ex4_1.htm


    
      

    

    


    Exhibit
      4.1

     

    BANK
      OF MARIN

    1999
      STOCK OPTION PLAN

     

    PURPOSES
      OF THE PLAN

    


    The
      1999
      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.

    


    Except
      as
      specifically provided in Section 7, options granted hereunder may be either
      "incentive stock options" as defined in Section 422 of the Internal Revenue
      Code
      of 1986, as amended, or "nonstatutory stock options" at the discretion of the
      Corporation and as reflected in the terms of the written option agreement with
      the holder of an option.

    


    ADMINISTRATION
      OF THE PLAN

    


    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 serving 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.

    


    Any
      reference to the Board in one or more provisions of the Plan shall, except
      for
      the references in Sections 7, 8, 10 and 11(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 or 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    ELIGIBILITY
      FOR OPTION GRANTS

    


    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).

    


    Except
      as
      provided in Section 7, 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.

    


    Subject
      to subsections (a) and (b) above and to Section 7 below, 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 422 of the Internal Revenue Code of 1986, as amended ("Internal
      Revenue Code"), or a non-statutory option not intended 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 424(d) of the Internal Revenue Code.

    


    For
      the
      purposes of the Plan, the terms "parent corporation" and "subsidiary
      corporation" shall have the meanings specified in Sections 424(e) and (f) of
      the
      Internal Revenue Code.

    


    STOCK
      SUBJECT TO THE PLAN

    


    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 650,000 shares, 95,000 of such shares
      being reserved for issuance only under Section 7, 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.

    


    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 8, 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    TERMS
      AND CONDITIONS OF OPTIONS

    


    Options
      granted pursuant to the Plan shall be authorized by action of the Board and
      may
      be either Incentive Stock Options or non-statutory
      options.  Individuals who are not employees of the Corporation or its
      parent or subsidiary corporations may be granted only nonstatutory
      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-statutory option. Options granted to
      non-employee directors of the Corporation shall only be granted in accordance
      with the terms of Section 7 below.

    


    Option
      Price.

    


    The
      option price per share 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.

    


    The
      option price shall be immediately due upon exercise of the
      option.  The consideration to be paid for the shares to be issued upon
      exercise of an option, including the method of payment, shall be determined
      by
      the Board and may consist entirely of cash, check, or any other consideration
      and method of payment for the issuance of shares permitted under applicable
      law.  In addition, full payment of the purchased shares may be
      effected through a broker-dealer sale and remittance procedure pursuant to
      which
      the optionee (i) shall provide irrevocable written instructions to a designated
      brokerage firm to effect the immediate sale of the purchased shares and remit
      to
      the Bank, out of the sale proceeds available on the settlement date, sufficient
      funds to cover the aggregate exercise price payable for the purchased shares
      plus all applicable federal, state and local income and employment taxes
      required to be withheld by the Bank by reason of such purchase and (ii) shall
      provide written directives to the Bank to deliver the certificates for the
      purchased shares directly to such brokerage firm in order to complete the sale
      transaction.

    


    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:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    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 or on the NASDAQ National Market System
      or Small Cap Market System, the fair market value shall be the reported bid
      price of one share of Common Stock on the date in question in the
      over-the-counter market.  If there are no reported bid prices on the
      date in question, then the reported bid price on the last preceding date for
      which such quotations exist shall be determinative of fair market
      value.

    


    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.

    


    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.

    


    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 other
      than
      by will or by the laws of descent and distribution.

    


    Effect
      of
      Termination of Employment.

    


    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    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.

    


    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.

    


    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.

    


    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.

    


    INCENTIVE
      STOCK OPTIONS

    


    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-statutory options when issued under the Plan
      shall not be subject to such terms and conditions.

    


    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    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.

    


    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 424(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:

    


    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.

    


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

    


    OPTION
      TO NON-EMPLOYEE DIRECTORS

    


    Notwithstanding
      any other term or provision in this Plan, members of the Board who are not
      also
      employees of the Corporation or its parent or subsidiary corporations shall
      be
      eligible to receive option grants under the Plan but any such options may be
      granted only upon the terms set forth in this Section 7, and other terms of
      the
      Plan not inconsistent with the terms of this paragraph. To the extent that
      any
      other terms or provisions in the Plan conflict with the terms of this Section
      7
      for such non-employee options, the terms of this Section 7 shall
      apply.

    


    Eligibility.  All
      non-employee directors shall receive options pursuant to the terms of this
      Section 7, as of the later of (i) the date of their next election to the Board
      of Directors (after the effective date of the Plan) after they have served
      as a
      director for not less than 12 months and (ii) approval of this Amended and
      Restated Plan by the Department of Financial Institutions and the shareholders
      of the Corporation.

    


    Stock
      Subject to This Section.  The aggregate number of issuable shares for
      nonemployee directors shall not exceed 95,000 of the total number of shares
      authorized for the Plan as set forth in Section 4 subject to adjustment from
      time to time in accordance with Section 4(b).

    


    Terms
      and
      Conditions.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Non-Statutory.  Non-employee
      directors may only be granted non-statutory options.  Each option
      shall be granted on the terms and conditions set forth herein.

    


    Number
      of
      Shares.  As of the date of first eligibility as described in Section
      7(a) each such non-employee director shall be granted options to acquire 5,000
      shares of the Corporation's Common Stock, subject to adjustment as provided
      in
      Section 4(b).  No other options shall be granted to any non-employee
      director.

    


    Option
      Price.  The option price per share shall be 100% of the fair market
      value of a share of Common Stock as of the date of the option
      grants.

    


    Term
      and
      Exercise.  Each option granted to non-employee directors shall vest as
      to 1,000 shares as of the date of grant, and 1,000 shares on each anniversary
      of
      the date of grant through the fourth anniversary. Such options may be exercised
      as to vested options at any time provided that all such options shall have
      a
      term of seven years from the date of grant and any options not exercised on
      or
      before the expiration of the term shall lapse and be of no further force or
      effect. During the lifetime of the non-employee director each option granted
      shall be exercisable only by such person and shall not be assignable or
      transferable other than by will or by intestate succession.

    


    Termination
      of Status as Director.

    


    Except
      as
      otherwise provided in subsection 7(e)(2), in the event of the termination of
      a
      non-employee director optionee as a director of the Corporation for any reason
      prior to the expiration of the option term, then any options granted shall
      remain exercisable for a period of 90 days after termination (but not later
      than
      the expiration of the term), but only to the extent that such options had vested
      as of the date of termination.

    


    In
      the
      event of the termination of a non-employee director optionee as a director
      of
      the Corporation pursuant to applicable law because such director has been
      declared of unsound mind by an order of court or convicted of a felony or has
      been found by a court to have committed fraudulent or dishonest acts or gross
      abuse of authority or discretion with reference to the Corporation, then any
      outstanding options granted the optionee under the Plan shall terminate and
      cease to be exercisable immediately upon such termination.

    


    Modification
      of Options, Amendment of the Plan.  The Board has no power or
      authority to modify or waive any of the terms, conditions or restrictions
      applicable to any options outstanding to non-employee directors, nor has it
      any
      power or authority to amend, modify, suspend or terminate any terms of this
      Section 7, except to the extent that any such modification or amendment is
      for
      the purpose of complying with changes in the Internal Revenue Code of 1986
      or
      changes in ERISA.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Acceleration.  In
      the event, the Corporation or its stockholders 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 to non-employee directors 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 under
      such
      option.

    


    ACCELERATION
      AND TERMINATION OF OPTIONS

    


    In
      the
      event that the Corporation or its stockholders 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.  Except as provided in Section 7, 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 or options of the successor corporation
      comparable to the options granted under the Plan and to be granted under the
      Plan are to be granted to each optionee hereunder.  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.

    


    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.

    


    AMENDMENT
      OF THE PLAN

    


    Except
      as
      provided in Section 7, 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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, except for any options granted
      pursuant to Section 7, to the extent necessary to qualify any or all options
      under the Plan for such favorable federal income tax treatment as may be
      afforded incentive stock options under Section 422 of the Internal Revenue
      Code
      and regulations promulgated thereunder.

    


    EFFECTIVE
      DATE AND TERM OF PLAN

    


    The
      Plan
      shall become effective on the later of (i) June 30, 1999 or (ii) the day after
      the day as of which the Plan is approved by the Department of Financial
      Institutions of the State of California, but the Plan shall terminate, and
      no
      options granted hereunder shall be exercisable, unless the Plan shall have
      been
      approved by the stockholders of the Corporation holding not less than a majority
      of the shares present or represented at a meeting of shareholders duly called
      within 12 months after the effective date.  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.
      As of the effective date the Plan shall be the only stock option plan of the
      Bank and any and all prior plans shall terminate.

    


    Unless
      the Plan is sooner terminated in accordance with Section 8, 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.

    


    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.

     

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    WITHHOLDING

    


    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.

    


    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 (b) by such optionee
      shall be made only in accordance with the applicable requirements of FDIC
      Regulation 335.411.

    


    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.

    


    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.

    


    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.  Continuance of the Plan
      is subject to approval by the shareholders of the Corporation within 12 months
      after the Plan is adopted by the Board.  Shareholder approval shall
      consist of approval by the affirmative vote of the holders of a majority of
      shares present or represented and entitled to vote at a meeting duly held and
      by
      a majority of the disinterested shares represented and voting at the meeting
      or
      by the written consent of holders of a majority of the outstanding shares and
      a
      majority of the disinterested shares.

     

    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.