Document:

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 voting 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):

 

o                                    The Option IS an Incentive Stock Option

 

o                                    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 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 twenty percent (20%) of such Option Shares (rounded down to the nearest whole share) may be purchased at any time after one (1) year from the Grant Date and prior to the termination of this Option;

 

(ii)                                  Up to forty percent (40%) 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 two (2) years from the Grant Date and prior to the termination of this Option;

 

(iii)                               Up to sixty percent (60%) 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 three (3) years from the Grant Date and prior to the termination of this Option;

 

(iv)                              Up to eighty percent (80%) 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 four (4) years from the Grant Date and prior to the termination of this Option;

 

(v)                                 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 five (5) 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

 

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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.

 

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.

 

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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.  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

 

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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 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:

 

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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 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

 

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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 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

 

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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.
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Jerry Baack,   President
    
	
 
    	
 
    
	
OPTIONEE:
    	
 
    
	
 
    	
 
    
	
 
    	
Signature of   Optionee
    
	
 
    	
 
    
	
 
    	
[                                     ]
    
	
 
    	
Name of Optionee   Typed or Printed
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SS#          -       -
    

 

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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 Voting 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:

 

o                                    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.

 

o                                    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)Exhibit 10.7

 

BRIDGEWATER BANCSHARES, INC.

 

2012 COMBINED INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

 

 

ARTICLE I.

GENERAL

 

1.1                               DEFINITIONS. As used in this Bridgewater Bancshares, Inc. 2012 Combined Incentive and Non-Statutory Stock Option Plan, the following definitions shall apply:

 

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

 

b.                                      “Board of Directors” or “Board” means the Board of Directors of the Company.

 

c.                                       “Code” means the Internal Revenue Code of 1986, as amended.

 

d.                                      “Committee” means any Committee of the Board of Directors appointed by the Board to administer the Plan. The Committee may be comprised of the entire Board or two or more members of the Board.

 

e.                                       “Common Stock” means the common stock, par value $0.01 per share, of the Company.

 

f.                                        “Company” means Bridgewater Bancshares, Inc., a Minnesota corporation.

 

g.                                      “Fair Market Value” means (i) if the Common Stock is listed or admitted to unlisted trading privileges on any national securities exchange, the average of the closing sales prices of the Common Stock on the end of any day on all national securities exchanges on which the Common Stock may at the time be listed or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day or, (ii) if the Common Stock is not so listed or admitted but transactions in the Common Stock are reported on The Nasdaq Stock Market, the closing price quoted on The Nasdaq Stock Market on such day, or (iii) if the Common Stock is not so listed or admitted to unlisted trading privileges or quoted on The Nasdaq Stock Market, and bid and asked prices therefor in the domestic over-the-counter market are reported by the National Quotation Bureau, Incorporated (or any comparable reporting service), the average of the closing bid and asked prices on such day as reported by the National Quotation Bureau, Incorporated (or any comparable reporting service), or (iv) if the Common Stock is not listed on any national securities exchange or quoted on The Nasdaq Stock Market or in the domestic over-the-counter market, the fair value of the Common Stock determined by the Board of Directors or the Committee in good faith in the exercise of its reasonable discretion based upon a reasonable application of a reasonable

 

 

valuation method within the meaning of Code Section 409A and treasury regulations or other authority promulgated thereunder. One of the considerations the Board of Directors or the Committee may take into account, in making a determination of fair value of the Common Stock, is the value of the Common Stock as determined pursuant to any shareholder agreement that governs substantially all of the Company’s Common Stock.

 

h.                                      “Incentive Stock Option” means an Option to purchase shares of Common Stock which is intended to qualify as an incentive stock option as defined in Section 422 of the Code.

 

i.                                         “Non-Statutory Option” means an Option which is not an Incentive Stock Option.

 

j.                                         “Option” means an Incentive Stock Option or a Non-Statutory Option.

 

k.                                      “Option Agreement” means the formal written agreement to be entered into by and between the Company and the Optionee which will contain the specific terms and conditions upon which an Option is granted to an Optionee, as determined by the Board of Directors or the Committee.

 

l.                                         “Optionee” means a holder of an Option granted pursuant to the Plan.

 

m.                                  “Plan” means the Bridgewater Bancshares, Inc. 2012 Combined Incentive and Non-Statutory Stock Option Plan outlined herein.

 

n.                                      “Shareholders” means the holders of outstanding shares of the Company’s Common Stock.

 

1.2                               PURPOSE. The purpose of the Plan is to promote the growth and general prosperity of the Company and its Affiliates by permitting the Company to grant Options to consultants, employees, officers and members of the Board of Directors, thereby assisting the Company in its efforts to attract and retain the best available persons for positions of substantial responsibility, and to provide employees, officers and members of the Board of Directors an additional incentive to contribute, by the performance of services, to the future success of the Company and its Affiliates.

 

1.3                               ADMINISTRATION.

 

a.                                      Board of Directors or Committee. Except as otherwise provided for in this Plan, the Plan shall be administered by the Board of Directors or the Committee.

 

b.                                      Powers and Duties. Subject to the provisions of this Plan, the Board of Directors or the Committee shall have sole authority to do everything necessary or appropriate to administer the Plan, including, without limitation, making any rules and regulations

 

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governing the administration of the Plan; selecting the eligible consultants, employees, officers and members of the Board of Directors to whom Options shall be granted; determining the type, amount, size and terms of Options; determining the time when Options shall be granted; determining whether any restrictions shall be placed on shares of Common Stock purchased upon exercising an Option; determining whether any specific grants of Options shall include provisions regarding non-solicitation, non-competition, and/or confidentiality; determining whether any Optionee will be required to enter into a buy-sell stockholder agreement that will bind the stock resulting from exercise of Options as a condition to the grant and exercise of any such Options; interpreting the Plan; and making all other determinations necessary or advisable for the administration of the Plan. The determinations of the Board or the Committee need not be uniform and may be made by it selectively among persons who are eligible to receive Options under the Plan, whether or not such persons are similarly situated. All decisions, determinations and interpretations of the Board of Directors or the Committee regarding the Plan shall be final and binding on all Optionees. The day-to-day administrative duties for the Plan may be delegated by the Board of Directors or the Committee to one or more executive officers or other employees of the Company. All actions authorized to be taken by the Board of Directors under this Plan may as well be taken by any appropriately appointed committee thereof.

 

1.4                               TERM OF THE PLAN. The Plan was adopted by the Board of Directors effective March 27, 2012 and shall be effective that date, subject to the required approval of the Plan by the Shareholders as provided herein. No Options shall be granted under the Plan after the earlier of (a) the date on which the Plan is terminated as provided in Section 1.8 hereof, or (b) March 27, 2022. The expiration of the term of the Plan with respect to any Options granted under the Plan shall not affect Options then outstanding which have not yet expired.

 

1.5                               STOCK TO BE OPTIONED. The maximum number of shares of Common Stock which may be optioned and sold under the Plan is 750,000 shares of Common Stock, which number of shares is subject to adjustment in the same manner as the number of shares of Common Stock underlying Options are subject to adjustment pursuant to Section 1.9 of this Plan. In addition, the number of shares of Common Stock authorized for issuance under the Plan may be increased from time to time by approval of the Board of Directors or the Committee and, if required by the Code or any rules or regulations adopted thereunder, the Shareholders. Shares of Common Stock subject to Options which terminate or expire prior to exercise shall be available for the issuance of future Options.

 

1.6                               GRANTING OF OPTIONS. An Option granted pursuant to the Plan shall entitle the Optionee, upon vesting and exercise, to purchase shares of Common Stock at a specified price during a specified period. The Board or Committee may grant Options in the form of Incentive Stock Options, Non-Statutory Options, or any combination thereof. Subject to the following, Options shall be subject to such terms and conditions as the Board or Committee shall from time to time approve and may be made exercisable in one or more installments, upon the happening of certain events, upon the fulfillment of certain conditions, or upon such other terms and conditions as the Board or Committee shall determine; provided, that each Option shall be

 

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subject to the following requirements in addition to the requirements set forth in Article II or Article III (as the case may be):

 

a.                                      Type of Option. Each Option shall be identified in the agreement pursuant to which it is granted as an Incentive Stock Option or a Non-Statutory Option, as the case may be.

 

b.                                      Payment. The purchase price of the shares of Common Stock subject to an Option shall be payable in full at the time the Option is exercised. Payment may be made in cash or by a cashier’s or certified check. However, in the sole discretion of the Board or the Committee, and subject to such terms and conditions as the Board 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 or shares of Common Stock issuable upon the exercise of that Option, 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.

 

c.                                       Termination of Employment or Other Relationship. Subject to the discretion of the Board of Directors or the Committee to determine otherwise at the time of grant of an Option, upon termination of the Optionee’s employment or other relationship with the Company or with an Affiliate for any reason other than by the Optionee’s death, all Options held by the Optionee 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 of such Option. Notwithstanding the foregoing, if an independent contractor or other non-employment relationship between the Optionee and the Company or an Affiliate is terminated due to the commencement of an employment relationship with the Company or an Affiliate, this provision shall apply only upon termination of both the independent contractor and employment relationship between the Optionee and the Company or an Affiliate.

 

d.                                      Death of Optionee. Subject to the discretion of the Board of Directors or the Committee to determine otherwise at the time of grant of an Option, upon termination of an Optionee’s employment as a result of the death of an Optionee, all Options held by the Optionee may be exercised to the same extent that the Optionee would have been entitled to exercise it at the date of death and may be exercised within a period of one (1) year after the date of death, but in no case later than the expiration date of such Option. In such event, 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 will or the laws of descent and distribution. Any portion of an Option that is not exercisable at the time of an Optionee’s death shall automatically terminate.

 

e.                                       Written Agreement. Each Option shall be granted pursuant to a formal written Option Agreement to be entered into by and between the Company and the Optionee, which Option Agreement shall be in such form as the Board of Directors or Committee

 

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may deem appropriate. Multiple Options may be evidenced by a single agreement. Subject to the limitations of the Plan, the Board or Committee may, with the consent of the Optionee, amend any such agreement to modify the terms or conditions governing the Option.

 

1.7                               ELIGIBLE OPTIONEES. Subject to the requirements of Section 2.1 regarding Incentive Stock Options, Options may be issued to any employees of the Company or of any Affiliate, including, among others, employees who are officers and/or members of the Board of Directors of the Company or any Affiliate. In addition, notwithstanding anything to the contrary contained herein, the Board of Directors or Committee may grant Options under the Plan which are Non-Statutory Options to persons who are, at the time of such grant, employees of the Company, or its Affiliates, or to persons who are, at the time of such grant, not employees of the Company but who are members of the Board of Directors of the Company or its Affiliates or persons who are deemed by the Board of Directors or Committee to be important to the future success of the Company or its Affiliates, including, but not limited to, directors, employees, consultants, independent contractors or other providers of services to the Company or its Affiliates. In addition, eligible persons may be selected to receive Options individually or by group category (for example, by pay grade) as the Board or Committee may determine. A person who has been granted an Option under the Plan or under any other plan of the Company or its Affiliates may be granted additional Options if the Board or Committee shall so determine. Except to the extent otherwise provided in an agreement evidencing an Option, the granting of an Option under this Plan shall not affect any outstanding Options previously granted under this Plan or under any other plan of the Company or any Affiliate.

 

1.8                               AMENDMENT OR TERMINATION OF THE PLAN.

 

a.                                      Except as hereinafter provided, notwithstanding anything to the contrary contained herein, the Board of Directors or Committee may amend the Plan from time to time in such respects as the Board of Directors or Committee may deem advisable, including, without limitation, the right to amend the Plan so as to affect Options already granted. However, neither the Board nor the Committee shall adopt an amendment that materially increases the benefits accruing to participants under the Plan, increases the Option price of Options already granted, decreases or terminates Options already granted, or materially modifies the requirements as to eligibility for participation in the Plan, without the affirmative vote of Shareholders holding at least a majority of the number of shares of voting stock of the Company represented in person or by proxy at a duly-held meeting of the Shareholders.

 

b.                                      The Board of Directors or the Committee may at any time terminate the Plan. Any such termination of the Plan shall not affect Options already granted, and such Options shall remain in full force and effect as if the Plan had not been terminated.

 

1.9                               ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If an Optionee exercises all or any portion of an Option subsequent to any change in the number of outstanding shares of Common Stock of the Company occurring by reason of any stock dividend, stock split,

 

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reverse stock split, reclassification, combination, exchange of shares or other similar recapitalization of the Company, there shall be an appropriate adjustment to the number of shares of Common Stock underlying the Option and, where applicable, to the per share exercise price of the Option so that the Optionee shall then receive for the aggregate price paid by him or her on such exercise of an Option the number of shares which he or she would have held at the time of such exercise if such Option had been exercised to the same extent prior to such stock dividend, stock split, reverse stock split or other similar recapitalization. Notwithstanding the foregoing, no fractional shares shall be issued or paid for. No adjustment shall be made under this Section 1.9 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 Shareholders on a proportionate basis.

 

1.10                        AGREEMENT AND REPRESENTATIONS OF OPTIONEE. As a condition to the exercise of any portion of an Option, if the exercise of the Option is not registered under the federal Securities Act of 1933, as amended, or applicable state securities laws, upon the request of the Company, the Optionee must represent and agree that any and all shares of Common Stock purchased under an Option will be acquired for investment and not for resale. The Company may restrict the transfer of the shares of Common Stock purchased and affix a legend to the certificate representing such shares, stating that such shares may not be transferred without an opinion of counsel satisfactory to the Company that the proposed transfer may lawfully be made without registration under the federal Securities Act of 1933 and registration, notice or approval under any applicable state securities laws, or such applicable registration(s), notice(s) and approval(s).

 

1.11                        EXERCISE OF OPTIONS. Options can be exercised only by Optionees or other proper parties delivering written notice to the Company at its principal office within the Option period, stating the number of shares as to which the Option is being exercised and accompanied by payment in full of the exercise price for all shares designated in the notice, as provided in Section 1.6(b) of this Plan and in the Option Agreement for each Option. Such notice shall further contain a representation that such shares are being acquired for investment and not for resale. The Company shall then cause a certificate or certificates for such shares to be delivered within a reasonable period.

 

1.12                        ACCELERATION OF VESTING. Subject to the discretion of the Board of Directors or the Committee to provide otherwise at the time of grant of an Option, all Options will become exercisable in full immediately if, subsequent to the date such Option is granted, any of the following events shall occur while the Optionee is an employee of or otherwise rendering services to the Company:

 

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 Shareholders of any plan or proposal for the liquidation or dissolution of the Company;

 

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c.                                       Any person, group of persons acting in concert or entity becomes 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 date that the Optionee was granted Options; or

 

d.                                      A merger or consolidation to which the Company is a party if the Shareholders 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.

 

ARTICLE II.

INCENTIVE STOCK OPTIONS

 

2.1                               ELIGIBLE RECIPIENTS. Incentive Stock Options may be granted only to persons who are employees of the Company or an Affiliate.

 

2.2                               EXERCISE PRICE. Subject to the provisions of Section 2.5, the exercise price of shares of Common Stock that are subject to an Incentive Stock Option shall not be less than 100% of the Fair Market Value of such shares at the time the Option is granted, as determined in good faith by the Board or Committee.

 

2.3                               LIMIT ON EXERCISABILITY. The aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable by the Optionee for the first time during any calendar year, under this Plan or any other plan of the Company or any Affiliate, shall not exceed $100,000. To the extent an Incentive Stock Option exceeds this $100,000 limit, the portion of the Incentive Stock Option in excess of such limit shall be deemed a Non-Statutory Option.

 

2.4                               LIMIT ON TERM. An Incentive Stock Option shall not be exercisable more than ten (10) years after the date on which it is granted.

 

2.5                               RESTRICTIONS FOR CERTAIN SHAREHOLDERS. The purchase price of shares of Common Stock that are subject to an Incentive Stock Option granted to an employee of the Company or any Affiliate who, at the time such Option is granted, owns 10% or more of the total combined voting power of all classes of stock of the Company or of any Affiliate, shall not be less than 110% of the Fair Market Value of such shares on the date such Option is granted, and such Option may not be exercisable more than five (5) years after the date on which it is granted. For the purposes of this subparagraph, the rules of Section 424(d) of the Code shall apply in determining the stock ownership of any employee of the Company or any Affiliate.

 

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2.6                               INCENTIVE STOCK OPTIONS NOT TRANSFERABLE. Incentive Stock Options shall not be transferable except by will or the laws of descent and distribution, and Incentive Stock Options shall be exercisable during an Optionee’s lifetime only by such Optionee.

 

2.7                               EFFECT OF NOT MEETING REQUIREMENTS. Subject to the discretion of the Board of Directors or the Committee to provide otherwise, if the terms of an Incentive Stock Option do not meet any requirements of this Plan or the Code necessary to be treated as an Incentive Stock Option under the Code, such Option shall not terminate but shall be a Non-Statutory Option granted under this Plan.

 

ARTICLE III.

NON-STATUTORY OPTIONS

 

3.1                               SECTION 83(b) ELECTION. The Company recognizes that certain persons who receive Non-Statutory Options may be subject to restrictions regarding their right to trade Common Stock under Section 16(b) of the Securities Exchange Act of 1934. Such restrictions may cause Optionees not to be taxable when they exercise their Non-Statutory Options. However, it may be more beneficial to an Optionee to be taxed upon exercise of an Option as opposed to when trading restrictions lapse. Accordingly, Optionees exercising such Non-Statutory Options may consider making an election to be taxed upon exercise of the Option under Section 83(b) of the Code. If requested, the Company shall provide reasonable assistance to such Optionees to effect a Section 83(b) election.

 

3.2                               TRANSFERABILITY. Subject to the discretion of the Board of Directors or the Committee to provide otherwise upon the grant of a Non-Statutory Option, Non-Statutory Options shall not be transferable other than by will or the laws of descent and distribution, and Non-Statutory Options shall be exercisable during an Optionee’s lifetime only by such Optionee.

 

ARTICLE IV.

ADDITIONAL PROVISIONS

 

4.1                               SHAREHOLDER APPROVAL. The Plan shall be submitted for the approval of the Shareholders at either a meeting of Shareholders or by written consent of the Shareholders but no later than one year after the date of its approval by the Board of Directors, and any Option granted under the Plan prior to the date of such approval shall be contingent upon such approval. If the Shareholders do not approve the Plan as provided in the preceding sentence, the Plan shall terminate.

 

4.2                               NO RIGHTS AS SHAREHOLDER. No Optionee shall have any rights as a Shareholder with respect to any share of Common Stock subject to his or her Option prior to the date of issuance to him or her of a certificate or certificates for such shares.

 

4.3                               WITHHOLDING. Whenever the Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Company shall have the right to require the

 

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Optionee to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax liability prior to the delivery of any certificate or certificates for such shares. Whenever under the Plan payments are to be made in cash, such payments shall include an amount sufficient to satisfy any federal, state, or local withholding tax liability.

 

4.4                               RESERVATION OF SHARES OF COMMON STOCK. The Company, during the term of the Plan and all Options issued under the Plan, will at all times reserve and keep available, and will use its commercially reasonable best efforts to seek or obtain approval from any regulatory body having jurisdiction over the transactions contemplated by this Plan necessary in order to issue and sell, such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan.

 

4.5                               INCOME TAX TREATMENT. Government jurisdiction, income reporting and tax withholding requirements will be complied with by the Company whenever the Options are exercised and any income tax payment and any income tax prepayment requirements (including any tax withholding requirements imposed upon the Company) will be effectively borne by the Optionee. SINCE FEDERAL INCOME TAX LAW IS SUBJECT TO CHANGE AND INCOME TAX LAWS VARY FROM STATE TO STATE, THE COMPANY STRONGLY RECOMMENDS THAT OPTIONEES CONSULT WITH THEIR INDIVIDUAL TAX ADVISORS PRIOR TO EXERCISE OF AN OPTION.

 

4.6                               EXCEPTIONS TO TERMINATION OF EMPLOYMENT. Whether military, government or other service or other leave of absence shall constitute a termination of employment or other relationship with the Company shall be determined in each case by the Board of Directors or the Committee at its discretion, and any determination by the Board of Directors or the Committee shall be final and conclusive. A termination of employment or other relationship with the Company shall not occur where the Optionee transfers from the Company to one of its Affiliates or transfers from an Affiliate to the Company or another Affiliate.

 

4.7                               NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this Plan or in any agreement entered into in accordance with the Plan shall confer on an Optionee any right to continuance of employment by or with the Company or its Affiliates, or any right to continue to provide services to the Company or an Affiliate as a consultant, independent contractor, or other service provider, nor shall this Plan or such agreements interfere in any way with the Optionee’s or the Company’s right to terminate such employment or other such relationship at any time for any reason or no reason.

 

4.8                               EXPENSES OF PLAN. The expenses of administering this Plan shall be borne by the Company and its Affiliates.

 

4.9                               RELIANCE ON REPORTS. Each member of the Board or Committee and each member of the Board of Directors shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Affiliates and upon any other information furnished in connection with this Plan by any person or persons other than himself or herself. In no event shall any person who is or shall have been a member of the

 

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Board of Directors or of a Committee of the Board of Directors be liable for any determination made or other action taken or omitted in reliance upon any such report or information, or for any action taken or omitted, including the furnishing of information, in good faith.

 

4.10                        GENERAL RESTRICTIONS. Each Option granted pursuant to the Plan shall be subject to the requirement that if, in the opinion of the Board or Committee, the listing, registration, or qualification of any shares of Common Stock related thereto upon any securities exchange or under any state or federal law, the consent or approval of any regulatory body, or an agreement by the recipient with respect to the disposition of any such shares, is necessary or desirable as a condition of the issuance or sale of such shares, such Option shall not be exercised and/or such 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 or Committee.

 

4.11                        SUCCESSORS AND ASSIGNS. This Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Optionees, and agreements entered into in accordance with the Plan shall be binding upon the heirs, successors and assigns of the Company and the Optionees.

 

4.12                        MINNESOTA LAW. The validity, construction, interpretation, administration and effect of the Plan, any rules, regulations and actions relating to the Plan, and the agreements evidencing Options granted under the Plan, will be governed by and construed exclusively in accordance with the laws of the State of Minnesota.

 

I hereby certify that this Plan was adopted by the Board of Directors of Bridgewater Bancshares, Inc. effective March 27, 2012, and by the Shareholders of Bridgewater Bancshares, Inc. effective April 24, 2012.

 

	
 
    	
BRIDGEWATER BANCSHARES, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jerry J. Baack
    
	
 
    	
 
    	
Jerry J. Baack, CEO/President
    

 

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