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                                 EXHIBIT (10.26)


                                    EXECUTIVE


         This Agreement is made and entered into this 1 day of February 1999, by
and between Heritage Oaks Bank, a bank chartered under the laws of the State of
California (the "Employer"), and Margaret Torres, an individual residing in the
State of California (hereinafter referred to as the "Executive").

                                    RECITALS

                  WHEREAS, the Executive is an employee of the Employer and
is serving as its Executive Vice President - Chief Financial Officer.

                  WHEREAS, the Executive's experience and knowledge of the
affairs of the Employer and the banking industry are extensive and valuable;

                  WHEREAS, it is deemed to be in the best interest of the
Employer to provide the Executive with certain salary continuation benefits, on
the terms and conditions set forth herein, in order to reasonably induce the
Executive to remain in the Employer's employment; and

                  WHEREAS, the Executive and the Employer wish to specify in
writing the terms and conditions upon which this additional compensatory
incentive will be provided to the Executive or to the Executive's spouse or the
Executive's designated beneficiaries, as the case may be;

                  NOW, THEREFORE, in consideration of the services to be
performed in the future, as well as the mutual promises and covenants contained
herein, the Executive and the Employer agree as follows:

                                    AGREEMENT

           1.       TERMS AND DEFINITIONS.

                    1.1      ADMINISTRATOR. The Employer shall be the
                             "Administrator" and, solely for the purposes of
                             ERISA, the "Fiduciary" of this Agreement where a
                             fiduciary is required by ERISA.

                    1.2.     ANNUAL BENEFIT. The term "Annual Benefit" shall
                             mean the amount determined by first multiplying the
                             sum of Thirty Thousand Dollars

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                             ($30,000) by the Applicable Percentage (defined
                             below), and by then subtracting from that amount
                             those additional as may be: (1) required under the
                             other provisions of this Agreement, including, but
                             not

         limited to, Paragraphs 5 and 6 hereof; (ii) required by reason of
         lawful order of any regulatory agency or body having jurisdiction over
         the Employer; and (iii) required in order for the Employer to properly
         comply with any and all applicable state and federal laws, including,
         but not limited to income, employment and disability income tax laws
         (e.g., FICA, FUTA, SDI).

1.3      APPLICABLE PERCENTAGE. The term "Applicable Percentage" shall mean that
         percentage listed on Schedule "A" attached hereto which is adjacent to
         the number of complete years (with a "year" being the performance of
         personal services for or on behalf of he Employer for a period of 365
         days) which have elapsed starting from the Effective date of this
         Agreement and ending on the date payments are to first begin under the
         terms of this Agreement. Notwithstanding the foregoing or the
         percentages set forth on Schedule "A", but subject to all other terms
         and conditions set forth herein, the "Applicable Percentage" shall be:
         (i) subject to clause (ii) of this Paragraph 1.3, one hundred percent
         (100%) in the event the Executive dies prior to Retirement as defined
         in subparagraph 1. I I below; and (ii) notwithstanding the subclause
         (i) of this Paragraph 1.3, zero percent (0%) the event the Executive
         takes any action which prevents the Employer from collecting the
         proceeds of any life insurance policy which the Employer may happen to
         own at the time of the Executive's death and of which the Employer is
         the designated beneficiary.

  1.4    BENEFICIARY, Excepting the reference made at the end of Paragraphs 1.3
         and 1. IO hereof, the term "beneficiary" or "designated beneficiary "
         shall mean the person or persons whom the Executive shall designate in
         a Vlid Beneficiary Designation, a copy of which is attached hereto as
         Exhibit "B", to receive the benefits provided hereunder. A Beneficiary
         Designate shall be valid only if it is in the form attached hereto and
         made a part hereof and is received by the Administrator prior to the
         Executive's death.

  1.5    CHANGE IN Control. The term "Change in Control" shall mean, with
         respect to the Employer or any corporation formed to act as a parent
         or holding company of the Employer or its stock: (1) a change in
         control of a nature that would be required to be reported in response
         to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
         Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
         in response to any other form or report to the regulatory agencies or
         governmental authorities having jurisdiction over the Employer or any
         stock exchange on which the Employer's shares are listed which requires
         the reporting of a change in control; (ii) any merger, consolidation or
         reorganization of the any sale lease employer in which the Employer
         does not survive; (iii) any sale, lease, exchange, mortgage, pledge,
         transfer or other disposition (in fair market value of fifty percent
         (50%) of the total value of the

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         assets of the Employer, reflected in the most recent balance sheet
         of the Employer; (iv) a transaction whereby any "person" (as such
         term is used in the Exchange Act or any individual, corporation,
         partnership, trust or any other entity becomes the beneficial owner,
         directly or indirect , or securitie's of the Employer representing
         twenty-five (25%) or more of the combined voting power of the
         Employer's then outstanding securities; or (v) a situation where, in
         any one-year period, individuals who at the beginning of such period
         constitute the Board of Directors of the Employer cease for any
         reason to constitute at least a majority thereof, unless the
         election, or the nomination for election by the Employer's
         shareholders, of each new director is approved by a vote of at least
         three-quarters (3/4) of the directors then still in office who were
         directors at the beginning of the period.

1.6      THE CODE. The "Code" shall mean the Internal Revenue Code of 1986,
         as amended (the "Code").

1.7      DISABILITY/DISABLED. The term "Disability" or "Disabled" shall have the
         same meaning given such term in the principal disability insurance
         policy covering the Executive, which is incorporated herein by
         reference to the limited extent thereof In the event the Executive is
         not covered by a disability policy containing a definition of
         "Disability" or "Disabled," these terms shall mean an illness or
         incapacity which, having continued for a period of one hundred and
         eighty (I 80) consecutive days, thereafter prevents the Executive from
         adequately performing the Executive's regular employment duties. The
         determination of whether the Executive is Disabled shall be made by an
         independent physician selected by mutual agreement of the parties.

1.8      EFFECTIVE DATE.  The term "Effective Date" shall mean the date upon
         which this Agreement was entered into by the parties, as first
         written above.

1.9      ERISA.  The term "ERISA" shall mean the Employee Retirement Income
         I Security Act of 1974, as amended

1.10.    LUMP SUM PAYOUT Amount. The term "Lump Sum Payout Amount" (also
         referred to herein as the "LSPA") shall mean that dollar amount
         determined by: (a) multiplying (i) the "Designated Dollar Amount"
         listed on Schedule "C" corresponding to the year in which an event
         occurs requiring payment of the LSPA to the Executive occurs under
         this Agreement, by (ii) the "LSPA Percentage" listed on Schedule
         corresponding to the year in which the event occurs requiring
         payment of the LSPA to the Executive under this Agreement; and (b)
         reducing this resulting amount as may be: (i) required under the
         other provisions of this Agreement, including, but not limited to
         Paragraph 4.2 (i.e., to take into account any previous Disability
         payment which may have been paid under the terms of this Agreement),
         Paragraph 5 and Paragraph 6 hereof, (ii) required by reason of the
         lawful order of any regulatory agency or body having jurisdiction
         over the Employer; and (iii) required in order for the Employer to
         properly comply with any and all applicable state and federal laws,
         including, but not limited to

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         income, employment and disability income tax laws (e.g., FICA,
         FUTA,- SDI), partnership, trust or any other entity) becomes the
         beneficial owner, directly or indirectly, of securities of the
         Employer representing twenty-five percent (25%) or more of the
         combined voting power of the Employer's then outstanding securities-
         or (v) a situation where, in any one-year period, individuals who at
         the beginning of such period constitute the Board of Directors of
         the Employer cease for any reason to constitute at least a majority
         thereof, unless the election, or the nomination for election by the
         Employer's shareholders, of each new director is approved by a vote
         of at least three quarters (3/4) of the directors then still in
         office who were directors at the beginning of the period.

Notwithstanding the foregoing or the percentages set forth on Schedule "D but
subject to all other terms and conditions set forth herein, the "LSPA
Percentage" shall be zero percent (04b) in the event the Executive takes any
action which. prevents the Employer from collecting the proceeds of any life
insurance policy which the Employer may happen to own at the time of the
Executive's death and of which the Employer is the designated beneficiary.

1.11.    RETIREMENT. The term "Retirement" or "Retires" shall refer to the date
         on which, after the Executive attains sixty (60) years of age, the
         Executive acknowledges in writing to Employer to be the last day he
         will provide any significant personal services, whether as an employee
         or independent consultant or contractor, to Employer or to, for, or on
         behalf of, any other business entity conducting, performing or making
         available to any person or entity banking or other financial services
         of any kind. For purposes of this Agreement, the phrase "significant
         personal services" shall mean more THAN ten (10) hours of personal
         services rendered to one or more individuals or entitles in any thirty
         (30) day period.

1.12     SURVIVING SPOUSE. The term "Surviving Spouse" shall mean the person, if
         who shall be legally married to the Executive on the date of the
         Executive's death.

        1.3    TERMINATION FOR CAUSE. The term "Termination for Cause" shall
               mean termination of the employment of the Executive by reason of
               any of the following:

               (A)A termination "for cause" as this term may be defined in any
               written employment agreement entered into by and between the
               Employer and the Executive;

               (B)The willful breach of duty by the Executive in the course of
               his employment;

               (C)The habitual neglect by the Executive of his employment
               responsibilities and duties;

               (D)The Executive's deliberate violation of any state or federal
               banking or securities laws, or of the Bylaws, rules, policies or
               resolutions of the Employer, or of the rules

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               or regulations of the: (i) The California Institute of Banking
               (ii) Federal Deposit Insurance Corporation; (iii) Securities
               and Exchange Commission; or (iv) any other regulatory agency
               or governmental authority having jurisdiction over the
               Employer;

               (E)The determination by a state or federal banking agency or
               other governmental authority having jurisdiction over the
               Employer that the Executive is not suitable to act in the
               capacity for which she is employed by the Employer;

               (F)The Executive is convicted of any felony or a crime involving
               moral turpitude or a fraudulent or dishonest act; or

               (G)The Executive discloses without authority any secret or
               confidential information not otherwise publicly available
               concerning the Employer or takes any action which the Employer's
               Board of Directors determines, in its sole discretion and subject
               to good faith, fair dealing and reasonableness, constitutes
               unfair competition with or induces any customer to breach any
               contract with the Employer.

2.       SCOPE, PURPOSE AND EFFECT.

         2.1.     CONTRACT OF EMPLOYMENT. Although this Agreement is intended to
                  provide in the employ of the Executive with an additional
                  incentive to remain Employer, this Agreement shall not be
                  deemed to constitute a contract of employment between the
                  Executive and the Employer nor shall any Provision of this
                  Agreement restrict or expand the right of the Employer to
                  terminate the Executive's employment. This Agreement shall
                  have no impact or effect upon any separate written Employment
                  Agreement which the Executive may have with the Employer, it
                  being the parties' intention and agreement that unless this
                  Agreement is specifically referenced in said Employment
                  Agreement (or any modification thereto), this Agreement (and
                  the Employer's obligations hereunder) shall stand separate and
                  apart and shall have no effect upon, nor be affected by, the
                  terms and provisions of said Employment Agreement.

         2.2. FRINGE BENEFIT. The benefits provided by this Agreement are
         granted by the Employer as a fringe benefit to the Executive and are
         not a part of any salary reduction plan or any arrangement deferring a
         bonus or a salary increase. The Executive has no option to take any
         current payments or bonus in lieu of the benefits provided by this
         Agreement.


31       PAYMENTS UPON OR AFTER RETIREMENT.

         3.1.     PAYMENTS UPON RETIREMENT. If the Executive shall remain in the
                  continuous employment of the Employer until attaining sixty
                  (60) of age, the Executive shall be entitled to be paid the
                  Annual Benefit, as defined

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                  above, for a period of fifteen (I 5) years, with each
                  Annual Benefit amount to be paid in twelve (12) equal
                  monthly installments (paid on the first day of each month)
                  beginning with the month following the month in which the
                  Executive Retires or upon such later date as may be
                  mutually agreed upon by the Executive and the Employer in
                  advance of said Retirement date. At the Employer's sole and
                  absolute discretion. the Employer may increase the Annual
                  Benefit as and when the Employer determines the same to be
                  appropriate in order to reflect substantial change in the
                  cost of living. Notwithstanding anything contained herein
                  to the contrary, the Employer shall have no obligation
                  hereunder to make any such cost-of-living adjustment.

         3.2.     PAYMENTS IN THE EVENT, OF DEATH AFTER RETIREMENT. The Employer
                  agrees that if the Executive Retires, but shall die before
                  receiving all of the monthly payments to which he is entitled
                  hereunder, the Employer will continue to make such monthly
                  payments to the Executive's designated beneficiary for the
                  remaining period. If a valid Beneficiary Designation is not in
                  effect, then the remaining amounts due to the Executive under
                  the term of this Agreement shall be paid to the Executive's
                  Surviving spouse. If the Executive leaves no Surviving Spouse,
                  the remaining amounts due to the Executive under the terms of
                  this Agreement shall be paid to the duly qualified personal
                  representative, executor or administrator of the Executive's
                  estate.

4.     PAYMENTS IN THE EVENT DEATH OR DISABILITY OCCURS PRIOR TO RETIREMENT

       4.1.PAYMENTS IN THE EVENT OF DEATH PRIOR TO RETIREMENT. In the event the
       Executive should die while actively employed by the Employer at any time
       after the Effective Date of this Agreement, but prior to attaining sixty
       (66) years of age or if the Executive chooses to work after attaining
       sixty (60) years of age, but dies before Retirement, the Employer agrees
       to pay the Annual Benefit to the Executive's designated beneficiary for a
       period of fifteen (15) years, with each Annual Benefit amount to be paid
       in twelve (12) equal monthly installments (paid on the first day of each
       month), beginning with the month following the month in which the
       Executive's death occurs. If a valid Beneficiary designation is not in
       effect, then the remaining amounts due to the Executive under the terms
       of this Agreement shall be paid to the Executive's Surviving Spouse in
       the same manner. If the Executive leaves no Surviving Spouse, the
       remaining amounts due to the Executive under the terms of this Agreement
       shall be PAID to the duly qualified personal representative, executor or
       administrator of the Executive's estate.

         4.2. PAYMENTS IN THE EVENT OF PERMANENT DISABILITY PRIOR TO RETIREMENT.
         In the event the Executive becomes Disabled while actively employed by
         The Employer at any time after the date of this Agreement but prior to
         Retirement, the Executive shall be entitled to be paid the Annual
         Benefit, as defined above, for a period of fifteen (I 5)years, with
         each Annual Benefit amount to be paid in twelve (12) equal monthly
         installments paid on the first day of each month), beginning with the
         month following

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         the earlier of (1) the month in which the Executive formally retires
         after reaching sixty (60) years of age, or (2) the date upon which
         the Executive is no longer entitled to receive Disability benefits
         under the Executive's principal Disability Insurance policy (or the
         date of the Disability if no Disability policy exists), provided
         that the Executive remains unable to return to and thereafter
         fulfill the responsibilities associated with the employment position
         held with The Employer prior to becoming Disabled by reason of such
         Disability continuing. However, in the event the Executive's
         Disability should cease and Executive is able to return to and
         thereafter fulfill the responsibilities associated with the
         employment position held with the Employer prior to becoming
         Disabled, the Employer's obligation to make additional payments
         under this Paragraph shall be suspended until such time as Executive
         next becomes eligible to receive payments under the terms of this
         Agreement. In the event the Employer's obligation to make additional
         payments under this Paragraph is suspended as aforesaid, and the
         Executive then becomes entitled to receive payments under the terms
         of the Agreement, the aggregate amount paid prior to suspension
         shall be treated, notwithstanding anything contained in this
         Agreement to the contrary, as having satisfied the Employer's
         payment obligations with respect to that number of initial monthly
         payments as is equal to the aggregate amount previously paid out
         under the terms of this Paragraph; provided, however, that the
         Employer promptly begin making the remaining monthly payments
         required under this Agreement to the Executive for as long as such
         payments @Would otherwise be required after proper adjustment has
         been made for the amounts previously paid to the Executive under
         this Paragraph. For example, if the Executive receives $10,000
         during a period of Disability, and the Executive returns to work
         (such that future payments are suspended) and then becomes eligible
         for the Retirement payout option described above (and is entitled to
         receive $10,000 over the first twelve payments under such option),
         the Employer shall be entitled to credit the prior payments as
         having satisfied its obligation to make the first twelve payments
         due to the Executive provided the Employer pays to the Executive, on
         the first day of each successive month following the month in which
         the Retirement occurs (as provided for above), the next monthly
         payment amount required with respect to the payout option selected,
         i.e., in this example, the amount to be paid as the first monthly
         payment under the Retirement option would equal the amount payable
         under the Retirement option for the thirteenth month (with the
         second payment equaling the amount payable with respect to the
         fourteenth month and so on), until such time as the Executive, etc.,
         has received the 168 remaining payments due after making the
         adjustment for payments made prior to suspension. In the event a
         Lump Sum Payment Amount is to be paid under Paragraph 5, the SPA
         shall be reduced as provided for in Paragraph 1. 10 above by the
         aggregate amounts previously distributed to the Executive under the
         terms of this Paragraph.

5. PAYMENTS IN THE EVENT EMPLOYMENT IS TERMINATED PRIOR TO RETIREMENT. As
indicated in Paragraph 2 above, the Employer reserves the right to terminate the
Executive's employment, with or without cause but subject to any written
employment agreement which may then exist, at any time prior to the Executive's
Retirement. In the event that the

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employment of the Executive shall be terminated, other than by reason of
Disability, Death or Retirement, prior to the Executive's attaining sixty
(60) years of age, then this Agreement shall terminate upon the date of such
termination of employment; provided, however, that the Executive shall be
entitled to the following benefits, which shall be paid in lieu of any other
payout options contained herein, depending. upon the circumstances
surrounding the Executive's termination:

           5.1. TERMINATION WITHOUT CAUSE. If the Executive's employment is
           terminated by the Employer without cause, the Executive shall be
           entitled to be paid the Lump Sum Payment Amount, as defined above,
           within ninety (90) days after the effective date of the Executive's
           termination, or upon such later date as may be mutually agreed upon
           by the Executive and the Employer in advance of the effective date of
           the Executive's termination

        5.2. VOLUNTARY TERMINATION BY THE EXECUTIVE. If the Executive's
        employment is voluntarily terminated by the Executive, the Executive
        shall be entitled to be paid the Lump Sum Payment Amount, as defined
        above, within ninety (90) days after the effective date of the
        Executive's termination, or upon such later date as may be mutually
        agreed upon by the Executive and the Employer in advance of the
        effective date of the Executive's termination.

        5.3. TERMINATION FOR CAUSE. The Executive agrees that his employment
        with the Employer is terminated "for cause," as defined in subparagraph
        1. 13 of this Agreement, he forfeit any and all rights and benefits he
        may have under the toughens of this Agreement and shall have no right to
        be paid any of the amounts which would otherwise be due or paid to the
        Executive by the Employer pursuant to the terms of this Agreement.

5.4.     TERMINATION BY THE EMPLOYER ON ACCOUNT OF OR AFTER A CHANGE IN CONTROL.
         In the event: (i) the executive's employment with the Employer is
         terminated by the Employer in conjunction with, or by reason of, a
         "change in control" (as defined in subparagraph 1.5 above); or (ii) by
         reason of the. Employer's actions any adverse and material change
         occurs in the scope of the Executive's position, responsibilities,
         duties, salary, benefits, or location of employment after a "change in
         control" (as defined in subparagraph 1.5) occurs or (iii) the Employer
         causes an event to occur which reasonably constitutes or results in a
         demotion, a significant diminution of responsibilities or authority, or
         a constructive termination by forcing a resignation or otherwise) of
         the Executive's employment after a "change in control." (as defined in
         subparagraph 1.5) occurs, then the Executive shall be entitled to be
         paid the Annual Benefit, as defined above, for a period of fifteen (I
         5) years, with each Annual Benefit amount to be paid in twelve (12)
         equal monthly installments paid on the first day of each month),
         beginning with the month following the month in which the Executive is
         terminated or the action referred to above occurs.

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6.ADDITIONAL LIMITATIONS ON THE AMOUNT OF THE ANNUAL BENEFIT.  The Executive
acknowledges and agrees that the parties have entered into this Agreement based
Upon the certain financial and tax accounting assumptions. Accordingly with full
knowledge of the potential consequences the Executive agrees that,
notwithstanding anything contained herein to the contrary: (i) the amount of the
Annual Benefit or the SPA, as the case may be, shall be Limited to that amount
of the Annual Benefit or the SPA (determined without regard to this Paragraph 6)
which will be deductible by the Employer under the Code in the year in which
payment is to. be made to the Executive; (ii) the Annual Benefit or the SPA
amount shall be deemed to be the last payment made to the Executive and the
first for which an income tax deduction, if any, has been disallowed; and (iii)
any compensatory amounts for which a deductions is denied to the Employer shall,
at the Employer's elections, serve to first reduce the Employer's obligation to
pay the monthly Annual Benefit payments or the SPA to the Executive under the
terms of this Agreement. The Executive recognizes that, in this regard,
limitations on deductibility may be imposed under, but not limited to, Code
Section 280G. Consistent with the foregoing, and in the event that any payment
or benefit received or to be received by the Executive, whether payable pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Employer (together with the Annual Benefit or the SPA, (the "Total
Payments"), will not be deductible (in whole or in part) as a result of Code
Section 280G, the Annual Benefit or the SPA, as the case may be, shall be
reduced until no portion of the Total Payments is nondeductible as a result of
Section 28OG of the Code (or the Annual Benefit or SPA is reduced to zero (0)).
For purposes of this limitation:

(a) No portion of the Total Payments, the receipt or enjoyment of which the
Executive shall have effectively waived in writing prior to the date of payment
of a SPA or any future Annual Benefit payments, shall be taken into account;

(b) No portion of the Total Payments which, in the opinion of the tax counsel
selected by the Employer and acceptable to the Executive, does not constitute a
"parachute payment" within the meaning of Section 28OG of the Code shall be
taken into, account;

(c) Future Annual Benefit payments, or the SPA as the case may be, shall be
reduced--only to the extent necessary so that the Total Payments (other than
those referred to in clauses (a) or above in their entirety) constitute
reasonable compensation for services actually rendered within the meaning of
Section 28OG of the Code, in the opinion of tax counsel refined to in clause (b)
above; and

(d) The value of any noncash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by the Employer's independent
auditor's in accordance with the principles of Section 28OG of the Code.

7. RIGHT TO DETERMINE FUNDING METHODS. The Employer reserves the right to
determine, in its sole and absolute discretion, whether, to what extent and by
what method, if any, to provide for the payment of the amounts which may be
payable to the Executive, the Executive's spouse or the Executive's
beneficiaries under the terms of this Agreement. In the

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event that the Employer elects to fund this Agreement, in whole or in part,
through the use of life insurance or annuities, or both, the Employer shall
determine the ownership and beneficial interests of any such policy of life
insurance or annuity. The Employer further reserves the right, in its sole
and absolute discretion, to terminate any such policy, and any other device
used to fund its obligations under this Agreement, at any lime, in whole or,
in part. Consistent with Paragraph 9 below, neither the Executive, any right,
title or the Executive's spouse nor the beneficiaries shall have any right,
title or interest in or to any funding source or amount utilized by the
Employer pursuant to this Agreement, and any such funding source or amount
shall not constitute a security for the performance of the Employer's
obligations pursuant to this Agreement. In connection with the foregoing, the
Executive agrees to execute such documents and undergo such medical
examinations or tests which the Employer may request and which may be
reasonably necessary to facilitate any funding for this Agreement including,
without limitation, the Employer's acquisition of any policy of insurance or
annuity. Furthermore, a refusal by the Executive to consent to, participate
in and undergo any such medical examinations or tests shall result in the
immediate termination of this Agreement and the immediate forfeiture by the
Executive, the Executive's spouse and the Executive's beneficiaries of any
and all rights to payment hereunder. Notwithstanding anything contained
herein to the contrary, no interest shall accrue or be payable with respect
to any of the amounts payable under the terms of this Agreement.

8. CLAIMS PROCEDURE. The Employer shall, but only to the extent necessary to
comply with ERISA, be designated as the named fiduciary under this Agreement and
shall have authority to control and manage the operation and administration of
this Agreement. Consistent therewith, the Employer shall make all determinations
as to the rights to benefits under this Agreement. Any decision by the Employer
denying a claim by the Executive, the Executive's spouse, or the Executive's
beneficiary for benefits under this Agreement shall be stated in writing and
delivered or mailed, via registered or certified mail, to the Executive, the
Executive's spouse or the Executive's beneficiary, as the case may be. Such
decision shall set forth the specific reasons for the denial of a claim. In
addition, the Employer shall provide the Executive, the Executive's spouse or
the Executive's beneficiary with a reasonable opportunity for a full and fair
review of the decision denying such claim.

9. STATUS AS AN UNSECURED GENERAL CREDITOR. Notwithstanding anything contained
herein to the contrary: (i) neither the Executive, the Executive's spouse or the
Executive's beneficiary shall have any legal or equitable rights, interests or
claims in or to any Specific property or assets of the Employer; (ii) none of
the Employer's assets shall be held in or under any trust for the benefit of the
Executive, the Executive's spouse or the Executive's beneficiaries or held in
any way as security for the fulfillment of the obligations of the Employer under
this Agreement; (iii) all of the Employer's assets shall be and remain the
general unpledged and unrestricted assets of the Employer; (iv) the Employer's
obligation under this Agreement shall be that of an unfunded and unsecured
promise by the Employers to pay money in the future; and (v) the Executive, the
Executive's spouse and the Executive's beneficiaries shall be unsecured general
creditors with respect to any benefits which may be payable under the terms of
this Agreement.

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10.     MISCELLANEOUS.

         10.1 OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL. The Executive
         acknowledges that he has been afforded the opportunity to consult with
         independent counsel of his choosing regarding both the benefits granted
         to him under the terms of this Agreement and the terms and conditions
         which the Executive's right to these benefits. The Executive further
         acknowledges that he has read, understands and consents to all of the
         terms and conditions of this Agreement, and that he enters into this
         Agreement with a full understanding of its terms and conditions.

             10.2. ARBITRATION OF DISPUTES. All claims, disputes and other
             matters in question arising out of or relating to this Agreement or
             the breach or interpretation thereof, other than those matters
             which are to be determined by the Employer in its sole and absolute
             discretion, shall be resolved by. binding arbitration before a
             representative member, selected by the mutual agreement of the
             parties, of the Judicial Arbitration and Mediation Services, Inc.
             ("JAMS"), presently located at I I I Pine Suite, Suite 710, in
             San Francisco, California. In the event JAMS is unable or
             unwilling to conduct the arbitration provided for under THE terms
             of this Paragraph, or has discontinued its business, the parties
             agree that a. representative member, selected by the mutual
             agreement of the parties, of the American. Arbitration Association
             ("AAA"), presently located at 417 Montgomery Street, in San
             Francisco, California, shall conduct the binding Arbitration
             referred to in this Paragraph. Notice of the demand for arbitration
             shall be filed in writing with the other party to this Agreement
             and with JAMS (or AAA, if necessary). In no event shall the demand
             for arbitration be made after the date when institution of legal or
             equitable proceedings based on such claim, dispute or other matter
             in question would be barred by the applicable statute of
             limitations. The arbitration shall be subject to such rules of
             procedure used or established by JAMS, or if there are NONE, the
             rules of procedure used or established by AAA. Any award rendered
             by JAMS or AAA shall be final and binding upon the parties, and as
             applicable, their respective heirs, beneficiaries, legal
             representatives, agents, successors and assigns, and may be entered
             in any court having jurisdiction thereof. The obligation of the
             parties to arbitrate pursuant to this clause shall be specifically
             enforceable in accordance with, and shall be conducted consistently
             with, the provisions of Title 9 of Part 3 of the California Code of
             Civil Procedure. Any arbitration hereunder shall be conducted in
             San Francisco, California, unless otherwise agreed to by the
             parties.

             10.3. Attorneys' FEES. In the event of any arbitration or
             litigation concerning any controversy, claim or dispute between the
             parties hereto, arising out of or relating to this Agreement or the
             breach hereof, or the interpretation hereof, the prevailing party
             shall be entitled to recover from the losing party reasonable
             expenses, Attorney fees and costs incurred or collection of any
             judgement or award rendered therein. The "prevailing party" means
             the party determined by the arbitrator(s) or court, as the

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            case may be, to have most nearly prevailed, even if such party did
            not prevail in all matters, not necessarily the one in whose favor a
            judgment is rendered.

  10.4. NOTICE. Any notice required or permitted of either the Executive or the
  Employer under this Agreement shall be deemed to have been duly given, if by
  personal delivery, upon the date received by the party or its authorized
  representation; if by facsimile, upon transmission to a telephone number
  previously provided by the party to whom the facsimile is transmitted as
  reflected in the records of the party transmitting the facsimile and upon
  reasonable confirmation of such transmission; and if by mail, on the third day
  after mailing via, U.S. first class mail, registered or certified postage
  prepaid and return receipt requested, and addressed to the party at the
  address given below for the receipt of notices, or such changed address as may
  be requested in writing by a party.

  If to the Employer:          Heritage Oaks Bank
                               545 Twelfth Street
                              Paso Robles, CA 93446

         Attn:    Corporate Secretary

  If to the Executive:           Margaret Torres
                           2401 Branch Creek Circle #3
                              Paso Robles, CA 93446


  10.5. ASSIGNMENT. Neither the Executive, the Executive's spouse nor any other
  beneficiary under this Agreement shall have any power or right to transfer,
  assign, anticipate, hypothecate, modify or otherwise encumber any part or all
  of the amounts payable hereunder, nor, prior to payment in accordance with the
  terms of this Agreement, shall any portion of such amounts be: (i) subject to
  seizure by any creditor of any such beneficiary, by a proceeding at law or in
  equity, for the payment of any debts, judgments, alimony or separate
  maintenance obligations which may be owed by the Executive, the Executive's
  spouse, or any designated beneficiary; or (ii) transferable by operation of
  law in the event of bankruptcy, insolvency or otherwise. Any such attempted
  assignment or transfer shall be void and shall terminate this Agreement, and
  the Employer shall thereupon have no further liability hereunder.

  10.6. BINDING EFFECT/MERGER OR REORGANIZATION. This Agreement shall be binding
  upon and inure to the benefit of the Executive and the Employers and, as
  applicable, their respective heirs, beneficiaries, legal representatives
  agents, successors and assigns. Accordingly, the Employer shall not merge or
  consolidate into or with another corporation, or reorganize or sell
  substantially all of its assets to another corporation, firm or person, unless
  and until such succeeding or continuing corporation, firm or person agrees to
  assume and discharge the obligations of the Employer under this Agreement.
  Upon the occurrence of such event, the term "Employer" as used in this
  Agreement shall be deemed to refer to such

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<PAGE>

  surviving or successor firm, person, entity of corporation.


        10.7. NONWAIVER. The failure of either party to enforce at any time or
        for any period of time any one or more of the terms or conditions of
        this Agreement shall not be a waiver of such term(s) or condition(s)
        of that party's right thereafter to enforce each and every term and
        condition of this Agreement.

        10.8.   PARTIAL INVALIDITY. If any term, provision, covenant, or
                condition of this Agreement is determined by an arbitrator or a
                court, as the case maybe, to be invalid, void, or unenforceable,
                such determination shall not render any other term, provision,
                covenant or condition invalid, void or unenforceable, and the
                Agreement shall remain in full force and effect notwithstanding
                such partial invalidity.

      10.9. ENTIRE AGREEMENT. This Agreement supersedes any and all other
      agreements, either oral or in writing, between the parties with respect to
      the subject matter of this Agreement and contains all of the covenants and
      agreements between the parties with respect thereto. Each party to this
      Agreement inducements, promises, or acknowledges that no other
      representations, agreements, oral or otherwise, have been made by any
      party, or anyone acting on behalf of any party, which are not set forth
      herein, and that no other agreement, statement, Or Promise not contained
      in this Agreement shall be valid or binding on either party.



10.10. MODIFICATIONS. Any modification of this Agreement shall be effective only
if it is in writing and signed by each party or such party's authorized
representative.

10.11 PARAGRAPH HEADINGS. The paragraph headings used in this Agreement are
included solely for the convenience of the parties and shall not affect or be
used in connection with the interpretation of this Agreement.


10.12. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.


         10.13. GOVERNING LAW. The laws of the State of California, other than
         those laws denominated choice of law rules, and, where applicable, the
         rules and regulations of the: (i) Office of the California
         Superintendent of Banks; (ii) Federal Deposit Insurance

                                      13

<PAGE>

        Corporation; and (iii) Securities and Exchange Commission shall govern
        the validity, interpretation, construction and effect of this Agreement.

         IN WITNESS WTMREOF, the Employer and the Executive have executed this
         Agreement on the date first above-written in the City of Paso Robles,
         San Luis Obispo County, California.

         THE EMPLOYER:                              THE EXECUTIVE:

         HERITAGE OAKS BANK

         By.

         Dr. R. R. Bryant, Chairman                 Margaret Torres



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