EXHIBIT
      4.1

    


    


    BAY
      NATIONAL CORPORATION 2007 STOCK
      INCENTIVE PLAN 

     

    1. Establishment,
      Purpose and Types of Awards. Bay National Corporation (the “Company”), the
      parent holding company of Bay National Bank (the “Bank”) hereby establishes the
      BAY NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN (the “Plan”). The
      purpose of the Plan is to advance the interests of the Company by providing
      directors and selected employees of the Bank, the Company, and their Affiliates
      with the opportunity to acquire shares of Common Stock. By encouraging stock
      ownership, the Company seeks to attract, retain and motivate the best available
      personnel for positions of substantial responsibility; to provide additional
      incentive to directors and selected employees of the Company, the Bank and
      their
      Affiliates to promote the success of the business as measured by the value
      of
      its shares; and generally to increase the commonality of interests among
      directors, employees, and other shareholders.

    


    The
      Plan
      permits the granting of stock options (including incentive stock options within
      the meaning of Code section 422 and non-qualified stock options), stock
      appreciation rights, restricted or unrestricted stock awards, phantom stock,
      performance awards, other stock-based awards, or any combination of the
      foregoing.

    


    2. Definitions.
      Under the Plan, except where the context otherwise indicates, the following
      definitions apply:

    


    “Administrator”
      means the Board or the committee(s) or officer(s) appointed by the Board that
      have authority to administer the Plan as provided in Section 3
      hereof.

    


    “Affiliate”
      means any entity, whether now or hereafter existing, which controls, is
      controlled by, or is under common control with, the Company (including, but
      not
      limited to, joint ventures, limited liability companies, and partnerships),
      including Bay National Bank. For this purpose, “control” shall mean ownership of
      50% or more of the total combined voting power or value of all classes of stock
      or interests of the entity.

    


    “Award”
      means any stock option, stock appreciation right, stock award, phantom stock
      award, performance award, or other stock-based award pursuant to the
      Plan.

    


    The
      “Bank” means Bay National Bank.

    


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

    


    “Change
      of Control” means if any of the following occurs 

    


    (i)
      any
      individual, firm, corporation or other entity, or any group (as defined in
      Section 13(d)(3) or the Exchange Act becomes, directly or indirectly, the
      beneficial owner (as defined in the general rules and regulations of the
      Securities and Exchange Commission with respect to Sections 13(d) and 13(g)
      of
      the Act) of more than 35% of the then outstanding shares of the Company's
      capital stock entitled vote generally in the election of directors of the
      Company; or

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ii)
      the
      stockholders of the Company approve a definitive agreement for (i) the merger
      or
      other business combination of the Company with or into another corporation
      pursuant to which the stockholders of the Company do not own, immediately after
      the transaction, more than 50% of the voting power of the corporation that
      survives and is a publicly owned corporation and not a subsidiary of another
      corporation, or (ii) the sale, exchange or other disposition of all or
      substantially all of the assets of the Company; or

    


    (iii)
      during any period of two years or less, individuals who at the beginning of
      such
      period constituted the Board cease for any reason to constitute at least a
      majority thereof, unless the election, or the nomination for election by the
      stockholders of the Company, of each new director was approved by a vote of
      at
      least 75% of the directors then still in office who were directors at the
      beginning of the period. Notwithstanding the foregoing, a Change of Control
      shall not be deemed to have taken place if beneficial ownership is acquired
      by,
      or a tender exchange offer is commenced by, the Company or any of its
      subsidiaries, any profit sharing, employee ownership or other employee benefit
      plan of the Company or any subsidiary of any trustee of or fiduciary with
      respect to any such plan when acting in such capacity, or any group comprised
      solely of such entities.

    


    “Code”
      means the Internal Revenue Code of 1986, as amended, and any regulations
      promulgated thereunder

    


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

    


    “Company”
      means Bay National Corporation.

    


    “Cause”
      has the meaning ascribed to such term or words of similar import in
      Participant’s written employment or service contract with the Company or Bank
      and, in the absence of such agreement or definition, means Participant’s
      (i) conviction of, or plea of guilty or nolo contendere to, a felony or
      crime involving moral turpitude; (ii) fraud on or misappropriation of any
      funds or property of Bank, any affiliate, customer or vendor;
      (iii) personal dishonesty, incompetence, willful misconduct, willful
      violation of any law, rule or regulation (other than minor traffic violations
      or
      similar offenses), or breach of fiduciary duty which involves personal profit;
      (iv) willful misconduct in connection with Participant’s duties or willful
      failure to perform Participant’s responsibilities in the best interests of the
      Company or Bank; (v) illegal use or distribution of drugs;
      (vi) violation of any Company or Bank rule, regulation, procedure or
      policy; or (vii) breach of any provision of any employment, non-disclosure,
      non-competition, non-solicitation or other similar agreement executed by
      Participant for the benefit of the Company or Bank, all as determined by the
      Administrator, which determination will be conclusive.

    


    “Disability”
      shall mean the inability to engage in any substantial gainful activity by reason
      of any medically determinable physical or mental impairment which can be
      expected to result in death or which has lasted or can be expected to last
      for a
      continuous period of not less than twelve months. The Administrator may require
      such proof of Disability as the Administrator in its sole discretion deems
      appropriate and the Administrator’s good faith determination as to whether
      Participant is totally and permanently disabled will be final and binding on
      all
      parties concerned.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    “Employee”
      means any person employed by the Company, the Bank, or any affiliate, other
      than
      in the capacity as director, advisory director or comparable
      status.

    


    “Exchange
      Act” means the Securities Exchange Act of 1934, as amended.

    


    “Fair
      Market Value” means, with respect to a share of Common Stock for any purpose on
      a particular date: (i) the closing price quoted on the Nasdaq Stock Market
      or
      other national securities exchange or national securities association that
      is
      the principal market for the Common Stock, or (ii) if the Common Stock is not
      so
      listed, the last or closing price on the relevant date quoted on the OTC
      Bulletin Board Service or by Pink Sheets LLC or a comparable service as
      determined in the Administrator’s sole discretion; or (iii) if the Common
      Stock is not listed or quoted by any of the above, the average of the closing
      bid and asked prices on the relevant date furnished by a professional market
      maker for the Common Stock selected by the Administrator in its sole discretion.
      If the Common Stock is listed or quoted as described in clause (i), clause
      (ii)
      or clause (iii) above, as applicable, but no public trading of the Common Stock
      occurs on the relevant date, then Fair Market Value shall be determined as
      of
      the nearest preceding date on which trading of the Common Stock occurred. For
      all purposes under the Plan, the term “relevant date” as used in this definition
      means either the date as of which Fair Market Value is to be determined or
      the
      nearest preceding date on which public trading of the Common Stock occurred,
      as
      determined in the Administrator’s sole discretion.

    


    “Grant
      Agreement” means a written document memorializing the terms and conditions of an
      Award granted pursuant to the Plan. Each Grant Agreement shall incorporate
      the
      terms of the Plan.

     

    “Participants”
      shall have the meaning set forth in Section 5. 

     

    “Parent”
      shall mean a corporation, whether nor or hereafter existing, within the meaning
      of the definition of “parent corporation” provided in Code section 424(e), or
      any successor thereto. 

     

    “Performance
      Goals” shall mean performance goals established by the Administrator which may
      be based on one or business criteria selected by the Administrator that apply
      to
      an individual or group of individuals, the Corporation and/or one or more of
      its
      Affiliates either separately or together, over such performance period as the
      Administrator may designate, including, but not limited to, criteria based
      on
      operating income, earnings or earnings growth, sales, return on assets, equity
      or investment, regulatory compliance, satisfactory internal or external audits,
      improvement of financial ratings, achievement of balance sheet or income
      statement objectives, or any other objective goals established by the
      Administrator, and may be absolute in their terms or measured against or in
      relationship to other companies comparably, similarly or otherwise situated.
      

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Subsidiary”
      and “Subsidiaries” shall mean only a corporation or corporations, whether now or
      hereafter existing, within the meaning of the definition of “subsidiary
      corporation” provided in section 424(f) of the Code, or any successor thereto.


     

    “Ten-Percent
      Stockholder” shall mean a Participant who (applying the rules of Code section
      424(d)) owns stock possessing more than 10% of the total combined voting power
      or value of all classes of stock or interests of the Corporation or a Parent
      or
      Subsidiary of the Corporation.

     

    3. Administration.

    


    (a) Administration
      of the Plan. The Plan shall be administered by the Board or a committee that
      may be appointed by the Board from time to time; provided, however, that unless
      otherwise determined by the Board, the Administrator shall be composed solely
      of
      two or more persons who are “outside directors” within the meaning of Code
      section 162(m)(4)(C)(i) and the regulations promulgated thereunder and
“non-employee directors” within the meaning of Rule 16b-3 promulgated under the
      Exchange Act. To the extent allowed by applicable state or federal law, the
      Board by resolution may authorize an officer or officers to grant Awards (other
      than stock Awards) to other officers and employees of the Company and its
      Affiliates, and, to the extent of such authorization, such officer or officers
      shall be the Administrator.

    


    (b) Powers
      of the Administrator. The Administrator shall have all the powers vested in
      it by the terms of the Plan, such powers to include authority, in its sole
      discretion, to grant Awards under the Plan, prescribe Grant Agreements
      evidencing such Awards and establish programs for granting Awards.

    


    The
      Administrator shall have full power and authority to take all other actions
      necessary to carry out the purpose and intent of the Plan, including, but not
      limited to, the authority to: (i) determine the eligible persons to whom,
      and the time or times at which, Awards shall be granted; (ii) determine the
      types of Awards to be granted; (iii) determine the number of shares to be
      covered by or used for reference purposes for each Award; (iv) impose such
      terms, limitations, restrictions and conditions (not inconsistent with the
      Plan)
      upon any such Award as the Administrator shall deem appropriate, including,
      but
      not limited to, whether a stock option shall be an incentive stock option or
      a
      nonqualified stock option, any exceptions to nontransferability, any Performance
      Goals applicable to Awards, any provisions relating to vesting, any
      circumstances in which the Awards would terminate, the period during which
      Awards may be exercised, and the period during which Awards shall be subject
      to
      restrictions; (v) modify, amend, extend or renew outstanding Awards, or
      accept the surrender of outstanding Awards and substitute new Awards (provided
      however, that, except as provided in Section 6 or 7(d) of the Plan, any
      modification that would materially adversely affect any outstanding Award shall
      not be made without the consent of the holder); (vi) accelerate, extend or
      otherwise change the time in which an Award may be exercised or becomes payable
      and to waive or accelerate the lapse, in whole or in part, of any restriction
      or
      condition with respect to such Award, including, but not limited to, any
      restriction or condition with respect to the vesting or exercisability of an
      Award following termination of any grantee’s employment or other relationship
      with the Company or an Affiliate; (vii) establish objectives and conditions
      (including, without limitation, vesting criteria), if any, for earning Awards
      and determining whether such objectives and conditions have been satisfied;
      (viii) determine the Fair Market Value of the Common Stock from time to time
      in
      accordance with the Plan; and (ix) for any purpose, including but not
      limited to, qualifying for preferred tax treatment under foreign tax laws or
      otherwise complying with the regulatory requirements of local or foreign
      jurisdictions, to establish, amend, modify, administer or terminate sub-plans,
      and prescribe, amend and rescind rules and regulations relating to such
      sub-plans.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The
      Administrator shall have full power and authority, in its sole discretion,
      to
      administer and interpret the Plan, Grant Agreements and all other documents
      relevant to the Plan and Awards issued thereunder, and to adopt and interpret
      such rules, regulations, agreements, guidelines and instruments for the
      administration of the Plan and for the conduct of its business as the
      Administrator deems necessary or advisable.

    


    (c) Non-Uniform
      Determinations. The Administrator’s determinations under the Plan
      (including, without limitation, determinations of the persons to receive Awards,
      the form, amount and timing of such Awards, the terms and provisions of such
      Awards and the Grant Agreements evidencing such Awards) need not be uniform
      and
      may be made by the Administrator selectively among persons who receive, or
      are
      eligible to receive, Awards under the Plan, whether or not such persons are
      similarly situated.

    


    (d) Limited
      Liability. To the maximum extent permitted by law, no member of the
      Administrator shall be liable for any action taken or decision made in good
      faith relating to the Plan or any Award thereunder.

    


    (e) Indemnification.
      To the maximum extent permitted by law and by the Company’s charter and by-laws,
      the members of the Administrator shall be indemnified by the Company in respect
      of all their activities under the Plan.

    


    (f) Reliance
      on Reports. Each member of the Board shall be fully justified in relying or
      acting in good faith upon any report made by the independent public accountants
      of the Company, and upon any other information furnished in connection with
      this
      Plan. In no event shall any person who is or shall have been a member of the
      Board or the Administrator be liable for any determination made or other action
      taken or any omission to act in reliance upon any such report or information,
      or
      for any action taken, including the furnishing of information, or failure to
      act, if in good faith.

    


    (g) Effect
      of Administrator’s Decision. All actions taken and decisions and
      determinations made by the Administrator on all matters relating to the Plan
      pursuant to the powers vested in it hereunder shall be in the Administrator’s
      sole discretion and shall be conclusive and binding on all parties concerned,
      including the Company, its stockholders, any participants in the Plan and any
      other employee, consultant, or director of the Company, and their respective
      successors in interest.

    


    4. Shares
      Available for the Plan. The aggregate number of shares of Common Stock
      issuable pursuant to all Awards granted under the Plan shall not exceed 200,000
      plus (i) any available shares of Common Stock under the Prior Plan as of
      its termination date and (ii) shares of Common Stock subject to options
      granted under the Prior Plan that expire or terminate without having been fully
      exercised. Notwithstanding the foregoing (but subject to adjustment as provided
      in Section 7(f)), in no event may the number of shares issuable pursuant to
      the exercise of incentive stock options granted hereunder exceed 200,000. The
      aggregate number of shares of Common Stock available for grant under this Plan
      and the number of shares of Common Stock subject to outstanding Awards shall
      be
      subject to adjustment as provided in Section 7(f). 

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    The
      Company shall reserve such number of shares for Awards under the Plan, subject
      to adjustments as provided in Section 7(f) of the Plan. If any Award, or
      portion of an Award, under the Plan expires or terminates unexercised, becomes
      unexercisable or is forfeited or otherwise terminated, surrendered or canceled
      as to any shares, or if any shares of Common Stock are repurchased by or
      surrendered to the Company in connection with any Award (whether or not such
      surrendered shares were acquired pursuant to any Award), or if any shares are
      withheld by the Company, the shares subject to such Award and the repurchased,
      surrendered and withheld shares shall thereafter be available for further Awards
      under the Plan; provided, however, that to the extent required by applicable
      law, any such shares that are surrendered to or repurchased or withheld by
      the
      Company in connection with any Award or that are otherwise forfeited after
      issuance shall not be available for purchase pursuant to incentive stock options
      intended to qualify under Code section 422. 

    


    5. Participation.
      Participation in the Plan shall be open to those employees, officers, and
      directors of, and other individuals providing bona fide services to or for,
      the
      Company, or of any Affiliate of the Company, as may be selected by the
      Administrator from time to time. The Administrator may also grant Awards to
      individuals in connection with hiring, retention or otherwise, prior to the
      date
      the individual first performs services for the Company or an Affiliate, provided
      that such Awards shall not become vested or exercisable prior to the date the
      individual first commences performance of such services.

    


    6. Awards.
      The Administrator, in its sole discretion, shall establish the terms of all
      Awards granted under the Plan. All Awards shall be subject to the terms and
      conditions provided in the Grant Agreement. Awards may be granted individually
      or in tandem with other types of Awards. Each Award shall be evidenced by a
      Grant Agreement, and each Award shall be subject to the terms and conditions
      provided in the applicable Grant Agreement. The Administrator may permit or
      require a recipient of an Award to defer such individual’s receipt of the
      payment of cash or the delivery of Common Stock that would otherwise be due
      to
      such individual by virtue of the exercise of, payment of, or lapse or waiver
      of
      restrictions respecting, any Award. If any such deferral is required or
      permitted, the Administrator shall, in its sole discretion, establish rules
      and
      procedures for such deferral.

    


    (a) Stock
      Options. The Administrator may from time to time grant to eligible
      Participants Awards of incentive stock options as that term is defined in Code
      section 422 or non-qualified stock options; provided, however, that Awards
      of incentive stock options shall be limited to employees of the Company or
      of
      any current or hereafter existing “parent corporation” or “subsidiary
      corporation,” as defined in Code sections 424(e) and (f), respectively, of the
      Company. The exercise price of any option granted under the Plan shall not
      be
      less than the Fair Market Value of the shares of Common Stock underlying such
      option on the date of grant, provided, however, that an incentive stock option
      granted to an Employee who owns stock representing more than 10% of the combined
      voting power of the Company or any Affiliate must have an exercise price at
      least equal to 110% of Fair Market Value as of the date of grant. No stock
      option shall be an incentive stock option unless so designated by the
      Administrator at the time of grant or in the Grant Agreement evidencing such
      stock option. 

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (i)
      Special Rules for Incentive Stock Options. The aggregate Fair Market
      Value, as of the date the Option is granted, of the shares of Common Stock
      with
      respect to which incentive stock options are exercisable for the first time
      by a
      Participant during any calendar year (under all incentive stock option plans,
      as
      defined in Section 422 of the Code, of the Company, or any Parent or
      Subsidiary), shall not exceed $100,000 or such other dollar limitation as may
      be
      provide in the Code. Notwithstanding the prior provisions of this Section,
      the
      Board may grant Options in excess of the foregoing limitations, in which case
      such Options granted in excess of such limitation shall be Options which are
      non-qualified stock options.

     

    (b) Stock
      Appreciation Rights. The Administrator may from time to time grant to
      eligible participants Awards of Stock Appreciation Rights (“SAR”). A SAR may be
      exercised in whole or in part as provided in the applicable Grant Agreement
      and
      entitles the grantee to receive, subject to the provisions of the Plan and
      the
      Grant Agreement, a payment having an aggregate value equal to the product of
      (i) the excess of (A) the Fair Market Value on the exercise date of
      one share of Common Stock over (B) the base price per share specified in
      the Grant Agreement, which shall not be less than the Fair Market Value of
      one
      share of Common Stock as of the date the SAR is granted, times (ii) the
      number of shares specified by the SAR, or portion thereof, which is exercised.
      Payment by the Company of the amount receivable upon any exercise of a SAR
      may
      be made by the delivery of Common Stock or cash, or any combination of Common
      Stock and cash, as specified in the Grant Agreement or as determined in the
      sole
      discretion of the Administrator. If upon settlement of the exercise of a SAR
      a
      grantee is to receive a portion of such payment in shares of Common Stock,
      the
      number of shares shall be determined by dividing such portion by the Fair Market
      Value of a share of Common Stock on the exercise date. No fractional shares
      shall be used for such payment and the Administrator shall determine whether
      cash shall be given in lieu of such fractional shares or whether such fractional
      shares shall be eliminated.

    


    (c) Stock
      Awards. The Administrator may from time to time grant restricted or
      unrestricted Stock Awards to eligible Participants in such amounts, on such
      terms and conditions (which terms and conditions may condition the vesting
      or
      payment of Stock Awards on the achievement of one or more Performance Goals),
      and for such consideration, including no consideration or such minimum
      consideration as may be required by law, as it shall determine. 

    


    (d) Phantom
      Stock. The Administrator may from time to time grant Awards to eligible
      participants denominated in stock-equivalent units (“Phantom Stock”) in such
      amounts and on such terms and conditions as it shall determine, which terms
      and
      conditions may condition the vesting or payment of Phantom Stock on the
      achievement of one or more Performance Goals. Phantom Stock units granted to
      a
      Participant shall be credited to a bookkeeping reserve account solely for
      accounting purposes and shall not require a segregation of any of the Company’s
      assets. An Award of phantom stock may be settled in Common Stock, in cash,
      or in
      a combination of Common Stock and cash, as specified in the Grant Agreement.
      Except as otherwise provided in the applicable Grant Agreement, the grantee
      shall not have the rights of a stockholder with respect to any shares of Common
      Stock represented by a phantom stock unit solely as a result of the grant of
      a
      phantom stock unit to the grantee. In granting any such Phantom Stock Awards,
      the Administrator shall consider the potential application of Section 409A
      of
      the Code, and the applicable Grant Agreement shall include appropriate
      disclosure with respect to any such potential application.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (e) Performance
      Awards. The Administrator may, in its sole discretion, grant Performance
      Awards, which become payable on account of attainment of one or more Performance
      Goals established by the Administrator. Performance awards may be paid by the
      delivery of Common Stock or cash, or any combination of Common Stock and cash,
      as specified in the Grant Agreement. 

    


    (f) Other
      Stock-Based Awards. The Administrator may from time to time grant other
      stock-based awards to eligible Participants in such amounts, on such terms
      and
      conditions, and for such consideration, including no consideration or such
      minimum consideration as may be required by law, as it shall determine. Other
      stock-based awards may be denominated in cash, in Common Stock or other
      securities, in stock-equivalent units, in stock appreciation units, in
      securities or debentures convertible into Common Stock, or in any combination
      of
      the foregoing and may be paid in Common Stock or other securities, in cash,
      or
      in a combination of Common Stock or other securities and cash, all as determined
      in the sole discretion of the Administrator as set forth in the Grant Agreement.
      In granting any such Awards, the Administrator shall consider the potential
      application of Section 409A of the Code, and the applicable Grant Agreement
      shall include appropriate disclosure with respect to any such potential
      application.

    


    7. Miscellaneous.

    


    (a) Investment
      Representations. The Administrator may require each person acquiring shares
      of Common Stock pursuant to Awards hereunder to represent to and agree with
      the
      Company in writing that such person is acquiring the shares without a view
      to
      distribution thereof. The certificates for such shares may include any legend
      that the Administrator deems appropriate to reflect any restrictions on
      transfer. All certificates for shares issued pursuant to the Plan shall be
      subject to such stock transfer orders and other restrictions as the
      Administrator may deem advisable under the rules, regulations and other
      requirements of the Securities and Exchange Commission, any stock exchange
      upon
      which the Common Stock is then listed or interdealer quotation system upon
      which
      the Common Stock is then quoted, and any applicable federal or state securities
      laws. The Administrator may place a legend or legends on any such certificates
      to make appropriate reference to such restrictions.

    


    (b) Compliance
      with Securities Law. Each Award shall be subject to the requirement that if,
      at any time, counsel to the Company shall determine that the listing,
      registration or qualification of the shares subject to such an Award upon any
      securities exchange or interdealer quotation system or under any state or
      federal law, or the consent or approval of any governmental or regulatory body,
      or that the disclosure of nonpublic information or the satisfaction of any
      other
      condition is necessary in connection with the issuance or purchase of shares
      under such an Award, such Award may not be exercised, in whole or in part,
      unless such satisfaction of such condition shall have been effected on
      conditions acceptable to the Administrator. Nothing herein shall be deemed
      to
      require the Company to apply for or to obtain such listing, registration or
      qualification, or to satisfy such condition.

    


    (c) Withholding
      of Taxes. Grantees and holders of Awards shall pay to the Company or its
      Affiliate, or make provision satisfactory to the Administrator for payment
      of,
      any taxes required to be withheld in respect of Awards under the Plan no later
      than the date of the event creating the tax liability. The Company or its
      Affiliate may, to the extent permitted by law, deduct any such tax obligations
      from any payment of any kind otherwise due to the grantee or holder of an Award.
      In the event that payment to the Company or its Affiliate of such tax
      obligations is made in shares of Common Stock, such shares shall be valued
      at
      Fair Market Value on the applicable date for such purposes and shall not exceed
      in amount the minimum statutory tax withholding obligation.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (d) Loans.
      To the extent otherwise permitted by law, the Company or its Affiliate may
      make
      loans to grantees to assist grantees in exercising Awards and satisfying any
      withholding tax obligations.

    


    (e) Transferability.
      Except as otherwise determined by the Administrator or provided in a Grant
      agreement, and in any event in the case of an incentive stock option or a stock
      appreciation right granted with respect to an incentive stock option, no Award
      granted under the Plan shall be transferable by a grantee otherwise than by
      will
      or the laws of descent and distribution or pursuant to the terms of a “qualified
      domestic relations order” (within the meaning of Section 414(p) of the Code and
      the regulations and rulings thereunder). Unless otherwise determined by the
      Administrator in accord with the provisions of the immediately preceding
      sentence, an Award may be exercised during the lifetime of the grantee, only
      by
      the grantee or, during the period the grantee is under a legal disability,
      by
      the grantee’s guardian or legal representative.

    


    (f) Adjustments
      for Corporate Transactions and Other Events.

    


    (i) Capital
      Adjustments. In the event of any change in the outstanding Common Stock by
      reason of any stock dividend, stock split, reverse stock split, split up,
      recapitalization, reclassification, reorganization, combination or exchange
      of
      shares, merger, consolidation, liquidation or the like, then (A) the maximum
      number of shares of such Common Stock as to which Awards may be granted under
      the Plan, and (B) the number of shares covered by and the exercise price
      and other terms of outstanding Awards, shall, without further action of the
      Board, be appropriately adjusted to reflect such event, unless, with respect
      to
      Section 7(f)(i)(A) only, the Board determines, at the time it approves such
      action that no such adjustment shall be made. The Administrator may make
      adjustments, in its sole discretion, to address the treatment of fractional
      shares and fractional cents that arise with respect to outstanding Awards as
      a
      result of the stock dividend, stock split or reverse stock split.

    


    (ii) Change
      of Control Transactions. In the event of any transaction resulting in a
      Change of Control of the Company, (A) outstanding stock options and other Awards
      that are payable in or convertible into Common Stock under the Plan will
      terminate upon the effective time of such Change of Control unless provision
      is
      made in connection with the transaction for the continuation or assumption
      of
      such Awards by, or for the substitution of the equivalent awards of, the
      surviving or successor entity or a parent thereof; (B) except as provided in
      the
      next sentence of this Section 7(f)(ii), all outstanding stock options and other
      Awards shall vest and become exercisable to the extent provided for in the
      applicable Grant Agreement, and (C) the holders of stock options and other
      Awards under the Plan will be permitted, immediately before the Change of
      Control, to exercise or convert all portions of such stock options or other
      Awards under the Plan that are then exercisable or convertible or which become
      exercisable or convertible upon or prior to the effective time of the Change
      of
      Control. If the acceleration of vesting of an Award or Awards pursuant to this
      Section 7(f)(ii) would cause any portion of the Award or Awards to be
      treated as a “parachute payment” (as defined in section 280G of the Code),
      then except as may be expressly provided in the applicable Grant Agreement
      such
      Award or Awards shall vest only to the extent that such acceleration of vesting
      does not cause any portion of the Award or Awards to be so treated. In addition,
      and notwithstanding any provision of any Grant Agreement, payments in respect
      of
      Awards are subject to and conditioned upon compliance with 12 U.S.C. Section
      1828(k) and 12 C.F.R. Part 359, Golden Parachute and Indemnification
      Payments.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (g) Substitution
      of Awards in Mergers and Acquisitions. Awards may be granted under the Plan
      from time to time in substitution for awards held by employees, officers,
      consultants or directors of entities who become or are about to become
      employees, officers, consultants or directors of the Bank or an Affiliate as
      the
      result of a merger or consolidation of the employing entity with the Bank or
      an
      Affiliate, or the acquisition by the Bank or an Affiliate of the assets or
      stock
      of the employing entity. The terms and conditions of any substitute Awards
      so
      granted may vary from the terms and conditions set forth herein to the extent
      that the Administrator deems appropriate at the time of grant to conform the
      substitute Awards to the provisions of the awards for which they are
      substituted.

    


    (h) Termination,
      Amendment and Modification of the Plan. The Board may terminate, amend or
      modify the Plan or any portion thereof at any time, but no amendment or
      modification shall be made which would impair the rights of any grantee under
      any Award theretofore made, without his or her consent. Notwithstanding anything
      to the contrary contained in the Plan, the Board may not amend or modify the
      Plan or any portion thereof without stockholder approval where such approval
      is
      required by applicable law or by the rules of any securities exchange (e.g.
      the
      Nasdaq Stock Market) or quotation system on which the Common Stock is listed
      or
      traded. Furthermore, notwithstanding anything to the contrary contained in
      the
      Plan, the Administrator may not amend or modify any Award if such amendment
      or
      modification would require the approval of the stockholders if the amendment
      or
      modification were made to the Plan.

    


    (i) Non-Guarantee
      of Employment or Service. Nothing in the Plan or in any Grant Agreement
      thereunder shall confer any right on an individual to continue in the service
      of
      the Company or shall interfere in any way with the right of the Company to
      terminate such service at any time with or without cause or notice and whether
      or not such termination results in (i) the failure of any Award to vest;
      (ii) the forfeiture of any unvested or vested portion of any Award; and/or
      (iii) any other adverse effect on the individual’s interests under the
      Plan.

    


    (j) No
      Trust or Fund Created. Neither the Plan nor any Award shall create or be
      construed to create a trust or separate fund of any kind or a fiduciary
      relationship between the Company and a grantee or any other person. To the
      extent that any grantee or other person acquires a right to receive payments
      from the Company pursuant to an Award, such right shall be no greater than
      the
      right of any unsecured general creditor of the Company.

    


    (k) Governing
      Law. The validity, construction and effect of the Plan, of Grant Agreements
      entered into pursuant to the Plan, and of any rules, regulations, determinations
      or decisions made by the Administrator relating to the Plan or such Grant
      Agreements, and the rights of any and all persons having or claiming to have
      any
      interest therein or thereunder, shall be determined exclusively in accordance
      with applicable federal laws and the laws of the State of Maryland without
      regard to its conflict of laws principles. Any suit with respect to the Plan
      shall be brought in the federal or state courts in the districts which include
      the city and state in which the principal offices of the Company are
      located.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    (l) Effective
      Date; Termination Date. The Plan is effective as of the date approved by the
      Company’s stockholders and shall continue in effect for a term of ten years,
      unless earlier terminated pursuant to Section 7(g) hereof. No Award shall be
      granted under the Plan after the close of business on the day immediately
      preceding the tenth anniversary of the effective date of the Plan, or if
      earlier, the tenth anniversary of the date the Plan is approved by the
      stockholders, and no Award under the Plan shall have a term of more than ten
      (10) years. Subject to other applicable provisions of the Plan, all Awards
      made
      under the Plan prior to such termination of the Plan shall remain in effect
      until such Awards expire or have been satisfied or terminated in accordance
      with
      the Plan and the terms of such Awards; provided, however, that no Award that
      contemplates exercise or conversion may be exercised or converted, and no Award
      that defers vesting, shall remain outstanding and unexercised, unconverted
      or
      unvested, in each case, for more than ten years after the date such Award was
      initially granted.

    


    (m)
       Regulatory
      Restrictions. The Plan and the Company’s obligations under the Plan and any
      Grant Agreement shall be subject to all applicable federal and state laws,
      rules
      and regulations, and to such approvals by any regulatory or governmental agency
      as may be required. Without limiting the generality of the foregoing, (i) the
      Company shall not be required to sell or issue any shares of Common Stock
      pursuant to any Award if the sale or issuance of such shares would constitute
      a
      violation by the individual exercising the Award or the Company of any provision
      of any law or regulation of any governmental authority, including without
      limitation any federal or state securities laws or regulations, and (ii) the
      inability of the Company to obtain any necessary authority from any regulatory
      body having jurisdiction, which authority is deemed by the Company’s counsel to
      be necessary to the lawful exercise or payment of any Award hereunder, shall
      relieve the Company of any liability in respect of the exercise or payment
      of
      such Award to the extent such requisite authority shall have been deemed
      necessary and shall not have been obtained.

    


    PLAN
      APPROVAL:

     

    Date
      Approved by the Board:   
April
      5,
      2007

    


    Date
      Approved by the Stockholders:   May
      22,
      2007


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    BAY
      NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN

    


    SAMPLE
      RESTRICTED STOCK AGREEMENT

    


    
      

      
        	
                PARTICPANT:     


              	
                [Insert
                  Name]

              
	
                 

              	 
	
                AWARD
                  NO.     
                  

              	
                [Insert
                  Award No.]

              
	 	 
	
                DATE
                  OF GRANT:     


              	
                [Insert
                  Date]

              
	 	 
	
                NUMBER
                  OF SHARES:

              	
                [Insert
                  Number of Shares]

              


      

      
 

      THIS
        RESTRICTED STOCK AGREEMENT (this “Agreement”)
        is
        made effective as of [Insert Date] by and between Bay National Corporation,
        a
        Maryland corporation (the “Corporation”),
        and
        the above-listed participant (“Participant”).

      


            1. Certain
        Definitions.
        In this
        Agreement, terms with initial capitals shall have the meanings provided in
        the
        Plan, except as follows or as otherwise provided in this Agreement:

      


                  (a)
        “Awarded
        Shares”
means
        the shares of Common Stock awarded to the Participant pursuant to Section 2
        hereof.

      


                 (b)
        “Date
        of Grant”
means
        the date set forth as the “Date of Grant” on page 1 of this
        Agreement.

      


                  (c)
        “Plan”
means
        the Bay National Corporation 2007 Stock Incentive Plan.

      


                  (d)
        “Restriction
        Period”
shall
        mean, with respect to any Awarded Share, the period commencing on the Date
        of
        Grant of such Awarded Share and ending on the date upon which such Awarded
        Share
        vests.

      


            2. Grant
        of Stock.
        Participant shall be granted on the Date of Grant the Awarded Shares, which
        shall (i) vest as provided below, (ii) be subject to the restrictions
        provided below, and (iii) otherwise be subject to all the terms of this
        Agreement and the Plan. The Awarded Shares shall be subject to dilution upon
        future Share issuances or other dilutive events. Until such time, if any,
        as the
        Awarded Shares Revert (as defined in Section 5) or are transferred by
        Participant as permitted under this Agreement, and except as otherwise provided
        in the Plan or this Agreement, Participant shall have all the rights of a
        stockholder of the Corporation (including the right to vote and to receive
        dividends) with respect to the Awarded Shares, including the Awarded Shares
        held
        in escrow. All such rights and privileges shall cease in the event that the
        Awarded Shares Revert.

      


            3. Subject
        to Plan.
        The
        Awarded Shares are in all instances subject to the terms and conditions of
        the
        Plan, the provisions of which are incorporated herein by this reference.
        In the
        event of any direct conflict between this Agreement and the Plan, the provisions
        of the Plan shall control. Participant acknowledges receipt of a copy of
        the
        Plan and hereby accepts the Awarded Shares subject to all of its terms and
        conditions.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


            4. Vesting
        Schedule With Respect to Awarded Shares.
        Except
        as otherwise provided in this Agreement, the Awarded Shares shall vest in
        accordance with the schedule attached hereto as Exhibit A, based on
        Participant’s continued service with the Corporation and/or any Affiliate
        (“Continued Service”).

      


      5.
        Reversion
        and Cancellation of Unvested Awarded Shares; Restrictions During Restriction
        Period.

       

                  (a) In
        the event of termination of Participant’s Continued Service, any portion of the
        Awarded Shares that is not vested on the date Participant ceases to provide
        Continued Service shall, automatically and without need of any further action
        by
        any person or entity, (i) cease to be owned by Participant,
        (ii) revert to the Corporation, (iii) be cancelled, and
        (iv) return to the status of authorized but unissued stock of Corporation
        (collectively, “Revert”)
        immediately upon such date. Neither Participant nor any successor, heir,
        assign,
        or personal representative of Participant shall thereafter have any further
        rights or interest in such Reverted Awarded Shares.

      


                  (b) During
        the Restriction Period, the certificates representing the Awarded Shares
        shall
        be held in escrow by the Secretary of the Corporation, and shall bear the
        following legends (in addition to any other required legends):

      


      THIS
        CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE
        TERMS
        AND CONDITIONS (INCLUDING THE RISKS OF FORFEITURE AND RESTRICTIONS AGAINST
        TRANSFER) CONTAINED IN THE BAY NATIONAL CORPORATION 2007 STOCK INCENTIVE
        PLAN,
        AND AN AGREEMENT ENTERED INTO BETWEEN
        THE REGISTERED OWNER AND BAY NATIONAL CORPORATION RELEASE FROM SUCH TERMS
        AND
        CONDITIONS SHALL BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SUCH PLAN
        AND
        AGREEMENT, A COPY OF EACH OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY
        OF
        BAY NATIONAL CORPORATION

      


                  (c) In
        the event the Restriction Period shall terminate with respect to particular
        Awarded Shares and such Awarded Shares shall not theretofore have Reverted,
        the
        Corporation shall within 2 1⁄2 months from the end of the calendar year in which
        such Restriction Period terminates reissue the certificate representing such
        Awarded Shares without the above legend and shall deliver such certificate
        to
        Participant or his legal representative. Upon any such termination of the
        Restriction Period, Participant shall be required to provide the Corporation
        with the means to satisfy any federal, state or local income tax withholding
        and
        payroll tax requirements with respect to such Awarded Shares (“Tax
        Liabilities”).

      


                (d) Awarded
        Shares, the right to vote Awarded Shares and the right to receive dividends
        thereon may not be sold, assigned, transferred, exchanged, pledged, hypothecated
        or otherwise encumbered during the Restriction Period with respect to such
        Awarded Shares.

      


            6.
        No
        Restriction On Corporation.
        This
        Agreement shall not in any way affect the right of the Corporation to make
        changes in its capital or business structure or to merge, consolidate, dissolve,
        liquidate or sell or transfer all or any part of its business or
        assets.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


            7.
        Stock
        Distributions; Capital Adjustments.

      


                  (a) If
        the Corporation makes any distribution of stock with respect to the Awarded
        Shares by way of a stock dividend or stock split, or pursuant to any
        recapitalization, reorganization, consolidation, merger or otherwise, and
        Participant receives any additional shares of stock in the Corporation (or
        other
        shares of stock in another corporation) as a result thereof, such additional
        (or
        other) shares shall be deemed Awarded Shares hereunder and shall be subject
        to
        the same restrictions and obligations imposed by this Agreement.

      


                  (b) In
        the event of any recapitalization, stock split, reorganization, merger,
        consolidation, spin-off, combination, repurchase, or share exchange, or other
        similar corporate transaction or event that affects the Awarded Shares such
        that
        an adjustment is appropriate in order to prevent dilution or enlargement
        of the
        rights of Participant, then the Board shall make equitable changes or
        adjustments as are necessary or appropriate to prevent the dilution or
        enlargement of Participant’s rights relating to the number and kind of Awarded
        Shares that may thereafter by issued in connection with the Awarded
        Shares.

      


      8. Liability
        of Corporation.

      


      	(a)  	
              The
                grant of the Awarded Shares shall be subject to compliance by the
                Corporation and Participant with all applicable requirements of law
                relating thereto, including, without limitation, state and federal
                securities laws. The Corporation shall not be obligated to
                register, qualify or make any exemption from registration qualification
                available with respect to any Awarded Shares under any such
                laws.

            


       

      	(b)  	
              The
                Corporation makes no representation regarding the tax treatment of
                the
                Awarded Shares, and Participant should consult his or her tax advisor
                regarding the tax consequences to Participant of any transaction
                involving
                the Awarded Shares. Participant has been advised of the possibility
                of
                making an election under Code Section 83(b). If Participant makes an
                election under Code Section 83(b) with respect to Awarded Shares,
                Participant shall provide notice to the Corporation within 30 days
                thereof.

            


       

            9. No
        Employment Contract.
        Neither
        the grant or issuance of Awarded Shares pursuant to this Agreement nor any
        term
        or provision of this Agreement shall constitute or be evidence of any
        understanding, express or implied, on the part of the Company or any Affiliate
        to employ the Participant for any period.

      


            10. Governing
        Law.
        This
        Agreement and the rights and obligations of the parties hereunder shall be
        governed by and construed in accordance with the laws of the State of Maryland
        without giving effect to the principles of conflicts of laws. Any action
        or
        proceeding brought by any party hereto shall be brought only in a state or
        federal court of competent jurisdiction located in Maryland and all parties
        hereto hereby submit to the in personam jurisdiction of such court for purposes
        of any such action or proceeding and irrevocably agree that such court presents
        a convenient forum for the resolution of such dispute.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


           11. Severability
        of Provisions.
        In the
        event that any provision hereof is found invalid or unenforceable pursuant
        to
        judicial decree or decision, the remainder of this Agreement shall remain valid
        and enforceable according to its terms.

      


            12. Notices.
        All
        notices or other communications pursuant to this Agreement shall be in writing
        and shall be deemed duly given if personally delivered or if mailed by certified
        mail, return receipt requested, prepaid and addressed to the address of the
        party as set forth in this Agreement or such other address as such party
        shall
        have furnished to the other party in writing.

      


            13. Entire
        Agreement.
        This
        Agreement and the Plan embody the entire agreement and understandings of
        the
        parties hereto in respect of the subject matter contained herein and supersede
        all prior written or oral communications or agreements all of which are merged
        herein. There are no restrictions, promises, warranties, covenants, or
        undertakings, other than those expressly set forth or referred to
        herein.

      


            14. No
        Waiver.
        No
        waiver of any provision of this Agreement or any rights or obligations of
        any
        party hereunder shall be effective, except pursuant to a written instrument
        signed by the party or parties waiving compliance, and any such waiver shall
        be
        effective only in the specific instance and for the specific purpose stated
        in
        such writing.

      


            15. Survival.
        All
        warranties, covenants and agreements of the parties made in this Agreement
        shall
        survive the issuance and purchase of the Awarded Shares and the delivery
        to
        Participant of the certificate or certificates evidencing the Awarded
        Shares.

      


            16. Amendment
        and Modification.
        This
        Agreement may be amended, modified and supplemented only by written agreement
        of
        all of the parties hereto.

      


            17. Assignment.
        This
        Agreement and all of the provisions hereof shall be binding upon and inure
        to
        the benefit of the parties hereto and their respective successors and permitted
        assigns, but except to the extent (if any) expressly provided in this Agreement
        neither this Agreement nor any of the rights, interests or obligations hereunder
        may be assigned by Participant without the prior written consent of the
        Corporation. The Corporation shall assign this Agreement and all of its rights
        hereunder in connection with any reorganization, merger, consolidation, sale
        or
        transfer of substantially all of the Corporation’s assets or sale or transfer of
        a controlling interest in the Corporation’s outstanding equity
        securities.

      


            18. Withholding.
        Participant shall provide the Corporation with the means to satisfy all Tax
        Liabilities at the time such Tax Liabilities are imposed on the Corporation,
        which may include the surrender of Awarded Shares to the Corporation.


      


      [SIGNATURES
        APPEAR ON THE FOLLOWING PAGE.]

      


      


      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


       

      IN
        WITNESS WHEREOF, the Corporation has caused this Agreement to be executed
        on its
        behalf by its duly authorized officer and Participant has also executed this
        Agreement as of the day and year indicated above.

      
 

      BAY
        NATIONAL CORPORATION

      


      By:
        ________________________     

      


      Print
        Name: __________________   

      


      Title:
        _______________________    

      


      PARTICIPANT

                                             
________________________________

      


      

        
          
             

          

          
             

            
              

            

          

          
             

          

        



      BAY
        NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN

      


      SAMPLE
        NON-QUALIFIED STOCK OPTION GRANT AGREEMENT

      


            This
        Stock Option Grant Agreement (the “Agreement”) is entered into on [INSERT DATE],
        by and between Bay National Corporation, a Maryland corporation (the
“Corporation”), and [INSERT OPTIONEE NAME] (the “Optionee”), effective as of
        [INSERT GRANT DATE] (the “Grant Date”).

      


            In
        consideration of the premises, mutual covenants and agreements herein, the
        Corporation and the Optionee agree as follows:

      


            1. Grant
        of Option.
        The
        Corporation hereby grants to the Optionee, pursuant to the Bay National
        Corporation 2007 Stock Incentive Plan (the “Plan”), a stock option to purchase
        from the Corporation, at a price of $[INSERT PRICE] per share (the “Exercise
        Price”), up to [INSERT GRANT AMOUNT] shares of Common Stock of the Corporation,
        $.01 par value, subject to the provisions of this Agreement and the Plan
        (the
“Option”). The Option shall expire at 5:00 p.m. Eastern Time on the last
        business day preceding the tenth anniversary of the Grant Date (the “Expiration
        Date”), unless fully exercised or terminated earlier.

      


            2. Terminology.
        Unless
        stated otherwise in this Agreement, capitalized terms in this Agreement shall
        have the meaning set forth in the Plan.

      


            (a)
         Vesting.
        Subject
        to the terms of the Plan with respect to vesting, the Options granted shall
        vest
        in whole or in part, in accordance with the schedule attached hereto as Exhibit
        A; provided
        that
        the
        Optionee is in the continuous employ of, or in a service relationship with,
        the
        Corporation from the Grant Date through the applicable date upon which such
        Options become vested.
        The
        extent to which the Options are vested as of a particular vesting date shall
        be
        rounded down to the nearest whole share. However, vesting is rounded up to
        the
        nearest whole share on the last vesting date. 

      


      (b)
        Right
        to Exercise.
        The
        Optionee shall have the right to exercise the Options from and after the
        date
        upon which they vest and on
        or
        before the Expiration Date or earlier termination of the Options. To
        the
        extent not exercised, the number of shares as to which the Option is exercisable
        shall accumulate and remain exercisable, in whole or in part, at any time
        after
        becoming exercisable, but not later than the Expiration Date or other
        termination of the Option. In the event of the Optionee’s termination of
        employment, the exercisability is governed by Section 4.

      


                  (b) Exercise
        Procedure.
        Subject
        to the conditions set forth in this Agreement, the Option shall be exercised
        (to
        the extent then exercisable) by delivery of written notice of exercise on
        any
        business day to the Corporate Secretary of the Corporation in such form as
        the
        Administrator may require from time to time. Such notice shall specify the
        number of shares in respect to which the Option is being exercised and shall
        be
        accompanied by full payment of the Exercise Price for such shares in accordance
        with Section 3(d) of this Agreement. The exercise shall be effective upon
        receipt by the Corporate Secretary of the Corporation of such written notice
        accompanied by the required payment. The Option may be exercised only in
        multiples of whole shares and may not be exercised at any one time as to
        fewer
        than one hundred shares (or such lesser number of shares as to which the
        Option
        is then exercisable). No fractional shares shall be issued pursuant to this
        Option.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


                  (c) Effect.
        The
        exercise, in whole or in part, of the Option shall cause a reduction in the
        number of shares of Common Stock subject to the Option equal to the number
        of
        shares of Common Stock with respect to which the Option is
        exercised.

      


                  (d) Method
        of Payment.
        In
        addition to any other method approved by the Administrator, if any, payment
        of
        the Exercise Price shall be by any of the following, or a combination thereof,
        as determined by the Administrator in its discretion at the time of
        exercise:

      


      (i)  by
        delivery of cash, certified or cashier’s check, or money order or other cash
        equivalent acceptable to Administrator in its sole discretion; or

      


      (ii)   by
        a broker-assisted cashless exercise in accordance with Regulation T of the
        Board of Governors of the Federal Reserve System and the following provisions.
        Subject to such limitations as the Administrator may determine, at any time
        during which the Common Stock is publicly traded on a national securities
        exchange or Nasdaq, the Exercise Price shall be deemed to be paid, in whole
        or
        in part, if the Optionee delivers a properly executed exercise notice, together
        with irrevocable instructions: (i) to a brokerage firm approved by the
        Corporation to deliver promptly to the Corporation the aggregate amount of
        sale
        or loan proceeds to pay the Exercise Price and any withholding tax obligations
        that may arise in connection with the exercise; and (ii) to the Corporation
        to deliver the certificates for such purchased shares directly to such brokerage
        firm.

      


                  (e) Issuance
        of Shares Upon Exercise.
        Upon
        due exercise of the Option, in whole or in part, in accordance with the terms
        of
        this Agreement, the Corporation shall issue to the Optionee, the brokerage
        firm
        specified in the Optionee’s delivery instructions pursuant to a broker-assisted
        cashless exercise, or such other person exercising the Option, as the case
        may
        be, the number of shares of Common Stock so paid for, in the form of fully
        paid
        and non-assessable stock and shall deliver certificates therefore as soon
        as
        practicable thereafter.

      


                  (f) Restrictions
        on Exercise and upon Shares Issued upon Exercise.
        Notwithstanding any other provision of the Agreement, the Option may not
        be
        exercised at any time that the Corporation does not have in effect a
        registration statement under the Securities Act of 1933, as amended, relating
        to
        the offer of Common Stock to the Optionee under the Plan, unless the Corporation
        agrees to permit such exercise. Upon the issuance of any shares of Common
        Stock
        pursuant to the exercise of the Option, the Optionee will, upon the request
        of
        the Corporation, agree in writing that the Optionee is acquiring such shares
        for
        investment only and not with a view to resale, and that the Optionee will
        not
        sell, pledge or otherwise dispose of such shares so issued unless (i) the
        Corporation is furnished with an opinion of counsel to the effect that
        registration of such shares pursuant to the Securities Act of 1933, as amended,
        is not required by that Act or by the rules and regulations thereunder;
        (ii) the staff of the Securities and Exchange Commission has issued a
“no-action” letter with respect to such disposition; or (iii) such
        registration or notification as is, in the opinion of counsel for the
        Corporation, required for the lawful disposition of such shares has been
        filed
        by the Corporation and has become effective; provided, however, that the
        Corporation is not obligated hereby to file any such registration or
        notification. In addition, the Common Stock issued upon the exercise of any
        Options shall be subject to repurchase by the Corporation for an amount equal
        to
        the Exercise Price of such Options upon the occurrence of an event described
        in
        Section 4(d) of this Agreement. The Corporation may place a legend embodying
        such restrictions on the certificates evidencing such shares.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


        4.
        Termination
        of Employment or Service.

      


      (a)
        Exercise
        Period Following Cessation of Employment or Other Service Relationship, In
        General.
        If
        Optionee ceases to be employed by, or in a service relationship with, Bank
        for
        any reason other than death, Disability, or discharge for Cause, (i) the
        unvested Options shall terminate immediately upon such cessation, and
        (ii) the vested Options shall remain exercisable during the 30-day period
        following such cessation, but in no event after the Expiration Date. Unless
        sooner terminated, any unexercised vested Options shall terminate upon the
        expiration of such 30-day period.

      


      (b)
        Death
        of Optionee.
        If
        Optionee dies prior to the expiration or other termination of the Options,
        (i) the unvested Options shall terminate immediately upon Optionee’s death,
        and (ii) the vested Options shall remain exercisable during the one-year
        period following Optionee’s death, but in no event after the Expiration Date, by
        Optionee’s executor, personal representative, or the person(s) to whom the
        Options are transferred by will or the laws of descent and distribution.
        Unless
        sooner terminated, any unexercised vested Options shall terminate upon the
        expiration of such one-year period.

      


      (c)
        Disability
        of Optionee.
        If
        Optionee ceases to be employed by, or in a service relationship with, Bank
        as a
        result of Optionee’s Disability, (i) the unvested Options shall terminate
        immediately upon such cessation, and (ii) the vested Options shall remain
        exercisable during the one-year period following such cessation, but in no
        event
        after the Expiration Date. Unless sooner terminated, any unexercised vested
        Options shall terminate upon the expiration of such one-year
        period.

      


      (d)
        Misconduct.
        Notwithstanding anything to the contrary in this Agreement, the Options shall
        terminate in their entirety, regardless of whether the Options are vested,
        immediately upon Optionee’s discharge of employment or other service
        relationship for Cause or upon Optionee’s commission of any of the following
        acts during any period following the cessation of Optionee’s employment or other
        service relationship during which the Options otherwise would be exercisable:
        (i) fraud on or misappropriation of any funds or property of Bank, or
        (ii) breach by Optionee of any provision of any employment, non-disclosure,
        non-competition, non-solicitation, assignment of inventions, or other similar
        agreement executed by Optionee for the benefit of Bank, as determined by
        the
        Administrator, which determination will be conclusive.

      


        5.
        Adjustments
        and Business Combinations.

      


                  (a) Adjustments
        for Events Affecting Common Stock.
        In the
        event of changes in the Common Stock of the Corporation by reason of any
        stock
        dividend, spin-off, split-up, reverse stock split, recapitalization,
        reclassification, merger, consolidation, liquidation, business combination
        or
        exchange of shares and the like, the Administrator shall, in its discretion,
        make appropriate substitutions for or adjustments in the number, kind and
        price
        of shares covered by this Option, and shall, in its discretion and without
        the
        consent of the Optionee, make any other substitutions for or adjustments
        in this
        Option, including but not limited to reducing the number of shares subject
        to
        the Option or providing or mandating alternative settlement methods such
        as
        settlement of the Option in cash or in shares of Common Stock or other
        securities of the Corporation or of any other entity, or in any other matters
        which relate to the Option as the Administrator shall, in its sole discretion,
        determine to be necessary or appropriate.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


                  (b) Pooling
        of Interests Transaction.
        Notwithstanding anything in the Plan or this Agreement to the contrary and
        without the consent of the Optionee, the Administrator, in its sole discretion,
        may make any modifications to the Option, including but not limited to
        cancellation, forfeiture, surrender or other termination of the Option in
        whole
        or in part regardless of the vested status of the Option, in order to facilitate
        any business combination that is authorized by the Board to comply with
        requirements for treatment as a pooling of interests transaction for accounting
        purposes under generally accepted accounting principles.

      


                  (c) Adjustments
        for Other Events.
        The
        Administrator is authorized to make, in its discretion and without the consent
        of the Optionee, adjustments in the terms and conditions of, and the criteria
        included in, the Option in recognition of unusual or nonrecurring events
        affecting the Corporation, or the financial statements of the Corporation,
        or of
        changes in applicable laws, regulations, or accounting principles, whenever
        the
        Administrator determines that such adjustments are appropriate in order to
        prevent dilution or enlargement of the benefits or potential benefits intended
        to be made available under the Option or the Plan.

      


                  (d) Binding
        Nature of Adjustments.
        Adjustments under this Section 5 will be made by the Administrator, whose
        determination as to what adjustments, if any, will be made and the extent
        thereof will be final, binding and conclusive. No fractional shares will
        be
        issued pursuant to this Option on account of any such adjustments.

      


                  (e) Effect
        of Change of Control Event.
        All
        outstanding portions of the Option, if any, shall become fully vested upon
        the
        occurrence of any Change of Control Event, except to the extent that
provision
        is made in connection with the Change
        of
        Control Event
        for the
        continuation or assumption of the Option by, or for the substitution of
        equivalent options with respect to, the surviving or successor entity or
        a
        parent thereof, and shall be exercisable in accordance with the Plan;
        provided, that unless otherwise decided in the sole discretion of the
        Administrator, the acceleration of vesting in connection with a Change of
        Control Event shall be limited as provided in the Plan.

      


        6.
        Non-Guarantee
        of Employment.
        Nothing
        in the Plan or in this Agreement shall confer on an individual any legal
        or
        equitable right against the Corporation or the Administrator, except as
        expressly provided in the Plan or this Agreement. Nothing in the Plan or
        in this
        Agreement shall (a) constitute inducement, consideration, or contract for
        employment or service between an individual and the Corporation; (b) confer
        any right on an individual to continue in the service of the Corporation;
        or
        (c) shall interfere in any way with the right of the Corporation to
        terminate such service at any time with or without cause or notice, or to
        increase or decrease compensation for such service.

      


            7. No
        Rights as Stockholder.
        The
        Optionee shall not have any of the rights of a stockholder with respect to
        the
        shares of Common Stock that may be issued upon the exercise of the Option
        (including, without limitation, any rights to receive dividends or noncash
        distributions with respect to such shares) until such shares of Common Stock
        have been issued to him or her upon the due exercise of the Option. No
        adjustment shall be made for dividends or distributions or other rights for
        which the record date is prior to the date such certificate or certificates
        are
        issued.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


       
         8. Nonqualified
        Nature of the Option.
        The
        Options are not
        intended
        to qualify as incentive stock options within the meaning of Code
        section 422, and this Agreement shall be so construed. Optionee
        acknowledges that, upon exercise of the Options, Optionee will recognize
        taxable
        income in an amount equal to the excess of the then Fair Market Value of
        the
        Option Shares over the Exercise Price and must comply with the provisions
        of
        Section 9 of this Agreement with respect to any tax withholding obligations
        that arise as a result of such exercise.

      


            9. Withholding
        of Taxes.

      


                  (a) In
        General.
        At the
        time the Option is exercised in whole or in part, or at any time thereafter
        as
        requested by the Corporation, the Optionee hereby authorizes withholding
        from
        payroll or any other payment of any kind due the Optionee and otherwise agrees
        to make adequate provision for foreign, federal, state and local taxes required
        by law to be withheld, if any, which arise in connection with the Option.
        The
        Corporation may require the Optionee to make a cash payment to cover any
        withholding tax obligation as a condition of exercise of the Option. If the
        Optionee does not make such payment when requested, the Corporation may refuse
        to issue any stock certificate under the Plan until arrangements satisfactory
        to
        the Administrator for such payment have been made.

      


                  (b) Means
        of Payment.
        The
        Administrator may, in its sole discretion, permit the Optionee to satisfy,
        in
        whole or in part, any withholding tax obligation which may arise in connection
        with the Option by any of the following means or by a combination of such
        means:
        (i) tendering a cash payment, (ii) authorizing the Corporation to deduct
        any such tax obligations from any payment of any kind otherwise due to the
        Optionee, (iii) authorizing the Corporation to withhold shares of Common
        Stock otherwise issuable to the Optionee pursuant to the exercise of this
        Option, or (iv) delivering to the Corporation unencumbered shares of Common
        Stock already owned by the Optionee.

      


      10.
        Compliance
        with Regulations of the FRB and OCC; Forfeiture.
        Subject
        to the terms of the Plan, the grant of Options made hereby are subject to
        the
        rules and regulations promulgated by the Federal Reserve Board (“FRB”) and the
        Office of the Comptroller of Currency (“OCC”). In accordance with certain
        provisions of such regulations, the Options granted hereby must be exercised
        or
        forfeited in the event the Company or its affiliates, including Bay National
        Bank, becomes critically undercapitalized (as defined in 12 C.F.R. § 6.4, or any
        successor law or regulation), is subject to FRB or OCC enforcement action,
        or
        receives a capital directive under 12 C.F.R § 6.21 or any successor law or
        regulation.

      


      11. The
        Corporation’s Rights.
        The
        existence of this Option shall not affect in any way the right or power of
        the
        Corporation or its stockholders to make or authorize any or all adjustments,
        recapitalizations, reorganizations or other changes in the Corporation’s capital
        structure or its business, or any merger or consolidation of the Corporation,
        or
        any issue of bonds, debentures, preferred or other stocks with preference
        ahead
        of or convertible into, or otherwise affecting the Common Stock or the rights
        thereof, or the dissolution or liquidation of the Corporation, or any sale
        or
        transfer of all or any part of the Corporation’s assets or business, or any
        other corporate act or proceeding, whether of a similar character or
        otherwise.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


            12. Optionee.
        Whenever the word “Optionee” is used in any provision of this Agreement under
        circumstances where the provision should logically be construed, as determined
        by the Administrator, to apply to the estate, personal representative or
        beneficiary to whom this Option may be transferred by will, by the laws of
        descent and distribution, or pursuant to a qualified domestic relations order
        as
        defined in Code section 414(p), the word “Optionee” shall be deemed to include
        such person.

      


            13. Transferability
        of Option.
        This
        Option is not transferable other than by will or the laws of descent and
        distribution, pursuant to a qualified domestic relations order as defined
        in
        Code section 414(p), or as otherwise permitted by the Administrator, in its
        sole
        discretion. During the lifetime of the Optionee, the Option may be exercised
        only by the Optionee, by such permitted transferees or, during the period
        the
        Optionee is under a legal disability, by the Optionee’s guardian or legal
        representative. Except as provided above, the Option may not be assigned,
        transferred, pledged, hypothecated or disposed of in any way (whether by
        operation of law or otherwise) and shall not be subject to execution, attachment
        or similar process.

      


            14. Notices.
        All
        notices and other communications made or given pursuant to this Agreement
        shall
        be in writing and shall be sufficiently made or given if hand delivered or
        mailed by certified mail, addressed to the Optionee at the address contained
        in
        the records of the Corporation, or addressed to the Administrator, care of
        the
        Corporation for the attention of its Corporate Secretary at its principal
        office
        or, if the receiving party consents in advance, transmitted and received
        via
        telecopy or via such other electronic transmission mechanism as may be available
        to the parties.

      


            15. Entire
        Agreement.
        This
        Agreement and the Plan contain the entire agreement between the parties with
        respect to the Option granted hereunder. Any oral or written agreements,
        representations, warranties, written inducements, or other communications
        made
        prior to the execution of this Agreement with respect to the Option granted
        hereunder shall be void and ineffective for all purposes.

      


            16. Amendment.
        This
        Agreement may not be modified, except as provided in the Plan or in a written
        document signed by each of the parties hereto.

      


            17. Conformity
        with Plan.
        This
        Agreement is intended to conform in all respects with, and is subject to
        all
        applicable provisions of, the Plan, which is incorporated herein by reference.
        Inconsistencies between this Agreement and the Plan shall be resolved in
        accordance with the terms of the Plan. In the event of any ambiguity in this
        Agreement or any matters as to which this Agreement is silent, the Plan shall
        govern. A copy of the Plan is available upon request to the
        Administrator.

      


            18. Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Maryland, other than the conflict of laws principles
        thereof.

       

      
             
          19. Headings.
          The
          headings in this Agreement are for reference purposes only and shall not
          affect
          the meaning or interpretation of this Agreement.

        


         

        [Signatures
          appear on the following page.]

      


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      IN
        WITNESS WHEREOF, the Corporation has caused this Agreement to be executed
        by its
        duly authorized officer as of the date first above written.

      


      BAY
        NATIONAL CORPORATION

      


      By:
        ________________________     

      


      Print
        Name: __________________   

      


      Title:
        _______________________    

      


       

      


      The
        undersigned hereby acknowledges that he/she has carefully read this Agreement
        and the prospectus of the Plan and agrees to be bound by all of the provisions
        set forth in such documents.

      


      OPTIONEE:

      


      


      DATE: 
        _________________                         
______________________________        

      


              Print
        Name: _____________________ 

       

       

        

      


      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


      


      EXERCISE
        FORM

      


      


      Bay
        National Corporation

      2328
        West
        Joppa Road

      Lutherville,
        Maryland 21093

      


      


      Gentlemen:

      


           I
        hereby exercise the Option granted to me on __________, by Bay National
        Corporation (the “Corporation”), subject to all the terms and provisions thereof
        and of the Bay National Corporation 2007 Stock Incentive Plan (the “Plan”), and
        notify you of my desire to purchase ___ incentive shares and ___ non-qualified
        shares of Common Stock of the Corporation at a price of $_______  per
        share pursuant to the exercise of said Option.

      


      Payment
        Amount: $___________________

      
        	
                 

              	
                 

              	
                 

              
	
                Date:
                                                                              

              	
                 

              	
                                                                            

              
	
                 

              	
                 

              	
                Optionee
                  Signature

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                Received
                  by Bay National Corporation on

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                                                                            

              


      

      


      


      



      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Broker
        Information:

      
        
          

        

         

      

      Firm
        Name

      
        
 


      
        	
                 

              	
                 

              	
                 

              
	
                Contact
                  Person

              	
                 

              	
                 

              


      

      


      
        
 


      
        	
                 

              	
                 

              	
                 

              
	
                Broker
                  Address

              	
                 

              	
                 

              


      

      


      
        
 


      
        	
                 

              	
                 

              	
                 

              	
                 

              	
                 

              
	
                City,
                  State, Zip Code

              	
                 

              	
                Phone
                  Number

              	
                 

              	
                 

              


      

      


      
        
 

      


      
        	
                 

              	
                 

              	
                 

              
	
                Broker
                  Account Number

              	
                 

              	
                 

              


      

      


      
        
 


      
        	
                 

              	
                 

              	
                 

              
	
                Electronic
                  Transfer Number:

              	
                 

              	
                 

              


      

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      BAY
        NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN

      


      SAMPLE
        QUALIFIED STOCK OPTION GRANT AGREEMENT

      


            This
        Stock Option Grant Agreement (the “Agreement”) is entered into on [INSERT DATE],
        by and between Bay National Corporation, a Maryland corporation (the
“Corporation”), and [INSERT OPTIONEE NAME] (the “Optionee”), effective as of
        [INSERT GRANT DATE] (the “Grant Date”).

      


            In
        consideration of the premises, mutual covenants and agreements herein, the
        Corporation and the Optionee agree as follows:

      


            1. Grant
        of Option.
        The
        Corporation hereby grants to the Optionee, pursuant to the Bay National
        Corporation 2007 Stock Incentive Plan (the “Plan”), a stock option to purchase
        from the Corporation, at a price of $[INSERT PRICE] per share (the “Exercise
        Price”), up to [INSERT GRANT AMOUNT] shares of Common Stock of the Corporation,
        $.01 par value, subject to the provisions of this Agreement and the Plan
        (the
“Options”). The Options shall expire at 5:00 p.m. Eastern Time on the last
        business day preceding the tenth anniversary of the Grant Date (the “Expiration
        Date”), unless fully exercised or terminated earlier.

      


            2. Terminology.
        Unless
        stated otherwise in this Agreement, capitalized terms in this Agreement shall
        have the meaning set forth in the Plan.

      


            3. Exercise
        of Option.

      


                (a)
         Vesting.
        Subject
        to the terms of the Plan with respect to vesting, the Options granted shall
        vest
        in accordance with the schedule attached as Exhibit A to this Agreement,
        provided
        that
        the
        Optionee is in the continuous employ of, or in a service relationship with,
        the
        Corporation from the Grant Date through the applicable date upon which such
        Options become vested.
        The
        extent to which the Options are vested as of a particular vesting date shall
        be
        rounded down to the nearest whole share. However, vesting is rounded up to
        the
        nearest whole share on the last vesting date. 

      


      (b)
        Right
        to Exercise.
        The
        Optionee shall have the right to exercise the Options, whether or not vested,
        in
        whole or in part at any time prior to the Expiration Dare or earlier termination
        of the Options in accordance with the Plan and this Agreement; provided,
        that to
        the extent, if any, that the aggregate Fair Market Value of the Common Stock
        subject to the Options as of the Grant Date, plus the aggregate fair market
        value (determined as of the date of grant) of all other stock with respect
        to
        which incentive stock options granted to the Optionee prior to the Grant
        Date
        under all plans of the Corporation and its parent and subsidiary corporations
        first become exercisable during any calendar year exceeds $100,000 (the “Annual
        Limitation”), then except as otherwise provided in this Agreement the Options
        shall be exercisable during that year only to the extent, if any, that their
        exercisability does not cause the Annual Limitation to be exceeded. Any Options
        that are not exercisable due to the proviso in the preceding sentence shall
        be
        exercisable during the next calendar year, subject again to the application
        of
        that proviso. To the extent not exercised, the number of shares as to which
        the
        Option is exercisable shall accumulate and remain exercisable, in whole or
        in
        part, at any time after becoming exercisable, but not later than the Expiration
        Date or other termination of the Option. In the event of the Optionee’s
        termination of employment, the exercisability is governed by
        Section 4.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


                  (c) Exercise
        Procedure.
        Subject
        to the conditions set forth in this Agreement, the Option shall be exercised
        (to
        the extent then exercisable) by delivery of written notice of exercise on
        any
        business day to the Corporate Secretary of the Corporation in such form as
        the
        Administrator may require from time to time. Such notice shall specify the
        number of shares in respect to which the Option is being exercised and shall
        be
        accompanied by full payment of the Exercise Price for such shares in accordance
        with Section 3(e) of this Agreement. The exercise shall be effective upon
        receipt by the Corporate Secretary of the Corporation of such written notice
        accompanied by the required payment. The Option may be exercised only in
        multiples of whole shares and may not be exercised at any one time as to
        fewer
        than one hundred shares (or such lesser number of shares as to which the
        Option
        is then exercisable). No fractional shares shall be issued pursuant to this
        Option.

      


                  (d) Effect.
        The
        exercise, in whole or in part, of the Option shall cause a reduction in the
        number of shares of Common Stock subject to the Option equal to the number
        of
        shares of Common Stock with respect to which the Option is
        exercised.

                  (e) Method
        of Payment.
        In
        addition to any other method approved by the Administrator, if any, payment
        of
        the Exercise Price shall be by any of the following, or a combination thereof,
        as determined by the Administrator in its discretion at the time of
        exercise:

      


          (i)
        by
        delivery of cash, certified or cashier’s check, or money order or other cash
        equivalent acceptable to Administrator in its sole discretion; or

      


                        (ii)
        by a
        broker-assisted cashless exercise in accordance with Regulation T of the
        Board of Governors of the Federal Reserve System and the following provisions.
        Subject to such limitations as the Administrator may determine, at any time
        during which the Common Stock is publicly traded on a national securities
        exchange or Nasdaq, the Exercise Price shall be deemed to be paid, in whole
        or
        in part, if the Optionee delivers a properly executed exercise notice, together
        with irrevocable instructions: (i) to a brokerage firm approved by the
        Corporation to deliver promptly to the Corporation the aggregate amount of
        sale
        or loan proceeds to pay the Exercise Price and any withholding tax obligations
        that may arise in connection with the exercise; and (ii) to the Corporation
        to deliver the certificates for such purchased shares directly to such brokerage
        firm.

      


                  (f) Issuance
        of Shares Upon Exercise.
        Upon
        due exercise of the Option, in whole or in part, in accordance with the terms
        of
        this Agreement, the Corporation shall issue to the Optionee, the brokerage
        firm
        specified in the Optionee’s delivery instructions pursuant to a broker-assisted
        cashless exercise, or such other person exercising the Option, as the case
        may
        be, the number of shares of Common Stock so paid for, in the form of fully
        paid
        and non-assessable stock and shall deliver certificates therefore as soon
        as
        practicable thereafter.

      


                  (g) Restrictions
        on Exercise and upon Shares Issued upon Exercise.
        Notwithstanding any other provision of the Agreement, the Option may not
        be
        exercised at any time that the Corporation does not have in effect a
        registration statement under the Securities Act of 1933, as amended, relating
        to
        the offer of Common Stock to the Optionee under the Plan, unless the Corporation
        agrees to permit such exercise. Upon the issuance of any shares of Common
        Stock
        pursuant to the exercise of the Option, the Optionee will, upon the request
        of
        the Corporation, agree in writing that the Optionee is acquiring such shares
        for
        investment only and not with a view to resale, and that the Optionee will
        not
        sell, pledge or otherwise dispose of such shares so issued unless (i) the
        Corporation is furnished with an opinion of counsel to the effect that
        registration of such shares pursuant to the Securities Act of 1933, as amended,
        is not required by that Act or by the rules and regulations thereunder;
        (ii) the staff of the Securities and Exchange Commission has issued a
“no-action” letter with respect to such disposition; or (iii) such
        registration or notification as is, in the opinion of counsel for the
        Corporation, required for the lawful disposition of such shares has been
        filed
        by the Corporation and has become effective; provided, however, that the
        Corporation is not obligated hereby to file any such registration or
        notification. In addition, the Common Stock issued upon the exercise of any
        Options shall be subject to repurchase by the Corporation for an amount equal
        to
        the Exercise Price of such Options (i) upon the occurrence of an event described
        in Section 4(d) of this Agreement, or (ii) if the Options were not vested
        when
        they were exercised, upon the occurrence of any event that would have resulted
        in the termination of those Options under the Plan and this Agreement if
        those
        Options had not been exercised. The Corporation may place a legend embodying
        such restrictions on the certificates evidencing such shares.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


      	4.  	
              Termination
                of Employment or Service.

            


      


      (a)
        Exercise
        Period Following Cessation of Employment or Other Service Relationship, In
        General.
        If
        Optionee ceases to be employed by, or in a service relationship with, Bank
        for
        any reason other than death, Disability, or discharge for Cause, (i) the
        unvested Options shall terminate immediately upon such cessation, and
        (ii) the vested Options shall remain exercisable during the 30-day period
        following such cessation, but in no event after the Expiration Date. Unless
        sooner terminated, any unexercised vested Options shall terminate upon the
        expiration of such 30-day period.

      


      (b)
        Death
        of Optionee.
        If
        Optionee dies prior to the expiration or other termination of the Options,
        (i) the unvested Options shall terminate immediately upon Optionee’s death,
        and (ii) the vested Options shall remain exercisable during the one-year
        period following Optionee’s death, but in no event after the Expiration Date, by
        Optionee’s executor, personal representative, or the person(s) to whom the
        Options are transferred by will or the laws of descent and distribution.
        Unless
        sooner terminated, any unexercised vested Options shall terminate upon the
        expiration of such one-year period.

      


      (c)
        Disability
        of Optionee.
        If
        Optionee ceases to be employed by, or in a service relationship with, Bank
        as a
        result of Optionee’s Disability, (i) the unvested Options shall terminate
        immediately upon such cessation, and (ii) the vested Options shall remain
        exercisable during the one-year period following such cessation, but in no
        event
        after the Expiration Date. Unless sooner terminated, any unexercised vested
        Options shall terminate upon the expiration of such one-year
        period.

      


      (d)
        Misconduct.
        Notwithstanding anything to the contrary in this Agreement, the Options shall
        terminate in their entirety, regardless of whether the Options are vested,
        immediately upon Optionee’s discharge of employment or other service
        relationship for Cause or upon Optionee’s commission of any of the following
        acts during any period following the cessation of Optionee’s employment or other
        service relationship during which the Options otherwise would be exercisable:
        (i) fraud on or misappropriation of any funds or property of Bank, or
        (ii) breach by Optionee of any provision of any employment, non-disclosure,
        non-competition, non-solicitation, assignment of inventions, or other similar
        agreement executed by Optionee for the benefit of Bank, as determined by
        the
        Administrator, which determination will be conclusive.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


        5.
        Adjustments
        and Business Combinations.

      


                  (a) Adjustments
        for Events Affecting Common Stock.
        In the
        event of changes in the Common Stock of the Corporation by reason of any
        stock
        dividend, spin-off, split-up, reverse stock split, recapitalization,
        reclassification, merger, consolidation, liquidation, business combination
        or
        exchange of shares and the like, the Administrator shall, in its discretion,
        make appropriate substitutions for or adjustments in the number, kind and
        price
        of shares covered by this Option, and shall, in its discretion and without
        the
        consent of the Optionee, make any other substitutions for or adjustments
        in this
        Option, including but not limited to reducing the number of shares subject
        to
        the Option or providing or mandating alternative settlement methods such
        as
        settlement of the Option in cash or in shares of Common Stock or other
        securities of the Corporation or of any other entity, or in any other matters
        which relate to the Option as the Administrator shall, in its sole discretion,
        determine to be necessary or appropriate.

      


                  (b) Pooling
        of Interests Transaction.
        Notwithstanding anything in the Plan or this Agreement to the contrary and
        without the consent of the Optionee, the Administrator, in its sole discretion,
        may make any modifications to the Option, including but not limited to
        cancellation, forfeiture, surrender or other termination of the Option in
        whole
        or in part regardless of the vested status of the Option, in order to facilitate
        any business combination that is authorized by the Board to comply with
        requirements for treatment as a pooling of interests transaction for accounting
        purposes under generally accepted accounting principles.

      


                  (c) Adjustments
        for Other Events.
        The
        Administrator is authorized to make, in its discretion and without the consent
        of the Optionee, adjustments in the terms and conditions of, and the criteria
        included in, the Option in recognition of unusual or nonrecurring events
        affecting the Corporation, or the financial statements of the Corporation,
        or of
        changes in applicable laws, regulations, or accounting principles, whenever
        the
        Administrator determines that such adjustments are appropriate in order to
        prevent dilution or enlargement of the benefits or potential benefits intended
        to be made available under the Option or the Plan.

      


                  (d) Binding
        Nature of Adjustments.
        Adjustments under this Section 5 will be made by the Administrator, whose
        determination as to what adjustments, if any, will be made and the extent
        thereof will be final, binding and conclusive. No fractional shares will
        be
        issued pursuant to this Option on account of any such adjustments.

      


      (e) Effect
        of Change of Control Event.
        All
        outstanding portions of the Option, if any, shall become fully vested upon
        the
        occurrence of any Change of Control Event, except to the extent that
provision
        is made in connection with the Change
        of
        Control Event
        for the
        continuation or assumption of the Option by, or for the substitution of
        equivalent options with respect to, the surviving or successor entity or
        a
        parent thereof, and shall be exercisable in accordance with the Plan;
        provided, that unless otherwise decided in the sole discretion of the
        Administrator, the acceleration of vesting in connection with a Change of
        Control Event shall be limited as provided in the Plan. 

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


            6. Non-Guarantee
        of Employment.
        Nothing
        in the Plan or in this Agreement shall confer on an individual any legal
        or
        equitable right against the Corporation or the Administrator, except as
        expressly provided in the Plan or this Agreement. Nothing in the Plan or
        in this
        Agreement shall (a) constitute inducement, consideration, or contract for
        employment or service between an individual and the Corporation; (b) confer
        any right on an individual to continue in the service of the Corporation;
        or
        (c) shall interfere in any way with the right of the Corporation to
        terminate such service at any time with or without cause or notice, or to
        increase or decrease compensation for such service.

      


            7. No
        Rights as Stockholder.
        The
        Optionee shall not have any of the rights of a stockholder with respect to
        the
        shares of Common Stock that may be issued upon the exercise of the Option
        (including, without limitation, any rights to receive dividends or noncash
        distributions with respect to such shares) until such shares of Common Stock
        have been issued to him or her upon the due exercise of the Option. No
        adjustment shall be made for dividends or distributions or other rights for
        which the record date is prior to the date such certificate or certificates
        are
        issued.

      


            8. Incentive/Nonqualified
        Nature of the Option.
        The
        Options are intended to qualify as an incentive stock option within the meaning
        of Section 422A of the Code to the extent set forth herein, and this
        Agreement shall be so construed; provided,
        however,
        to the
        extent that the aggregate Fair Market Value as of the date of this grant,
        of the
        shares into which the Option becomes exercisable for the first time by the
        Optionee during any calendar year exceeds $100,000, the portion of the Option
        which is in excess of the $100,000 limitation will be treated as a nonqualified
        stock option.

      


            9. Withholding
        of Taxes.

      


                  (a) In
        General.
        At the
        time the Option is exercised in whole or in part, or at any time thereafter
        as
        requested by the Corporation, the Optionee hereby authorizes withholding
        from
        payroll or any other payment of any kind due the Optionee and otherwise agrees
        to make adequate provision for foreign, federal, state and local taxes required
        by law to be withheld, if any, which arise in connection with the Option
        (including, without limitation, upon a disqualifying disposition with the
        meaning of Code section 421(b)). The Corporation may require the Optionee
        to
        make a cash payment to cover any withholding tax obligation as a condition
        of
        exercise of the Option. If the Optionee does not make such payment when
        requested, the Corporation may refuse to issue any stock certificate under
        the
        Plan until arrangements satisfactory to the Administrator for such payment
        have
        been made.

      


                  (b) Means
        of Payment.
        The
        Administrator may, in its sole discretion, permit the Optionee to satisfy,
        in
        whole or in part, any withholding tax obligation which may arise in connection
        with the Option by any of the following means or by a combination of such
        means:
        (i) tendering a cash payment, (ii) authorizing the Corporation to deduct
        any such tax obligations from any payment of any kind otherwise due to the
        Optionee, (iii) authorizing the Corporation to withhold shares of Common
        Stock otherwise issuable to the Optionee pursuant to the exercise of this
        Option, or (iv) delivering to the Corporation unencumbered shares of Common
        Stock already owned by the Optionee.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


                  (c) Disposition
        of Shares.
        The
        acceptance of shares of Common Stock upon exercise of this Option shall
        constitute an agreement by the Optionee (i) to notify the Corporation if
        any of such shares are disposed of by the Optionee within two years from
        the
        Grant Date or within one year from the date the shares were issued to the
        Optionee pursuant to the exercise of the Option, and (ii) if required by
        law, to remit to the Corporation, at the time of any such disposition, an
        amount
        sufficient to satisfy the Corporation’s withholding tax obligations with respect
        to such disposition, whether or not, as to both (i) and (ii), the Optionee
        is employed by or has any other relationship with the Corporation at the
        time of
        such disposition.

      


      10.
        Compliance
        with Regulations of the FRB and OCC; Forfeiture.
        Subject
        to the terms of the Plan, the grant of Options made hereby are subject to
        the
        rules and regulations promulgated by the Federal Reserve Board (“FRB”) and the
        Office of the Comptroller of Currency (“OCC”). In accordance with certain
        provisions of such regulations, the Options granted hereby must be exercised
        or
        forfeited in the event the Company or its affiliates, including Bay National
        Bank, becomes critically undercapitalized (as defined in 12 C.F.R. § 6.4, or any
        successor law or regulation), is subject to FRB or OCC enforcement action,
        or
        receives a capital directive under 12 C.F.R § 6.21 or any successor law or
        regulation.

      


      11. The
        Corporation’s Rights.
        The
        existence of this Option shall not affect in any way the right or power of
        the
        Corporation or its stockholders to make or authorize any or all adjustments,
        recapitalizations, reorganizations or other changes in the Corporation’s capital
        structure or its business, or any merger or consolidation of the Corporation,
        or
        any issue of bonds, debentures, preferred or other stocks with preference
        ahead
        of or convertible into, or otherwise affecting the Common Stock or the rights
        thereof, or the dissolution or liquidation of the Corporation, or any sale
        or
        transfer of all or any part of the Corporation’s assets or business, or any
        other corporate act or proceeding, whether of a similar character or
        otherwise.

      


            12. Optionee.
        Whenever the word “Optionee” is used in any provision of this Agreement under
        circumstances where the provision should logically be construed, as determined
        by the Administrator, to apply to the estate, personal representative or
        beneficiary to whom this Option may be transferred by will, by the laws of
        descent and distribution, or pursuant to a qualified domestic relations order
        as
        defined in Code section 414(p), the word “Optionee” shall be deemed to include
        such person.

      


            13. Transferability
        of Option.
        This
        Option is not transferable other than by will or the laws of descent and
        distribution, pursuant to a qualified domestic relations order as defined
        in
        Code section 414(p), or as otherwise permitted by the Administrator, in its
        sole
        discretion. During the lifetime of the Optionee, the Option may be exercised
        only by the Optionee, by such permitted transferees or, during the period
        the
        Optionee is under a legal disability, by the Optionee’s guardian or legal
        representative. Except as provided above, the Option may not be assigned,
        transferred, pledged, hypothecated or disposed of in any way (whether by
        operation of law or otherwise) and shall not be subject to execution, attachment
        or similar process.

      


            14. Notices.
        All
        notices and other communications made or given pursuant to this Agreement
        shall
        be in writing and shall be sufficiently made or given if hand delivered or
        mailed by certified mail, addressed to the Optionee at the address contained
        in
        the records of the Corporation, or addressed to the Administrator, care of
        the
        Corporation for the attention of its Corporate Secretary at its principal
        office
        or, if the receiving party consents in advance, transmitted and received
        via
        telecopy or via such other electronic transmission mechanism as may be available
        to the parties.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


            15. Entire
        Agreement.
        This
        Agreement and the Plan contain the entire agreement between the parties with
        respect to the Option granted hereunder. Any oral or written agreements,
        representations, warranties, written inducements, or other communications
        made
        prior to the execution of this Agreement with respect to the Option granted
        hereunder shall be void and ineffective for all purposes.

      


            16. Amendment.
        This
        Agreement may not be modified, except as provided in the Plan or in a written
        document signed by each of the parties hereto.

      


            17. Conformity
        with Plan.
        This
        Agreement is intended to conform in all respects with, and is subject to
        all
        applicable provisions of, the Plan, which is incorporated herein by reference.
        Inconsistencies between this Agreement and the Plan shall be resolved in
        accordance with the terms of the Plan. In the event of any ambiguity in this
        Agreement or any matters as to which this Agreement is silent, the Plan shall
        govern. A copy of the Plan is available upon request to the
        Administrator.

      


            18. Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Maryland, other than the conflict of laws principles
        thereof.

      


            19. Headings.
        The
        headings in this Agreement are for reference purposes only and shall not
        affect
        the meaning or interpretation of this Agreement.

      


        


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      IN
        WITNESS WHEREOF, the Corporation has caused this Agreement to be executed
        by its
        duly authorized officer as of the date first above written.

      


      BAY
        NATIONAL CORPORATION

      


      By: ____________________________    

      


      Print
        Name: ______________________   

      


      Title:
        ___________________________    

      
 

      The
        undersigned hereby acknowledges that he/she has carefully read this Agreement
        and the Plan and agrees to be bound by all of the provisions set forth in
        such
        documents.

      


      OPTIONEE:
        

      


      


      DATE: _______________________        __________________________       

      


      


             Print
        Name: ___________________________

       

       

         

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      


      EXERCISE
        FORM

      


       

      Bay
        National Corporation

      2328
        West
        Joppa Road

      Lutherville,
        Maryland 21093

      


      


      Gentlemen:

      


           I
        hereby exercise, to the extent indicated below, the Option granted to me
        on
        __________, by Bay National Corporation (the “Corporation”), subject to all the
        terms and provisions thereof and of the Bay National Corporation 2007 Stock
        Incentive Plan (the “Plan”), and notify you of my desire to purchase ___
        incentive shares and ___ non-qualified shares of Common Stock of the Corporation
        at a price of $__________ per share pursuant to the exercise of said
        Option.

      


      Payment
        Amount: $____________________

      
        	
                 

              	
                 

              	
                 

              
	
                Date:                                                            

              	
                 

              	
                                                                            

              
	
                 

              	
                 

              	
                Optionee
                  Signature

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                Received
                  by Bay National Corporation on

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	
                                                                            

              


      

      


       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Broker
        Information:

      
        
          

        

         

      

      Firm
        Name

       

      
        
          

        

      

      
        	
                 

              	
                 

              	
                 

              
	
                Contact
                  Person

              	
                 

              	
                 

              


      

      


      
        
          

        

      

      


      
        	
                 

              	
                 

              	
                 

              
	
                Broker
                  Address

              	
                 

              	
                 

              


      

      


      
        
 

      
        	
                 

              	
                 

              	
                 

              	
                 

              	
                 

              
	
                City,
                  State, Zip Code

              	
                 

              	
                Phone
                  Number

              	
                 

              	
                 

              


      

      


      
        
          

        

      

       

      
        	
                 

              	
                 

              	
                 

              
	
                Broker
                  Account Number

              	
                 

              	
                 

              


      

      


      
        
          

        

      

       

      
        	
                 

              	
                 

              	
                 

              
	
                Electronic
                  Transfer Number: