Document:

Unassociated Document

    FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT

    

    

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

    

    RECITALS

    

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

    

    
      	
              F.    

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

            

    

    

    
      	
              G.    

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

            

    

    

    
      	
              H.    

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

            

    

    

    
      	
              I.    

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

            

    

    

    TERMS

    

    In
consideration of the premises and the respective covenants and agreements of the
parties herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:

    

    
      	
              12.    

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

            

    

    

    
      	
               
      

            	
              (c)

            	
              “Cause”
      means:

            

    

    

    
      	
              (i)    

            	
              Executive’s
      failing to perform her duties and obligations as an employee of the
      Company and failing to cure such breach within 15 days following delivery
      to Executive of written notice specifying in reasonable detail the
      failures to perform;

            

    

    
      	
              (ii)    

            	
              Executive’s
      engaging in either grossly negligent conduct or willful misconduct in
      connection with the performance of her duties as an employee of the
      Company;

            

    

    

    
      	
              (iii)    

            	
              The
      conviction of Executive for any crime which constitutes a felony (other
      than a vehicular violation not involving theft or fraud) in the
      jurisdiction in which committed and which involves an act of theft or
      fraud, or the entry by Executive of a plea of guilty or nolo contendre to
      such a felony in any jurisdiction;

            

    

    

    
      	
              (iv)    

            	
              Any
      violation by Executive of her fiduciary duty to the Company which has the
      effect of unlawfully converting for Executive’s own personal benefit, any
      material property or prospect of the
Company;

            

    

    

    
      	
              (v)    

            	
              The
      repeated consumption of alcohol or drugs in a manner that materially
      impairs Executive abilities to perform her duties under this
      Agreement;

            

    

    

    
      	
              (vi)    

            	
              Executive’s
      personal dishonesty;

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
              (vii)    

            	
              Executive engages, or is
      alleged to have engaged, in activity which, in the opinion of the Board or
      the Bank’s Chief Executive Officer, could materially adversely affect the
      Bank’s reputation in the community or which evidences the lack of
      Executive’s fitness or ability to perform Executive’s duties as determined
      by the Board or the Bank’s Chief Executive Officer, as the case may be, in
      good faith, after Executive has been given written warning specifically
      advising her that she has engaged in such activity, and after Executive
      has been given a reasonable time period (not to exceed 15 days) after such
      warning to provide assurance to the Board or the Bank of her continuing
      fitness and ability to perform her duties;
  or

            

    

    

    
      	
              (viii)  

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

            

    

    

    
      	
              13.    

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

            

    

    

    
      	
               
      

            	
              (e)

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

            

    

    

    
      	
              (i)    

            	
              If
      the Company, without the prior written consent of Executive, reduces, by
      more than ten percent (10%), Executive’s base salary or any bonus
      compensation applicable to her as in effect prior to such reduction other
      than as part of a Company-wide reduction in compensation expenses that
      similarly affects all other senior members of management at and above
      Executive’s pay grade or as required by the United States Department of
      Treasury for the purpose of compliance with the restrictions on executive
      compensation as set forth by the CPP as authorized under the TARP, and
      those laws and/or amendments thereto that modify the terms
      thereof;

            

    

    

    
      	
              (ii)    

            	
              If
      the Company, without the prior written consent of Funari, deprives Funari
      of the title of Executive Vice President of Heritage Oaks Bank and
      President of Business First Bank, a division of Heritage Oaks Bank or
      materially diminishes the authority delegated to Funari in her capacity as
      a member of the Executive Committee of Heritage Oaks Bank and as President
      of Business First Bank, a division of Heritage Oaks
  Bank;

            

    

    

    
      	
              (iii)    

            	
              If
      the Company, without the prior written consent of Funari, requires Funari
      to relocate her principal place of business outside of Santa Barbara
      County;

            

    

    

    
      	
              (iv)    

            	
              A  failure
      by the Company to maintain any of the benefits and perks to which Funari
      was entitled at a level substantially equal to or greater than the value
      of those benefits and perks in effect immediately prior to such change in
      benefits or perks; or the taking of any action by the Company which would
      materially affect Funari’s participation in or reduce Funari’s benefits
      under any such benefits or ‘perks’ plans, programs or policies, or deprive
      Funari of any material fringe benefits enjoyed by her immediately prior to
      any such action;

            

    

    

    
      	
              (v)    

            	
              Any
      purported Termination of Funari’s employment by the Company other than
      those effected in good faith pursuant to Sections 7(a) and 7(b) of the
      Agreement;

            

    

    

    
      	
              (vi)    

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

            

    

    

    
      	
              (vii)    

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

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
              14.    

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

            

    

     

    (c)

    
    

    
      	
               
      

            	
              (iv)

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

            

    

    

    
      	
              15.    

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

            

    

    

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

    

    
      	
               
      

            	
              (i)

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

            

    

    

    
      	
               
      

            	
              (ii)

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

            

    

    

    
      	
               
      

            	
              (iii)

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

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
               
      

            	
              (iv)

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

            

    

    

    
      	
              16.    

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

            

    

    

    
      	
              17.    

            	
              This
      First Amendment may be entered into in one or more counterparts, all of
      which shall be considered one and the same instrument, and it shall become
      effective when one or more counterparts have been signed by each of the
      Parties and delivered to the other Parties, it being understood that all
      Parties need not sign the same
counterpart.

            

    

    

    
      	
              18.    

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

            

    

    

    
      	
              19.    

            	
              This
      First Amendment shall be governed by and construed in accordance with the
      laws of the State of California.

            

    

    

    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.

     

    
      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	ATTEST: 	 	 	HERITAGE
      OAKS BANK	 
	
                                        /s/
      Joni Watson

                                      	 	 	/s/
      Ron Oliveira	 
	
                                         

                                      	 	 	Its:	
                                        EVP
      and COO

                                      	 

                              

                            

                          

                        

                      

                    

                  

                  
                    
                      
                        	
                                 

                              	 	 	Print
      name:	
                                Ron
      Oliveira

                              	 

                      

                    

                  

                   

                   

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

                                                      	 	 	Joanne
      FunariUnassociated Document

     

    FIRST AMENDMENT TO
NON-COMPETE, NON-SOLICITATION AGREEMENT

    

    

    This
First Amendment to the Non-Compete, Non-Solicitation Agreement (the “First
Amendment”) is made and is effective as of August 26, 2009, by and between
Joanne Funari (“Funari”) and Heritage Oaks Bancorp (“Bancorp”), a California
corporation and registered bank holding company of its wholly-owned subsidiary,
Heritage Oaks Bank (“Bank”).  Bancorp, Bank and any other division of
either Bancorp or the Bank shall be referred to herein as the
“Company.”

    

    RECITALS

    

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

    

    
      	
              A.    

            	
              Funari
      is currently employed by the Bank as the Executive Vice President of the
      Bank and the President of Business First Bank, a division of the Bank,
      pursuant to that certain Employment Agreement dated as of May 29, 2007 by
      and between the Bank and the Funari (the “Employment
      Agreement”).

            

    

    

    
      	
              B.    

            	
              Bancorp
      and Funari are parties to that certain Non-Compete, Non-Solicitation
      Agreement dated as of May 29, 2007 (the
  “Agreement”).

            

    

    

    
      	
              C.    

            	
              Funari
      has requested certain changes to the Agreement that the Company is willing
      to make on the terms and conditions set forth
  herein.

            

    

    

    
      	
              D.    

            	
              The
      Parties desire to amend the terms of the Agreement in the manner as set
      forth herein.

            

    

    

    

    TERMS

    

    In
consideration of the premises and the respective covenants and agreements of the
parties herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:

    

    
      	
              20.    

            	
              Section
      1(g) will be added to the Agreement and shall read as
    follows:

            

    

    

    (g) Termination Other Than For
Cause. Funari shall be
released from the covenant in Section 1(a), above, and such covenant shall be of
no further force or effect, if the Company terminates Funari’s employment other
than for “Cause.”  For this purpose, the term “Cause” means (i)
Funari’s failing to perform her duties and obligations as an employee of the
Company and failing to cure such breach within 15 days following delivery to
Funari of written notice specifying in reasonable detail the failures to
perform; (ii) Funari’s engaging in either grossly negligent conduct or willful
misconduct in connection with the performance of her duties as an employee of
the Company; (iii) the conviction of Funari for any crime which constitutes a
felony (other than a vehicular violation not involving theft or fraud) in the
jurisdiction in which committed and which involves an act of theft or fraud, or
the entry by Funari of a plea of guilty or nolo contendre to such a felony in
any jurisdiction; (iv) any violation by Funari of her fiduciary duty to the
Company which has the effect of unlawfully converting for Funari’s own personal
benefit, any material property or prospect of the Company;  (v) the
repeated consumption of alcohol or drugs in a manner that materially impairs
Funari’s abilities to perform her duties under this Agreement; (vi) Executive’s
personal dishonesty; (vii) Executive engages, or is alleged to have engaged, in
activity which, in the opinion of the Board or the Bank’s Chief Executive
Officer, could materially adversely affect the Bank’s reputation in the
community or which evidences the lack of Funari’s fitness or ability to perform
Funari’s duties as determined by the Board or the Bank’s Chief Executive
Officer, as the case may be, in good faith, after Funari has been given written
warning specifically advising her that she has engaged in such activity, and
after Funari has been given a reasonable time period (not to exceed 15 days)
after such warning to provide assurance to the Board or the Bank of her
continuing fitness and ability to perform her duties; or (vii) Funari’s material
breach of any provision of this Agreement.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
              21.    

            	
              Section
      1(h) will be added to the Agreement and shall read as
    follows:

            

    

    

    Resignation for Good
Reason.    Funari shall be released from the covenant
in Section 1(a), above, and such covenant shall be of no further force or
effect, if (a) Funari delivers to the Company written notice specifying in
reasonable detail, the circumstances constituting “Good Reason” and confirming
her intent to resign for “Good Reason,” (b) the Company fails to correct the
circumstances constituting “Good Reason” within fourteen (14) days following the
delivery of the notice, and (c) Funari thereafter resigns within seven (7) days
following expiration of that 14-day period.  For this purpose, the
term “Good Reason” means and shall exist only if the Company, without prior
written consent of Funari, (i) reduces, by more than ten percent (10%), Funari’s
base salary or any bonus compensation applicable to her as in effect prior to
such reduction other than as part of a Company-wide reduction in compensation
expenses that similarly affects all other senior members of management at and
above Funari’s pay grade or as required by the United States Department of
Treasury for the purpose of compliance with the restrictions on executive
compensation as set forth by the Capital Purchase Program as authorized under
the Troubled Asset Relief Program, and those laws and/or amendments thereto that
modify the terms thereof, (ii) deprives Funari of the title of Executive Vice
President of Heritage Oaks Bank and President of Business First Bank, a division
of Heritage Oaks Bank or materially diminishes the authority delegated to Funari
in her capacity as a member of the Executive Committee of Heritage Oaks Bank and
as President of Business First Bank, a division of Heritage Oaks Bank, (iii)
requires Funari to relocate her principal place of business outside of Santa
Barbara County,(iv) a failure by the Company to maintain any of the Executive
benefits and perks to which Funari was entitled at a level substantially equal
to or greater than the value of those benefits and perks in effect immediately
prior to such change in benefits or perks; or the taking of any action by the
Company which would materially affect Funari’s participation in or reduce
Funari’s benefits under any such benefits or ‘perks’ plans, programs or
policies, or deprive Funari of any material fringe benefits enjoyed by her
immediately prior to any such action, (v) any purported Termination of Funari’s
employment by the Company other than those effected in good faith pursuant to
Sections 7(a) and 7(b) of the Employment Agreement, (vi) the failure of the
Company to obtain the assumption of the Employment Agreement by any successor or
(vii) receipt by Funari of a Notice of Non-Renewal per the Employment
Agreement.

    

    
      	
              22.    

            	
              The
      following paragraph will be added to Section 3 of the
      Agreement:

            

    

    

    The
term of this Agreement shall expire on May 29, 2012, the fifth (5th) annual
anniversary of the date on which the Company acquired Business First National
Bank, which was May 29, 2007.

    

    
      	
              23.    

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

            

    

    

    
      	
              24.    

            	
              This
      First Amendment may be entered into in one or more counterparts, all of
      which shall be considered one and the same instrument, and it shall become
      effective when one or more counterparts have been signed by each of the
      Parties and delivered to the other Parties, it being understood that all
      Parties need not sign the same
counterpart.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    
      	
              25.    

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

            

    

    

    
      	
              26.    

            	
              This
      First Amendment shall be governed by and construed in accordance with the
      laws of the State of California.

            

    

    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.

    

    

    
      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	ATTEST: 	 	 	HERITAGE
      OAKS BANK	 
	
                                        /s/
      Lorraine R. Williams    
      

                                      	 	 	/s/
      Lawrence P Ward	 
	
                                         

                                      	 	 	Its:	
                                        President
      and CEO

                                      	 

                              

                            

                          

                        

                      

                    

                  

                  
                    
                      
                        	
                                 

                              	 	 	Print
      name:	
                                Lawrence
      P Ward

                              	 

                      

                    

                  

                  
                     

                     

                     

                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	ATTEST: 	 	 	HERITAGE
      OAKS BANK	 
	
                                                      /s/
      Lorraine R. Williams    
      

                                                    	 	 	/s/
      Lawrence P Ward	 
	
                                                       

                                                    	 	 	Its:	
                                                      President
      and CEO

                                                    	 

                                            

                                          

                                        

                                      

                                    

                                  

                                

                                
                                  
                                    
                                      	
                                               

                                            	 	 	Print
      name:	
                                              Lawrence
      P Ward

                                            	 

                                    

                                  

                                

                                 

                              

                            

                          

                        

                      

                    

                  

                   

                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                	 	 	 	THE
      EXECUTIVE	 
	 	 	 	 	 	 
	      
                                                        /s/
      Lorraine R. Williams    
      

                                                      	 	 	/s/
      Joanne Funari	 
	
                                                        Witness

                                                      	 	 	Joanne
      Funari

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