ex4_1.htm


    
      

    

    

      Exhibit
        4.1

      


      BANK
        OF MARIN

      1989
        STOCK OPTION PLAN

      


       

      
        	
                1.

              	
                PURPOSES
                  OF THE PLAN

              


      

      


      The
        1989
        Stock Option Plan ("Plan") is intended to promote the interests of the Bank
        of
        Marin ("Corporation") by providing a method whereby eligible individuals
        who are
        responsible for the management, growth or financial success of the Corporation
        or its parent or subsidiary corporations may be offered incentives and rewards
        which will encourage them to acquire a proprietary interest, or otherwise
        increase their proprietary interest, in the Corporation and continue to render
        services to the Corporation or its parent or subsidiary
        corporations.

      


      
        	
                2.

              	
                ADMINISTRATION
                  OF THE PLAN

              


      

      


      (a)           The
        Board of Directors of the Corporation ("Board") shall administer the
        Plan.  The Board may, however, at any time appoint a committee
        ("Committee") consisting of not fewer than three members and delegate to
        such
        Committee one or more of the administrative powers allocated to the Board
        under
        the provisions of the Plan, including (without limitation) the power to grant
        options under the Plan, the power to accelerate the exercisability of options
        granted under the Plan and the power to administer the option surrender
        provisions of the Plan.  Each member of the Committee shall be a
        "disinterested person" within the meaning of FDIC Regulation
        335.411.  Members of the Committee shall serve for such term as the
        Board may determine and shall be subject to removal by the Board at any
        time.  The Board may also at any time terminate the functions of the
        Committee and reassume all powers and authority previously delegated to the
        Committee.  No person service as a member of the Board or the
        Committee shall act on any matter relating solely to such person's own interests
        under the Plan or any option thereunder.

      


      (b)           Any
        reference to the Board in one or more provisions of the Plan shall, except
        for
        the references in Sections 7, 9 and 10(c), mean the Committee, if the Committee
        is at the time responsible for the administration of either the Plan or those
        particular provisions of the Plan.  The Board or the Committee, as the
        case may be, is authorized (subject to the provisions of the Plan) to establish
        such rules and regulations as it may deem appropriate for the proper
        administration of the Plan and to make such determinations under, and issue
        such
        interpretations of, the Plan and any outstanding option as it may deem necessary
        or advisable.  Decisions of the Board of the Committee, as the case
        may be, shall be final and binding on all parties who have an interest in
        the
        Plan or any outstanding options.


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      
        	
                3.

              	
                ELIGIBILITY
                  FOR OPTION GRANTS

              


      

      


      (a)           The
        individuals who shall be eligible to receive options pursuant to the Plan
        shall
        be those key full-time salaried employees of the Corporation or its parent
        or
        subsidiary corporations (whether or not they are officers or members of the
        Board) and members of the Board (whether or not they are
        employees).

      


      (b)           Except
        as provided in Section 5(h), members of the Board who are not also employees
        of
        the Corporation or its parent or subsidiary corporations shall not be eligible
        to receive option grants under the Plan.

      


      (c)           Subject
        to subsections (a) and (b), the Board shall have full authority to determine
        the
        individuals who are to be granted options under the Plan, the number of shares
        to be covered by each granted option, whether each such option is to be an
        incentive stock option ("Incentive Stock Option") under Section 422A of the
        Internal Revenue Code of 1986, as amended ("Internal Revenue Code"), or a
        non-qualified option intended not to meet the requirements of Section 422A,
        and
        the time or times at which each such option is to become
        exercisable.  In no event may the total number of shares subject to
        options granted to an optionee exceed 10% of the total outstanding shares
        of the
        same class or series of the Corporation, determined with application of the
        ownership attribution rules of Section 425(d) of the Internal Revenue
        Code.

      


      (d)           For
        the purposes of the Plan, the terms "parent corporation" and "subsidiary
        corporation" shall have the meanings specified in Sections 425(e) and (f)
        of the
        Internal Revenue Code.

      


      
        	
                4.

              	
                STOCK
                  SUBJECT TO THE PLAN

              


      

      


      (a)           The
        stock issuable under the Plan shall be shares of the Corporation's authorized
        but unissued or reacquired common stock ("Common Stock").  The
        aggregate number of issuable shares shall not exceed 164,830 shares, subject
        to
        adjustment from time to time in accordance with subsection
        (b).  Should an option be terminated for any reason without being
        exercised in whole or in part, the shares subject to the portion of the option
        not so exercised shall be available for subsequent option grants under the
        Plan.

      


      (b)           In
        the event any change is made to the Common Stock issuable under the Plan
        (whether by reason of merger, consolidation, reorganization, recapitalization,
        stock dividend, stock split, combination of shares, exchange of shares, or
        other
        change in corporate or capital structure effected without receipt of
        consideration), then, unless such change results in the termination of all
        outstanding options pursuant to the provisions of Section 7, the maximum
        number
        and/or class of shares issuable under the Plan shall be automatically adjusted
        to reflect the effect of such change upon the Corporation's capital structure,
        and the Board shall make appropriate adjustments to the number and/or class
        of
        shares and the option price per share of the stock subject to each outstanding
        option in order to prevent the dilution or enlargement of benefits
        thereunder.  The adjustments determined by the Board shall be final,
        binding and conclusive.

      


      
        	
                5.

              	
                TERMS
                  AND CONDITIONS OF OPTIONS

              


      

      


      (a)           Options
        granted pursuant to the Plan shall be authorized by action of the Board and
        may
        be either Incentive Stock Options or non-qualified
        options.  Individuals who are not employees of the Corporation or its
        parent or subsidiary corporations may be granted only non-qualified
        options.  Each option granted shall be evidenced by an instrument in
        such form as the Board shall from time to time approve; provided, however,
        that
        each such instrument shall comply with and incorporate the terms and conditions
        specified by the Plan and shall specify whether it is intended to be an
        Incentive Stock Option or a non-qualified option.


      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (b)           Option
        Price.

      


      (1)           The
        option price per shall be fixed by the Board, but in no event shall the option
        price per share be less than 100% of the fair market value of a share of
        Common
        Stock on the date of the option grant.

      


      (2)           The
        option price shall become immediately due upon exercise of the option and
        shall
        be payable in cash or cash equivalents in a form acceptable to the
        Board.

      


      (3)           The
        fair market value of a share of Common Stock on any relevant date under the
        Plan
        shall be determined in accordance with the following provisions:

      


      (i)           If
        Common Stock is not at the time listed or admitted to trading on any stock
        exchange but is traded in the over-the-counter market (but not on the NASDAQ
        National Market System), the fair market value shall be the mean between
        the
        reported bid price and reported asked price of one share of Common Stock
        on the
        date in question in the over-the-counter market, as such prices are reported
        by
        the National Association of Securities Dealers through its NASDAQ system
        or any
        successor system.  If there are no reported bid and asked prices on
        the date in question, then the mean between the reported bid price and reported
        asked price on the last preceding date for which such quotations exist shall
        be
        determinative of fair market value.  If Common Stock is traded
        over-the-counter on the NASDAQ National Market System, the fair market value
        shall be the mean between the highest and lowest reported sale prices of
        shares
        of Common Stock on the date in question as such prices are reported by the
        National Association of Securities Dealers through such system or any successor
        system.  If there is no reported sale of Common Stock on the date in
        question, then the mean between the highest and lowest reported sale prices
        on
        the last preceding date for which such quotations exist shall be determinative
        of fair market value.

      


      (ii)           If
        Common Stock is at the time listed or admitted to trading on any stock exchange,
        then the fair market value shall be the mean between the highest and lowest
        reported sale prices of shares of Common Stock on the date in question on
        the
        stock exchange determined by the Board to be the primary market for Common
        Stock, as such price is officially quoted on the composite tape of transactions
        on such exchange.  If there is no reported sale of Common Stock on
        such exchange on the date in question, then the fair market value shall be
        the
        mean between the highest and lowest reported sale prices on the exchange
        on the
        last preceding date for which such quotations exist.

      


      (iii)           If
        Common Stock is at the time neither listed nor admitted to trading on any
        stock
        exchange nor traded in the over-the-counter market, then the fair market
        value
        shall be determined by the Board in accordance with the guidelines set forth
        in
        Treasury Regulations Section 20.2031-2 after taking into account such factors
        as
        the Board shall deem appropriate.

      


      (c)           Term
        and Exercise of Options.  Each option granted under the Plan shall
        be exercisable at such time or times, during such period, and for such number
        of
        shares as shall be determined by the Board and set forth in the instrument
        evidencing such option; provided, however, that no option granted under the
        Plan
        shall have a term in excess of ten years from the grant date.  During
        the lifetime of the optionee, each option shall be exercisable only by the
        optionee and shall not be assignable or transferable by the optionee otherwise
        than by will or by the laws of descent and distribution.


      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (d)           Effect
        of Termination of Employment.

      


      (1)           Except
        as otherwise provided in this subsection (d), should an optionee cease to
        be an
        employee of the Corporation or its parent or subsidiary corporations for
        any
        reason while the holder of one or more outstanding options granted to such
        optionee under the Plan, then such option or options shall in no event remain
        exercisable for more than a ninety (90) day period (12 months in the case
        of
        termination by reason of death or permanent disability), or such shorter
        period
        as is determined by the Board and set forth in the option agreement, following
        the date of cessation of employee status (and under no circumstances shall
        any
        such option be exercisable after the specified expiration date of the option
        term), and each such option shall, during such period, be exercisable only
        to
        the extent of the number of shares for which the option is exercisable on
        the
        date of such cessation of employee status.  Upon the expiration of
        such period or (if earlier) upon the expiration of the option term, the option
        shall terminate and cease to be exercisable.

      


      (2)           If
        the optionee's employment is terminated for cause (including, but not limited
        to, any substantial act of dishonesty, willful misconduct, fraud or embezzlement
        or any unauthorized disclosure of confidential information or trade secrets),
        then any outstanding option granted the optionee under the Plan shall terminate
        and cease to be exercisable immediately upon such termination of
        employment.

      


      (3)           The
        Board shall have discretion, exercisable either at the time the option is
        granted or at the time the optionee's employment is terminated, to establish
        as
        a provision applicable to the exercise of one or more options granted under
        the
        Plan that during the limited period of exercisability following termination
        of
        employment as provided in paragraph (1), the option may be exercised not
        only
        with respect to the number of shares for which it is exercisable at the time
        of
        the optionee's termination of employment but also with respect to one or
        more
        installments of purchasable shares for which the option otherwise would have
        become exercisable had such termination of employment not occurred.

      


      (4)           If
        the optionee is not an employee of the Corporation or its parent or subsidiary
        corporations, then the provisions of paragraphs (1) and (2) shall apply by
        treating the optionee's termination of service as a director with the
        Corporation or its parent or subsidiary corporations as termination of
        employment.

      


      (e)           Stockholder
        Rights.  An option holder shall have none of the rights of a
        stockholder with respect to any shares covered by the option until such
        individual shall have exercised the option, paid the option price and been
        issued a stock certificate for the purchased shares.

      


      (f)           Withholding.

      


      (1)           In
        the event that an optionee is required to pay to the Corporation an amount
        with
        respect to federal, state or local income and employment tax withholding
        obligations in connection with the exercise of an option, the Board may,
        in its
        discretion and subject to such rules as it may adopt, permit the optionee
        to
        satisfy the obligations, in whole or in part, by either (i) making an
        irrevocable election that a portion of the total value of the shares of Common
        Stock subject to the option be paid in the form of cash in lieu of the issuance
        of Common Stock and that such cash payment be applied to the satisfaction
        of the
        withholding obligations or (ii) tendering shares previously held by the optionee
        in a number sufficient to satisfy such obligations.

       

      (2)           If
        the optionee is subject to the trading restrictions of Section 16(b) of the
        Securities Exchange Act of 1934, as amended ("1934 Act") at the time of exercise
        of an option, any election under this subparagraph (f) by such optionee shall
        be
        made only in accordance with the applicable requirements of FDIC Regulation
        335.411.

      

        
          
             

          

          
             

            
              

            

          

          
             

          

        



      (g)           Modification
        of Options.  The Board shall have full power and authority to
        modify or waive any or all of the terms, conditions or restrictions applicable
        to any outstanding option, to the extent not inconsistent with the Plan;
        provided, however, that no such modification or waiver shall, without the
        consent of the option holder, adversely affect the holder's rights
        thereunder.

      


      (h)           Initial
        Option Grants.  Upon the effective date of the Plan (as determined
        under Section 10), options for shares of Common Stock equal to the specified
        percentages of the number of shares sold pursuant to the Offering shall be
        granted to the following individuals:  (1)  William P.
        Murray, Jr.:  5%;  (2) J. Dale Sullivan: 5%; (3) W. Robert
        Griswold: 3%; and (4) Philip J. Salz: 1.5%.  Each of the foregoing
        options shall be exercisable at an option price per share equal to 100% of
        the
        fair market value of a share of Common Stock on the date of grant, shall
        be for
        a term of 10 years and shall otherwise be in the form of the option agreement
        attached hereto.  The exercisability of the option granted to William
        P. Murray, Jr., may not be accelerated by the Board.

      


      
        	
                6.

              	
                INCENTIVE
                  STOCK OPTIONS

              


      

      


      (a)           General
        Conditions.  The terms and conditions set forth in this Section
        shall apply to all Incentive Stock Options granted under the
        Plan.  Options that are specifically designated as non-qualified
        options when issued under the Plan shall not be subject to such terms and
        conditions.

      


      (b)           Option
        Price.  The option price per share of Common Stock subject to an
        Incentive Stock Option shall in no event be less than 100% of the fair market
        value of a share of Common Stock on the date of grant.

      


      (c)           Dollar
        Limitation.  To the extent that the aggregate fair market value
        (determined as of the respective date or dates of grant) of shares with respect
        to which options that would otherwise be Incentive Stock Options are exercisable
        for the first time by any individual during any calendar year under the Plan
        (or
        any other plan of the Corporation, a parent or subsidiary corporation or
        predecessor thereof) exceeds the sum of $100,000 (or such greater amount
        as may
        be permitted under the Internal Revenue Code), whether by reason of acceleration
        or otherwise, such options shall be treated as options which are not Incentive
        Stock Options.  Such options shall be taken into account in the order
        in which they were granted.

      


      (d)           10%
        Shareholder.  If an employee to whom an Incentive Stock Option is
        to be granted pursuant to the provisions of the Plan is on the date of grant
        the
        owner of stock (as determined under Section 425(d) of the Internal Revenue
        Code)
        possessing more than 10% of the total combined voting power of all classes
        of
        stock of the Corporation or any one of its parent or subsidiary corporations,
        then the following special provisions shall be applicable to the Incentive
        Stock
        Option granted to such employee:

      


      (1)           The
        option price per share of the Common Stock subject to such Incentive Stock
        Option shall not be less than 110% of the fair market value of one share
        of
        Common Stock on the date of grant.

      


      (2)           The
        option shall not have a term in excess of five years from the date of
        grant.


      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	
                7.

              	
                ACCELERATION
                  AND TERMINATION OF OPTIONS

              


      

      


      (a)           In
        the event that the Corporation or its stock holders enter into an agreement
        to
        dispose of all or substantially all of the assets or outstanding capital
        stock
        of the Corporation by means of sale, merger, reorganization or liquidation,
        then
        each option outstanding under the Plan shall become exercisable, immediately
        prior to the consummation of such sale, merger, reorganization or liquidation,
        with respect to the full number of shares of Common Stock purchasable under
        such
        option.  No such acceleration of the exercise date, however, shall
        occur if the terms of the agreement require as a prerequisite for the
        consummation of any such sale, merger, reorganization or liquidation that
        each
        such outstanding option shall either be assumed by the successor corporation
        or
        parent  thereof.  The determination of such comparability
        shall be made by the Board, and its determination shall be final, binding
        and
        conclusive.  Upon consummation of the sale, merger, reorganization or
        liquidation contemplated by the agreement, all outstanding options, whether
        or
        not accelerated, shall terminate and cease to be exercisable, unless assumed
        pursuant to a written agreement by the successor corporation or parent
        thereof.

      


      
        	
                8.

              	
                CANCELLATION
                  AND NEW GRANT OF OPTIONS

              


      

      


      The
        Board
        shall have the authority to effect, at any time and from time to time, with
        the
        consent of the affected option holders, the cancellation of any or all
        outstanding options under the Plan and to grant in substitution therefor
        new
        options under the Plan covering the same or different numbers of shares of
        Common Stock but having an option price per share not less than 100% of fair
        market value (110% of the fair market value if the new option is to be Incentive
        Stock Option subject to Section 6(d)) as of the new grant date.

      


      
        	
                9.

              	
                AMENDMENT
                  OF THE PLAN

              


      

      


      (a)           The
        Board shall have complete and exclusive power and authority to amend, modify,
        suspend or terminate the Plan in any or all respects whatsoever at any time;
        provided, however, that no such amendment or modification shall, without
        the
        consent of option holders, adversely affect rights and obligations with respect
        to options at the time outstanding under the Plan; and provided, further,
        that
        the Board shall not, without the approval of the Corporation's stockholders,
        (i)
        increase the maximum number of shares issuable under the Plan, except for
        permissible adjustments under Section 4(b), (ii) materially increase the
        benefits accruing to individuals who participate in the Plan, or (iii) modify
        the eligibility requirements for the grant of options under the
        Plan.

      


      (b)           Notwithstanding
        the provisions of subsection (a) (other than those provisions which require
        approval of certain amendments by the Corporation's stockholders), the Board
        shall have the right to amend or modify the terms and provisions of the Plan
        and
        of any outstanding options under the Plan to the extent necessary to qualify
        any
        or all options under the Plan for such favorable federal income tax treatment
        as
        may be afforded employee stock options under Section 422A of the Internal
        Revenue Code and regulations promulgated thereunder.

      


      
        	
                10

              	
                EFFECTIVE
                  DATE AND TERM OF PLAN

              


      

      


      (a)           The
        Plan shall become effective on the later of (i) the day on which the Corporation
        is licensed to conduct a banking business by the Superintendent of Banks
        of the
        State of California or (ii) the day after the day as of which the Plan is
        approved by the Superintendent of Banks of the State of California (April
        12,
        1990), but no option granted under the Plan shall become exercisable unless
        and
        until the Plan shall have been approved by the stockholders of the Corporation
        holding not less than a majority of the voting power of the
        Corporation.  Subject to such limitation, the Board may grant options
        under the Plan at any time on or after the effective date and before the
        date
        fixed herein for termination of the Plan.


      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (b)           Unless
        the Plan is sooner terminated in accordance with Section 7, no options shall
        be
        granted after the earlier of (i) the tenth anniversary of the date of the
        adoption of the Plan by the Board or (ii) the date on which all shares available
        for issuance under the Plan shall have been issued pursuant to the exercise
        of
        options granted hereunder.

      


      (c)           Options
        may be granted under this Plan to purchase shares of Common Stock in excess
        of
        the number of shares then available for issuance under the Plan, provided
        (i) an
        amendment to increase the maximum number of shares issuable under the Plan
        is
        adopted by the Board prior to the initial grant of any such option and is
        thereafter submitted to the Corporation's stockholders for approval and (ii)
        each option so granted is not to become exercisable, in whole or in part,
        at any
        time prior to the obtaining of such stockholder approval.

      


      
        	
                11.

              	
                USE
                  OF PROCEEDS

              


      

      


      The
        cash
        proceeds received by the Corporation from the sale of shares pursuant to
        options
        granted under the Plan shall be used for general corporate
        purposes.

      


      
        	
                12.

              	
                WITHHOLDING

              


      

      


      The
        Corporation's obligation to deliver shares upon the exercise or surrender
        of any
        option granted under the Plan shall be subject to the option holder's
        satisfaction of all applicable federal, state and local income and employment
        tax withholding requirements.

      


      
        	
                13.

              	
                NO
                  EMPLOYMENT OR SERVICE
                  OBLIGATION

              


      

      


      Neither
        the action of the Corporation in establishing the Plan, nor any action taken
        by
        the Board or the Committee hereunder, nor any provision of the Plan itself
        shall
        be construed so as to grant any individual the right to remain in the employ
        or
        service of the Corporation or its parent corporation or any of its subsidiaries
        for any period of specific duration, and the Corporation (or its parent
        corporation or any subsidiary retaining the services of such individual)
        may
        terminate such individual's service at any time and for any reason, with
        or
        without cause.

      


      
        	
                14.

              	
                REGULATORY
                  APPROVALS

              


      

      


      The
        implementation of the Plan, the granting of any option hereunder, and the
        issuance of stock upon the exercise or surrender of any such option shall
        be
        subject to the Corporation's procurement of all approvals and permits required
        by regulatory authorities having jurisdiction over the Plan, the options
        granted
        under it and the stock issued pursuant to it.

      


      
        	
                15.

              	
                GOVERNING
                  LAW

              


      

      


      To
        the
        extent not otherwise governed by federal law, the Plan and its implementation
        shall be governed by and construed in accordance with the laws of the State
        of
        California.