Exhibit 10.6

BRIDGEWATER BANCSHARES, INC.

2017 COMBINED INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

 

STOCK OPTION AGREEMENT

 

 

 

 

 

OPTIONEE:

                              

GRANT DATE:

__________, 20__

NUMBER OF OPTION SHARES:

             shares of Common Stock

EXERCISE PRICE PER SHARE:

$_______ per share of Common Stock

EXPIRATION DATE:

__________, 20__

 

 

 

THIS AGREEMENT is made as of the Grant Date set forth above by and between
Bridgewater Bancshares, Inc., a Minnesota corporation (the “Company”), and the
Optionee named above, who is an employee of or provider of services to the
Company or an Affiliate of the Company (the “Optionee”).

The Company desires, by affording the Optionee an opportunity to purchase shares
of its common stock, par value $.01 per share (the “Common Stock”), as
hereinafter provided, to carry out the purpose of the Bridgewater Bancshares,
Inc. 2017 Combined Incentive and Non-Statutory Stock Option Plan (the “Option
Plan”).

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth,
and for other good and valuable consideration, the parties hereby agree as
follows:

1.

Grant of Option.  The Company hereby grants to the Optionee the right and option
(the “Option”) to purchase all or any part (but not as to a fractional share) of
the aggregate number of shares of Common Stock set forth above (the “Option
Shares”) (such number being subject to adjustment as provided in Section 10
hereof) on the terms and subject to the conditions set forth in this Agreement
and in the Option Plan.  This Option is or is not an “incentive stock option”
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”) as indicated below (Company to check one box below at time
of grant):

The Option IS an Incentive Stock Option

The Option is a Non-Statutory Option (i.e. is NOT an Incentive Stock Option)

2.

Purchase Price.  The per share purchase price of the Option Shares shall be the
Exercise Price Per Share set forth above (such Exercise Price Per Share being
subject to adjustment as provided in Section 10 hereof).  Except to the extent
provided in Section 11.b. below, the Exercise Price is intended to equal or
exceed the Fair Market Value for the shares of the Company’s Common Stock as of
the Grant Date, as determined by the Board of

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Directors in good faith in the exercise of its reasonable discretion and using
the reasonable application of a reasonable valuation method within the meaning
of Section 409A of the Code and the regulations or other authority issued
thereunder.

3.

Term and Exercise of Option.

a.

The term of this Option shall commence on the Grant Date set forth above and
shall continue until the Expiration Date set forth above, unless earlier
terminated as provided herein. 

b.

This Option shall be exercisable only in the event that and to the extent that
such Option has become vested and exercisable pursuant to the terms of this
Section 3.b (or Sections 7 or 8 below, if applicable).  Subject to the earlier
termination of this Option pursuant to its terms and to the terms of the Option
Plan, this Option shall vest and become exercisable as follows, but only if the
Optionee is then an employee of or continues to provide services to the Company
or an Affiliate at the specified time:

(i)

[Up to _________ percent (___%) of such Option Shares (rounded down to the
nearest whole share) may be purchased at any time after ___  (__) year(s) from
the Grant Date and prior to the termination of this Option;

(ii)

Up to _________ percent (__%) of such Option Shares (rounded down to the nearest
whole share and less any shares previously purchased pursuant to this Option
that vest pursuant to this Section 3.b) may be purchased at any time after __
 (__) years from the Grant Date and prior to the termination of this Option;

(iii)

Up to 100% of such Option Shares (less any shares previously purchased pursuant
to this Option that vest pursuant to this Section 3.b) may be purchased at any
time after __ (__) years from the Grant Date and prior to the termination of
this Option.] 

c.

To exercise this Option, the Optionee shall satisfy the following conditions:
(i) deliver written notice to the Company at its principal office within the
option period, which written notice must be in the form of attached Exhibit A to
this Agreement, and (ii) deliver payment in full for the Option Shares with
respect to which this Option is then being exercised, as provided in
Section 4(a) below. 

d.

Neither the Optionee nor the Optionee’s legal representatives, legatees or
distributees, as the case may be, will be, or will be deemed to be, a holder of
any Option Shares for any purpose unless and until certificates for such Option
Shares are issued (or are reflected upon the official records of the Company) to
the Optionee or the Optionee’s legal representatives, legatees or distributees,
under the terms of the Option Plan.

4.

Limitations on Exercise of Option.

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a.

The exercise of this Option will be contingent upon receipt from the Optionee
(or the purchaser acting under Section 7 below) of the full Exercise Price of
such Option Shares.  Payment may be made in cash or by a cashier’s or certified
check.  However, in the sole discretion of the Board of Directors or the
Committee, and subject to such terms and conditions as the Board of Directors or
Committee deems appropriate in its discretion, payment of the Exercise Price or
a portion thereof may be made by surrender to the Company of previously acquired
shares of Common Stock, such shares to be credited against the Exercise Price
based upon the Fair Market Value thereof on the date of exercise, or by a
combination of the above.  No Option Shares will be issued until full payment
therefor has been made and the Optionee has executed any and all agreements that
the Company may require the Optionee to execute.

b.

The issuance of Option Shares upon the exercise of this Option shall be subject
to all applicable laws, rules, and regulations.  If, in the opinion of the Board
of Directors of the Company or a Committee of the Board of Directors, (i) the
listing, registration, or qualification of the Option Shares upon any securities
exchange or under any state or federal law, (ii) the consent or approval of any
regulatory body, or (iii) an agreement of the Optionee with respect to the
disposition of the Option Shares, is necessary or desirable as a condition to
the issuance or sale of the Option Shares, this Option shall not be exercised
and/or the Option Shares shall not be sold unless and until such listing,
registration, qualification, consent, approval or agreement is effected or
obtained in form satisfactory to the Board of Directors or the Committee.

5.

Nontransferability of Option.  This Option shall not be transferable by the
Optionee other than by will or the laws of descent and distribution, and during
the lifetime of the Optionee, this Option shall be exercisable only by the
Optionee.

6.

Termination of Employment.  Upon termination of the Optionee’s employment with
or providing of services to the Company or an Affiliate other than as a result
of the death of the Optionee, this Option may be exercised to the same extent
that the Optionee would have been entitled to exercise it at the date of
termination and may be exercised within a period of ninety (90) days after the
date of termination, but in no case later than the Expiration Date set forth
above.

7.

Death of Optionee.  If the Optionee dies while employed by or providing services
to the Company or an Affiliate, this Option will vest in the following manner:
(1) 50% of the Option Shares shall become exercisable upon the Optionee’s death
if the Optionee was employed by or providing services to the Company or an
Affiliate for two years and six months or less at the time of the Optionee’s
death; and (2) 100% of the Option Shares shall become exercisable upon the
Optionee’s death if the Optionee was employed by or providing services to the
Company or an Affiliate for more than two years and six months at the time of
the Optionee’s death.  In such event, this Option may be exercised within a
period of one (1) year after the date of death, but in no case later than the
Expiration Date set forth above.  In addition, this Option shall be exercisable
only by the executors or administrators of the Optionee or by the person or
persons to whom the Optionee’s rights under the Option shall pass by the
Optionee’s will or the laws of descent and distribution. 

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Any portion of an Option that is not exercisable at the time of an Optionee’s
death and does not become exercisable under this Section shall automatically
terminate.

8.

Effect of Certain Transactions.  Notwithstanding any provision in this Option to
the contrary, this Option will become exercisable in full immediately if,
subsequent to the Grant Date set forth above, any of the following events shall
occur while the Optionee is an employee of or providing services to the Company
or an Affiliate:

a.

The sale, lease, exchange or other transfer, directly or indirectly, of all or
substantially all of the assets of the Company (in one transaction or in a
series of related transactions) to a person or entity that is not controlled by
the Company,

b.

The approval by the Company’s shareholders of any plan or proposal for the
liquidation or dissolution of the Company;

c.

Any persons or entities become the owner, directly or indirectly, of more than
fifty percent (50%) of the combined voting power of the outstanding securities
of the Company ordinarily having the right to vote at elections of directors who
were not owners of at least fifty percent (50%) of such combined voting power as
of the Grant Date; and

d.

A merger or consolidation to which the Company is a party if the shareholders of
the Company immediately prior to the effective date of such merger or
consolidation have, solely on account of ownership of securities of the Company
at such time, ownership immediately following the effective date of such merger
or consolidation of securities of the surviving company representing less than
fifty percent (50%) of the combined voting power of the surviving corporation’s
then outstanding securities ordinarily having the right to vote at elections of
directors.

Notwithstanding any provision in the Option Plan or this Option Agreement to the
contrary, the Board of Directors or the Committee shall not have the power or
right, either before or after the occurrence of an event described in
subparagraphs a. through d. above, to rescind, modify or amend the provisions of
this Section without the consent of the Optionee.  Provided, however, in the
sole discretion of the Board of Directors or Committee, this Option and all
Option Shares granted hereunder will terminate upon the closing of an event
described in subparagraphs a. through d. above, with such termination to be
deemed to occur immediately after Optionee is provided with the opportunity to
exercise the Optionee’s right to purchase any Option Shares that are then
exercisable under the Option.

9.

No Right to or Reasonable Expectation of Continued Employment.  This Option will
not confer upon the Optionee any right with respect to continuance of employment
with or providing of services to the Company or an Affiliate of the Company, nor
will it interfere in any way with the Company’s right or the Affiliate’s right
to terminate the Optionee’s employment or providing of services at any time.  In
addition, Optionee represents that, regardless of whether Optionee is an
employee, officer and/or director of the Company or an Affiliate, this Option
and any Common Stock to be purchased as a result of this Option will be held for
their potential as an equity investment and without any expectation that
ownership of the Common Stock will entitle Optionee to any rights as an
employee, officer

4

 

or director of the Company or Affiliate that would not exist if Optionee were
not a shareholder of the Company.  Optionee further agrees that no change in
Optionee’s expectations concerning Optionee’s employment by the Company or
Affiliate or concerning Optionee’s participation as an officer or director of
the Company or Affiliate will have a reasonable basis unless set forth in a
written agreement expressly giving Optionee additional rights as to such
matters.  The Company and Affiliates hereby advise Optionee that they have the
expectation that Optionee will not have any right to employment by the Company
or Affiliate or to continue to be an officer or director of the Company or
Affiliate by virtue of Optionee’s ownership of any Common Stock, and that they
would not have issued this Option to Optionee if Optionee had any contrary
expectations.

10.

Anti-Dilution Adjustments. In the event of any change in the number of
outstanding shares of Common Stock by reason of any dividend, split, reverse
split, reclassification, combination, merger, exchange of shares, or other
similar recapitalization of the Company, there shall be an appropriate and
proportionate adjustment to the number of Option Shares and the per share
Exercise Price Per Share hereunder so that the Optionee then shall receive for
the aggregate Exercise Price paid by the Optionee upon exercise of this Option
the number of shares the Optionee would have received if this Option had been
exercised before such recapitalization event occurred.  No adjustment shall be
made under this Section upon the issuance by the Company of any warrants,
rights, or options to acquire additional Common Stock or of securities
convertible into Common Stock unless such warrants, rights, options or
convertible securities are issued to all of the Company’s members on a
proportionate basis.

11.

Additional Rules for Incentive Stock Options.  For any Option that is an
Incentive Stock Option (as indicated in Section 1 above), the following terms
and conditions shall apply to the Option:

a.

Option Granted to Employee.  In order for the Option to constitute an Incentive
Stock Option, the Optionee must be an employee of the Company or Affiliate at
the time the Option is granted.

b.

Exercise Price.  It is the intent of the Company that the Option qualify for
treatment as an "Incentive Stock Option" in accordance with Section 422 of the
Code.  Although the Company has attempted to comply with the statutory
requirements for an Incentive Stock Option, no assurance is given that the
Option does in fact so qualify.  One of the requirements of an Incentive Stock
Option is that the Exercise Price Per Share for the Option equals or exceed the
fair market value of the underlying Common Stock at the time the option is
granted.  For Optionees who own stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company, the exercise price
of the option must equal or exceed one hundred ten percent (110%) of the fair
market value of the underlying Common Stock at the time the option is
granted.  The Company has determined (with independent advice where considered
necessary) that the Exercise Price Per Share for the Option equals or exceeds
the fair market value of the Common Stock as of the Grant Date.  However, no
assurance can be given that the Exercise Price

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Per Share and fair market value so determined will be accepted by the government
or a court as correct.

c.

Other Qualification Considerations.  In addition, in order to qualify for
favorable tax treatment, no disposition of stock obtained pursuant to an
Incentive Stock Option may be made within 2 years from the date of the grant of
the Option or within 1 year after exercise of the Option and the transfer of
such stock to the Optionee.  Further, in order to qualify for favorable tax
treatment, the Option must be exercised no later than three (3) months after the
termination of the Optionee's employment with the Company or an Affiliate (other
than as a result of the death of the Optionee), whether such termination is
voluntary or involuntary, with or without Cause.  If these requirements are not
observed, the Optionee will not receive the favorable tax treatment described
below.

d.

Exercise After Termination of Employment.  Upon termination of the Optionee’s
employment with the Company or an Affiliate other than as a result of the death
of the Optionee, this Option may be exercised to the same extent that the
Optionee would have been entitled to exercise it at the date of termination and
may be exercised within a period of ninety (90) days after the date of
termination, but in no case later than the Expiration Date set forth above.  In
the event that the Option does not expire under the terms of this Agreement
following the end of the ninety (90) day period, any portion of the Option that
remains after that time shall no longer constitute an Incentive Stock Option
and, instead, shall thereafter be a Non-Statutory Stock Option.

e.

Tax Treatment.  If the Option qualifies for favorable tax treatment as an
Incentive Stock Option, the Optionee will realize no income upon receipt or
exercise of an Option.  Upon the sale of the Common Stock acquired with an
Incentive Stock Option, the Optionee will generally be subject to tax on the
gain (if any) realized therefrom.  The Optionee's basis in such stock will be
the Exercise Price under the Option.  Since federal income tax law is subject to
change and income tax laws vary from state to state, the Company urges the
Optionee to consult with his or her individual tax advisor(s) prior to the
exercise of an Option and the subsequent sale of Common Stock acquired pursuant
to such exercise.  THE COMPANY IS NOT GIVING, AND WILL NOT GIVE,  BY THIS
AGREEMENT OR OTHERWISE, INDIVIDUAL INCOME TAX ADVICE TO THE OPTIONEE.

12.

Mandatory Exercise or Forfeiture of Options. All Options issued under this
Agreement shall be made subject to the following restriction:    If the
Minnesota Department of Commerce (“DOC”) or other primary state or federal
regulator of Bridgewater Bank (the “Bank”), for which the Company is the holding
company, determines that the existence of any Options issued under this
Agreement impairs the Bank’s ability to raise capital, the Company shall notify
the Optionee of such determination, and, within thirty (30) days of delivery of
the Company’s notice to the Optionee of such determination, the Optionee shall
be required to exercise the Options (but in no event by paying the Exercise
Price or a portion thereof by surrender to the Company of previously acquired
shares of Common Stock or shares of Common Stock issuable upon the exercise of
the Options) in full, or with respect to such lesser number of Options as may be
permitted by the DOC or other

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primary state or federal regulator of the Bank, or shall forfeit the right to
purchase the Common Stock pursuant to the Options issued under this Agreement.

13.

Limitation on Payments and Benefits.  Notwithstanding anything in this Agreement
to the contrary, if any of the payments or benefits to be made or provided in
connection with this Agreement, together with any other payments, benefits or
awards which you have the right to receive from the Company, or any corporation
which is a member of an “affiliated group” (as defined in Section 1504(a) of the
Code without regard to Section 1504(b) of the Code) of which the Company is a
member (“Affiliate”), constitute an “excess parachute payment” (as defined in
Section 280G(b) of the Code), such payments, benefits or awards to be made or
provided in connection with this Agreement, or any other agreement between you
and the Company or its Affiliates, may be reduced, eliminated, modified, or
waived, at Optionee’s election, to the extent necessary to prevent all, or any
portion, of such payments, benefits or awards from becoming “excess parachute
payments” and therefore subject to the excise tax imposed under Section 4999 of
the Code.  The Optionee will have the sole right and discretion to determine
whether the payments, benefits or awards to be made or provided in connection
with this Agreement, or any other agreement between the Optionee and the
Company, should be reduced, whether or not such other agreement with the Company
or an Affiliate expressly addresses the potential application of Section 280G or
Section 4999 of the Code (including, without limitation, that “payments” under
such agreement be reduced).  The Optionee will also have the right to designate,
in accordance with Section 409A of the Code, the particular payments, benefits
or awards that are to be reduced, eliminated, modified or waived; provided that
no such adjustment will be made if it results in additional expense to the
Company in excess of expenses the Company would have experienced if no
adjustment had been made.  The determination as to whether any such decrease in
the payments or benefits is necessary must be made in good faith by legal
counsel or a certified public accountant selected by you and reasonably
acceptable to the Company, and such determination will be conclusive and binding
upon you and the Company.  The Company will pay or reimburse you on demand for
the reasonable fees, costs and expenses of the counsel or accountant selected to
make the determinations under this Section.

14.

Interpretation.  The interpretation and construction of any provision of the
Option Plan and this Option shall be made by the Board of Directors or the
Committee and shall be final, conclusive and binding on the Optionee and all
other persons.

15.

Definitions; Option Plan Governs.  Any capitalized term used herein that is not
expressly defined herein shall have the meaning ascribed to it in the Option
Plan.  This Option is in all respects subject to and governed by all of the
provisions of the Option Plan.  The Optionee acknowledges receipt of a copy of
the Option Plan, represents that the Optionee is familiar with its terms and
provisions, and hereby accepts this Option subject to all of the terms and
provisions thereof.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its
corporate name by its duly authorized officer, and the Optionee has executed
this Agreement as of the Grant Date set forth above.

 

COMPANY:BRIDGEWATER BANCSHARES, INC.

7

 

 

By

     Jerry Baack, President

 

OPTIONEE:

Signature of Optionee

 

[                                 ]

Name of Optionee Typed or Printed

 

Address:

SS# _____-____-______

 

8

 

Exhibit 10.6

 

EXHIBIT A

NOTICE OF EXERCISE OF

STOCK OPTION

 

TO:BRIDGEWATER BANCSHARES, INC.

 

FROM:[                                 ]

 

DATE:_________________________

 

RE:Exercise of Stock Option

 

I hereby exercise my option to purchase  shares of the Common Stock of the
Company at $_______ per share (total exercise price of $).  This notice is given
in accordance with the terms of my Stock Option Agreement (“Agreement”) dated as
of __________________, 20___.  The option price and exercise is in accordance
with Sections 2 and 3 of the Agreement. I represent that all of the shares are
being acquired for investment purposes and not for resale.

 

Check One:

 

Enclosed is cash, or a cashier’s or certified check payable to Bridgewater
Bancshares, Inc. for the total exercise price of the shares being purchased.

 

Attached is a certificate(s) for ______ shares of Common Stock duly endorsed in
blank and surrendered for the exercise price of the shares being purchased.*

 

*The use of this alternative is subject to the approval of Bridgewater
Bancshares, Inc.

 

 

 

Please prepare the certificate for the Common Stock to be issued in the
following name(s):
______________________________________________________________________.

 

Sincerely,

 

(Signature)

 

[                                 ]

(Print or Type Name)

 

Letter and consideration

received on __________________

(effective date of exercise)

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