Unassociated Document


    FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT

    


    


    This
First Amendment to the Employment Agreement (the “First Amendment”) is made and
is effective as of August 26, 2009, by and between Heritage Oaks Bank, a
California state chartered bank (“Bank”) and Joanne Funari
(“Executive”).

    


    RECITALS

    


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

    


    
      	
              F.    

            	
              Executive
      is currently employed by the Bank pursuant to that certain Employment
      Agreement dated on May 29, 2007 by and between the Bank and the Executive
      (the “Agreement”).

            


    

    


    
      	
              G.    

            	
              Heritage
      Oaks Bancorp (the “Company”), the Bank’s holding company, closed a
      transaction with the United States Department of Treasury (the “Treasury”)
      and as a result, became a participant in the Capital Purchase Program
      (“CPP”), as authorized under the Troubled Asset Relief Program
      (“TARP”).

            


    

    


    
      	
              H.    

            	
              As
      a result of the Company’s participation in the CPP, the Company and its
      subsidiaries, including the Bank, are subject to executive compensation
      and other restrictions as set forth in the CPP, as modified by the
      American Recovery and Reinvestment Act of 2009 (“ARRA”) and the Interim
      Final Rule on TARP Standards for Compensation and Corporate Governance
      published in the Federal Register on June 15, 2009 (the “Interim Final
      Rule”).

            


    

    


    
      	
              I.    

            	
              Executive
      and Bank desire to amend the terms of the Agreement in the manner set
      forth herein for the purpose of complying with
  TARP.

            


    

    


    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:

    


    
      	
              12.    

            	
              Section
      1(c) of the Agreement is hereby removed in its entirety and amended to
      read as follows:

            


    

    


    
      	
               
      

            	
              (c)

            	
              “Cause”
      means:

            


    

    


    
      	
              (i)    

            	
              Executive’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 Executive of written notice specifying in reasonable detail the
      failures to perform;

            


    

    
      	
              (ii)    

            	
              Executive’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 Executive 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 Executive of a plea of guilty or nolo contendre to
      such a felony in any jurisdiction;

            


    

    


    
      	
              (iv)    

            	
              Any
      violation by Executive of her fiduciary duty to the Company which has the
      effect of unlawfully converting for Executive’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 Executive 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
      Executive’s fitness or ability to perform Executive’s duties as determined
      by the Board or the Bank’s Chief Executive Officer, as the case may be, in
      good faith, after Executive has been given written warning specifically
      advising her that she has engaged in such activity, and after Executive
      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

            


    

    


    
      	
              (viii)  

            	
              Executive’s
      material breach of any provision of the Agreement or the Employment
      Agreement.

            


    

    


    
      	
              13.    

            	
              Section
      7(e) of the Agreement is hereby removed in its entirety and amended to
      read as follows:

            


    

    


    
      	
               
      

            	
              (e)

            	
              Resignation
      for Good Reason.  Either before or
      following a Change in Control during the Term hereof, Executive may, under
      the following circumstances, regard Executive’s employment as being
      constructively terminated by the Bank (and in such case Executive’s
      employment shall terminate) and may, therefore, Resign for Good Reason
      within 90 days of Executive’s discovery of the occurrence of one or more
      of the following events, any of which shall constitute “Good Reason” for
      such Resignation for Good
Reason:

            


    

    


    
      	
              (i)    

            	
              If
      the Company, without the prior written consent of Executive, reduces, by
      more than ten percent (10%), Executive’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
      Executive’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 CPP as authorized under the TARP, and
      those laws and/or amendments thereto that modify the terms
      thereof;

            


    

    


    
      	
              (ii)    

            	
              If
      the Company, without the prior written consent of Funari, 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)    

            	
              If
      the Company, without the prior written consent of Funari, 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 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
      Agreement;

            


    

    


    
      	
              (vi)    

            	
              The
      failure of the Company to obtain the assumption of the Agreement by any
      successor; or

            


    

    


    
      	
              (vii)    

            	
              The
      receipt by Funari of a Notice of Non-Renewal per the
      Agreement.

            


    

    


    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
              14.    

            	
              The
      following will be added as Section 6(b)(iv) to the
    Agreement:

            


    

     

    (c)

    
    

    
      	
               
      

            	
              (iv)

            	
              If
      the Company is subject to the executive compensation limitations under the
      TARP at the time Executive receives a bonus under this section, any and
      all such bonuses and/or portions thereof shall be subject to forfeiture
      and/or repayment by the Executive to the Company if the payment of such
      bonus was based on materially inaccurate financial statements or any other
      materially inaccurate performance metric
  criteria.

            


    

    


    
      	
              15.    

            	
              Section
      8(h) of the Agreement is hereby removed in its entirety and amended to
      read as follows:

            


    

    


    (h)           Reduction of Payment; IRC
Section 409A Compliance.

    


    
      	
               
      

            	
              (i)

            	
              Notwithstanding
      anything in the foregoing to the contrary, if the payments made to
      Executive following a Termination Without Cause or Resignation For Good
      Reason or any of the other payments provided for in this Agreement,
      together with any other payments which Executive has the right to receive
      from the Bank would constitute a “parachute payment” (as defined in
      Section 280G of the Code), the payments pursuant to this Agreement shall
      be reduced to the largest amount as will result in no portion of such
      payments being subject to the excise tax imposed by Section 4999 of the
      Code; provided, however, that (A) the parties acknowledge that the
      foregoing payment is for services to be rendered in the event of a Change
      in Control over and above those normally and reasonably expected of the
      Executive, and (B) the determination as to whether any reduction in the
      payments under this Agreement pursuant to this proviso is necessary shall
      be made in good faith by the Bank’s independent auditors or if such firm
      is no longer providing tax services to Bank to such other tax advisor as
      shall be mutually acceptable to Bank and Executive, and such determination
      shall be conclusive and binding on the Bank and Executive with respect to
      the treatment of the payment for tax reporting
  purposes.

            


    

    


    
      	
               
      

            	
              (ii)

            	
              This
      Agreement, and any payments or benefits hereunder, are made expressly
      subject to and conditioned upon compliance with all federal and state law,
      regulations and policies relating to the subject matter of this Agreement,
      including but not limited to the provisions of law codified at 12 U.S.C.
      Section 1828(k), the regulations of the FDIC codified as 12 C.F.R. Part
      359, and any successor or similar federal or state law or regulation
      applicable to the Bank or Bancorp.  Employee acknowledges that
      he understands the sections of law and regulations cited above and that
      Bank’s and Bancorp’s obligations to make payments hereunder are expressly
      relieved if such payments violate any federal or state law or regulation
      applicable to the Bank or Bancorp.

            


    

    


    
      	
               
      

            	
              (iii)

            	
              If
      the Company is subject to the executive compensation limitations under
      TARP at the time the Executive receives payment(s) under sections 8(d)
      and/or 8(e) and any such payment(s), together with any other payments
      which Executive has the right to receive from the Company, exceed the
      limits allowed for Executive established under TARP, then the aggregate
      payments pursuant to this Agreement, and any other agreement with
      Executive, shall be reduced to the largest amount as will result in no
      portion of such payments violating the executive compensation limitations
      under TARP.

            


    

    


    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
               
      

            	
              (iv)

            	
              Notwithstanding
      any provision existing in this Agreement or any amendment thereto, it is
      the intent of the Bank and Executive that any payment or benefit provided
      pursuant to this Agreement shall be made and paid in a manner, at a time
      and in a form which complies with the applicable requirements of IRC
      Section 409A, in order to avoid any unfavorable tax consequences resulting
      from any such failure to comply. Furthermore, for the purposes of this
      Agreement, IRC Section 409A shall be read to include any related or
      relevant IRS Notices (including but not limited to Notice
      2007-86).  In the event of any ambiguity in terms, or in the
      event further clarification of any term or provision is necessary, all
      interpretations and payouts of benefits based thereon shall be in
      accordance with IRC 409A and any related notices or guidance
      thereon.

            


    

    


    
      	
              16.    

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

            


    

    


    
      	
              17.    

            	
              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.

            


    

    


    
      	
              18.    

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

            


    

    


    
      	
              19.    

            	
              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/
      Joni Watson

                                      	 	 	/s/
      Ron Oliveira	 
	
                                         

                                      	 	 	Its:	
                                        EVP
      and COO

                                      	 


                              

                            

                          

                        

                      

                    

                  

                  
                    
                      
                        	
                                 

                              	 	 	Print
      name:	
                                Ron
      Oliveira

                              	 


                      

                    

                  

                   

                   

                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                	 	 	 	THE
      EXECUTIVE	 
	 	 	 	 	 	 
	/s/ Denise
      Sandford             
      	 	 	/s/
      Joanne Funari 	 
	
                                                        Witness

                                                      	 	 	Joanne
      Funari