**Exhibit 10.28**

 

**HERITAGE OAKS BANK**

**SALARY CONTINUATION AGREEMENT**

 

THIS AGREEMENT is adopted this1st day of February 2002, by and between HERITAGE OAKS BANK, a state-charteredcommercial bank located in Paso Robles, California (the “Bank”), and CHRISSALSANDS (the “Executive”).

 

**INTRODUCTION**

 

To encourage the Executiveto remain an employee of the Bank, the Bank is willing to provide salarycontinuation benefits to the Executive. The Bank will pay the benefits from its general assets.

 

**AGREEMENT**

 

The Bank and the Executive agreeas follows:

 

**Article 1**

**Definitions**

 

**Whenever used in this Agreement, the following words and phrases shallhave the meanings specified:**

 

1.1                                 *“Change of Control”* means:

 

(a)           A change in theownership of the capital stock of the Company, whereby another corporation,person, or group acting in concert (hereinafter this Agreement shallcollectively refer to any combination of these three [another corporation,person, or group acting in concert] as a “Person”) as described in Section 14(d)(2)of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),acquires, directly or indirectly, beneficial ownership (within the meaning ofRule 13d-3 promulgated under the Exchange Act) of a number of shares of capitalstock of the Company which constitutes fifty percent (50%) or more of thecombined voting power of the Company’s then outstanding capital stock then entitled to vote generally in theelection of directors; or

 

(b)           The persons who weremembers of the Board of Directors of the Company  immediately prior to a tender offer, exchange offer, contestedelection or any combination of the foregoing, cease to constitute a majority ofthe Board of Directors; or

 

(c)           The adoption by theBoard of Directors of the Company of a merger, consolidation or reorganizationplan involving the Company in which the Company is not the surviving entity, ora sale of all or substantially all of the assets of the Company.  For purposes of this Agreement, a sale of allor substantially all of the assets of the Company shall be deemed to occur ifany Person acquires (or during the 12-month period ending on the date of themost recent acquisition by such Person, has acquired) gross assets of theCompany that have an aggregate fair market value equal to fifty percent (50%)or more of the fair market value of all of the respective gross assets of theCompany immediately prior to such acquisition or acquisitions; or

 

(d)           A tender offer orexchange offer is made by any Person which results in such Person beneficiallyowning (within the meaning of Rule 13d-3 promulgated under the Exchange Act)either fifty percent (50%) or more of the Company’s outstanding shares ofCommon Stock or shares of capital stock having fifty percent (50%) or more thecombined voting power of the Company’s then outstanding capital stock (otherthan an offer made by the Company), and sufficient shares are acquired underthe offer to cause such person to own fifty percent (50%) or more of the votingpower; or

 

(e)           Any othertransactions or series of related transactions occurring which havesubstantially the same effect as the transactions specified in any of thepreceding clauses of this Section 1.1.

 

Notwithstandingthe above, certain transfers are permitted within Section 318 of the Code andsuch transfers shall not be deemed a Change of Control under this Section 1.2.

 

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1.2. *“Code”* means theInternal Revenue Code of 1986, as amended.

 

1.1                   *“Company”* means Heritage Oaks Bancorp

 

1.2                   *“Bank”* means Heritage Oaks Bank

 

1.3                   *“Disability”* means the Executive’s suffering a sickness,accident or injury which has been determined by the carrier of any individualor group disability insurance policy covering the Executive, or by the SocialSecurity Administration, to be a disability rendering the Executive totally andpermanently disabled.  The Executivemust submit proof to the Bank of the carrier’s or Social SecurityAdministration’s determination upon the request of the Bank.

 

1.4                   *“Early Termination”* means the Termination of Employment before NormalRetirement Age for reasons other than death, Disability, Termination for Causeor following a Change of Control.

 

1.5                   *“Early Termination Date”* means the month, day and year in which EarlyTermination occurs.

 

1.6                   *“Effective Date”* means February 1, 2002.

 

1.7                   *“Normal Retirement Age”* means the Executive’s 65TH  birthday.

 

1.8                   *“Normal Retirement Date”* means the later of the Normal Retirement Age orTermination of Employment.

 

1.9                   *“Plan Year”* means each 12-month period from the EffectiveDate.

 

1.10             “Termination for Cause” See Article 5.

 

1.11             *“Termination of Employment”* means that the Executive ceases to be employed bythe Bank for any reason, voluntary or involuntary, other than by reason of aleave of absence approved by the Bank.

 

**Article 2**

**Lifetime Benefits**

 

2.1       *Normal Retirement Benefit*. Upon Termination of Employment on or after the Normal Retirement Age****forreasons other than death, the Bank shall pay to the Executive the benefitdescribed in this Section 2.1 in lieu of any other benefit under this Agreement.

 

2.1.1        *Amount of Benefit*. The annual benefit under this Section 2.1 is $18,000 (Eighteen ThousandDollars).  The Bank’s Board ofDirectors, in its sole discretion, may increase the annual benefit under thisSection 2.1.1; however, an increase shall require the recalculation of ScheduleA.

 

2.1.2        *Payment of Benefit*. The Bank shall pay the annual benefit to the Executive in 12 equalmonthly installments commencing with the month following the Executive’s NormalRetirement Date, paying the annual benefit to the Executive for a period of 15years.

 

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2.2       *Early Termination Benefit*.  Upon Early Termination, the Bank shall payto the Executive the benefit described in this Section 2.2 in lieu of any otherbenefit under this Agreement.

 

2.2.1*        Amountof Benefit*.  The benefitunder this Section 2.2 is the Early Termination Lump Sum set forth on ScheduleA for the Plan Year ending immediately prior to the Early Termination Date,determined by vesting the Executive in 10 percent of the Accrual Balance setforth on Schedule A for the first Plan Year and an additional 10 percent ofsaid amount for each succeeding year thereafter until the Executive becomes 100percent vested in the Accrual Balance.

 

2.2.2*        Paymentof Benefit*.  The Bank shallpay the benefit to the Executive in a lump sum amount pursuant to Schedule A,within 90 days following the Early Termination date.

 

2.3*       DisabilityBenefit.*  If the Executiveterminates employment due to Disability prior to Normal Retirement Age, theBank shall pay to the Executive the benefit described in this Section 2.3 inlieu of any other benefit under this Agreement.

 

2.3.1*        Amountof Benefit.*  The benefitunder this Section 2.3 is the Disability Annual Benefit set forth on Schedule Afor the Plan Year ending immediately prior to the date in which the Terminationof Employment occurs (except during the first Plan Year, the benefit is theamount set forth for Plan Year 1), determined by vesting the Executive in  100 percent of the Accrual Balance.

 

2.3.2*        Paymentof Benefit.*  The Bank shallpay the annual benefit to the Executive in 12 equal monthly installmentscommencing with the month following the Normal Retirement Age, paying theannual benefit to the Executive for a period of 15 years.

 

2.4*       Changeof Control Benefit*.  Upon aChange of Control, the Bank shall pay to the Executive the benefit described inthis Section 2.4 in lieu of any other benefit under this Agreement.

 

2.4.1*        Amountof Benefit.*  The benefitunder this Section 2.4 is the Change of Control Annual Benefit set forth onSchedule A for the Plan Year ending immediately prior to the date in whichTermination of Employment occurs (except during the first Plan Year, thebenefit is the amount set forth for Plan Year 1), determined by vesting theExecutive in the Normal Retirement Benefit described in Section 2.1.1.

 

2.4.2*        Paymentof Benefit**.******* The Bank shall pay the annual benefit to theExecutive in 12 equal monthly installments commencing with the month followingthe Normal Retirement Age, paying the annual benefit to the Executive for aperiod of 15 years.

 

2.4.3        *Excess Parachute Payment*. Notwithstanding any provision of this Agreement to the contrary, theBank shall not pay any benefit under this Agreement to the extent the benefitwould create an excise tax under the excess parachute rules of Section 280G ofthe Code.

 

**Article 3**

**Death Benefits**

 

3.1       *Death During Active Service*.  If the Executive dies while in the active service of the Bank,the Bank shall pay to the Executive’s beneficiary the benefit described in thisSection 3.1.  This benefit shall be paidin lieu of the benefits under Article 2.

 

3.1.1        *Amount of Benefit*. The annual benefit under this Section 3.1 is the Normal RetirementBenefit amount described in Section 2.1.1.

 

3.1.2        *Payment of Benefit*. The Bank shall pay the annual benefit to the Executive’s 

 

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beneficiary in 12 equal monthlyinstallments commencing with the month following the Executive’s death, payingthe annual benefit to the Executive’s beneficiary for a period of 15 years.

 

3.2       *Death During Payment of a Lifetime Benefit*.  If the Executive dies after any LifetimeBenefit payments have commenced under this Agreement but before receiving allsuch payments, the Bank shall pay the remaining benefits to the Executive’sbeneficiary at the same time and in the same amounts they would have been paidto the Executive had the Executive survived.

 

3.3       *Death After Termination of Employment But Before Payment of a LifetimeBenefit Commences.*** **Ifthe Executive is entitled to a Lifetime Benefit under this Agreement, but diesprior to the commencement of said benefit payments, the Bank shall pay the samebenefit payments to the Executive’s beneficiary that the Executive was entitledto prior to death except that the benefit payments shall commence on the firstday of the month following the date of the Executive’s death.

 

**Article 4**

**Beneficiaries**

 

4.1       *Beneficiary Designations*. The Executive shall designate a beneficiary by filing a writtendesignation with the Bank.  TheExecutive may revoke or modify the designation at any time by filing a newdesignation.  However, designations willonly be effective if signed by the Executive and received by the Bank during theExecutive’s lifetime.  The Executive’sbeneficiary designation shall be deemed automatically revoked if thebeneficiary predeceases the Executive, or if the Executive names a spouse asbeneficiary and the marriage is subsequently dissolved.  If the Executive dies without a validbeneficiary designation, all payments shall be made to the Executive’s estate.

 

4.2       *Facility of Payment*. If a benefit is payable to a minor, to a person declared incompetent, orto a person incapable of handling the disposition of his or her property, theBank may pay such benefit to the guardian, legal representative or personhaving the care or custody of such minor, incompetent person or incapableperson.  The Bank may require proof of incompetence,minority or guardianship as it may deem appropriate prior to distribution ofthe benefit.  Such distribution shallcompletely discharge the Bank from all liability with respect to such benefit.

 

**Article 5**

**General Limitations**

 

5.1       *Termination for Cause*. Notwithstanding any provision of this Agreement to the contrary, theBank shall not pay any benefit under this Agreement if the Bank terminates theExecutive’s employment for:

 

(a)       Gross negligence or gross neglect of duties;

 

(b)       Commission of a felony or of a gross misdemeanor involvingmoral turpitude; or

 

(c)       Fraud, disloyalty, dishonesty or willful violation of any lawor significant Bank policy committed in connection with the Executive’semployment and resulting in an adverse effect on the Bank.

 

5.2       *Suicide or Misstatement*. The Bank shall not pay any benefit under this Agreement if the Executivecommits suicide within three years after the date of this Agreement.  In addition, the Bank shall not pay anybenefit under this Agreement if the Executive has made any material misstatementof fact on an employment application or resume provided to the Bank, or on anyapplication for any benefits provided by the Bank to the Executive.

 

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**Article 6**

**Claims and Review Procedure**

 

6.1       *Claims Procedure*.  Any person or entity (“claimant”) who hasnot received benefits under the Agreement that he or she believes should bepaid shall make a claim for such benefits as follows:

 

6.1.1        *Initiation — Written Claim*.  The claimant initiates a claim by submittingto the Bank a written claim for the benefits.

 

6.1.2        *Timing of Bank Response.*  The Bank shall respond to such claimantwithin 90 days after receiving the claim. If the Bank determines that special circumstances require additionaltime for processing the claim, the Bank can extend the response period by anadditional 90 days by notifying the claimant in writing, prior to the end ofthe initial 90-day period, that an additional period is required.  The notice of extension must set forth thespecial circumstances and the date by which the Bank expects to render itsdecision.

 

6.1.3        *Notice of Decision*.  If the Bank denies part or all of the claim,the Bank shall notify the claimant in writing of such denial.  The Bank shall write the notification in a mannercalculated to be understood by the claimant. The notification shall set forth:

 

(a)       The specific reasons for the denial;

 

(b)       A reference to the specific provisions of the Agreement onwhich the denial is based;

 

(c)       A description of any additional information or materialnecessary for the claimant to perfect the claim and an explanation of why it isneeded;

 

(d)       An explanation of the Agreement’s review procedures and thetime limits applicable to such procedures; and

 

(e)       A statement of the claimant’s right to bring a civil actionunder ERISA Section 502(a) following an adverse benefit determination onreview.

 

6.2       *Review Procedure*.  If the Bank denies part or all of the claim,the claimant shall have the opportunity for a full and fair review by the Bankof the denial, as follows:

 

6.2.1        *Initiation — WrittenRequest*.  To initiate thereview, the claimant, within 60 days after receiving the Bank’s notice ofdenial, must file with the Bank a written request for review.

 

6.2.2        *Additional Submissions — InformationAccess*.  The claimant shallthen have the opportunity to submit written comments, documents, records andother information relating to the claim. The Bank shall also provide the claimant, upon request and free ofcharge, reasonable access to, and copies of, all documents, records and otherinformation relevant (as defined in applicable ERISA regulations) to theclaimant’s claim for benefits.

 

6.2.3        *Considerations on Review*.  In considering the review, the Bank shalltake into account all materials and information the claimant submits relatingto the claim, without regard to whether such information was submitted orconsidered in the initial benefit determination.

 

6.2.4        *Timing of Bank Response*.  The Bank shall respond in writing to suchclaimant within 60 days after receiving the request for review.  If the Bank determines that specialcircumstances require additional time for processing the claim, the Bank canextend the response period by an additional 60 days by notifying the claimantin writing, prior to the end of the initial 60-day period, that an additionalperiod is required.  The notice ofextension must set forth the special circumstances and the date by which theBank expects to render its decision.

 

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6.2.5        *Notice of Decision*.  The Bank shall notify the claimant inwriting of its decision on review.  TheBank shall write the notification in a manner calculated to be understood bythe claimant.  The notification shallset forth:

 

(a)       The specific reasons for the denial;

 

(b)       A reference to the specific provisions of the Agreement onwhich the denial is based;

 

(c)       A statement that the claimant is entitled to receive, uponrequest and free of charge, reasonable access to, and copies of, all documents,records and other information relevant (as defined in applicable ERISAregulations) to the claimant’s claim for benefits; and

 

(d)       A statement of the claimant’s right to bring a civil actionunder ERISA Section 502(a).

 

**Article 7**

**Amendments and Termination**

 

This Agreement may be amended orterminated only by a written agreement signed by the Bank and the Executive.

 

**Article 8**

**Miscellaneous**

 

8.1       *Binding Effect*.  ThisAgreement shall bind the Executive and the Bank, and their beneficiaries,survivors, executors, successors, administrators and transferees.

 

8.2       *No Guarantee of Employment*. This Agreement is not an employment policy or contract.  It does not give the Executive the right toremain an employee of the Bank, nor does it interfere with the Bank’s right todischarge the Executive.  It also doesnot require the Executive to remain an employee nor interfere with theExecutive’s right to terminate employment at any time.

 

8.3*       Non-Transferability*.Benefits under this Agreement cannot be sold, transferred, assigned, pledged,attached or encumbered in any manner.

 

8.4       *Reorganization. *TheBank shall not merge or consolidate into or with another Bank, or reorganize,or sell substantially all of its assets to another Bank, firm, or person unlesssuch succeeding or continuing Bank, firm, or person agrees to assume anddischarge the obligations of the Bank under this Agreement.  Upon the occurrence of such event, the term“Bank” as used in this Agreement shall be deemed to refer to the successor orsurvivor Bank.

 

8.5       *Tax Withholding*.  TheBank shall withhold any taxes that are required to be withheld from thebenefits provided under this Agreement.

 

8.6       *Applicable Law*.  TheAgreement and all rights hereunder shall be governed by the laws of the State ofCalifornia, except to the extent preempted by the laws of the United States ofAmerica.

 

8.7       *Unfunded Arrangement*. The Executive and beneficiary are general unsecured creditors of theBank for the payment of benefits under this Agreement.  The benefits represent the mere promise bythe Bank to pay such benefits.  Therights to benefits are not subject in any manner to anticipation, alienation,sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment bycreditors.  Any insurance on the Executive’slife is a general asset of the Bank to which the Executive and beneficiary haveno preferred or secured claim.

 

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8.8*       EntireAgreement. *This Agreementconstitutes the entire agreement between the Bank and the Executive as to thesubject matter hereof.  No rights aregranted to the Executive by virtue of this Agreement other than thosespecifically set forth herein.

 

8.9       *Administration. *TheBank shall have powers which are necessary to administer this Agreement,including but not limited to:

 

(a)                      Establishing and revising the method ofaccounting for the Agreement;

 

(b)                     Maintaining a record of benefit payments;

 

(c)       Establishing rules and prescribing any forms necessary ordesirable to administer the Agreement; and

 

8.10     *Named Fiduciary.*The Bank shall be the named fiduciary andplan administrator under this Agreement. It may delegate to others certain aspects of the management andoperational responsibilities including the employment of advisors and thedelegation of ministerial duties to qualified individuals.

 

IN WITNESS WHEREOF, theExecutive and the Bank have signed this Agreement.

 
| **EXECUTIVE:**     |   |   | **BANK:**              |      |   |   |   |
|--------------------|--------|--------|------------------------|-----------|--------|--------|--------|
|               |   |   | **HERITAGE OAKS BANK** |      |   |
|               |   |   |                   |      |   |   |   |
|               |   | **By** |                   |      |   |   |
|               |   |   |                   |      |   |
| **Chrissal Sands** |   |   |                   |      |   |   |
|               |   |   |                   | **Title** |   |   |   |
|               |   |   |                   |      |   |   |
|               |   |   |                   |      |   |   |   |
|                    |        |        |                        |           |        |        |        |  |  |

 

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