee, director, advisor or consultant providing bona fide services to the
Company or any of its affiliates. For purposes of this Stock Option Agreement,
termination of service would not be deemed to occur if the Optionee, after
terminating service in one capacity, continues to provide bona fide service to
the Company or any of its affiliates in another capacity. Termination of
service is sometimes also referred to herein as termination of employment or
other relationship with the Company or any of its affiliates.

 

4.5.                            Method of Exercise

 

The Option may be
exercised to the extent that shares have become exercisable hereunder by
delivery to the Company on any business day, at its principal office addressed
to the attention of the Committee, of written notice of exercise, which notice
shall specify the number of shares for which the Option is being exercised, and
shall be accompanied by payment in full of the Option Price of the shares for
which the Option is being exercised. Payment of the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option shall be made (i) in
cash or by certified check payable to the order of the Company; (ii) through
the tender to the Company of shares of Stock, which, if acquired from the
Company, have been held for six months and which shares shall be valued, for
purposes of determining the extent to which the Option Price has been paid
thereby, at their Fair Market Value on the date of exercise; or (iii) by a combination
of the methods described in Sections 4.5(i) and (ii) hereof.

 

If the Stock is publicly
traded, payment in full of the Option Price need not accompany the written
notice of exercise provided the notice directs that the Stock certificate or
certificates for the shares for which the Option is exercised be delivered to a
licensed broker acceptable to the Company as the agent for the individual
exercising the Option and, at the time such Stock certificate or certificates
are delivered, the broker tenders to the Company cash (or cash equivalents
acceptable to the Company) equal to the Option Price plus the amount (if any)
of federal and/or other taxes which the Company may, in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Promptly after the exercise of an Option
and the payment in full of the Option Price of the shares of Stock covered
thereby, the

 

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Optionee shall be entitled to the issuance of a Stock certificate or
certificates evidencing such individual’s ownership of such shares. An
individual holding or exercising the Option shall have none of the rights of a
stockholder until the shares of Stock covered thereby are fully paid and issued
to such individual and, except as provided in Section 9
hereof, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date of such issuance.

 

5.                                      TERMINATION OF
THE SERVICE RELATIONSHIP

 

5.1.                            Termination of Employment or Other
Relationship

 

The Option shall remain
exercisable for ninety (90) days following a termination of the employment or
other relationship of the Optionee with the Company or one of its affiliates,
other than for Cause or by reason of the death or “permanent and total
disability” (within the meaning of Section 22(e)(3) of the Code) of the
Optionee, to the extent such Option was vested at the time of termination. At
the end of such ninety (90) day period, the Option shall terminate unless
notice is given exercising such Option, and such Optionee shall have no further
right to purchase shares pursuant to such Option. If the termination of
employment or other relationship is for Cause, the Option shall terminate on
the termination of employment or other relationship or, if earlier, upon receipt of notice that the Company has terminated
the Optionee’s employment or other relationship for Cause. Whether a leave
of absence or leave on military or government service shall constitute a
termination of employment or other relationship for purposes of this Stock
Option Agreement shall be determined by the Committee, which determination
shall be final and conclusive. A termination of employment or other
relationship shall not be deemed to have occurred if, on termination of
employment or other relationship, the Optionee is employed or has a
relationship with the Company or one of its affiliates.

 

5.2.                            Rights in the Event of Death

 

If the Optionee dies
while employed by, or in the service of the Company or one of its affiliates,
the executors or administrators or legatees or distributees of such Optionee’s
estate shall have the right at any time within one year after the date of such
Optionee’s death, and subject to the general limitations imposed by Section 4.3 above, to exercise, in whole or in part, any
Option held by such Optionee at the date of such Optionee’s death, whether or
not such Option was exercisable immediately prior to such Optionee’s death.

 

5.3.                            Rights in the Event of Disability

 

If the Optionee
terminates employment or other relationship with the Company or one of its
affiliates by reason of the “permanent and total disability” (within the
meaning of Section 22(e)(3) of the Code) of the Optionee, the Option
granted hereunder shall continue to vest, and shall be exercisable to the
extent it is

 

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vested, for a period of one year after such termination of employment
or service, subject to the general limitation on exercise imposed by Section 4.3 above. Whether a termination of employment or
service is to be considered by reason of “permanent and total disability” for
purposes of the Plan shall be determined by the Board, which determination
shall be final and conclusive.

 

6.                                      PARACHUTE
LIMITATIONS

 

Notwithstanding any other
provision of this Stock Option Agreement or of any other agreement, contract,
or understanding heretofore or hereafter entered into by the Optionee and the
Company or any affiliate, except an agreement, contract, or understanding
hereafter entered into that expressly modifies or excludes application of this
Section (the “Other Agreements”), and notwithstanding any formal or informal
plan or other arrangement heretofore or hereafter adopted by the Company (or
any affiliate) for the direct or indirect compensation of the Optionee
(including groups or classes of participants or beneficiaries of which the
Optionee is a member), whether or not such compensation is deferred, is in
cash, or is in the form of a benefit to or for the Optionee (a “Benefit
Arrangement”), if the Optionee is a “disqualified individual,” as defined in
Section 280G(c) of the Code, the Option and any right to receive any payment
or other benefit under this Stock Option Agreement shall not become exercisable
or vested (i) to the extent that such right to exercise, vesting, payment,
or benefit, taking into account all other rights, payments, or benefits to or
for Optionee under the Plan, all Other Agreements, and all Benefit
Arrangements, would cause any payment or benefit to the Optionee under this
Stock Option Agreement to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Optionee from the
Company under this Stock Option Agreement, the Plan, all Other Agreements, and
all Benefit Arrangements would be less than the maximum after-tax amount that
could be received by Optionee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Stock Option Agreement, in
conjunction with all other rights, payments, or benefits to or for the Optionee
under the Plan, any Other Agreement or any Benefit Arrangement would cause the
Optionee to be considered to have received a Parachute Payment under this Stock
Option Agreement that would have the effect of decreasing the after-tax amount
received by the Optionee as described in clause (ii) of the preceding
sentence, then the Optionee shall have the right, in the Optionee’s sole
discretion, to designate those rights, payments, or benefits under this Stock
Option Agreement, the Plan, any Other Agreements, and any Benefit Arrangements
that should be reduced or eliminated so as to avoid having the payment or
benefit to the Optionee under this Stock Option Agreement be deemed to be a
Parachute Payment.

 

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7.                                      TRANSFERABILITY

 

During the lifetime of
the Grantee, only the Grantee (or, in the event of legal incapacity or
incompetency, the Grantee’s guardian or legal representative) may exercise an
Option. No Option shall be assignable or transferable by the Grantee to whom it
is granted, other than by will or the laws of descent and distribution.

 

8.                                      REQUIREMENTS OF
LAW

 

The Company shall not be
required to sell or issue any securities under the Option if the sale or
issuance of such securities would constitute a violation by the Optionee, the
individual exercising the Option, or the Company of any provisions of any law
or regulation of any governmental authority, including without limitation any
federal or state securities laws or regulations. If at any time the Company
shall determine, in its discretion, that the listing, registration or
qualification of any securities subject to the Option upon any securities
exchange or under any governmental regulatory body is necessary or desirable as
a condition of, or in connection with, the issuance or purchase of securities
hereunder, the Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Option. Specifically in connection with the 1933 Act, upon the exercise of the
Option, unless a registration statement under such act is in effect with
respect to the securities covered by the Option, the Company shall not be
required to sell or issue such securities unless the Committee has received
evidence satisfactory to it that the holder of such Option may acquire such
securities pursuant to an exemption from registration under such act. Any
determination in this connection by the Committee shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the 1933 Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of
the Option or the issuance of securities pursuant thereto to comply with any
law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that the Option shall not be exercisable
until the securities covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the
laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

 

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9.                                      EFFECT OF
CHANGES IN CAPITALIZATION

 

9.1.                            Changes in Stock

 

If the number of
outstanding shares of Stock is increased or decreased or the shares of Stock
are changed into or exchanged for a different number or kind of shares or other
securities of the Company on account of any recapitalization, reclassification,
stock split, reverse split combination of shares, exchange of shares, stock
dividend or other distribution payable in capital stock, or other increase or
decrease in such shares effected without receipt of consideration by the
Company, occurring after the date of grant of the Option, the number and kinds
of shares of Stock for which the Option was granted shall be adjusted
proportionately and accordingly by the Company so that the proportionate
interest of the Optionee immediately following such event shall, to the extent
practicable, be the same as immediately before such event. Any such adjustment
in the Option shall not change the aggregate Option Price payable with respect
to shares that are subject to the unexercised portion of the Option but shall
include a corresponding proportionate adjustment in the Option Price per share.

 

9.2.                            Reorganization in Which the Company
Is the Surviving Entity and in Which No Change in Control Occurs.

 

Subject
to Section 9.3 hereof, if the Company
shall be the surviving entity in any reorganization, merger, or consolidation
of the Company with one or more other entities in which no Change in Control
Occurs (as defined in the Plan), the Option shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares  remaining subject to the Option immediately
prior to such reorganization, merger, or consolidation.

 

9.3.                            Reorganization, Sale of Assets or
Sale of Stock Which Involves a Change in Control.

 

Upon
the dissolution or liquidation of the Company or upon any transaction approved
by the Board that results in a Change in Control (as defined in the Plan), the
Option, to the extent it remains outstanding, shall become immediately
exercisable for a period of fifteen days immediately prior to the scheduled
consummation of the event. Any exercise of the Option during such fifteen-day
period shall be conditioned upon the consummation of the event and shall be
effective only immediately before the consummation of the event. Upon
consummation of any such event, the Plan and all outstanding but unexercised
Options shall terminate, except to the extent provision is made in writing in connection
with such transaction for the

 

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assumption of such Options theretofore granted, or for the substitution
for such Options of new options covering the stock of a successor entity, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kinds of shares or units and exercise prices, in which event the Options
theretofore granted shall continue in the manner and under the terms so
provided. The Board shall send written notice of an event that will result in
such a termination to all individuals who hold Options not later than the time
at which the Company gives notice thereof to its stockholders.

 

9.4.                            Adjustments

 

Adjustments under this Section 9 related to stock or securities of the Company
shall be made by the Board, whose determination in that respect shall be final,
binding, and conclusive. No fractional shares of Stock or units of other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.

 

9.5.                            No Limitations on Company

 

The grant of the Option
shall not affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.

 

10.                               POOLING OF
INTERESTS

 

The Optionee, upon advice
from the Company, shall take (or refrain from taking, as appropriate) all
actions necessary or desirable with respect to this Option to ensure that
pooling of interests accounting is available to the Company.

 

11.                               DISCLAIMER OF
RIGHTS

 

No provision in this
Stock Option Agreement shall be construed to confer upon any individual the
right to remain in the employ or service of the Company or any of its
affiliates, or to interfere in any way with any contractual or other right or
authority of the Company or any of its affiliates either to increase or
decrease the compensation or other payments to any individual at any time, or
to terminate any employment or other relationship between any individual and
the Company or any of its affiliates. In addition, notwithstanding anything
contained in the Plan to the contrary, the Option shall not be affected by any
change of duties or position of the Optionee (including a transfer to or from
the Company or any of its affiliates), so long as such Optionee continues to be
an employee of, or otherwise in the service of, the Company or any of its
affiliates.

 

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12.                               FORFEITURE OF
RIGHTS

 

The Company at any time
shall have the right to cause a forfeiture of the rights of the Optionee on
account of the Optionee taking actions in competition with the Company. Unless
otherwise specified in an employment or other agreement between the Company and
the Optionee, the Optionee takes actions in competition with the Company if he
or she directly or indirectly owns any interest in, operates, joins, controls
or participates as a partner, director, principal, officer, or agent of, enters
into the employment of, acts as a consultant to, or performs any services for,
any entity which has material operations which compete with any business in
which the Company or any of its affiliates is engaged during the Optionee’s
employment or other relationship with the Company or any of its affiliates or
at the time of the Optionee’s termination of employment or other relationship.

 

13.                               CAPTIONS

 

The use of captions in
this Stock Option Agreement is for the convenience of reference only and shall
not affect the meaning of any provision of such Stock Option Agreement.

 

14.                               WITHHOLDING OF
TAXES

 

The Company shall have
the right to deduct from payments of any kind otherwise due to an Optionee any
federal, state, or local taxes of any kind required by law to be withheld with
respect to any payments, distributions and property transferred under this
Stock Option Agreement. At the time of exercise, the Optionee shall pay to the
Company any amount that the Company may reasonably determine to be necessary to
satisfy such withholding obligation.

 

15.                               SEVERABILITY

 

If any provision of the
Plan or this Stock Option Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions
thereof and hereof shall be severable and enforceable in accordance with their
terms, and all provisions shall remain enforceable in any other jurisdiction.

 

16.                               INTERPRETATION
OF THIS STOCK OPTION AGREEMENT

 

All decisions and
interpretations made by the Company, the Board or the Committee with regard to
any question arising under the Plan or this Stock Option Agreement shall be
final, binding and conclusive on the Company and the Optionee and any other
person entitled to exercise the Option as provided for herein.

 

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17.                               GOVERNING LAW

 

The validity and
construction of this Stock Option Agreement shall be governed by the laws of
the State of Maryland but not including the choice of law rules thereof.

 

18.                               BINDING EFFECT

 

Subject to all
restrictions provided for in this Stock Option Agreement, the Plan and by
applicable law limiting assignment and transfer of this Stock Option Agreement
and the Option provided for herein, this Stock Option Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, and assigns.

 

19.                               NOTICE

 

All notices or other
communications which may be or are required to be given by any party to any
other party pursuant to this Stock Option Agreement shall be in writing and
shall be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery or telecopier
(fax), addressed as follows:

 

If to the Company:

 

Washington Savings Bank,
F.S.B.

Attention: Option
Committee

4201 Mitchellville Road,
Suite 200

Bowie, Maryland 20716

Telecopier No.:
301-352-3131

 

If to Optionee:

 

At the address set forth
below under Optionee’s name at the foot of this Agreement.

 

Each party may designate
by notice in writing a new address to which any notice or other communication
may thereafter be so given. Each notice or other communication which shall be
mailed, delivered or transmitted in the manner described above, shall be deemed
sufficiently given for all purposes at such time as it is delivered to the
addressee with the return receipt, the delivery receipt, the affidavit of
personal courier or, with respect to a telecopy, upon acknowledgment of receipt
thereof and in all cases at such time as delivery is refused by the addressee
upon presentation.

 

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20.                               ENTIRE AGREEMENT

 

This Stock Option
Agreement and the Plan together constitute the entire agreement between the
parties hereto with respect to the subject matter hereof. Neither this Stock
Option Agreement nor any term hereof may be amended, waived, discharged or
terminated except by a written instrument signed by the Company and the
Optionee; provided, however, that the Company unilaterally may
waive any provision hereof in writing to the extent that such waiver does not
adversely affect the interests of the Optionee hereunder, but no such waiver
shall operate as or be construed to be a subsequent waiver of the same
provision or a waiver of any other provision hereof.

 

[THIS SPACE
INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the
parties hereto have duly executed and delivered this Stock Option Agreement, or
caused this Stock Option Agreement to be duly executed and delivered in their
name and on their behalf, as of the day and year first above written.

 

	
   

  	
  Washington Savings Bank, F.S.B.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  «Name»

  
	
   

  	
   

  
	
   

  	
  ADDRESS FOR NOTICE TO

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

Exhibit A:
Washington Savings Bank, F.S.B. 1999 Stock Option and Incentive Plan

 

12

 

OPTION
EXERCISE FORM

 

To be
executed by the Optionee to

exercise
the rights to purchase Stock

evidenced
by the foregoing Option

 

TO:         WASHINGTON SAVINGS BANK, F.S.B.

 

The undersigned hereby
exercises the right to purchase                      shares
of Stock covered by the attached Option in accordance with the terms and
conditions thereof, and herewith makes payment of the Option Price of such
shares in full.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address

  
				

 

 

Dated:                                              ,
          

Social Security
Number:Exhibit 10.8

 

THE WASHINGTON SAVINGS BANK, F.S.B.

2001 STOCK OPTION AND INCENTIVE PLAN

STOCK OPTION AGREEMENT

 

This
Stock Option Agreement is made as of «GrantDate» by and between The Washington Savings Bank,
F.S.B., a federally chartered, federally insured stock savings bank (the “Company”),
and «Name», an individual
(the “Optionee”) who is employed by, or providing services to, the Company or
one of its affiliates.

 

WHEREAS, the Board of Directors
have duly adopted and the stockholders of the Company have approved the
Washington Savings Bank, F.S.B. 2001 Stock Option and Incentive Plan (the “Plan”),
which Plan authorizes the Company to grant to eligible individuals options for
the purchase of shares of the Company’s Common Stock, par value $1.00 per share
(the “Stock”); and

 

WHEREAS,
the Company has determined that it is desirable and in its best interests to
grant to the Optionee, pursuant to the Plan, an option to purchase a certain
number of shares of Stock in order to provide the Optionee with an incentive to
advance the interests of the Company or one of its affiliates.

 

NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties hereto do hereby agree as follows:

 

1.                                      GRANT OF OPTION

 

Subject
to the terms of the Plan, the Company hereby grants to the Optionee the right
and option (the “Option”) to purchase from the Company, on the terms and
subject to the conditions set forth in the Plan and in this Option Agreement, «Shares» shares of Stock. This Option shall
constitute a non-qualified stock option. The date of grant of this Option is «GrantDate».

 

2.                                      OPTION PRICE

 

The
purchase price (the “Option Price”) for each share of Stock subject to the
Option granted by this Stock Option Agreement is «Optionsprice».

 

3.                                      TERMS OF PLAN

 

The
Option granted pursuant to this Stock Option Agreement is granted subject to
the terms and conditions set forth in the Plan. All terms and

 

 

conditions of the Plan are hereby incorporated
into this Stock Option Agreement by reference and shall be deemed to be part of
this Stock Option Agreement, without regard to whether such terms and
conditions are not otherwise set forth in this Stock Option Agreement. To the
extent any capitalized words used in this Stock Option Agreement are not defined,
they shall have the definitions stated for them in the Plan. In the event that
there is any inconsistency between the provisions of this Stock Option
Agreement and of the Plan, the provisions of the Plan shall govern.

 

4.                                      EXERCISE OF OPTION

 

4.1.                            Term

 

The
Option shall terminate and all rights to purchase the shares thereunder shall
cease upon the expiration of ten years after the Grant Date, unless terminated
earlier pursuant to another provision of this Stock Option Agreement.

 

4.2.                            Option Period
and Limitations on Exercise

 

The
Optionee may exercise the Option (subject to the limitations on exercise set
forth in this Stock Option Agreement and in the Plan), to the extent the Option
is vested and has not terminated. Any limitation on the exercise of an Option
may be rescinded, modified or waived by the Washington Savings Bank, F.S.B.
Option Committee (the “Committee”), in its sole discretion, at any time and
from time to time after the Grant Date of the Option, so as to accelerate the
time at which the Option may be exercised.

 

4.3.                            Limitations
on Exercise of Option

 

Notwithstanding
the foregoing Sections, in no event may the Option be exercised in whole or in
part:  (i) after ten years following the
Grant Date, as set forth in Section 1 above, (ii) following termination of
services for Cause (as defined below) or, if earlier, upon the Optionee’s
receipt of notice that the Company has terminated the Optionee’s employment or
other relationship for Cause, (iii) after an occurrence of an event referred to
in Section 9 hereof which results in
termination of the Option or (iv) following termination of employment or other
relationship except as provided in Sections 5.1, 5.2, and 5.3 below.

 

For
purposes of this Stock Option Agreement, “Cause” means (i) gross negligence or
willful misconduct in connection with the performance of duties; (ii)
conviction of a criminal offense (other than minor traffic offenses); or (iii)
material breach of any term of any employment, consulting or other services,
confidentiality, intellectual property or non-competition agreements, if any,
between Optionee and the Company or any of its affiliates.

 

2

 

4.4.                            Vesting in
Options and Definition of Termination of Service

 

The
Option becomes vested as to fifty percent (50%) of the shares purchasable
pursuant to the Option on the one year anniversary of the Grant Date (the “Anniversary
Date”), if the Optionee has been providing services to the Company or any of
its affiliates continuously from the Grant Date to the Anniversary Date. Thereafter,
so long as continuous service has not been interrupted, the Option becomes
vested as to the remaining fifty percent (50%) of the shares subject to the
Option one year from the Anniversary Date. Service for this purpose includes
service as an employee, director, advisor or consultant providing bona fide
services to the Company or any of its affiliates. For purposes of this Stock
Option Agreement, termination of service would not be deemed to occur if the Optionee,
after terminating service in one capacity, continues to provide bona fide
service to the Company or any of its affiliates in another capacity. Termination
of service is sometimes also referred to herein as termination of employment or
other relationship with the Company or any of its affiliates.

 

4.5.                            Method of
Exercise

 

The
Option may be exercised to the extent that shares have become exercisable
hereunder by delivery to the Company on any business day, at its principal
office addressed to the attention of the Committee, of written notice of
exercise, which notice shall specify the number of shares for which the Option
is being exercised, and shall be accompanied by payment in full of the Option
Price of the shares for which the Option is being exercised. Payment of the
Option Price for the shares of Stock purchased pursuant to the exercise of the
Option shall be made (i) in cash or by certified check payable to the order of
the Company; (ii) through the tender to the Company of shares of Stock, which,
if acquired from the Company, have been held for six months and which shares
shall be valued, for purposes of determining the extent to which the Option
Price has been paid thereby, at their Fair Market Value on the date of
exercise; or (iii) by a combination of the methods described in Sections 4.5(i) and (ii) hereof.

 

If
the Stock is publicly traded, payment in full of the Option Price need not
accompany the written notice of exercise provided the notice directs that the
Stock certificate or certificates for the shares for which the Option is
exercised be delivered to a licensed broker acceptable to the Company as the
agent for the individual exercising the Option and, at the time such Stock
certificate or certificates are delivered, the broker tenders to the Company
cash (or cash equivalents acceptable to the Company) equal to the Option Price
plus the amount (if any) of federal and/or other taxes which the Company may,
in its judgment, be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the shares
of Stock covered thereby, the

 

3

 

Optionee shall be entitled to the issuance of a
Stock certificate or certificates evidencing such individual’s ownership of
such shares. An individual holding or exercising the Option shall have none of
the rights of a stockholder until the shares of Stock covered thereby are fully
paid and issued to such individual and, except as provided in Section 9 hereof, no adjustment shall be made for dividends
or other rights for which the record date is prior to the date of such
issuance.

 

5.             TERMINATION OF THE SERVICE RELATIONSHIP

 

5.1.                            Termination
of Employment or Other Relationship

 

The
Option shall remain exercisable for ninety (90) days following a termination of
the employment or other relationship of the Optionee with the Company or one of
its affiliates, other than for Cause or by reason of the death or “permanent
and total disability” (within the meaning of Section 22(e)(3) of the Code)
of the Optionee, to the extent such Option was vested at the time of termination.
At the end of such ninety (90) day period, the Option shall terminate unless
notice is given exercising such Option, and such Optionee shall have no further
right to purchase shares pursuant to such Option. If the termination of
employment or other relationship is for Cause, the Option shall terminate on
the termination of employment or other relationship or, if earlier, upon receipt of notice that the Company has terminated
the Optionee’s employment or other relationship for Cause. Whether a leave
of absence or leave on military or government service shall constitute a
termination of employment or other relationship for purposes of this Stock
Option Agreement shall be determined by the Committee, which determination
shall be final and conclusive. A termination of employment or other
relationship shall not be deemed to have occurred if, on termination of
employment or other relationship, the Optionee is employed or has a
relationship with the Company or one of its affiliates.

 

5.2.                            Rights in the
Event of Death

 

If
the Optionee dies while employed by, or in the service of the Company or one of
its affiliates, the executors or administrators or legatees or distributees of
such Optionee’s estate shall have the right at any time within one year after the
date of such Optionee’s death, and subject to the general limitations imposed
by Section 4.3 above, to exercise, in
whole or in part, any Option held by such Optionee at the date of such Optionee’s
death, whether or not such Option was exercisable immediately prior to such
Optionee’s death.

 

5.3.                            Rights in the
Event of Disability

 

If
the Optionee terminates employment or other relationship with the Company or
one of its affiliates by reason of the “permanent and total disability” (within
the meaning of Section 22(e)(3) of the Code) of the Optionee, the Option
granted hereunder shall continue to vest, and shall be exercisable to the
extent it is

 

4

 

vested, for a period of one year after such
termination of employment or service, subject to the general limitation on
exercise imposed by Section 4.3
above. Whether a termination of employment or service is to be considered by
reason of “permanent and total disability” for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive.

 

6.                                      PARACHUTE LIMITATIONS

 

Notwithstanding
any other provision of this Stock Option Agreement or of any other agreement,
contract, or understanding heretofore or hereafter entered into by the Optionee
and the Company or any affiliate, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this Section (the “Other Agreements”), and notwithstanding any
formal or informal plan or other arrangement heretofore or hereafter adopted by
the Company (or any affiliate) for the direct or indirect compensation of the
Optionee (including groups or classes of participants or beneficiaries of which
the Optionee is a member), whether or not such compensation is deferred, is in
cash, or is in the form of a benefit to or for the Optionee (a “Benefit
Arrangement”), if the Optionee is a “disqualified individual,” as defined in
Section 280G(c) of the Code, the Option and any right to receive any payment
or other benefit under this Stock Option Agreement shall not become exercisable
or vested (i) to the extent that such right to exercise, vesting, payment,
or benefit, taking into account all other rights, payments, or benefits to or
for Optionee under the Plan, all Other Agreements, and all Benefit
Arrangements, would cause any payment or benefit to the Optionee under this
Stock Option Agreement to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Optionee from the
Company under this Stock Option Agreement, the Plan, all Other Agreements, and
all Benefit Arrangements would be less than the maximum after-tax amount that
could be received by Optionee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Stock Option Agreement, in
conjunction with all other rights, payments, or benefits to or for the Optionee
under the Plan, any Other Agreement or any Benefit Arrangement would cause the
Optionee to be considered to have received a Parachute Payment under this Stock
Option Agreement that would have the effect of decreasing the after-tax amount
received by the Optionee as described in clause (ii) of the preceding
sentence, then the Optionee shall have the right, in the Optionee’s sole
discretion, to designate those rights, payments, or benefits under this Stock
Option Agreement, the Plan, any Other Agreements, and any Benefit Arrangements
that should be reduced or eliminated so as to avoid having the payment or
benefit to the Optionee under this Stock Option Agreement be deemed to be a
Parachute Payment.

 

5

 

7.                                      TRANSFERABILITY

 

During
the lifetime of the Grantee, only the Grantee (or, in the event of legal
incapacity or incompetency, the Grantee’s guardian or legal representative) may
exercise an Option. No Option shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and
distribution.

 

8.                                      REQUIREMENTS OF LAW

 

The
Company shall not be required to sell or issue any securities under the Option
if the sale or issuance of such securities would constitute a violation by the
Optionee, the individual exercising the Option, or the Company of any
provisions of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any securities subject to the Option upon any
securities exchange or under any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
securities hereunder, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company, and any delay caused thereby shall in no way affect the date of
termination of the Option. Specifically in connection with the 1933 Act, upon
the exercise of the Option, unless a registration statement under such act is
in effect with respect to the securities covered by the Option, the Company
shall not be required to sell or issue such securities unless the Committee has
received evidence satisfactory to it that the holder of such Option may acquire
such securities pursuant to an exemption from registration under such act. Any
determination in this connection by the Committee shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the 1933 Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of
the Option or the issuance of securities pursuant thereto to comply with any
law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that the Option shall not be exercisable
until the securities covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the
laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

 

6

 

9.                                      EFFECT OF CHANGES IN CAPITALIZATION

 

9.1.                            Changes in
Stock

 

If
the number of outstanding shares of Stock is increased or decreased or the
shares of Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration
by the Company, occurring after the date of grant of the Option, the number and
kinds of shares of Stock for which the Option was granted shall be adjusted
proportionately and accordingly by the Company so that the proportionate
interest of the Optionee immediately following such event shall, to the extent
practicable, be the same as immediately before such event. Any such adjustment
in the Option shall not change the aggregate Option Price payable with respect
to shares that are subject to the unexercised portion of the Option but shall
include a corresponding proportionate adjustment in the Option Price per share.

 

9.2.                            Reorganization
in Which the Company Is the Surviving Entity and in Which No Change in Control
Occurs.

 

Subject to Section 9.3 hereof,
if the Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities in which no Change
in Control Occurs (as defined in the Plan), the Option shall pertain to and
apply to the securities to which a holder of the number of shares of Stock
subject to the Option would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price per share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation.

 

9.3.                            Reorganization,
Sale of Assets or Sale of Stock Which Involves a Change in Control.

 

Upon the dissolution or liquidation of the Company or
upon any transaction approved by the Board that results in a Change in Control
(as defined in the Plan), the Option, to the extent it remains outstanding,
shall become immediately exercisable for a period of fifteen days immediately
prior to the scheduled consummation of the event. Any exercise of the Option
during such fifteen-day period shall be conditioned upon the consummation of
the event and shall be effective only immediately before the consummation of
the event. Upon consummation of any such event, the Plan and all outstanding
but unexercised Options shall terminate, except to the extent provision is made
in writing in connection with such transaction for the

 

7

 

assumption of such Options theretofore granted,
or for the substitution for such Options of new options covering the stock of a
successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
in which event the Options theretofore granted shall continue in the manner and
under the terms so provided. The Board shall send written notice of an event
that will result in such a termination to all individuals who hold Options not
later than the time at which the Company gives notice thereof to its
stockholders.

 

9.4.                            Adjustments

 

Adjustments
under this Section 9 related to stock or
securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or
unit.

 

9.5.                            No
Limitations on Company

 

The
grant of the Option shall not affect or limit in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure or to merge, consolidate, dissolve, or
liquidate, or to sell or transfer all or any part of its business or assets.

 

10.                               POOLING OF INTERESTS

 

The
Optionee, upon advice from the Company, shall take (or refrain from taking, as
appropriate) all actions necessary or desirable with respect to this Option to
ensure that pooling of interests accounting is available to the Company.

 

11.                                DISCLAIMER OF RIGHTS

 

No
provision in this Stock Option Agreement shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any
of its affiliates, or to interfere in any way with any contractual or other
right or authority of the Company or any of its affiliates either to increase
or decrease the compensation or other payments to any individual at any time,
or to terminate any employment or other relationship between any individual and
the Company or any of its affiliates. In addition, notwithstanding anything
contained in the Plan to the contrary, the Option shall not be affected by any
change of duties or position of the Optionee (including a transfer to or from
the Company or any of its affiliates), so long as such Optionee continues to be
an employee of, or otherwise in the service of, the Company or any of its
affiliates.

 

8

 

12.                               FORFEITURE OF RIGHTS

 

The
Company at any time shall have the right to cause a forfeiture of the rights of
the Optionee on account of the Optionee taking actions in competition with the
Company. Unless otherwise specified in an employment or other agreement between
the Company and the Optionee, the Optionee takes actions in competition with
the Company if he or she directly or indirectly owns any interest in, operates,
joins, controls or participates as a partner, director, principal, officer, or
agent of, enters into the employment of, acts as a consultant to, or performs
any services for, any entity which has material operations which compete with
any business in which the Company or any of its affiliates is engaged during
the Optionee’s employment or other relationship with the Company or any of its
affiliates or at the time of the Optionee’s termination of employment or other
relationship.

 

13.                               CAPTIONS

 

The
use of captions in this Stock Option Agreement is for the convenience of
reference only and shall not affect the meaning of any provision of such Stock
Option Agreement.

 

14.                               WITHHOLDING OF TAXES

 

The
Company shall have the right to deduct from payments of any kind otherwise due
to an Optionee any federal, state, or local taxes of any kind required by law
to be withheld with respect to any payments, distributions and property
transferred under this Stock Option Agreement. At the time of exercise, the
Optionee shall pay to the Company any amount that the Company may reasonably
determine to be necessary to satisfy such withholding obligation.

 

15.                               SEVERABILITY

 

If
any provision of the Plan or this Stock Option Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions thereof and hereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.

 

16.                               INTERPRETATION OF THIS STOCK OPTION AGREEMENT

 

All
decisions and interpretations made by the Company, the Board or the Committee
with regard to any question arising under the Plan or this Stock Option
Agreement shall be final, binding and conclusive on the Company and the
Optionee and any other person entitled to exercise the Option as provided for
herein.

 

9

 

17.                               GOVERNING LAW

 

The
validity and construction of this Stock Option Agreement shall be governed by
the laws of the State of Maryland but not including the choice of law rules
thereof.

 

18.                               BINDING EFFECT

 

Subject
to all restrictions provided for in this Stock Option Agreement, the Plan and
by applicable law limiting assignment and transfer of this Stock Option
Agreement and the Option provided for herein, this Stock Option Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, and assigns.

 

19.                               NOTICE

 

All
notices or other communications which may be or are required to be given by any
party to any other party pursuant to this Stock Option Agreement shall be in
writing and shall be mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or transmitted by hand delivery or
telecopier (fax), addressed as follows:

 

	
   

  	
  If
  to the Company:

  
	
   

  	
   

  
	
   

  	
  Washington
  Savings Bank, F.S.B.

  
	
   

  	
  Attention:
  Option Committee

  
	
   

  	
  4201
  Mitchellville Road, Suite 200

  
	
   

  	
  Bowie,
  Maryland 20716

  
	
   

  	
  Telecopier
  No.: 301-352-3131

  
	
   

  	
   

  
	
   

  	
  If
  to Optionee:

  
	
   

  	
   

  
	
   

  	
  At
  the address set forth below under Optionee’s name at the foot of this
  Agreement.

  

 

Each
party may designate by notice in writing a new address to which any notice or
other communication may thereafter be so given. Each notice or other
communication which shall be mailed, delivered or transmitted in the manner
described above, shall be deemed sufficiently given for all purposes at such
time as it is delivered to the addressee with the return receipt, the delivery
receipt, the affidavit of personal courier or, with respect to a telecopy, upon
acknowledgment of receipt thereof and in all cases at such time as delivery is
refused by the addressee upon presentation.

 

10

 

20.                               ENTIRE AGREEMENT

 

This
Stock Option Agreement and the Plan together constitute the entire agreement
between the parties hereto with respect to the subject matter hereof. Neither
this Stock Option Agreement nor any term hereof may be amended, waived,
discharged or terminated except by a written instrument signed by the Company
and the Optionee; provided, however, that the Company
unilaterally may waive any provision hereof in writing to the extent that such
waiver does not adversely affect the interests of the Optionee hereunder, but
no such waiver shall operate as or be construed to be a subsequent waiver of
the same provision or a waiver of any other provision hereof.

 

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

11

 

IN
WITNESS WHEREOF, the parties hereto have duly executed and delivered this Stock
Option Agreement, or caused this Stock Option Agreement to be duly executed and
delivered in their name and on their behalf, as of the day and year first above
written.

 

	
   

  	
  Washington
  Savings Bank, F.S.B.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  «Name»

  
	
   

  	
   

  
	
   

  	
  ADDRESS
  FOR NOTICE TO

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

Exhibit A: Washington Savings Bank, F.S.B. 2001 Stock
Option and Incentive Plan

 

12

 

OPTION EXERCISE FORM

 

To be executed by the Optionee to

exercise the rights to purchase Stock

evidenced by the foregoing Option

 

TO:         WASHINGTON SAVINGS BANK, F.S.B.

 

The
undersigned hereby exercises the right to purchase                        shares
of Stock covered by the attached Option in accordance with the terms and
conditions thereof, and herewith makes payment of the Option Price of such
shares in full.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
  Dated:
                                        
         ,
                 

  	
   

  
	
   

  	
   

  
	
  Social Security Number:

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