FIRST AMENDMENT TO NON-COMPETE, NON-SOLICITATION AGREEMENT

This First Amendment to the Non-Compete, Non-Solicitation Agreement (the “First
Amendment”) is made and is effective as of August 26, 2009, by and between
Joanne Funari (“Funari”) and Heritage Oaks Bancorp (“Bancorp”), a California
corporation and registered bank holding company of its wholly-owned subsidiary,
Heritage Oaks Bank (“Bank”).  Bancorp, Bank and any other division of either
Bancorp or the Bank shall be referred to herein as the “Company.”

RECITALS

This First Amendment is made with regard to the following facts:

A.    
Funari is currently employed by the Bank as the Executive Vice President of the
Bank and the President of Business First Bank, a division of the Bank, pursuant
to that certain Employment Agreement dated as of May 29, 2007 by and between the
Bank and the Funari (the “Employment Agreement”).

B.    
Bancorp and Funari are parties to that certain Non-Compete, Non-Solicitation
Agreement dated as of May 29, 2007 (the “Agreement”).

C.    
Funari has requested certain changes to the Agreement that the Company is
willing to make on the terms and conditions set forth herein.

D.    
The Parties desire to amend the terms of the Agreement in the manner as set
forth herein.

TERMS

In consideration of the premises and the respective covenants and agreements of
the parties herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:

20.    
Section 1(g) will be added to the Agreement and shall read as follows:

(g) Termination Other Than For Cause. Funari shall be released from the covenant
in Section 1(a), above, and such covenant shall be of no further force or
effect, if the Company terminates Funari’s employment other than for
“Cause.”  For this purpose, the term “Cause” means (i) Funari’s failing to
perform her duties and obligations as an employee of the Company and failing to
cure such breach within 15 days following delivery to Funari of written notice
specifying in reasonable detail the failures to perform; (ii) Funari’s engaging
in either grossly negligent conduct or willful misconduct in connection with the
performance of her duties as an employee of the Company; (iii) the conviction of
Funari for any crime which constitutes a felony (other than a vehicular
violation not involving theft or fraud) in the jurisdiction in which committed
and which involves an act of theft or fraud, or the entry by Funari of a plea of
guilty or nolo contendre to such a felony in any jurisdiction; (iv) any
violation by Funari of her fiduciary duty to the Company which has the effect of
unlawfully converting for Funari’s own personal benefit, any material property
or prospect of the Company;  (v) the repeated consumption of alcohol or drugs in
a manner that materially impairs Funari’s abilities to perform her duties under
this Agreement; (vi) Executive’s personal dishonesty; (vii) Executive engages,
or is alleged to have engaged, in activity which, in the opinion of the Board or
the Bank’s Chief Executive Officer, could materially adversely affect the Bank’s
reputation in the community or which evidences the lack of Funari’s fitness or
ability to perform Funari’s duties as determined by the Board or the Bank’s
Chief Executive Officer, as the case may be, in good faith, after Funari has
been given written warning specifically advising her that she has engaged in
such activity, and after Funari has been given a reasonable time period (not to
exceed 15 days) after such warning to provide assurance to the Board or the Bank
of her continuing fitness and ability to perform her duties; or (vii) Funari’s
material breach of any provision of this Agreement.

 
 

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21.    
Section 1(h) will be added to the Agreement and shall read as follows:

Resignation for Good Reason.    Funari shall be released from the covenant in
Section 1(a), above, and such covenant shall be of no further force or effect,
if (a) Funari delivers to the Company written notice specifying in reasonable
detail, the circumstances constituting “Good Reason” and confirming her intent
to resign for “Good Reason,” (b) the Company fails to correct the circumstances
constituting “Good Reason” within fourteen (14) days following the delivery of
the notice, and (c) Funari thereafter resigns within seven (7) days following
expiration of that 14-day period.  For this purpose, the term “Good Reason”
means and shall exist only if the Company, without prior written consent of
Funari, (i) reduces, by more than ten percent (10%), Funari’s base salary or any
bonus compensation applicable to her as in effect prior to such reduction other
than as part of a Company-wide reduction in compensation expenses that similarly
affects all other senior members of management at and above Funari’s pay grade
or as required by the United States Department of Treasury for the purpose of
compliance with the restrictions on executive compensation as set forth by the
Capital Purchase Program as authorized under the Troubled Asset Relief Program,
and those laws and/or amendments thereto that modify the terms thereof, (ii)
deprives Funari of the title of Executive Vice President of Heritage Oaks Bank
and President of Business First Bank, a division of Heritage Oaks Bank or
materially diminishes the authority delegated to Funari in her capacity as a
member of the Executive Committee of Heritage Oaks Bank and as President of
Business First Bank, a division of Heritage Oaks Bank, (iii) requires Funari to
relocate her principal place of business outside of Santa Barbara County,(iv) a
failure by the Company to maintain any of the Executive benefits and perks to
which Funari was entitled at a level substantially equal to or greater than the
value of those benefits and perks in effect immediately prior to such change in
benefits or perks; or the taking of any action by the Company which would
materially affect Funari’s participation in or reduce Funari’s benefits under
any such benefits or ‘perks’ plans, programs or policies, or deprive Funari of
any material fringe benefits enjoyed by her immediately prior to any such
action, (v) any purported Termination of Funari’s employment by the Company
other than those effected in good faith pursuant to Sections 7(a) and 7(b) of
the Employment Agreement, (vi) the failure of the Company to obtain the
assumption of the Employment Agreement by any successor or (vii) receipt by
Funari of a Notice of Non-Renewal per the Employment Agreement.

22.    
The following paragraph will be added to Section 3 of the Agreement:

The term of this Agreement shall expire on May 29, 2012, the fifth (5th) annual
anniversary of the date on which the Company acquired Business First National
Bank, which was May 29, 2007.

23.    
Capitalized terms used herein and not otherwise defined shall have the same
meaning as set forth in the Agreement.

24.    
This First Amendment may be entered into in one or more counterparts, all of
which shall be considered one and the same instrument, and it shall become
effective when one or more counterparts have been signed by each of the Parties
and delivered to the other Parties, it being understood that all Parties need
not sign the same counterpart.

 
 

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25.    
Except as herein amended, the Agreement shall remain in full force and effect.

26.    
This First Amendment shall be governed by and construed in accordance with the
laws of the State of California.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

ATTEST:      HERITAGE OAKS BANK  
/s/ Lorraine R. Williams    
    /s/ Lawrence P Ward  
 
    Its:
President and CEO
 

 
    Print name:
Lawrence P Ward
 

 
 
 

ATTEST:      HERITAGE OAKS BANK  
/s/ Lorraine R. Williams    
    /s/ Lawrence P Ward  
 
    Its:
President and CEO
 

 
    Print name:
Lawrence P Ward
 

 
 

      THE EXECUTIVE              
/s/ Lorraine R. Williams    
    /s/ Joanne Funari  
Witness
    Joanne Funari  

 
 
 

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