**EXHIBIT10.37**

 

**EMPLOYMENT AGREEMENT**

 

This Agreement is made as of September 5,2003, by and between Hacienda Bank, a California banking corporation(“Hacienda”), and David Duarte (“Executive”).

 

WHEREAS, Hacienda has entered into anAgreement to Merge and Plan of Reorganization, dated June 11, 2003,  (the “Merger”) pursuant to which Haciendawill become a wholly owned subsidiary of Heritage Oaks Bancorp (“HOB”) andExecutive will become President and Chief Operating Officer of Hacienda; and

 

WHEREAS, Executive is currently employed byHacienda in the capacity of Chief Credit Officer, and Executive’s background,expertise and efforts have contributed to the success and financial strength ofHacienda; and

 

WHEREAS,Hacienda wishes to assure itself of the continued opportunity to benefit fromExecutive’s services after the Merger and for the period provided in thisAgreement, and Executive wishes to serve in the employ of Hacienda on afull-time basis solely in accordance with the terms hereof for such purposes;and

 

WHEREAS, the Board of Directors of Hacienda(“Board”) has determined that the best interests of Hacienda would be served byExecutive’s employment after the Merger as President and Chief OperatingOfficer with Hacienda under the terms of this Agreement.

 

NOW, THEREFORE, in order to effect theforegoing, the parties hereto wish to enter into an employment agreement on theterms and conditions set forth below. Accordingly, in consideration of the promises and the respectivecovenants and agreements of the parties herein contained, and intending to belegally bound hereby, the parties hereto agree as follows:

 

(1)                                  Definitions.

 

(a) “Agreement” means this employmentagreement and any amendments hereto complying with Section 14(a) hereof.

 

(b) “Board” means the Board of Directors of Hacienda unless thecontext otherwise requires.

 

(c) “Cause” means:

 

(1)Executive engages in personal dishonesty, incompetence, willful misconduct,breach of fiduciary duty involving personal profit, intentional failure to performstated duties (unless such failure was in good faith with a reasonable beliefthat Executive was acting in the best interests of Hacienda or HOB) or willfulviolation of any law, rule or regulation (other than traffic violations orsimilar minor offenses) ;

 

(2) Executive engages in illegal activity which materially adverselyaffects Hacienda’s reputation in the community or which evidences the lack ofExecutive’s fitness or ability to perform Executive’s duties as determined bythe Board of Directors in good faith; or

 

(3) Executive commits any act which would cause termination of coverageunder Hacienda’s Bankers’ Blanket Bond as to Executive (as distinguished fromtermination of coverage as to Hacienda as a whole).

 

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(d) “Change in Control” means a change of control of HOB of anature that would be required to be reported in response to Item 6(e) ofSchedule 14A of Regulation 14A (or in response to any similar item on anysimilar schedule or form) promulgated under the Securities Exchange Act, whetheror not HOB is then subject to such reporting requirement; provided, however,that without limitation, a Change in Control shall be deemed to have occurredif:

 

(i)                                     there is atransfer, voluntarily or by hostile takeover, by proxy contest (or similar action),operation of law, or otherwise, of control of HOB,

 

(ii)                                  any Person (otherthan a director or former director of HOB) is or becomes the “beneficial owner”(as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act or anysuccessor provisions thereof), directly or indirectly, of securities of HOBrepresenting 20% or more of the combined voting power of HOB’s then outstandingsecurities;

 

(iii)                               the individuals who weremembers of the Board of Directors of HOB immediately prior to a meeting of theshareholders of HOB, which meeting involves a contest for the election ofdirectors, do not constitute a majority of the Board of Directors of HOBfollowing such meeting or election;

 

(iv)                              a merger or consolidation(in which HOB is not the surviving entity) or sale or other disposition of allor substantially all of the assets of HOB in one transaction or a series oftransactions; or

 

(v)                                 there is a change,during any period of two consecutive years, of a majority of the Board ofDirectors of HOB as constituted as of the beginning of such period, unless theelection of each director who is not a director at the beginning of such periodwas approved by a vote of at least two-thirds of the directors then in officewho were directors at the beginning of such period.

 

In no event will (i) any of the transactions contemplated by the Mergernor (ii) any merger of Hacienda with and into a subsidiary of HOB, be deemed toconstitute a Change in Control of HOB.

 

(e) “Code”  shall meanthe Internal Revenue Code of 1986, as amended.

 

(f) “Control” means the possession, direct or indirect, by anyPerson or “group” (as defined in Section 13(d) of the Securities Exchange Act)of the power to direct or cause the direction of the management policies ofHOB, whether through ownership of voting securities, by contract or otherwise,and in any case means the ability to determine the election of a majority ofthe directors of HOB.

 

(g) “Disability” means physical or mental illness defined asExecutive being unable to fully perform the duties required under thisAgreement for a continuous period of ninety (90) days or a cumulative period ofone hundred twenty (120) days in any one calendar year.  If there should be a dispute between Haciendaand Executive as to Executive’s physical or mental disability for purposes ofthis Agreement, the question shall be settled by the opinion of an impartialreputable physician or psychiatrist agreed upon by the parties or theirrepresentatives, or if the parties cannot agree within ten (10) days after arequest for designation of such party, then by a physician or psychiatristdesignated by the Santa Barbara County Medical Association.  The certification of such physician orpsychiatrist as to the question in dispute shall be final and binding upon theparties hereto.

 

(h) “Expiration” means the termination of this Agreement(including Executive’s

 

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employment hereunder) and ofany further obligations of the parties (except as specified in this Agreement)upon completion of the Term.

 

(i) “Person” means an individual, a group acting in concert, acorporation, a partnership, an association, a joint stock company, a trust, anyunincorporated organization, a government or political subdivision thereof, orany other entity whatsoever.

 

(j) “Resign for Good Reason” or “Resignation for Good Reason”has the meaning found in Section 7(e).

 

(k) “Term” means the initial term of this Agreement and anyextensions hereof, as provided in Section 4, whether prior to or following aChange in Control.

 

(l) “Termination” or “Terminate(d)” means the termination ofExecutive’s employment hereunder for any of the following reasons unless thecontext indicates otherwise:

 

(i)                                     Retirementby Executive;

 

(ii)                                  Deathof Executive;

 

(iii)                               Disability;

 

(iv)                              Expiration;

 

(v)                                 Resignationfor Good Reason;

 

(vi)                              Resignationother than Resignation for Good Reason;

 

(vii)                           TerminationWithout Cause; and

 

(viii)                        Terminationfor Cause.

 

(m) “Termination Without Cause” or “Terminate(d) Without Cause”means the cessation of Executive’s employment hereunder for any reason except:

 

(i)                                     Aresignation by Executive, except for Resignation for Good Reason;

 

(ii)                                  Terminationfor Cause;

 

(iii)                               Retirement;

 

(iv)                              Disability;

 

(v)                                 Death;or

 

(vi)                              Expiration.

 

2.                                       At-WillEmployment.  It is agreed by theparties hereto that the Executive’s employment by Hacienda hereunder shall beat-will, and that, subject to Executive’s rights under this Agreement, Haciendamay at any time elect to terminate this Agreement and Executive’s employment byHacienda for any reason by action of its Board.

 

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3.                                       Positionand Responsibilities.  The Executiveshall serve as President and Chief Operating Officer of Hacienda and, subjectto the provisions of Section 5 below, shall have such responsibilities, dutiesand authority as are generally associated with such positions and as may fromtime to time be assigned to the Executive by the Board that are consistent withsuch responsibilities, duties and authority.

 

4.                                       Termof Agreement. Subject to the terms and provisions of this Agreement, thisAgreement and the period of Executive’s employment, shall be deemed to havecommenced as of the effective time of the Merger, and shall continue until12:00 midnight January 31, 2005, unless sooner terminated.  The initial term shall automatically beextended for an additional one (1) full additional year without further actionby the parties on January 31, 2005, and on each succeeding January 31stthereafter.  Hacienda or Executive, maystop an automatic one year extension, however, by serving written notice(“Notice of Non-Renewal”) upon the other party within 60 calendar days prior toJanuary 31, 2005, or within 60 calendar days prior to January 31 of anysucceeding year, as the case may be, of such party’s intention that thisAgreement shall expire at the end of such Term.  In the event Hacienda retains Executive as an employee followingthe Non-Renewal and expiration of the Term, such employment, absent a writtenagreement to the contrary, will be on an at-will basis with such compensationand upon such terms as the parties may then agree, subject to termination atany time with or without cause, and without liability.  If Hacienda does not retain Executive as anemployee after the Non-Renewal and Expiration of the Term, Executive’semployment shall cease without further liability of the parties to each other.Executive’s employment shall also terminate, and the Term of this Agreement willexpire, upon Executive’s resignation (unless resignation is for Good Reasonafter a Change in Control), retirement, death or Disability, or uponExecutive’s Termination for Cause.

 

5.                                       FullTime, Exclusive Employment.  Duringthe Term hereof, Executive shall devote exclusively all of his business time,attention, skill and efforts to the faithful performance of the business ofHacienda to the fullest extent necessary to properly discharge his duties andresponsibilities hereunder and consistent with the highest and best standardsof the banking industry and in compliance with all applicable laws, regulationsand rules as well as Hacienda’s Articles of Incorporation and Bylaws.  Further, with the approval of the Board,from time to time, Executive may serve, or continue to serve, on the boards ofdirectors of, and hold any other offices or positions in, companies orcharitable, political or civic organizations, which, in such Board’s judgment,will not present any material conflict of interest with Hacienda and will notunfavorably affect the performance of Executive’s duties pursuant to thisAgreement.

 

6.                                       Compensation.

 

(a)   Salary.   For Executive’sservices hereunder, Hacienda shall pay or cause to be paid as annual basesalary (gross) to Executive the sum of $112,000.00; provided, however, thatJanuary 31, 2004 and each January 31st thereafter during the Term will be theannual salary review date for Executive (a “Salary Review Date”) at which timeExecutive’s base salary shall be reviewed for increase based on the attainmentof yearly goals assigned to Executive. Any increase in base salary being effective as of February 1stof such year.

 

Said salary shall be payable in equal installments in conformity withHacienda’s normal payroll practice, and shall be paid less all applicabletaxes, with holdings, and deductions.

 

(b)   Bonuses.   Executive mayreceive an annual bonus in an amount to be determined by the Board ofDirectors, based upon the agreed-upon performance of Hacienda on an annualbasis.  Such bonus will be based uponthe bonus policy established by the board of directors of Hacienda and all

 

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bonuses will be paid on anannual basis during the first quarter of the next year.

 

(c)   Vacation.   Executive shallbe entitled to up to four (4) weeks of vacation each year during the Term,which vacation shall be taken at such times as are agreed upon by Executive andthe Board of Directors; provided, however, that during each year of the Term,Executive is required to and shall take at least two (2) weeks of said vacation(the Mandatory Vacation), which shall be taken consecutively.  Executive shall not be entitled to vacationpay in lieu of vacation; provided, however, that any vacation days earned butnot used in any year may be carried over to future years, subject to any cap orlimitation on vacation benefit accrual that may be contained in HOB’s EmployeePolicy Guide (which cap or limitation is hereby incorporated by reference).

 

(d)   Group Medical Benefits.   Hacienda,at its expense, shall provide for Executive full family medical and dentalinsurance as well as accident and health, and income continuation insurancebenefits (including disability) for Executive equivalent to the normal andcustomary benefits available from time to time in accordance with the policiesof HOB for itself and its subsidiaries****foran employee of Executive’s salary level

 

(e)   Employee Benefits and Perks.   Inaddition to the foregoing, during the period of the Executive’s employmenthereunder, the Executive shall be entitled to participate in all employeebenefits plans or arrangements of Hacienda or HOB not otherwise provided for inthis Agreement on the same basis as other employees of Hacienda including,without limitation, plans or arrangements providing use of Hacienda providedcredit card(s), car telephone(s), pager(s) and such other perks (if such is(are) being so provided) upon the terms and conditions previously in effect.

 

(f)   Expenses.   Duringthe period of the Executive’s employment hereunder, the Executive shall beentitled to receive prompt reimbursement for all reasonable and customaryexpenses incurred by the Executive in performing services hereunder inaccordance with the general policies and procedures established by Hacienda.

 

(g)   Stock Option.   Executiveshall be granted an option to purchase 20,000 shares of HOB common stock with20% of such options becoming vested on the first anniversary of the grant ofthe option and with an additional 20% of the option becoming vested on thesecond, third, fourth and fifth anniversary dates, respectively, of the grantof the option.  The strike price of saidstock option shall be 100% of the fair market value of HOB’s common stock onthe date of grant.

 

(h)   AutoAllowance.   Executive shall be entitled to payment of anautomobile allowance in the amount of $350.00 per month during the Term;provided, however, on each Salary Review Date this benefit will be reviewed byHacienda to determine if an auto allowance will continue for the next year orif an auto should be provided to executive with all related expenses paid byHacienda.

 

(i)   Life Insurance.   Assumingthat Executive qualifies insurable, Hacienda will provide Executive with a termlife insurance policy of $100,000 payable to a beneficiary to be designated byExecutive.  

 

(j)   401k.   Executive shall beentitled to participate in a Hacienda sponsored 401k plan, or if there is nosuch plan, then in a company-wide 401k plan sponsored by HOB.

 

(k)   Salary Continuation Program.   Subjectto Executive being able to qualify under a bank-owned life insurance program,Executive shall be eligible to participate in a Hacienda sponsored salarycontinuation program pursuant to which Executive will be entitled to receive abenefit of $2,500 per month for 180 months upon retirement at the age of 65.

 

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7.                                       Termination.

 

(a)   Resignation, Retirement, Death or Disability.   Executive’semployment hereunder shall cease at any time by Executive’s resignation (otherthan a resignation for Good Reason as provided in Section 7(e)), or byExecutive’s retirement, death or Disability. Disability shall be deemed to have occurred only after following theprocedure contained in Section 1(g) above.

 

(b)   Termination for Cause.   Executive’semployment shall cease upon a good faith finding of Cause by the Board;provided, however, that Executive shall be given written notice of the Board’sfinding of conduct by Executive amounting to Cause for such termination.  Said notice shall be accompanied by a copyof a resolution duly adopted by the affirmative vote of not less than amajority of a quorum of the Board at a duly-noticed meeting of the Board,finding that in the good faith opinion of the Board, Executive was guilty ofconduct amounting to Cause and specifying the particulars thereof; provided,however, that after a Change in Control, such resolution may be adopted only bythe affirmative vote of not less than a majority of a committee composed of atleast three (3) disinterested outside directors of HOB.  In the absence of at least three (3)disinterested outside directors, a determination of Cause shall be submitted toand made by an arbitrator(s) pursuant to Section 12 hereof.

 

(c)   Termination Without Cause.   Executive’semployment may be terminated Without Cause upon 30 days’ notice for any reason,subject to the payment of all amounts including severance benefits required bySection 8 hereof.  Any termination shallbe effective immediately unless another time period is specified herein uponHacienda’s giving of notice to Executive, and all liability or obligation byHacienda hereunder to Executive (except for severance benefits, as may beprovided below) shall thereupon cease. Such termination shall not prejudice any remedy which Hacienda may haveat law, in equity, or under this Agreement.

 

(d)   Expiration.   Executive’semployment shall cease, or shall continue on an at-will basis as provided inSection 4 hereof, upon the expiration of the Term of this Agreement as providedin Section 4 hereof.

 

(e)   Resignation for Good Reason.   Followinga Change in Control during the Term hereof, Executive may, under the followingcircumstances, regard Executive’s employment as being constructively terminatedby Hacienda (and in such case Executive’s employment shall terminate) and may,therefore, Resign for Good Reason within 90 days of Executive’s discovery ofthe occurrence of one or more of the following events, any of which shallconstitute “Good Reason” for such Resignation for Good Reason:

 

(i)                                     WithoutExecutive’s express written consent, the assignment to Executive of any dutiesmaterially inconsistent with Executive’s position, duties, responsibilities andstatus with Hacienda immediately prior to the Change in Control, or anysubsequent removal of Executive from or any failure to re-elect him to any suchposition;

 

(ii)                                  Without Executive’sexpress written consent, the termination and/or material reduction inExecutive’s facilities (including office space and general location) and staffreporting and available to Executive immediately prior to the Change inControl;

 

(iii)                               A reduction by Haciendaof Executive’s base salary or of any bonus compensation applicable to him as ineffect immediately prior to the Change in Control;

 

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**(iv)**                               **A failure by Hacienda to maintain any of the employeebenefits and perks to which Executive was entitled immediately prior to theChange in Control at a level substantially equal to or greater than the valueof those employee benefits and perks in effect immediately prior to the Changein Control; or the taking of any action by Hacienda which would materiallyaffect Executive’s participation in or reduce Executive’s benefits under anysuch benefits’ or perks’ plans, programs or policies, or deprive Executive ofany material fringe benefits enjoyed by him immediately prior to the Change inControl;**

 

(v)                                 Hacienda requiringExecutive to be based at an office that is greater than 25 miles from whereExecutive’s office is located immediately prior to the Change in Control,except for required travel on Hacienda’s behalf to an extent substantiallyconsistent with Executive’s present business travel obligations;

 

(vi)                              Any purported Terminationof Executive’s employment by Hacienda other than those effected in good faithpursuant to Sections 7(a) and 7(b) of this Agreement; or

 

(vii)                           The failure of Hacienda toobtain the assumption of this Agreement by any successor.

 

Additionally,even if no Change in Control has occurred, Executive shall be entitled toresign, in his sole and absolute discretion, at any time within one year of thelatest of: (1) the effective date of the Merger, (2) the close of the Merger, or(3) the date that Executive assumes the positions and responsibilities setforth in Section 3 hereinabove (“Commencement Date”).  Any resignation within one year of the Commencement Date shall bedeemed a Resignation for Good Reason, and Executive shall be entitled to theseverance payment due pursuant to Section 8(f).

 

(f)   Supervisory Suspension.   Ifthe Executive is suspended and/or temporarily prohibited from participating inthe conduct of Hacienda’s affairs by a notice served under Sections 8(e) or (g)of the Federal Deposit Insurance Act or similar statute, rule or regulation,Hacienda’s obligations under this Agreement shall be suspended as of the dateof service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, Hacienda shall, (i)pay the Executive all or part of the compensation withheld while itsobligations under this Agreement were suspended and (ii) reinstate (in whole orin part) any of its obligations which were suspended.

 

(g)   Regulatory Removal.   If theExecutive is removed and/or permanently prohibited from participating in theconduct of Hacienda’s affairs by an order issued under Sections 8(e) or (g) ofthe Federal Deposit Insurance Act or similar statute, rule or regulation, allobligations of Hacienda under this Agreement shall terminate as of theeffective date of the order.

 

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8.                                       Paymentsto Executive Upon Termination.

 

(a) Death, Disability or Retirement.  In the event of Termination of this Agreement due to Executive’sdeath, Disability or retirement, except for those benefits provided by lifeinsurance and salary continuation pursuant to Sections 6(d), (e), (i) and (k),Executive or Executive’s spouse and/or estate shall be entitled to NO benefitsfrom Hacienda and Hacienda shall have no further liability or obligation toExecutive, including any obligation to provide severance benefits pursuant tothis Section 8 below.

 

(b) Resignation Without Good Reason or Expiration.  In the event of Executive’s resignation(other than a Resignation for Good Reason), or upon Expiration, Hacienda shallhave no further obligations to Executive under this Agreement or otherwise,except as may be expressly required by law.

 

(c) Termination for Cause. In the event Executive is Terminated for Cause, Hacienda shall have nofurther obligations to Executive under this Agreement or otherwise, except asmay be expressly required by law.

 

(d) Termination Without Cause Prior to a Change in Control.  Upon the occurrence of a Termination WithoutCause prior to a Change in Control, as damages for breach of this Agreement,Hacienda shall as severance benefits to Executive provide the following: (a)severance pay in a sum equivalent to Executive’s then existing base salary fora period of twelve (12) months next following Executive’s termination (in lieuof any payments otherwise due for the balance of the Term), which payment shallbe payable to Executive in one lump sum payment on the effective date oftermination of Executive’s employment hereunder; and (b) continuation of familymedical insurance benefits provided to Executive hereunder for twelve (12)months after termination. Such lump sum shall be paid not later than the tenth(10th) day following the date of Termination Without Cause. Theparties agree that the provision of such severance benefits shall constitutefull and complete performance by Hacienda of its obligations hereunder.

 

(e) Termination Without Cause or Resignation for Good Reason, Aftera Change in Control.  If in thetwelve (12) month period following a Change in Control, Executive (i) Resignsfor Good Reason or (ii) is otherwise Terminated Without Cause, Hacienda shallpay to Executive a lump sum payment equal to twelve (12) months base salarythen in effect.  Such lump sum shall bepaid not later than the tenth (10th) day following the date of TerminationWithout Cause or a Resignation for Good Reason.  If Executive is not offered continuing employment at the time ofa Change in Control, Hacienda shall pay to Executive a lump sum payment equalto (A) twenty-four (24) months base salary then in effect and (B) the amountrequired to pay for family medical insurance coverage for a period of twelve(12) months.  Such lump sum shall bepaid not later than the tenth (10th) day following the date of Change inControl.

 

(f)  Termination Within OneYear of Commencement Date.  IfExecutive resigns for any reason within one year following the CommencementDate (as defined in Section 7(e)), Hacienda shall pay to Executive as severancehis remaining base salary then in effect from the date of termination throughthe date that is one full year following the Commencement Date, together withall amounts required to pay for family medical insurance through that same date. Said amounts shall be paid in a lumpsum payment no later than the tenth (10th) day following theeffective date of Executive’s resignation. The severance provided by this Section shall replace any severanceprovided by Executive’s existing change in control agreement with Hacienda,which shall be terminated upon the Commencement Date.

 

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The parties agree that theprovisions of such severance benefits shall constitute full and completeperformance by Hacienda and HOB of any obligations hereunder and under allprior change in control agreements.

 

(g) Merger of Hacienda with and into a Subsidiary of HOB.  If during the Term, Hacienda is merged withand into a subsidiary of HOB and (i) Executive is not offered employment withsuch subsidiary or (ii) Executive declines an offer of employment by suchsubsidiary, Executive shall be entitled to receive as severance an amount equalto the payment contemplated by Subsection (d).

 

(h) Source of Payments. All payments provided in Section 8 shall be paid in cash from thegeneral funds of Hacienda, and no special or separate fund need be establishedand no other segregation of assets need be made to assure payment.

 

(i) Consistent Returns. Hacienda and Executive agree that the payments being made under thisAgreement represent reasonable compensation for services and that neitherHacienda nor Executive will file any returns or reports which take a contraryposition.

 

(j) Reduction of Payment. Notwithstanding anything in the foregoing to the contrary, if thepayments made to Executive following a Termination Without Cause or ResignationFor 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 fromHacienda would constitute a “parachute payment” (as defined in Section 280G ofthe Code), the payments pursuant to this Agreement shall be reduced to thelargest amount as will result in no portion of such payments being subject tothe excise tax imposed by Section 4999 of the Code; provided, however, that thedetermination as to whether any reduction in the payments under this Agreementpursuant to this proviso is necessary shall be made in good faith by Hacienda’sindependent auditors or if such firm is no longer providing tax services toHacienda to such other tax advisor as shall be mutually acceptable to Haciendaand Executive, and such determination shall be conclusive and binding onHacienda and Executive with respect to the treatment of the payment for taxreporting purposes.

 

(k) Sole Remedy.  Thereceipt of the amounts described in this Section 8, and attorneys fees as setforth in Section 12 in the event of breach, if any, shall constitute Executivessole remedy under this Agreement against Hacienda and its officers, directors,employees and agents.

 

9.                                       Confidentialityand Trade Secrets.

 

(a) Trade Secrets. During the Term, Executive will have access to and become acquaintedwith what Executive and Hacienda acknowledge are trade secrets, to wit,knowledge or data concerning Hacienda and/or HOB,  including its operations and business, and the identity ofcustomers of Hacienda and HOB, including knowledge of their financialcondition, their financial needs, as well as their methods of doingbusiness.  Executive shall not discloseany of the aforesaid trade secrets, directly or indirectly, or use them in anyway, either during the Term or for a period of twenty four (24) months afterthe termination of this Agreement, except as required in the course ofExecutive’s employment with Hacienda.

 

(b) No Unfair Competition. Executive hereby acknowledges that the sale or unauthorized use ordisclosure of any of Hacienda’s or HOB’s Confidential Information obtained byExecutive by any means whatsoever, at any time before, during, or after theTerm shall constitute unfair competition. Executive shall not engage in any unfair competition with the Haciendaor HOB either during the Term or at any time thereafter

 

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(c) Return of Documents. Executive expressly agrees that all manuals, documents, files, reports,studies, instruments, software, computer programs or similarly generatedelectronic materials or other materials used and/or developed by Executiveduring the Term are solely the property of Hacienda, and that Executive has noright, title or interest therein.  Upontermination of the Term of this Agreement, Executive or Executive’srepresentative shall promptly deliver possession of all of said property toHacienda in good condition.

 

(d) Unauthorized Disclosure. During the period of his employment hereunder and for a period of twoyears following the cessation of such employment (irrespective of the reasontherefor), Executive shall not, except as required by any court, supervisoryauthority or administrative agency, without the written consent of the Board ora person authorized thereby, disclose to any person, other than an employee ofHacienda or a person to whom disclosure is reasonably necessary or appropriatein connection with the performance by the Executive of his duties as anemployee of Hacienda, any confidential information obtained by him while in theemploy of Hacienda; provided, however, that confidential information shall notinclude any information known generally to the public (other than as a resultof an unauthorized disclosure by the Executive).

 

10.                                 Waivers.  Any waiver by a party of any breach of thisAgreement by the other party shall not be construed as a continuing waiver oras a consent to any subsequent breach by the other party.

 

11.                                 Notices.  All notices, requests, demands and othercommunications hereunder shall be in writing and shall be deemed to have beenduly given if delivered by hand or mailed, certified or registered mail, returnreceipt requested, with postage prepaid, to the following addresses or to suchother address as either party may designate by like notice.

 

If to Hacienda, to:

Hacienda Bank

361 Town Center West, Suite 200

Santa Maria, California 93456

Attn: Lawrence Ward

Facsimile:(805)           

 

with a copy to:

 

John F. Stuart, Esq.

REITNER & STUART

1319 Marsh Street

San Luis Obispo, California 93401

Facsimile: (805) 545-8599

 

 

If to Executive, to:

 

David Duarte

c/o Hacienda Bank

361 Town Center West, Suite 200

Santa Maria, California 93456

 

and to such other or additional person or persons as either party shallhave designated to the other party

 

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in writing by like notice.

 

12.                                 Arbitration.  Any dispute or controversy arising or inconnection with this Agreement shall, upon written request of one party to theother, be submitted to and settled exclusively by arbitration in the State ofCalifornia and be governed by the California Arbitration Act as set forth inthe California Code of Civil Procedure. Judgment may be entered on the arbitrator’s award in any court ofcompetent jurisdiction.  The cost ofsuch arbitration, including reasonable attorney’s fees, shall be borne by thelosing party or in such proportions as the arbitrator(s) shall decide.  Arbitration shall be the exclusive remedy ofExecutive and Hacienda and the award of the arbitrator(s) shall be final andbinding upon the parties.  Allreasonable costs, including reasonable attorney’s fees, incurred in enforcingan arbitration award in court, or of seeking a court order to compelarbitration, shall be borne by the losing party in such proceedings.

 

13.                                 Indemnification.  Haciendawill indemnify Executive to the fullest extent permitted by the laws of thestate of California and to the extent not inconsistent with the foregoing, theArticles of Incorporation and Bylaws of Hacienda as in effect on the date ofthe Change in Control of Hacienda, in respect of all Executive’s services renderedto Hacienda and its subsidiaries prior to the Date of Termination.  Executive shall be entitled to theprotection of any insurance policies Hacienda now or hereafter maintainsgenerally for the benefit of its directors, officers and employees (but only tothe extent of the coverage afforded by the existing provisions of suchpolicies) to protect against all costs, charges and expenses whatsoeverincurred or sustained by Executive in connection with any action, suit orproceeding to which Executive may be made a party by reason of his being orhaving been a director, officer or employee of Hacienda or any of itssubsidiaries during his employment therewith.

 

14.                                 GeneralProvisions.

 

(a) Entire Agreement. This Agreement constitutes the entire agreement by the parties withrespect to the subject matter hereof, and supersedes and replaces all prioragreements among or between the parties, unless otherwise provided herein.  No amendment, waiver or termination of any ofthe provisions hereof shall be effective unless in writing and signed by theparty against whom it is sought to be enforced.  Any written amendment, waiver, or termination hereof executed byHacienda and Executive shall be binding upon them and upon all other Persons,without the necessity of securing the consent of any other Person, and noPerson shall be deemed to be a third-party beneficiary under this Agreement.

 

(b) Counterparts.  ThisAgreement may be executed in one or more counterparts, each of which shall bedeemed an original, but all of which taken together shall constitute one andthe same Agreement.

 

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(c) No Waiver.  Except asotherwise expressly set forth herein, no failure on the part of any partyhereto to exercise and no delay in exercising any right, power or remedyhereunder shall operate as a waiver thereof; nor shall any single or partialexercise of any right, power or remedy hereunder preclude any other or furtherexercise thereof or the exercise of any other right, power or remedy.

 

(d) Headings.  Theheadings of the Sections of this Agreement have been inserted for convenienceof reference only and shall in no way restrict or modify any of the terms orprovisions hereof.

 

(e) Severability.  If forany reason any provision of this Agreement is held invalid or unenforceable,such invalidity or unenforceability shall not affect the validity orenforceability of any other provision of this Agreement.  If any provision of this Agreement shall beheld invalid or unenforceable in part, such invalidity or unenforceabilityshall in no way effect the rest of such provision not held so invalid, and therest of such provision, together with all other provisions of this Agreement,shall to the full extent consistent with law continue in full force and effect.

 

(f) Governing Law.  ThisAgreement shall be governed and construed and the legal relationships of theparties determined in accordance with the laws the United States and to theextent not inconsistent therewith the laws of the State of Californiaapplicable to contracts executed and to be performed solely in the State ofCalifornia.

 

(g) Assumption.  Haciendashall require any successor in interest (whether direct or indirect or as aresult of purchase, merger, consolidation, Change in Control or otherwise) toall or substantially all of the business and/or assets of Hacienda to expresslyassume and agree to perform the obligations under this Agreement in the samemanner and to the same extent that Hacienda would be required to perform it ifno such succession had taken place.

 

(h) Advice of Counsel. Executive acknowledges that Hacienda has been represented by Counsel inconnection with the preparation of the Agreement and that he has beenencouraged to consult with other legal counsel of his choosing concerning theterms of this Agreement prior to executing this Agreement.  Any failure by Executive to consult withcompetent counsel prior to executing this Agreement shall not be a basis forrescinding or otherwise avoiding the binding effect of this Agreement.  The parties acknowledge that they areentering into this Agreement freely and voluntarily, with full understanding ofthe terms of this Agreement.  Interpretationof the terms and provisions of this Agreement shall not be construed for oragainst either party on the basis of the identity of the party who drafted theterms or provisions in question.

 

N WITNESS WHEREOF, the parties hereto have executed this Agreement asof the day and year first above written.

 
| ATTEST: |        | HACIENDA BANK |
|---------|-------------|---------------|
|    |        |
|    |        | By:           |   |   |
|    | Its:        |          |   |
|    | print name: |          |   |
|    |        |
|    |        |
|    |        | THE EXECUTIVE |
|    |        |
|    |        |          |   |   |   |
| Witness |        |
|         |             |               |  |  |  |  |  |  |

 

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