Document:

Exhibit
10.35

 

AMENDMENT NO.
1 TO

NOTE PURCHASE AGREEMENTS

 

THIS
AMENDMENT NO. 1, dated as of October 10, 2003 (this “Amendment”), is entered into among WILLIS LEASE FINANCE CORPORATION, a
Delaware corporation, as Servicer under the Note Purchase Agreements referred
to below (the “Servicer”), WILLIS ENGINE FUNDING LLC, a Delaware
limited liability company (the “Issuer”),
SHEFFIELD RECEIVABLES CORPORATION,
as Subclass A-1 Note Purchaser (the “Subclass
A-1 Note Purchaser”) and Subclass A-2 Note Purchaser (the “Subclass A-2 Note Purchaser”), FORTIS BANK (NEDERLAND) N.V., as a Subclass
B-1 Note Purchaser  (a “Subclass B-1 Note Purchaser”) and BARCLAYS BANK PLC, as a Subclass B-1 Note
Purchaser (a “Subclass B-1 Note Purchaser”),
Subclass B-2 Note Purchaser (the “Subclass
B-2 Note Purchaser”; the Subclass B-2 Note Purchaser, together
with the Subclass A-1 Note Purchaser, the Subclass A-2 Note Purchasers and the
Subclass B-1 Note Purchaser, are sometimes referred to herein as the “Note Purchasers”), and as Purchaser’s
Agent for the Note Purchasers (in such capacities, the “Purchaser’s Agent”), and amends:

 

(a)                                  the
Amended and Restated Subclass A-1 Note Purchase Agreement dated as of December
13, 2002 (as amended, restated, supplemented or otherwise modified from time to
time, the “Subclass A-1 Note Purchase
Agreement”) among the Issuer, the Servicer, the Subclass A-1
Note Purchaser and the Purchaser’s Agent;

 

(b)                                 the
Amended and Restated Subclass B-1 Note Purchase Agreement dated as of December
13, 2002 (as amended, restated, supplemented or otherwise modified from time to
time, the “Subclass B-1 Note Purchase
Agreement”) among the Issuer, the Servicer, the Subclass B-1
Note Purchasers and the Purchaser’s Agent;

 

(c)                                  the
Subclass A-2 Note Purchase Agreement dated as of December 13, 2002 (as amended,
restated, supplemented or otherwise modified from time to time, the “Subclass A-2 Note Purchase Agreement”)
among the Issuer, the Servicer, the Subclass A-2 Note Purchaser and the
Purchaser’s Agent; and

 

(d)                                 the
Subclass B-2 Note Purchase Agreement dated as of December 13, 2002 (as amended,
restated, supplemented or otherwise modified from time to time, the “Subclass B-2 Note Purchase Agreement”;
and, together with the Subclass A-1 Note Purchase Agreement, the Subclass B-1
Note Purchase Agreement and the Subclass A-2 Note Purchase Agreement, the “Note Purchase Agreements”) among the
Issuer, the Servicer, the Subclass B-2 Note Purchaser and the Purchaser’s
Agent.

 

In consideration of the mutual agreements herein contained and other
good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:

 

 

Section
1.                                          Definitions.  Terms defined in the Note
Purchase Agreements (or the Indenture referred to therein) and not otherwise
defined herein are used herein as therein defined.

 

Section 2.                                          Amendment to
the Subclass A-1 Note Purchase Agreement. 
(a)  The definition of “Commitment
Termination Date” set forth in Section 1.01 of the Subclass A-1 Note
Purchase Agreement hereby is amended and restated in its entirety as follows:

 

“Commitment
Termination Date” means September 9, 2004.

 

(b)                                 The last sentence
of Section 2.03(b) of the Subclass A-1 Note Purchase Agreement hereby is
amended and restated in its entirety as follows:

 

“It
shall be a condition to the extension of the Commitment Termination Date that
the commitment under the Subclass B-1 Note Purchase Agreement be extended to
the same date.”

 

Section 3.                                          Amendment to
the Subclass B-1 Note Purchase Agreement. 
The definition of “Commitment Termination Date” set forth in
Section 1.01 of the Subclass B-1 Note Purchase Agreement hereby is amended and
restated in its entirety as follows:

 

“Commitment
Termination Date” means September 9, 2004.

 

Section 4.                                          Amendment to
the Subclass A-2 Note Purchase Agreement. 
The definition of “Commitment Termination Date” set forth in
Section 1.01 of the Subclass A-2 Note Purchase Agreement hereby is amended and
restated in its entirety as follows:

 

“Commitment
Termination Date” means September 9, 2004.

 

Section 5.                                          Amendment to
the Subclass B-2 Note Purchase Agreement. 
The definition of “Commitment Termination Date” set forth in
Section 1.01 of the Subclass B-2 Note Purchase Agreement hereby is amended and
restated in its entirety as follows:

 

“Commitment
Termination Date” means September 9, 2004.

 

Section
6.                                          Representations
and Warranties.  To
induce the Purchaser’s Agent and the Note Purchasers to enter into this
Amendment, the Issuer represents and warrants to the Purchaser’s Agent and the
Note Purchasers that:

 

(a)                                  Representations
and Warranties in Related Documents. 
Each of the representations and warranties of the Issuer contained in
the Related Documents to which it is a party (i) were true and correct
when made and (ii) after giving effect to this Amendment, continue to be
true and correct in all material respects on the date hereof (except to the
extent that such representations and warranties relate expressly to an earlier
date).

 

(b)                                 Authority.  The execution and delivery by the Issuer of
this Amendment and the performance by the Issuer of its obligations under this
Amendment (i) are within

 

2

 

its power and authority,
(ii) have been duly authorized by all necessary proceedings, (iii) do
not and will not conflict with or result in any breach or contravention or any
provision of law, statute, rule or regulation to which the Issuer is subject or
any judgment, order, writ, injunction, license or permit applicable to the
Issuer so as to materially adversely affect the assets, business or any
activity of the Issuer, (iv) do not conflict with any provision of the
certificate of formation or operating agreement of the Issuer or any material
agreement or other instrument binding upon the Issuer and (v) do not and
will not require any waivers, consents or approvals which has not been
obtained.

 

(c)                                  Enforceability.  This Amendment and the Note Purchase
Agreements, as amended hereby, constitute the legal, valid and binding
obligations of the Issuer, enforceable against the Issuer in accordance with
their respective terms, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors’ rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.

 

(d)                                 No
Early Amortization Event.  After
giving effect to this Amendment, no Early Amortization Event has occurred and
is continuing.

 

Section
7.                                          Conditions
to Effectiveness.  This
Amendment shall become effective on the date when the following conditions
precedent have been satisfied (such date the “Amendment Effective Date”):

 

(a)                                  The
Purchaser’s Agent, each Note Purchaser, the Servicer and the Issuer shall have
delivered to the Purchaser’s Agent an executed counterpart of this Amendment.

 

(b)                                 The
Base Indenture shall have been amended in form, scope and substance satisfactory
to the Issuer, the Indenture Trustee, the Noteholders and the Control Parties;
the Purchaser’s Agent shall have received executed counterparts thereto from
the Issuer, the Indenture Trustee, the Noteholders and the Control Parties; and
all conditions precedent to the effectiveness of such amendment shall have been
satisfied other than the effectiveness of this Amendment.

 

(c)                                  The
representations and warranties set forth in Section 6 hereof shall be true and
correct in all material respects on the date hereof and on the Amendment
Effective Date.

 

Section
8.                                          Reference to
and Effect on Note Purchase Agreements.

 

(a)                                  Upon
the effectiveness of this Amendment, each reference in any Note Purchase
Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import,
and each reference in the other Related Documents to any Note Purchase
Agreement, shall mean and be a reference to the Note Purchase Agreements as
amended hereby.

 

3

 

(b)                                 Except
as expressly set forth herein, this Amendment shall not by implication or
otherwise limit, impair, constitute a waiver of, or otherwise affect the rights
and remedies of the Indenture Trustee, the Purchaser’s Agent or any Note
Purchaser under the Related Documents, and shall not alter, modify, amend or in
any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Related Documents, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.

 

(c)                                  Nothing
herein shall be deemed to entitle the Issuer to a waiver, amendment,
modification or other change of any of the terms, conditions, obligations,
covenants or agreements contained in the Related Documents in similar or
difference circumstances.

 

(d)                                 This
Amendment shall be a Related Document for all purposes.

 

Section
9.                                          Benefits of
Amendment.  The terms and
provisions of this Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns to the extent
contemplated by the Related Documents.

 

Section
10.                                   Interpretation.  The Section headings used in this Amendment
are for convenience of reference only and shall not affect the construction
hereof.

 

Section
11.                                   Execution in
Counterparts.  This
Amendment may be executed in any number of counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same Amendment.  Faxed signatures of
this Amendment shall be binding for all purposes.

 

Section
12.                                   Severability.  If any provision of this Amendment shall be
held to be invalid, illegal or unenforceable under applicable law in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity, illegality or unenforceability, which shall not affect any other
provisions hereof or the validity, legality and enforceability of such
provision in any other jurisdiction.

 

Section
13.                                   Governing
Law.  THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN NEW YORK.  THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS CONSENT SHALL BE TRIED AND
LITIGATED ONLY IN A FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, STATE OF
NEW YORK.  EACH OF THE PARTIES HERETO
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.  THE PARTIES HERETO HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS CONSENT OR ANY OF THE

 

4

 

TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS.  EACH OF THE PARTIES
HERETO REPRESENTS THAT IT HAS REVIEWED THIS CONSENT AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.  IN THE EVENT OF LITIGATION, A
COPY OF THIS CONSENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

Section 14.                                   Entire Agreement.  This Amendment together with all other
instruments, agreements, and certificates executed by the parties in connection
herewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supercede all prior agreements, understandings,
and inducements, whether express or implied, oral or written.

 

[signature pages
follow]

 

5

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first set forth above.

 

	
   

  	
  WILLIS LEASE FINANCE CORPORATION,

  a Delaware corporation,

  as Servicer

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DONALD A. NUNEMAKER

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Donald A. Nunemaker

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  	
   

  
	
   

  	
   

  	
   

  	
  Chief Operating Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WILLIS ENGINE FUNDING LLC,

  a Delaware limited liability company,

  as Issuer

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DONALD A. NUNEMAKER

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Donald A. Nunemaker

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

 

	
   

  	
  SHEFFIELD RECEIVABLES CORPORATION,

  as Subclass A-1 Note Purchaser and Subclass A-2

  Note Purchaser

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Barclays Bank PLC, as Attorney in Fact

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID LISTER

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David Lister

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BARCLAYS BANK PLC,

  as a Subclass B-1 Note Purchaser, Subclass B-2 Note

  Purchaser and the Purchaser’s Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ PIERRE DULEYRIE

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Pierre Duleyrie

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  
						

 

 

	
   

  	
  FORTIS BANK (NEDERLAND) N.V.,

  as a Subclass B-1 Note Purchaser

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ M. H. SCHIPPER

  	
   

  
	
   

  	
   

  	
  Name:

  	
  M. H. Schipper

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ WIJNAND TUTUARIMA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wijnand Tutuarima

  	
   

  
	
   

  	
   

  	
  Title:EXHIBIT
10.37

 

EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

NOW, THEREFORE, in order to effect the
foregoing, the parties hereto wish to enter into an employment agreement on the
terms and conditions set forth below. 
Accordingly, in consideration of the promises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:

 

(1)                                  Definitions.

 

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

 

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

 

(c) “Cause” means:

 

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

 

(2) Executive engages in illegal activity which materially adversely
affects Hacienda’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 of Directors in good faith; or

 

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

 

 

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

 

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

 

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

 

(iii)                               the individuals who were
members of the Board of Directors of HOB immediately prior to a meeting of the
shareholders of HOB, which meeting involves a contest for the election of
directors, do not constitute a majority of the Board of Directors of HOB
following such meeting or election;

 

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

 

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

 

In no event will (i) any of the transactions contemplated by the Merger
nor (ii) any merger of Hacienda with and into a subsidiary of HOB, be deemed to
constitute a Change in Control of HOB.

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

(i)                                     Retirement
by Executive;

 

(ii)                                  Death
of Executive;

 

(iii)                               Disability;

 

(iv)                              Expiration;

 

(v)                                 Resignation
for Good Reason;

 

(vi)                              Resignation
other than Resignation for Good Reason;

 

(vii)                           Termination
Without Cause; and

 

(viii)                        Termination
for Cause.

 

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

 

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

 

(ii)                                  Termination
for Cause;

 

(iii)                               Retirement;

 

(iv)                              Disability;

 

(v)                                 Death;
or

 

(vi)                              Expiration.

 

2.                                       At-Will
Employment.  It is agreed by the
parties hereto that the Executive’s employment by Hacienda hereunder shall be
at-will, and that, subject to Executive’s rights under this Agreement, Hacienda
may at any time elect to terminate this Agreement and Executive’s employment by
Hacienda for any reason by action of its Board.

 

3

 

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

 

4.                                       Term
of Agreement. Subject to the terms and provisions of this Agreement, this
Agreement and the period of Executive’s employment, shall be deemed to have
commenced as of the effective time of the Merger, and shall continue until
12:00 midnight January 31, 2005, unless sooner terminated.  The initial term shall automatically be
extended for an additional one (1) full additional year without further action
by the parties on January 31, 2005, and on each succeeding January 31st
thereafter.  Hacienda or Executive, may
stop an automatic one year extension, however, by serving written notice
(“Notice of Non-Renewal”) upon the other party within 60 calendar days prior to
January 31, 2005, or within 60 calendar days prior to January 31 of any
succeeding year, as the case may be, of such party’s intention that this
Agreement shall expire at the end of such Term.  In the event Hacienda retains Executive as an employee following
the Non-Renewal and expiration of the Term, such employment, absent a written
agreement to the contrary, will be on an at-will basis with such compensation
and upon such terms as the parties may then agree, subject to termination at
any time with or without cause, and without liability.  If Hacienda does not retain Executive as an
employee after the Non-Renewal and Expiration of the Term, Executive’s
employment shall cease without further liability of the parties to each other.
Executive’s employment shall also terminate, and the Term of this Agreement will
expire, upon Executive’s resignation (unless resignation is for Good Reason
after a Change in Control), retirement, death or Disability, or upon
Executive’s Termination for Cause.

 

5.                                       Full
Time, Exclusive Employment.  During
the Term hereof, Executive shall devote exclusively all of his business time,
attention, skill and efforts to the faithful performance of the business of
Hacienda to the fullest extent necessary to properly discharge his duties and
responsibilities hereunder and consistent with the highest and best standards
of the banking industry and in compliance with all applicable laws, regulations
and rules as well as Hacienda’s Articles of Incorporation and Bylaws.  Further, with the approval of the Board,
from time to time, Executive may serve, or continue to serve, on the boards of
directors of, and hold any other offices or positions in, companies or
charitable, political or civic organizations, which, in such Board’s judgment,
will not present any material conflict of interest with Hacienda and will not
unfavorably affect the performance of Executive’s duties pursuant to this
Agreement.

 

6.                                       Compensation.

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

(f)   Expenses.   During
the period of the Executive’s employment hereunder, the Executive shall be
entitled to receive prompt reimbursement for all reasonable and customary
expenses incurred by the Executive in performing services hereunder in
accordance with the general policies and procedures established by Hacienda.

 

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

 

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

 

(i)   Life Insurance.   Assuming
that Executive qualifies insurable, Hacienda will provide Executive with a term
life insurance policy of $100,000 payable to a beneficiary to be designated by
Executive.  

 

(j)   401k.   Executive shall be
entitled to participate in a Hacienda sponsored 401k plan, or if there is no
such plan, then in a company-wide 401k plan sponsored by HOB.

 

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

 

5

 

7.                                       Termination.

 

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

 

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

 

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

 

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

 

(e)   Resignation for Good Reason.   Following
a Change in Control during the Term hereof, Executive may, under the following
circumstances, regard Executive’s employment as being constructively terminated
by Hacienda (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)                                     Without
Executive’s express written consent, the assignment to Executive of any duties
materially inconsistent with Executive’s position, duties, responsibilities and
status with Hacienda immediately prior to the Change in Control, or any
subsequent removal of Executive from or any failure to re-elect him to any such
position;

 

(ii)                                  Without Executive’s
express written consent, the termination and/or material reduction in
Executive’s facilities (including office space and general location) and staff
reporting and available to Executive immediately prior to the Change in
Control;

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

8.                                       Payments
to Executive Upon Termination.

 

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

 

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

 

(c) Termination for Cause. 
In the event Executive is Terminated for Cause, Hacienda shall have no
further obligations to Executive under this Agreement or otherwise, except as
may be expressly required by law.

 

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

 

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

 

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

 

8

 

The parties agree that the
provisions of such severance benefits shall constitute full and complete
performance by Hacienda and HOB of any obligations hereunder and under all
prior change in control agreements.

 

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

 

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

 

(i) Consistent Returns. 
Hacienda and Executive agree that the payments being made under this
Agreement represent reasonable compensation for services and that neither
Hacienda nor Executive will file any returns or reports which take a contrary
position.

 

(j) Reduction of Payment. 
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
Hacienda 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 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 Hacienda’s
independent auditors or if such firm is no longer providing tax services to
Hacienda to such other tax advisor as shall be mutually acceptable to Hacienda
and Executive, and such determination shall be conclusive and binding on
Hacienda and Executive with respect to the treatment of the payment for tax
reporting purposes.

 

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

 

9.                                       Confidentiality
and Trade Secrets.

 

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

 

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

 

9

 

(c) Return of Documents. 
Executive expressly agrees that all manuals, documents, files, reports,
studies, instruments, software, computer programs or similarly generated
electronic materials or other materials used and/or developed by Executive
during the Term are solely the property of Hacienda, and that Executive has no
right, title or interest therein.  Upon
termination of the Term of this Agreement, Executive or Executive’s
representative shall promptly deliver possession of all of said property to
Hacienda in good condition.

 

(d) Unauthorized Disclosure. 
During the period of his employment hereunder and for a period of two
years following the cessation of such employment (irrespective of the reason
therefor), Executive shall not, except as required by any court, supervisory
authority or administrative agency, without the written consent of the Board or
a person authorized thereby, disclose to any person, other than an employee of
Hacienda or a person to whom disclosure is reasonably necessary or appropriate
in connection with the performance by the Executive of his duties as an
employee of Hacienda, any confidential information obtained by him while in the
employ of Hacienda; provided, however, that confidential information shall not
include any information known generally to the public (other than as a result
of an unauthorized disclosure by the Executive).

 

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

 

11.                                 Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed, certified or registered mail, return
receipt requested, with postage prepaid, to the following addresses or to such
other address as either party may designate by like notice.

 

If to Hacienda, to:

Hacienda Bank

361 Town Center West, Suite 200

Santa Maria, California 93456

Attn: Lawrence Ward

Facsimile:
(805)           

 

with a copy to:

 

John F. Stuart, Esq.

REITNER & STUART

1319 Marsh Street

San Luis Obispo, California 93401

Facsimile: (805) 545-8599

 

 

If to Executive, to:

 

David Duarte

c/o Hacienda Bank

361 Town Center West, Suite 200

Santa Maria, California 93456

 

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

 

10

 

in writing by like notice.

 

12.                                 Arbitration.  Any dispute or controversy arising or in
connection with this Agreement shall, upon written request of one party to the
other, be submitted to and settled exclusively by arbitration in the State of
California and be governed by the California Arbitration Act as set forth in
the California Code of Civil Procedure. 
Judgment may be entered on the arbitrator’s award in any court of
competent jurisdiction.  The cost of
such arbitration, including reasonable attorney’s fees, shall be borne by the
losing party or in such proportions as the arbitrator(s) shall decide.  Arbitration shall be the exclusive remedy of
Executive and Hacienda and the award of the arbitrator(s) shall be final and
binding upon the parties.  All
reasonable costs, including reasonable attorney’s fees, incurred in enforcing
an arbitration award in court, or of seeking a court order to compel
arbitration, shall be borne by the losing party in such proceedings.

 

13.                                 Indemnification.  Hacienda
will indemnify Executive to the fullest extent permitted by the laws of the
state of California and to the extent not inconsistent with the foregoing, the
Articles of Incorporation and Bylaws of Hacienda as in effect on the date of
the Change in Control of Hacienda, in respect of all Executive’s services rendered
to Hacienda and its subsidiaries prior to the Date of Termination.  Executive shall be entitled to the
protection of any insurance policies Hacienda now or hereafter maintains
generally for the benefit of its directors, officers and employees (but only to
the extent of the coverage afforded by the existing provisions of such
policies) to protect against all costs, charges and expenses whatsoever
incurred or sustained by Executive in connection with any action, suit or
proceeding to which Executive may be made a party by reason of his being or
having been a director, officer or employee of Hacienda or any of its
subsidiaries during his employment therewith.

 

14.                                 General
Provisions.

 

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

 

(b) Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and
the same Agreement.

 

11

 

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

 

(d) Headings.  The
headings of the Sections of this Agreement have been inserted for convenience
of reference only and shall in no way restrict or modify any of the terms or
provisions hereof.

 

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

 

(f) Governing Law.  This
Agreement shall be governed and construed and the legal relationships of the
parties determined in accordance with the laws the United States and to the
extent not inconsistent therewith the laws of the State of California
applicable to contracts executed and to be performed solely in the State of
California.

 

(g) Assumption.  Hacienda
shall require any successor in interest (whether direct or indirect or as a
result of purchase, merger, consolidation, Change in Control or otherwise) to
all or substantially all of the business and/or assets of Hacienda to expressly
assume and agree to perform the obligations under this Agreement in the same
manner and to the same extent that Hacienda would be required to perform it if
no such succession had taken place.

 

(h) Advice of Counsel. 
Executive acknowledges that Hacienda has been represented by Counsel in
connection with the preparation of the Agreement and that he has been
encouraged to consult with other legal counsel of his choosing concerning the
terms of this Agreement prior to executing this Agreement.  Any failure by Executive to consult with
competent counsel prior to executing this Agreement shall not be a basis for
rescinding or otherwise avoiding the binding effect of this Agreement.  The parties acknowledge that they are
entering into this Agreement freely and voluntarily, with full understanding of
the terms of this Agreement.  Interpretation
of the terms and provisions of this Agreement shall not be construed for or
against either party on the basis of the identity of the party who drafted the
terms or provisions in question.

 

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

 

	
  ATTEST:

  	
   

  	
  HACIENDA BANK

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
  print name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  THE EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Witness

  	
   

  
									

 

12

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