Exhibit 10.3


 


OUTSIDE DIRECTOR


 


Stock
Option


 


Granted by


 


WATERSTONE
FINANCIAL, INC.


 


under the


 


WATERSTONE FINANCIAL, INC.


2015 EQUITY INCENTIVE PLAN


 


This stock option agreement
(“Option” or “Agreement”) is and will be subject in every respect to the provisions of the
2015 Equity Incentive Plan (the “Plan”) of Waterstone Financial, Inc. (the “Company”) which
are incorporated herein by reference and made a part hereof, subject to the provisions of this Agreement. A copy of the Plan has
been provided to each person granted a stock option pursuant to the Plan. The holder of this Option (the “Participant”)
hereby accepts this Option, subject to all the terms and provisions of the Plan and this Agreement, and agrees that all decisions
under and interpretations of the Plan and this Agreement by the Committee appointed to administer the Plan (“Committee”)
or the Board will be final, binding and conclusive upon the Participant and the Participant’s heirs, legal representatives,
successors and permitted assigns. Except where the context otherwise requires, the term “Company” will include the
parent and all present and future subsidiaries of the Company as defined in Section 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended from time to time (the “Code”). Capitalized terms used herein but not defined will have
the same meaning as in the Plan.


 


		1.	Name of Participant: _________________________________________________________



 


		2.	Date of Grant: March 4, 2015



 


		3.	Total number of shares of Company common stock, $0.01 par value per share, that may be acquired pursuant to this
                                                                                                         Option:______________________________________________ 

(subject to adjustment pursuant to Section 10 hereof).



 


		·	This is a Non-Qualified Option.



 


		4.	Exercise price per share: $ _______



(subject to adjustment pursuant to Section 10
below)


 


		5.	Expiration Date of Option: March 3, 2025.



 


		6.	Vesting Schedule. Except as otherwise provided in this Agreement, this Option first becomes
exercisable, subject to the Option’s expiration date, in accordance with the vesting schedule specified herein.



 




    	 



    	 



    

 


The Options granted under this
Agreement shall vest in five (5) equal annual installments, with the first installment becoming exercisable on the first anniversary
of the date of grant, or March 4, 2016, and succeeding installments on each anniversary thereafter, through March 4, 2020. To the
extent the Options awarded to me are not equally divisible by “5,” any excess Options shall vest on March 4, 2020.


 


This Option may
not be exercised at any time on or after the Option’s expiration date. Vesting will automatically accelerate pursuant to
Section 2.9 of the Plan (in the event of death or Disability or Involuntary Termination of Service as a Director following a Change
in Control).


 


		7.	Exercise Procedure.



 


		7.1	Delivery of Notice of Exercise of Option. This Option will be exercised in whole or in part
by the Participant’s delivery to the Company of written notice (the “Notice of Exercise of Option” attached
hereto as Exhibit A) setting forth the number of shares with respect to which this Option is to be exercised, together with payment
by cash or other means acceptable to the Committee, including:



 


		·	Cash or personal, certified or cashier’s check in the sum of $_______, in full/partial payment
of the purchase price.



 


		·	Stock of the Company with a fair market value of $______ in full/partial payment of the purchase
price.



 


		·	By a net settlement of the Option, using a portion of the shares obtained on exercise in payment
of the exercise price of the Option (and, if applicable, any minimum required tax withholding).



 


		·	By selling ______ shares from my Option shares through a broker in full/partial payment of the
purchase price.



 


		7.2	“Fair Market Value” shall have the meaning set forth in Section 8.1(s) of the
Plan.



 


		8.	Delivery of Shares.



 


		8.1	Delivery of Shares. Delivery of shares of Common Stock upon the exercise of this Option
will comply with all applicable laws (including the requirements of the Securities Act) and the applicable requirements of any
securities exchange or similar entity.



 


		9.	Change in Control.



 


		9.1	In the event of the Participant’s Involuntary Termination of Service as a Director following
a Change in Control, all Options held by the Participant, whether or not exercisable at such time, will become fully exercisable,
subject to the expiration provisions otherwise applicable to the Option.



 




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		9.2	A “Change in Control” will be deemed to have occurred as provided in Section
4.2 of the Plan.



 


		10.	Adjustment Provisions.



 


This Option,
including the number of shares subject to the Option and the exercise price, will be adjusted upon the occurrence of the events
specified in, and in accordance with the provisions of Section 3.4 of the Plan.


 


		11.	Termination of Option and Accelerated Vesting.



 


This Option will
terminate upon the expiration date, except as set forth in the following provisions:


 


		(i)	Death. This Option will become exercisable as to all shares subject to an outstanding Award,
whether or not then exercisable, in the event of the Participant’s Termination of Service by reason of the Participant’s
death. This Option may thereafter be exercised by the Participant’s legal representative or beneficiaries for a period of
one year from the date of death, subject to termination on the expiration date of this Option, if earlier.



 


		(ii)	Disability. This Option will become exercisable as to all shares subject to an outstanding
Award, whether or not then exercisable, in the event of the Participant’s Termination of Service by reason of the Participant’s
Disability. This Option may thereafter be exercised for a period of one year from the date of such Termination of Service by reason
of Disability, subject to termination on the Option’s expiration date, if earlier.



 


		(iii)	Retirement. Vested Options may be exercised for a period of one (1) year from the date of
Termination of Service by reason of Retirement, subject to termination on the Option’s expiration dated, if earlier (and,
for purposes of clarity, non-vested Options will be forfeited on the date of Termination of Service by reason of Retirement). “Retirement”
shall have the meaning set forth in Section 8.1(dd) of the Plan.



 


		(iv)	Termination for Cause. If the Participant’s Service has been terminated for
Cause, all Options that have not been exercised will expire and be forfeited.



 


		(v)	Other Termination. If the Participant’s Service terminates for any reason other
than due to death, Disability, Retirement, Involuntary Termination following a Change in Control or for Cause, this Option may
thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of three months following
termination, subject to termination on the Option’s expiration date, if earlier.



 


12.Miscellaneous.


 


		12.1	No Option will confer upon the Participant any rights as a stockholder of the



 




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Company prior to the date on which
the individual fulfills all conditions for receipt of such rights.


 


		12.2	This Agreement may not be amended or otherwise modified unless evidenced in writing and signed
by the Company and the Participant.



 


		12.3	In the discretion of the Committee, a non-qualified Option granted under the Plan may be transferable
by the Participant, provided, however, that such transfers will be limited to Immediate Family Members of Participants, trusts
and partnerships established for the primary benefit of such family members or to charitable organizations, and provided, further,
that such transfers are not made for consideration to the Participant.



 


		12.4	This Option will be governed by and construed in accordance with the laws of the State of Wisconsin.



 


		12.5	This Option is subject to all laws, regulations and orders of any governmental authority which
may be applicable thereto and, notwithstanding any of the provisions hereof, the Participant agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of stock hereunder if the exercise thereof or the issuance
of such shares, as the case may be, would constitute a violation by the Participant or the Company of any such law, regulation
or order or any provision thereof.



 


		12.6	The granting of this Option does not confer upon the Participant any right to be retained in the
service of the Company or any subsidiary.



 




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IN WITNESS WHEREOF, the
Company has caused this instrument to be executed in its name and on its behalf as of the date of grant of this Option set forth
above.


 


	 	WATERSTONE FINANCIAL, INC.
	 	 	 
	 	By:	 


 


	 	Its: 	 


 


PARTICIPANT’S ACCEPTANCE


 


The undersigned hereby
accepts the foregoing Option and agrees to the terms and conditions hereof, including the terms and provisions of the 2015 Equity
Incentive Plan. The undersigned hereby acknowledges receipt of a copy of the Company’s 2015 Equity Incentive Plan.


 


	 	PARTICIPANT
	 	 
	 	 


 




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EXHIBIT A


NOTICE OF EXERCISE OF OPTION

(BY OUTSIDE DIRECTOR)


 


I hereby exercise the stock
option (the “Option”) granted to me by Waterstone Financial, Inc. (the “Company”) or its affiliate, subject
to all the terms and provisions set forth in the Stock Option Agreement (the “Agreement”) and the Waterstone Financial,
Inc. 2015 Equity Incentive Plan (the “Plan”) referred to therein, and notify you of my desire to purchase __________________
shares of common stock of the Company (“Common Stock”) for a purchase price of $______ per share.


 


I elect to pay the exercise
price by (check one):


 


		___	Cash or personal, certified or cashier’s check in the sum of $_______, in full/partial payment
of the purchase price.



 


		___	Stock of the Company with a fair market value of $______ in full/partial payment of the purchase
price.*



 


		___	A net settlement of the Option, using a portion of the shares obtained on exercise in payment of
the exercise price of the Option (and, if applicable, any minimum required tax withholding).



 


		___	Selling ______ shares from my Option shares through a broker in full/partial payment of the purchase
price.



 


I understand that after
this exercise, ____________ shares of Common Stock remain subject to the Option, subject to all terms and provisions set forth
in the Agreement and the Plan.


 


I hereby represent that
it is my intention to acquire these shares for the following purpose:


 


	___		investment



	___		resale or distribution



 


Please note: if your intention
is to resell (or distribute within the meaning of Section 2(11) of the Securities Act of 1933) the shares you acquire through this
Option exercise, the Company or transfer agent may require an opinion of counsel that such resale or distribution would not violate
the Securities Act of 1933 prior to your exercise of such Option.


 


	Date: ____________, _____.	_________________________________________
	 	Participant’s signature


 


*        If I elect to exercise
by exchanging shares I already own, I will constructively return shares that I already own to purchase the new option shares.
If my shares are in certificate form, I must attach a separate statement indicating the certificate number of the shares I am treating
as having exchanged. If the shares are held in “street name” by a registered broker, I must provide the Company with
a notarized statement attesting to the number of shares owned that will be treated as having been exchanged. I will keep the shares
that I already own and treat them as if they are shares acquired by the option exercise. In addition, I will receive additional
shares equal to the difference between the shares I constructively exchange and the total new option shares that I acquire.


 




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