**Exhibit 10.39**

 

February 1, 2004

 

Employment Agreement betweenHeritage Oaks Bank and Lawrence P. Ward

 

1.               Three year agreement calling forcontinued employment as President and CEO of Heritage Oaks Bank and HeritageOaks Bancorp through 1-31-2007.  This agreementwill automatically renew each year from the anniversary date unless eitherparty gives written notice to the contrary no less than 60 days from theAnniversary date.

 

2.               Annual base salary for year 2004,$230,000.00.  Bonus for 2003 to be paidin 2004 is $102,500.

 

3.               Continued participation in theperformance based bonus plan, approved annually by the Board of Directors.

 

4.               Continued participation in the banksponsored 401-K plan.

 

5.               Continued participation in the executivesalary continuation plan, which was established in 1994 and as increased inyear 2001.

 

6.               Payment of life insurance policypremiums of $121.90 per month on $100,000. Policy as is currently being done.

 

7.               Auto to be provided by the bank withbank covering all associated costs to operate. In the event of a change of control, see auto section as outlined in #9below.

 

8.               Continued participation in any othercompensation program established by the bank or its parent holding company thatis offered to any other employee of the organization.

 

9.               The Board may terminate this agreementat any time with or without cause, provided that if terminated without cause,Mr. Ward would be entitled to severance pay equal to one year annual basesalary in effect at the date of termination, plus an additional amountsufficient to pay for insurance coverage and automobile expenses for a periodof one year.  In the event oftermination during or after a merger or change in control, Mr. Ward would beentitled to severance pay equal to two years base salary in effect at the dateof termination, plus an additional amount sufficient to pay for insurancecoverage for a period of one year from the date of termination, and the autoprovided by the bank to Mr. Ward be transferred into his name at the time oftermination.  The sales tax calculationfor the transfer of the auto would be based on the depreciated value of theauto as it then appears on the bank’s books. In the event of a change of control where Mr. Ward is offered subsequentemployment, Mr. Ward would be entitled to severance pay equal to 2 years annualbase salary if he is terminated or quits for good cause.  Events that are considered good causeinclude but are not limited to, reduction in title, compensation, demotion,expanded traveling, etc.

 

10.         Grant an additional 20,000 shares of HeritageOaks Bancorp stock options out of the 1997 stock option plan with a strikeprice based on the current market price on the date of grant.

 

 
| Approved by  the Board of Directors | Accepted         |
|-------------------------------------|------------------|
|                                |             |
| By:                                 |             |   | By: |   |   |
|                                | Dr. B. R. Bryant | Lawrence P.  Ward |
|                                | Chairman         |   | President, CEO |
| Date                                |             |   | Date |   |   |
|                                     |                  |  |  |  |  |  |  |  |

 

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