Document:

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                                                                    EXHIBIT 10.3

                             EMPLOYMENT AGREEMENT

     This Employment Agreement (this "Agreement") is entered into as of July 23,
2001 by and between FIRST NORTHERN BANK OF DIXON, a California banking
corporation (the "Bank"), and Louise A. Walker (the "Executive").

                                   RECITAL:

     The parties desire to set forth the terms of Executive's employment with
the Bank.

     NOW, THEREFORE, the parties hereto agree as follows:

     1.   Employment. The Bank hereby employs Executive and Executive hereby
          ----------
accepts employment during the Term of Employment upon the terms and conditions
herein set forth.

     2.   Term of Employment. The Bank agrees to continue Executive's
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employment, and Executive agrees to remain in employment with the Bank, from
January 1, 2001 (the "Commencement Date") until the earliest of (i) December 31,
2003 or (ii) the date on which Executive's employment with the Bank terminates
pursuant to Section 7(a), (b), (c), (d), (e) or (f), as applicable (the "Term of
Employment"), provided that the terms and conditions of this Agreement and the
Term of Employment shall automatically extend for consecutive three-year
periods, on and after December 31, 2003, unless either Executive or the Bank
notifies the other in writing at least six months before the end of the then
current term that, for any reason, the Executive or the Bank has elected not to
extend the term.

     3.   Duties. Executive is employed as Senior Vice President and Chief
          ------
Financial Officer of the Bank and, under the direction of the President and the
Board of Directors, shall perform and discharge well and faithfully the duties
that may be assigned from time to time by the President or the Board of
Directors in connection with the conduct of the Bank's business.

     4.   Extent of Services. Executive shall devote Executive's entire business
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time, attention, and energies to the business of the Bank during the term of
Executive's employment with the Bank. The foregoing however, shall not preclude
Executive from engaging in appropriate civic, charitable, or religious
activities or from devoting a reasonable amount of time to private investments
or from serving on boards of directors of other entities, as long as such
activities and services do not interfere or conflict with responsibilities to
the Bank.

     5.   Compensation.
          ------------

     (a)  Salary. During the Term of Employment, the Bank shall pay Executive a
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base salary at the annual rate of $109,500.00 payable in accordance with the
standard payroll procedures of the Bank but not less than one time monthly.
Executive's base salary shall be adjusted annually effective on January 1 of
each year to reflect such changes as the President of the Bank determines
appropriate, based on Executive's performance for the most recent performance
period.

     (b)  Incentive Programs. During the Term of Employment, Executive shall be
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entitled to participate in any annual and long-term incentive programs adopted
by the Bank and which cover employees in positions comparable to that of
Executive.

     (c)  Expenses. Executive shall be entitled to prompt reimbursement of all
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reasonable business expenses incurred in the performance of Executive's duties
during the Term of Employment, subject to the presentment of appropriate
vouchers and receipts in accordance with the Bank's policies.

     6.   Employee Benefits. During the Term of Employment, Executive shall be
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entitled to participate in employee benefit plans or programs of the Bank, if
any, to the extent that the Executive's position, tenure, salary, age, health,
and other qualifications make Executive eligible to participate, subject to the
rules and regulations applicable thereto.

     7.   Termination. Notwithstanding the provisions of Sections 2 hereof, the
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Term of Employment and Executive's employment hereunder may be terminated
without any breach of this Agreement under the following circumstances:

     (a)  Death. The Term of Employment shall terminate upon Executive's death.
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     (b)  Disability. The Term of Employment shall terminate three (3) months
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after the Bank gives Executive written notice that it intends to terminate
executive's employment on account of Disability or on such later date as the
Bank specifies in such notice. If Executive resumes the performance of
substantially all duties under this Agreement before the termination becomes
effective, the notice of intent to terminate shall be deemed to have been
revoked.

     (c)  Voluntary Termination. Executive may terminate employment with the
          ---------------------
Bank at any time by giving the Bank three (3) months' written notice thereof.
The Term of Employment shall end on the earlier of the last day of the notice
period or the last day on which Executive performs services for the Bank.

     (d)  Termination for Good Reason. Executive may terminate employment with
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the Bank for Good Reason by giving the Bank thirty (30) days' notice of its
alleged breach, including the basis upon which Executive believes the alleged
breach constitutes Good Reason and a statement of the Executive's intent to
terminate employment on such basis. If the Bank cures its breach within the
thirty (30) day period following receipt of such notice, Executive shall either
rescind Executive's notice of intent to terminate and continue employment, or
terminate employment under Section 8 (c) hereof in which case the Executive's
notice of breach hereunder shall be deemed to satisfy the notice requirement
provided for under Section 8 (c) hereof. If the Bank fails to cure its breach
within the thirty (30) day period following receipt of such notice or Executive
decides to terminate employment as provided in the final clause of Section 8 (c)
hereof, the Term of Employment shall end on the last day of the 30-day period
following receipt of such notice.

     (e)  Involuntary Termination. Executive acknowledges and agrees that
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Executive's employment is at will. The Bank reserves the right to terminate
Executive's employment at any time whatsoever with or without cause by giving
thirty (30) days' written notice to Executive thereof. The Term of Employment
shall terminate on the last day of the notice period, but the Bank may require
Executive to cease performing services at any time after such notice is given.

     (f)  Involuntary Termination for Cause. The Bank reserves the right to
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terminate Executive's employment for Cause. The Bank shall give Executive
written notice of the termination and the reasons therefore. The Term of
Employment shall terminate immediately upon receipt of the notice.

     8.   Benefits on Termination of Employment. If Executive's employment is
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terminated during the Term of Employment, the Executive shall be entitled to
receive payments and benefits as follows:

     (a)  Death; Disability; Voluntary Termination; Termination for Cause.
          ---------------------------------------------------------------

          (i)  If employment is terminated under Section 7(a), (b), (c), or (f)
     hereof, Executive shall receive:

               (1)  base salary through the date the Term of Employment ends,

               (2)  any incentive compensation earned but not yet paid,

               (3)  whatever rights may be specified in Stock Option Agreements
                    with the Executive executed pursuant to the First Northern
                    Community Bancorp Stock Option Plan,

               (4)  whatever rights may be specified in Salary Continuation
                    Agreement wit the Executive executed pursuant to the First
                    Northern Bank of Dixon Salary Continuation Agreement/Split
                    Dollar Agreement, and

               (5)  reimbursement of expenses incurred under Section 5(c) hereof
                    but not yet reimbursed.

          (ii) Except as provided in this Section 8(a) or required by law, all
     of Executive's employee benefits and compensation shall cease on the last
     day on which the Executive performs services as an employee of the Bank.

     (b)  Change of Control.
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          (i)  If, within two years following a Change of Control, Executive's
     employment is terminated under the provisions of Section 7(d) or (e) hereof
     or as a result of the Bank's election not to extend this Agreement and the
     Term of Employment pursuant to Section 2 hereof, Executive shall receive:

               (1)  200% of the sum of (i) Executive's annual base salary under
     Section 5(a) hereof as in effect on the date the Term of Employment ends
     and (ii) the average of the annual bonuses awarded to Executive by the Bank
     for the most recent three consecutive years prior to the date the Term of
     Employment ends,
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               (2)  any incentive compensation earned but not yet paid, and

               (3)  any expenses incurred under Section 5(c) hereof but not yet
                    reimbursed.

               (4)  outplacement assistance.

     (ii)   The payment to which Executive is entitled pursuant to Section
8(b)(i)(1) hereof shall be paid in a single installment within forty-five (45)
days of termination with no percent value or other discount or, at Executive's
option, on a deferred basis with no premium.

     (iii)  During the 18-month period commencing on the date the Executive's
Term of Employment ends under Section 7(d) or (e) hereof, Executive (and, where
applicable, Executive's dependents) shall be entitled to continue participation
in the group insurance plans maintained by the Bank, including life, disability
and health insurance programs, as if Executive were still an employee of the
Bank. Where applicable, Executive's salary for purposes of such plans shall be
deemed to be equal to Executive's annual salary in effect immediately prior to
termination. To the extent that the Bank finds it not feasible to obtain
coverage for Executive under its group insurance policies during such 18-month
period, the Bank shall provide Executive with individual policies which offer at
least the same level of coverage and which impose not more than the same costs
on Executive. The foregoing notwithstanding, in the event that Executive becomes
eligible for comparable group insurance coverage in connection with new
employment, the coverage provided by the Bank under this Section 8(b)(iii) shall
terminate immediately. Any group health continuation coverage that the Bank is
required to offer under the Consolidated Omnibus Budget Reconciliation Act of
1986 ("COBRA") shall commence when coverage under this Section 8(b)(iii)
terminates.

     (iv)   (1)  Notwithstanding any other provision of this Agreement, except
as set forth below, in the event it shall be determined that any payment or
distribution by the Bank to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section iv) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

            (2)  (a)  Subject to the provisions of Section iv (3), all
determinations required to be made under Section iv including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
or such other nationally recognized certified public accounting firm as may be
designated by the Bank (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Bank and the Executive within 15 business
days after the Accounting Firm has been advised that a Payment was made, or such
earlier time as is requested by the Bank. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Bank shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall than be referred to as the Accounting Firm hereunder). All
reasonable fees and expenses of the Accounting Firm shall be borne solely by the
Bank. Any Gross-Up Payment, as determined pursuant to Section iv shall be paid
by the Bank to the Executive promptly following receipt of the Accounting Firm's
determination, unless the Bank requests further calculations. Any determination
made by the Accounting Firm shall be binding upon the Bank and the Executive,
although either party may challenge such a determination through a legal
proceeding. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Bank, should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Bank exhausts
its remedies pursuant to Section iv (3) and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Bank to or for the benefit of the Executive.

                 (b)  To the extent the Bank overpays any Excise Tax or Gross-Up
Payment, the Executive agrees that such overpayment(s) will be immediately
returned to the Bank by the Executive. As a condition to receipt of a Gross-Up
Payment or Excise Tax Payment, the Executive consents to jurisdiction and venue
in California in an action by Bank to recover any overpayments. The Executive
also agrees to provide Bank all financial information and data, including tax
information, reasonably requested by Bank to calculate such overpayments. The
Executive agrees that the Executive shall not be entitled to delay or avoid
repayment of overpayments (a) based on other types of tax disputes the Executive
may have with tax authorities, (b) based on a change in the residence of the
Executive following receipt of a Gross-Up Payment or Excise Tax Payment, (c)
based on any claim or claims by the Executive against Bank for additional sums
or benefits, or (d) based on any claim or claims for offset by the Executive
against Bank.
<PAGE>

            (3)  The Executive shall notify the Bank in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Bank of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Bank of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which the Executive gives such notice to the Bank (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Bank notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive shall:

                 (a)  give the Bank any information reasonably requested by the
Bank relating to such claim,

                 (b)  take such action in connection with contesting such claim
as the Bank shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Bank,

                 (c)  cooperate with the Bank in good faith in order to
effectively contest such claim, and

                 (d)  permit the Bank to participate in any proceedings relating
to such claim;

provided, however, that the Bank shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section iv (3), the Bank shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Bank shall determine;
provided, however, that if the Bank directs the Executive to pay such claim and
sue for a refund, the Bank shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Bank's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.

            (4)  If, after the receipt by the Executive of an amount advanced by
the Bank pursuant to Section iv (3), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Bank's complying with the requirements of Section iv (3)) promptly pay to the
Bank the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Bank pursuant to Section iv (3), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Bank does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after Bank's
receipt of such determination, then such advance shall be forgiven and shall
offset, to the extent thereof, the amount of Gross-Up payment required to be
paid.

     (v)    Except as provided in this Section 8(b) or required by law, all of
Executive's employee benefits and compensation shall cease on the last day on
which he performs services as an employee of the Bank.

     (vi)   Executive shall not be required to mitigate the amount of any
payment or benefit contemplated by this Section 8(b) (whether by seeking new
employment or otherwise) and no such payment or benefit shall be reduced by
earnings that Executive may receive from any other source.

     (vii)  In the event of a Change in Control of the Bank during the period
Executive remains in Service, all of the Shares which are unvested as of the
effective date of such Change in Control shall immediately become vested. For
the purposes hereof, a "Change in Control" shall have the meaning set forth in
Section 2(b) of the First Northern Community Bancorp 2000 Stock Option Plan.

     (viii) If employment is terminated due to a Change in Control of the Bank
the Executive shall receive whatever rights may be specified pursuant to the
First Northern Bank of Dixon Salary Continuation Agreement/Split Dollar
Agreement.
<PAGE>

     (c)  Involuntary Termination; Termination for Good Reason.
          ----------------------------------------------------

          (i)    If Executive's employment is terminated under the provisions of
     Section 7(d) or (e) hereof and such termination is not within two years
     following a Change of Control, Executive shall receive:

                 (1)   100% of the sum of (i) Executive's annual base salary
     under Section 5(a) hereof as in effect on the date the Term of Employment
     ends and (ii) the average of the annual bonuses awarded to Executive by the
     Bank for the three most recent consecutive years prior to the date the Term
     of Employment ends,

                 (2)  any incentive compensation earned but not yet paid,

                 (3)  whatever rights may be specified in Stock Option
                      Agreements with the Executive executed pursuant to the
                      First Northern Community Bancorp Stock Option Plan. It
                      being understood that the definition of Change of Control
                      set forth in such Stock Option Agreement may differ from
                      that set forth herein,

                 (4)  whatever rights may be specified in Salary Continuation
                      Agreement with the Executive executed pursuant to the
                      First Northern Bank of Dixon Salary Continuation
                      Agreement/Split Dollar Agreement, and

                 (5)  reimbursement of expenses incurred under Section 5(c)
                      hereof but not yet reimbursed.

          (ii)   During the 12-month period commencing upon a termination of
     employment under Section 7(d) or (e) hereof, Executive (and, where
     applicable, Executive's dependents) shall be entitled to continue
     participation in the group insurance plans maintained by the Bank,
     including life, disability and health insurance programs, as if Executive
     were still an employee of the Bank. Where applicable, Executive's salary
     for purposes of such plans shall be deemed to be equal to Executive's
     annual base salary as in effect on the date the Term of Employment ends. To
     the extent that the Bank finds it not feasible to obtain coverage for
     Executive under its group insurance policies during such 12-month period,
     the Bank shall provide Executive with individual policies which offer at
     least the same level of coverage and which impose not more than the same
     costs on the Executive. The foregoing notwithstanding, in the event that
     Executive becomes eligible for comparable group insurance coverage in
     connection with new employment, the coverage provided by the Bank under
     Section 6(f) shall terminate immediately. Any group health continuation
     coverage that the Bank is required to offer under the Consolidated Omnibus
     Budget Reconciliation Act of 1986 ("COBRA") shall commence when coverage
     under this Section 8(c)(ii) terminates.

          (iii)  Except as provided in this Section 8(c) or required by law, all
     of Executive's employee benefits and compensation shall cease on the last
     day on which Executive performs services as an employee of the Bank.

          (iv)   Executive shall not be required to mitigate the amount of any
     payment or benefit contemplated by this Section 8(c) (whether by seeking
     new employment or otherwise) and no such payment or benefit shall be
     reduced by earnings that Executive may receive from any other source.

     9.   Definition of Terms. The following terms used in this Agreement when
          -------------------
capitalized have the following meanings:

     (a)  "Board of Directors"  means the Bank's board of directors.
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     (b)   "Cause"  means that Executive has:
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          (i)    willfully breached or habitually neglected or breached the
     duties which the Executive was required to perform under the terms of this
     Agreement or the policies of the Bank or

          (ii)   committed act(s) of dishonesty, theft, embezzlement, fraud,
     misrepresentation, or other act(s) of moral turpitude against the Bank, its
     subsidiaries or affiliates, its shareholders, or its employees or which
     adversely impact the interest of the Bank.

     (c)  "Change of Control" means a change of control of the Bank 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 of 1934 (the "Act"), whether
or not the Bank is then subject to such reporting requirement; provided,
however, that without limitation, such a Change of Control shall be deemed to
have occurred if:
<PAGE>

          (i)    any person or group (as such terms are used in connection with
     Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner"
     (as defined in Rule 13d-3 and 13d-5 under the Act), directly or indirectly,
     of securities of the Bank representing 20% or more of the combined voting
     power of the Bank's then outstanding securities;

          (ii)   the Bank is a party to a merger, consolidation, sale of assets
     or other reorganization, or a proxy contest, as a consequence of which
     members of the Board of Directors in office immediately prior to such
     transaction or event constitute less than a majority of the Board of
     Directors thereafter; or

          (iii)  during any period of twenty-four (24) consecutive months,
     individuals who at the beginning of such period constituted the Board of
     Directors (including for this purpose any new director whose election or
     nomination for election by the Bank's stockholders was approved by a vote
     of at least two-thirds of the directors then still in office who were
     directors at the beginning of such period) cease for any reason to
     constitute at least a majority of the Board of Directors.

Notwithstanding the foregoing provisions of this Section 9(c), a "Change of
Control" will not be deemed to have occurred solely because of the acquisition
of securities of the Bank (or any reporting requirement under the Act relating
thereto) by an employee benefit plan maintained by the Bank for its employees.

     (d)  "Disability" means that Executive has been unable to perform the
           ----------
essential functions of Executive's job under this Agreement, with or without
reasonable accommodation, for a period of three (3) consecutive months as the
result of Executive's incapacity due to physical or mental illness.

     (e)  "Good Reason" means any of (i) a material reduction in Executive's
           -----------
compensation under Section 5 hereof or benefits under Section 7 hereof, (ii) a
material reduction in the Executive's title or responsibilities, (iii) a
relocation of Executive's principal office so that Executive's one-way commute
distance from Executive's residence is increased by more than forty (40) miles
or (iv) failure of the Bank's successor to assume and perform this Agreement as
contemplated by Section 14(a) hereof.

     10.  Non-Competition Clause. In addition to Executive's obligations as an
          ----------------------
executive and whether or not Executive remains an executive of the Bank,
Executive agrees that during the period beginning on the Commencement Date and
ending upon termination of employment with the Bank, however caused, the
Executive will not, without the prior written consent of the Bank, engage,
directly or indirectly, in any business that competes with the Bank for
customers or prospective customers of the Bank.

     11.  Locations of Performance. Executive's services shall be performed
          ------------------------
primarily in Solano, Yolo and Sacramento Counties, California. The parties
acknowledge, however, that Executive may be required to travel in connection
with the performance of Executive's duties hereunder.

     12.  Proprietary Information.
          -----------------------

     (a)  Executive agrees to comply fully with the Bank's policies relating to
non-disclosure of the Bank's trade secrets and proprietary information and
processes, including information regarding the Bank's customers and prospective
customers. Without limiting the generality of the foregoing, Executive will not,
during the term of Executive's employment by the Bank, disclose any such
secrets, information, or processes to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever, nor shall
Executive make use of any such property for Executive's own purposes or for the
benefit of any person, firm, corporation, or other entity (except the Bank)
under any circumstances during or after the term of Executive's employment,
provided that after the term of Executive's employment, this provision shall not
apply to secrets, information, and processes that are then in the public domain
(provided that Executive was not responsible, directly or indirectly, for such
secrets, information, or processes entering the public domain without the Bank's
consent).

     (b)  Executive hereby sells, transfers, and assigns to the Bank all of the
entire right, title, and interest of Executive in and to all inventions, ideas,
disclosures, and improvements, whether patented or unpatented, and copyrightable
material, to the extent made or conceived by Executive, solely or jointly,
during the term of this Agreement, except to the extent prohibited by Section
2870 of the California Labor Code, a copy of which is attached hereto as Exhibit
A. Executive shall communicate promptly and disclose to the Bank, in such form
as the Bank requests, all information, details, and data pertaining to the
aforementioned inventions, ideas, disclosures, and improvements; and, whether
during the term hereof or thereafter, Executive shall execute and deliver to the
Bank such formal transfers and assignments and such other papers and documents
as may be required of Executive to permit the Bank to file and prosecute any
patent applications relating to such inventions, ideas, disclosures, and
improvements and, as to copyrightable material, to obtain copyright thereon.

     (c)  Trade secrets, proprietary information, and processes shall not be
deemed to include information which is:

          (i)    known to Executive at the time of the disclosure;

          (ii)   publicly known (or becomes publicly known) without the fault
     or negligence of Executive;
<PAGE>

          (iii)  received from a third party without restriction and without
     breach of this Agreement;

          (iv)   approved for release by written authorization of the Bank; or

          (v)    required to be disclosed by law; provided, however, that in the
     event of a proposed disclosure pursuant to this subsection 12(c)(v), the
     recipient shall give the Bank prior written notice before such disclosure
     is made.

     (d)  Executive agrees that in the event that Executive's employment
terminates for any reason, Executive shall promptly deliver to the Bank all
property belonging to the Bank, including all documents and materials of any
nature pertaining to Executive's employment with the Bank.

     13.  Employment Taxes. All payments made pursuant to this Agreement shall
          ----------------
be subject to withholding of applicable taxes.

     14.  Successors.
          ----------

     (a)  Bank's Successors. The Bank shall require any successor to all or
          -----------------
substantially all of the Bank's business and/or assets and liabilities (whether
by purchase, merger, consolidation, reorganization, liquidation or otherwise) to
assume and expressly agree to perform this Agreement in the same manner and to
the same extent as the Bank would be required to perform if there were no
succession. The Bank's failure to obtain an assumption agreement in form and
substance reasonably acceptable to Executive by the effective date of such
succession shall constitute a breach of the Bank's obligations to Executive
under this Agreement as of the effective date of such succession and shall
entitle Executive to all of the payments and other benefits described in Section
8(b) hereof.

     (b)  Executive's Successors. This Agreement and all rights of the Executive
          ----------------------
hereunder shall inure to the benefit of, and be enforceable by, Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees, it being agreed by Executive that Executive
cannot assign or make subject to an option any of Executive's rights, including
rights to payments and benefits, under this Agreement

     15.  Notices. Any notice required or permitted to be given under this
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Agreement shall be sufficient if in writing and sent by registered mail to
Executive at Executive's residence maintained on the Bank's records, or to the
Bank at its executive offices, or such other addresses as either party shall
notify the other in accordance with the above procedure.

     16.  Force Majeure. Neither party shall be liable to the other for any
          -------------
delay or failure to perform hereunder, which delay or failure is due to causes
beyond the control of said party, including, but not limited to: acts of God;
acts of the public enemy; acts of the United States of America, or any State,
territory, or political subdivision thereto or of the District of Columbia;
fires; floods; epidemics; quarantine restrictions; strikes; or freight
embargoes. Notwithstanding, the foregoing provisions of this Section 16, in
every case the delay or failure to perform must be beyond the control and
without the fault or negligence of the party claiming excusable delay.

     17.  Integration. This Agreement and any attachments, schedules, and
          -----------
exhibits hereto represent the entire agreement and understanding between the
parties as to the subject matter hereof and supersede all prior or
contemporaneous agreements, whether written or oral regarding Executive's
employment at the Bank and all rights, privileges and benefits related thereto.
Without limiting the generality of the foregoing, Executive acknowledges and
agrees that effective on the Commencement Date, the terms and conditions of this
Agreement will supplant any different terms and conditions that previously
existed or governed Executive's employment with the Bank. No waiver, alteration,
or modification of any of the provisions of this Agreement shall be binding
unless in writing and signed by duly authorized representatives of the parties
hereto.

     18.  Waiver. Failure or delay on the part of either party hereto to enforce
          ------
any right, power, or privilege hereunder shall not be deemed to constitute a
waiver thereof. Additionally, a waiver by either party of a breach of any
promise hereof by the other party shall not operate as or be construed to
constitute a waiver of any subsequent waiver by such other party.

     19.  Savings Clause. If any term, covenant, or condition of this Agreement
          --------------
or the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant, or condition to persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby
and each term, covenant, or condition of this Agreement shall be valid and
enforced to the fullest extent permitted by law.

     20.  Authority to Contract. The Bank warrants and represents that it has
          ---------------------
full authority to enter into this Agreement and to consummate the transactions
contemplated hereby and that this Agreement is not in conflict with any other
agreement to which the Bank is a party or by which it may be bound. The Bank
further warrants and represents that the individuals executing this Agreement on
behalf of the Bank have the full power and authority to bind the Bank to the
terms hereof and have been authorized to do so in accordance with the Bank's
corporate organization.
<PAGE>

     21.  Dispute Resolution.
          ------------------

     (a)  Any controversy or claim between Bank and Executive arising from or
relating to this Agreement or any agreement or instrument delivered under or in
connection with this Agreement, including any alleged dispute, breach, default,
or misrepresentation in connection with any of the provisions of this Agreement,
shall, at the option of Executive or Bank, be submitted to arbitration, using
either the American Arbitration Association ("AAA") or Judicial Arbitration and
Mediation Services, Inc. ("JAMS") in accordance with the rules of either JAMS or
AAA (at the option of the party initiating the arbitration) and Title 9 of the
U.S. Code. All statutes of limitations or any waivers contained herein which
would otherwise be applicable shall apply to any arbitration proceeding under
this Section 21(a). The parties agree that related arbitration proceedings may
be consolidated. The arbitrator shall prepare written reasons for the award.
Judgment upon the award rendered may be entered in any court having
jurisdiction.

     (b)  No provision of, or the exercise of any rights under, Section 21(a)
hereof shall limit the right of any party to exercise self help remedies or to
obtain provisional or ancillary remedies, such as injunctive relief from a court
having jurisdiction before, during or after the pendency of any arbitration. The
institution and maintenance of an action for judicial relief or pursuit of
provisional or ancillary remedies or exercise of self help remedies shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration.

     (c)  If any arbitration, legal action or other proceeding is brought for
the enforcement of this Agreement or any agreement or instrument delivered under
or in connection with this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.

     22.  Remedies. In the event of a breach by Executive of Sections 10 or 12
          --------
of this Agreement, in addition to other remedies provided by applicable law, the
Bank will be entitled to issuance of a temporary restraining order or
preliminary injunction enforcing its rights under such Sections.

     23.  Governing Law.  This Agreement shall be governed by and construed in
          -------------
accordance with the laws of the State of California.

     24.  Counterparts.  This Agreement may be executed in counterparts, each
          ------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

     25.  Advice of Counsel. Before signing this Agreement, Executive either (i)
          -----------------
consulted with and obtained advice from Executive's independent legal counsel in
respect to the legal nature and operation of this Agreement, including its
impact on executive's rights, privileges and obligations, or (ii) freely and
voluntarily decided not to have the benefit of such consultation and advice with
legal counsel.

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

                              FIRST NORTHERN BANK OF DIXON

                              _______________________________
                              Owen J. Onsum,
                              President & Chief Executive Officer

                              EXECUTIVE

                              _______________________________
                              Louise A. Walker,
                              Senior Vice President/Chief Financial Officer

Exhibit A  -  California Labor Code Section 2870
<PAGE>

                                   EXHIBIT A
                                   ---------

                      CALIFORNIA LABOR CODE SECTION 2870

Section 2870. Application of provision providing that employee shall assign or
offer to assign rights in invention to employer.

(a)  Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either;

     (i)  Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.

     (ii) Result from any work performed by the employee for the employer.

(b)  To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.<PAGE>

                                                                 EXHIBIT 10.4

         This Employment Agreement (this "Agreement") is entered into as of July
23, 2001 by and between FIRST NORTHERN BANK OF DIXON, a California banking
corporation (the "Bank"), and Robert M. Walker (the "Executive").

                                    RECITAL:

         The parties desire to set forth the terms of Executive's employment
with the Bank.

         NOW, THEREFORE, the parties hereto agree as follows:

         1.   Employment. The Bank hereby employs Executive and Executive hereby
              ----------
accepts employment during the Term of Employment upon the terms and conditions
herein set forth.

         2. Term of Employment. The Bank agrees to continue Executive's
            ------------------
employment, and Executive agrees to remain in employment with the Bank, from
January 1, 2001 (the "Commencement Date") until the earliest of (i) December 31,
2003 or (ii) the date on which Executive's employment with the Bank terminates
pursuant to Section 7(a), (b), (c), (d), (e) or (f), as applicable (the "Term of
Employment"), provided that the terms and conditions of this Agreement and the
Term of Employment shall automatically extend for consecutive three-year
periods, on and after December 31, 2003, unless either Executive or the Bank
notifies the other in writing at least six months before the end of the then
current term that, for any reason, the Executive or the Bank has elected not to
extend the term.

         3. Duties. Executive is employed as Senior Vice President and Branch
            ------
Administrator of the Bank and, under the direction of the President and the
Board of Directors, shall perform and discharge well and faithfully the duties
that may be assigned from time to time by the President or the Board of
Directors in connection with the conduct of the Bank's business.

         4. Extent of Services. Executive shall devote Executive's entire
            ------------------
business time, attention, and energies to the business of the Bank during the
term of Executive's employment with the Bank. The foregoing however, shall not
preclude Executive from engaging in appropriate civic, charitable, or religious
activities or from devoting a reasonable amount of time to private investments
or from serving on boards of directors of other entities, as long as such
activities and services do not interfere or conflict with responsibilities to
the Bank.

         5.  Compensation.
             ------------

         (a) Salary. During the Term of Employment, the Bank shall pay Executive
             ------
a base salary at the annual rate of $103,260.00 payable in accordance with the
standard payroll procedures of the Bank but not less than one time monthly.
Executive's base salary shall be adjusted annually effective on January 1 of
each year to reflect such changes as the President of the Bank determines
appropriate, based on Executive's performance for the most recent performance
period.

         (b) Incentive Programs. During the Term of Employment, Executive shall
             ------------------
be entitled to participate in any annual and long-term incentive programs
adopted by the Bank and which cover employees in positions comparable to that of
Executive.

         (c) Expenses. Executive shall be entitled to prompt reimbursement of
             --------
all reasonable business expenses incurred in the performance of Executive's
duties during the Term of Employment, subject to the presentment of appropriate
vouchers and receipts in accordance with the Bank's policies.

         6.  Employee Benefits. During the Term of Employment, Executive shall
             -----------------
be entitled to participate in employee benefit plans or programs of the Bank, if
any, to the extent that the Executive's position, tenure, salary, age, health,
and other qualifications make Executive eligible to participate, subject to the
rules and regulations applicable thereto.

         7.  Termination. Notwithstanding the provisions of Sections 2 hereof,
             -----------
the Term of Employment and Executive's employment hereunder may be terminated
without any breach of this Agreement under the following circumstances:

         (a) Death. The Term of Employment shall terminate upon Executive's
             ------
death.

<PAGE>

         (b) Disability. The Term of Employment shall terminate three (3) months
             ----------
after the Bank gives Executive written notice that it intends to terminate
executive's employment on account of Disability or on such later date as the
Bank specifies in such notice. If Executive resumes the performance of
substantially all duties under this Agreement before the termination becomes
effective, the notice of intent to terminate shall be deemed to have been
revoked.

         (c) Voluntary Termination. Executive may terminate employment with the
             ---------------------
Bank at any time by giving the Bank three (3) months' written notice thereof.
The Term of Employment shall end on the earlier of the last day of the notice
period or the last day on which Executive performs services for the Bank.

         (d) Termination for Good Reason. Executive may terminate employment
             ---------------------------
with the Bank for Good Reason by giving the Bank thirty (30) days' notice of its
alleged breach, including the basis upon which Executive believes the alleged
breach constitutes Good Reason and a statement of the Executive's intent to
terminate employment on such basis. If the Bank cures its breach within the
thirty (30) day period following receipt of such notice, Executive shall either
rescind Executive's notice of intent to terminate and continue employment, or
terminate employment under Section 8 (c) hereof in which case the Executive's
notice of breach hereunder shall be deemed to satisfy the notice requirement
provided for under Section 8 (c) hereof. If the Bank fails to cure its breach
within the thirty (30) day period following receipt of such notice or Executive
decides to terminate employment as provided in the final clause of Section 8 (c)
hereof, the Term of Employment shall end on the last day of the 30-day period
following receipt of such notice.

         (e) Involuntary Termination. Executive acknowledges and agrees that
             -----------------------
Executive's employment is at will. The Bank reserves the right to terminate
Executive's employment at any time whatsoever with or without cause by giving
thirty (30) days' written notice to Executive thereof. The Term of Employment
shall terminate on the last day of the notice period, but the Bank may require
Executive to cease performing services at any time after such notice is given.

         (f) Involuntary Termination for Cause. The Bank reserves the right to
             ---------------------------------
terminate Executive's employment for Cause. The Bank shall give Executive
written notice of the termination and the reasons therefore. The Term of
Employment shall terminate immediately upon receipt of the notice.

         8.  Benefits on Termination of Employment. If Executive's employment is
             -------------------------------------
terminated during the Term of Employment, the Executive shall be entitled to
receive payments and benefits as follows:

         (a)   Death; Disability; Voluntary Termination; Termination for Cause.
               ---------------------------------------------------------------

               (i) If employment is terminated under Section 7(a), (b), (c), or
         (f) hereof, Executive shall receive:

                   (1) base salary through the date the Term of Employment ends,

                   (2) any incentive compensation earned but not yet paid,

                   (3) whatever rights may be specified in Stock Option
                       Agreements with the Executive executed pursuant to the
                       First Northern Community Bancorp Stock Option Plan,

                   (4) whatever rights may be specified in Salary Continuation
                       Agreement with the Executive executed pursuant to the
                       First Northern Bank of Dixon Salary Continuation
                       Agreement/Split Dollar Agreement, and

                   (5) reimbursement of expenses incurred under Section 5(c)
                       hereof but not yet reimbursed.

              (ii) Except as provided in this Section 8(a) or required by law,
         all of Executive's employee benefits and compensation shall cease on
         the last day on which the Executive performs services as an employee of
         the Bank.

         (b)   Change of Control.
               -----------------

               (i)  If, within two years following a Change of Control,
         Executive's employment is terminated under the provisions of Section
         7(d) or (e) hereof or as a result of the Bank's election not to extend
         this Agreement and the Term of Employment pursuant to Section 2 hereof,
         Executive shall receive:

                    (1) 200% of the sum of (i) Executive's annual base salary
         under Section 5(a) hereof as in effect on the date the Term of
         Employment ends and (ii) the average of the annual bonuses awarded to
         Executive by the Bank for the most recent three consecutive years prior
         to the date the Term of Employment ends,
<PAGE>

                  (2)   any incentive compensation earned but not yet paid, and

                  (3)   any expenses incurred under Section 5(c) hereof but not
                        yet reimbursed.

                  (4)   outplacement assistance.

             (ii)  The payment to which Executive is entitled pursuant to
         Section 8(b)(i)(1) hereof shall be paid in a single installment within
         forty-five (45) days of termination with no percent value or other
         discount or, at Executive's option, on a deferred basis with no
         premium.

             (iii) During the 18-month period commencing on the date the
         Executive's Term of Employment ends under Section 7(d) or (e) hereof,
         Executive (and, where applicable, Executive's dependents) shall be
         entitled to continue participation in the group insurance plans
         maintained by the Bank, including life, disability and health insurance
         programs, as if Executive were still an employee of the Bank. Where
         applicable, Executive's salary for purposes of such plans shall be
         deemed to be equal to Executive's annual salary in effect immediately
         prior to termination. To the extent that the Bank finds it not feasible
         to obtain coverage for Executive under its group insurance policies
         during such 18-month period, the Bank shall provide Executive with
         individual policies which offer at least the same level of coverage and
         which impose not more than the same costs on Executive. The foregoing
         notwithstanding, in the event that Executive becomes eligible for
         comparable group insurance coverage in connection with new employment,
         the coverage provided by the Bank under this Section 8(b)(iii) shall
         terminate immediately. Any group health continuation coverage that the
         Bank is required to offer under the Consolidated Omnibus Budget
         Reconciliation Act of 1986 ("COBRA") shall commence when coverage under
         this Section 8(b)(iii) terminates.

              (iv) (1) Notwithstanding any other provision of this Agreement,
         except as set forth below, in the event it shall be determined that any
         payment or distribution by the Bank to or for the benefit of the
         Executive (whether paid or payable or distributed or distributable
         pursuant to the terms of this Agreement or otherwise, but determined
         without regard to any additional payments required under this Section
         iv) (a "Payment") would be subject to the excise tax imposed by Section
         4999 of the Code or any interest or penalties are incurred by the
         Executive with respect to such excise tax (such excise tax, together
         with any such interest and penalties, are hereinafter collectively
         referred to as the "Excise Tax"), then the Executive shall be entitled
         to receive an additional payment (a "Gross-Up Payment") in an amount
         such that after payment by the Executive of all taxes (including any
         interest or penalties imposed with respect to such taxes), including,
         without limitation, any income taxes (and any interest and penalties
         imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
         Payment equal to the Excise Tax imposed upon the Payments.

                   (2) (a) Subject to the provisions of Section iv (3), all
         determinations required to be made under Section iv including whether
         and when a Gross-Up Payment is required and the amount of such Gross-Up
         Payment and the assumptions to be utilized in arriving at such
         determination, shall be made by or such other nationally recognized
         certified public accounting firm as may be designated by the Bank (the
         "Accounting Firm") which shall provide detailed supporting calculations
         both to the Bank and the Executive within 15 business days after the
         Accounting Firm has been advised that a Payment was made, or such
         earlier time as is requested by the Bank. In the event that the
         Accounting Firm is serving as accountant or auditor for the individual,
         entity or group effecting the Change in Control, the Bank shall appoint
         another nationally recognized accounting firm to make the
         determinations required hereunder (which accounting firm shall than be
         referred to as the Accounting Firm hereunder). All reasonable fees and
         expenses of the Accounting Firm shall be borne solely by the Bank. Any
         Gross-Up Payment, as determined pursuant to Section iv shall be paid by
         the Bank to the Executive promptly following receipt of the Accounting
         Firm's determination, unless the Bank requests further calculations.
         Any determination made by the Accounting Firm shall be binding upon the
         Bank and the Executive, although either party may challenge such a
         determination through a legal proceeding. As a result of the
         uncertainty in the application of Section 4999 of the Code at the time
         of the initial determination by the Accounting Firm hereunder, it is
         possible that Gross-Up Payments which will not have been made by the
         Bank, should have been made ("Underpayment"), consistent with the
         calculations required to be made hereunder. In the event that the Bank
         exhausts its remedies pursuant to Section iv (3) and the Executive
         thereafter is required to make a payment of any Excise Tax, the
         Accounting Firm shall determine the amount of the Underpayment that has
         occurred and any such Underpayment shall be promptly paid by the Bank
         to or for the benefit of the Executive.

                       (b) To the extent the Bank overpays any Excise Tax or
         Gross-Up Payment, the Executive agrees that such overpayment(s) will be
         immediately returned to the Bank by the Executive. As a condition to
         receipt of a Gross-Up Payment or Excise Tax Payment, the Executive
         consents to jurisdiction and venue in California in an action by Bank
         to recover any overpayments. The Executive also agrees to provide Bank
         all financial information and data, including tax information,
         reasonably requested by Bank to calculate such overpayments. The
         Executive agrees that the Executive shall not be entitled to delay or
         avoid repayment of overpayments (a) based on other types of tax
         disputes the Executive may have with tax authorities, (b) based on a
         change in the residence of the Executive following receipt of a Gross-
         Up Payment or Excise Tax Payment, (c) based on any claim or claims by
         the Executive against Bank for additional sums or benefits, or (d)
         based on any claim or claims for offset by the Executive against Bank.
<PAGE>

                        (3) The Executive shall notify the Bank in writing of
         any claim by the Internal Revenue Service that, if successful, would
         require the payment by the Bank of a Gross-Up Payment. Such
         notification shall be given as soon as practicable but no later than
         ten business days after the Executive is informed in writing of such
         claim and shall apprise the Bank of the nature of such claim and the
         date on which such claim is requested to be paid. The Executive shall
         not pay such claim prior to the expiration of the 30-day period
         following the date on which the Executive gives such notice to the Bank
         (or such shorter period ending on the date that any payment of taxes
         with respect to such claim is due). If the Bank notifies the Executive
         in writing prior to the expiration of such period that it desires to
         contest such claim, the Executive shall:

                 (a) give the Bank any information reasonably requested by the
         Bank relating to such claim,

                 (b) take such action in connection with contesting such claim
         as the Bank shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an attorney reasonably selected by the Bank,

                 (c) cooperate with the Bank in good faith in order to
         effectively contest such claim, and

                 (d) permit the Bank to participate in any proceedings relating
         to such claim;

         provided, however, that the Bank shall bear and pay directly all costs
         and expenses (including additional interest and penalties) incurred in
         connection with such contest and shall indemnify and hold the Executive
         harmless, on an after-tax basis, for any Excise Tax or income tax
         (including interest and penalties with respect thereto) imposed as a
         result of such representation and payment of costs and expenses.
         Without limitation on the foregoing provisions of this Section iv (3),
         the Bank shall control all proceedings taken in connection with such
         contest and, at its sole option, may pursue or forgo any and all
         administrative appeals, proceedings, hearings and conferences with the
         taxing authority in respect of such claim and may, at its sole option,
         either direct the Executive to pay the tax claimed and sue for a refund
         or contest the claim in any permissible manner, and the Executive
         agrees to prosecute such contest to a determination before any
         administrative tribunal, in a court of initial jurisdiction and in one
         or more appellate courts, as the Bank shall determine; provided,
         however, that if the Bank directs the Executive to pay such claim and
         sue for a refund, the Bank shall advance the amount of such payment to
         the Executive, on an interest-free basis and shall indemnify and hold
         the Executive harmless, on an after-tax basis, from any Excise Tax or
         income tax (including interest or penalties with respect thereto)
         imposed with respect to such advance or with respect to any imputed
         income with respect to such advance; and further provided that any
         extension of the statute of limitations relating to payment of taxes
         for the taxable year of the Executive with respect to which such
         contested amount is claimed to be due is limited solely to such
         contested amount. Furthermore, the Bank's control of the contest shall
         be limited to issues with respect to which a Gross-Up Payment would be
         payable hereunder and the Executive shall be entitled to settle or
         contest, as the case may be, any other issue raised by the Internal
         Revenue Service or any other taxing authority.

                 (4) If, after the receipt by the Executive of an amount
         advanced by the Bank pursuant to Section iv (3), the Executive becomes
         entitled to receive any refund with respect to such claim, the
         Executive shall (subject to the Bank's complying with the requirements
         of Section iv (3)) promptly pay to the Bank the amount of such refund
         (together with any interest paid or credited thereon after taxes
         applicable thereto). If, after the receipt by the Executive of an
         amount advanced by the Bank pursuant to Section iv (3), a determination
         is made that the Executive shall not be entitled to any refund with
         respect to such claim and the Bank does not notify the Executive in
         writing of its intent to contest such denial of refund prior to the
         expiration of 30 days after Bank's receipt of such determination, then
         such advance shall be forgiven and shall offset, to the extent thereof,
         the amount of Gross-Up payment required to be paid.

            (v)    Except as provided in this Section 8(b) or required by law,
         all of Executive's employee benefits and compensation shall cease on
         the last day on which he performs services as an employee of the Bank.

            (vi)   Executive shall not be required to mitigate the amount of any
         payment or benefit contemplated by this Section 8(b) (whether by
         seeking new employment or otherwise) and no such payment or benefit
         shall be reduced by earnings that Executive may receive from any other
         source.

            (vii)  In the event of a Change in Control of the Bank during the
         period Executive remains in Service, all of the Shares which are
         unvested as of the effective date of such Change in Control shall
         immediately become vested. For the purposes hereof, a "Change in
         Control" shall have the meaning set forth in Section 2(b) of the First
         Northern Community Bancorp 2000 Stock Option Plan.

            (viii) If employment is terminated due to a Change in Control of
         the Bank the Executive shall receive whatever rights maybe specified
         pursuant to the First Northern Bank of Dixon Salary Continuation
         Agreement/Split Dollar Agreement.
<PAGE>

         (c)   Involuntary Termination; Termination for Good Reason.
               ----------------------------------------------------

              (i) If Executive's employment is terminated under the provisions
         of Section 7(d) or (e) hereof and such termination is not within two
         years following a Change of Control, Executive shall receive:

                  (1) 100% of the sum of (i) Executive's annual base salary
         under Section 5(a) hereof as in effect on the date the Term of
         Employment ends and (ii) the average of the annual bonuses awarded to
         Executive by the Bank for the three most recent consecutive years prior
         to the date the Term of Employment ends,

                  (2) any incentive compensation earned but not yet paid,

                  (3) whatever rights may be specified in Stock Option
                      Agreements with the Executive executed pursuant to the
                      First Northern Community Bancorp Stock Option Plan. It
                      being understood that the definition of Change of Control
                      set forth in such Stock Option Agreement may differ from
                      that set forth herein,

                  (4) whatever rights may be specified in Salary Continuation
                      Agreement with the Executive executed pursuant to the
                      First Northern Bank of Dixon Salary Continuation
                      Agreement/Split Dollar Agreement, and

                  (5) reimbursement of expenses incurred under Section 5(c)
                      hereof but not yet reimbursed.

             (ii) During the 12-month period commencing upon a termination of
         employment under Section 7(d) or (e) hereof, Executive (and, where
         applicable, Executive's dependents) shall be entitled to continue
         participation in the group insurance plans maintained by the Bank,
         including life, disability and health insurance programs, as if
         Executive were still an employee of the Bank. Where applicable,
         Executive's salary for purposes of such plans shall be deemed to be
         equal to Executive's annual base salary as in effect on the date the
         Term of Employment ends. To the extent that the Bank finds it not
         feasible to obtain coverage for Executive under its group insurance
         policies during such 12-month period, the Bank shall provide Executive
         with individual policies which offer at least the same level of
         coverage and which impose not more than the same costs on the
         Executive. The foregoing notwithstanding, in the event that Executive
         becomes eligible for comparable group insurance coverage in connection
         with new employment, the coverage provided by the Bank under Section
         6(f) shall terminate immediately. Any group health continuation
         coverage that the Bank is required to offer under the Consolidated
         Omnibus Budget Reconciliation Act of 1986 ("COBRA") shall commence when
         coverage under this Section 8(c)(ii) terminates.

              (iii) Except as provided in this Section 8(c) or required by law,
         all of Executive's employee benefits and compensation shall cease on
         the last day on which Executive performs services as an employee of the
         Bank.

              (iv)  Executive shall not be required to mitigate the amount of
         any payment or benefit contemplated by this Section 8(c) (whether by
         seeking new employment or otherwise) and no such payment or benefit
         shall be reduced by earnings that Executive may receive from any other
         source.

         9.  Definition of Terms. The following terms used in this Agreement
             -------------------
when capitalized have the following meanings:

         (a)  "Board of Directors"  means the Bank's board of directors.
               ------------------

         (b)  "Cause"  means that Executive has:
               -----

              (i)  willfully breached or habitually neglected or breached the
         duties which the Executive was required to perform under the terms of
         this Agreement or the policies of the Bank or

              (ii) committed act(s) of dishonesty, theft, embezzlement, fraud,
         misrepresentation, or other act(s) of moral turpitude against the Bank,
         its subsidiaries or affiliates, its shareholders, or its employees or
         which adversely impact the interest of the Bank.

         (c)  "Change of Control" means a change of control of the Bank 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 of 1934
(the "Act"), whether or not the Bank is then subject to such reporting
requirement; provided, however, that without limitation, such a Change of
Control shall be deemed to have occurred if:
<PAGE>

              (i)   any person or group (as such terms are used in connection
         with Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
         owner" (as defined in Rule 13d-3 and 13d-5 under the Act), directly or
         indirectly, of securities of the Bank representing 20% or more of the
         combined voting power of the Bank's then outstanding securities;

              (ii)  the Bank is a party to a merger, consolidation, sale of
         assets or other reorganization, or a proxy contest, as a consequence of
         which members of the Board of Directors in office immediately prior to
         such transaction or event constitute less than a majority of the Board
         of Directors thereafter; or

              (iii)  during any period of twenty-four (24) consecutive months,
         individuals who at the beginning of such period constituted the Board
         of Directors (including for this purpose any new director whose
         election or nomination for election by the Bank's stockholders was
         approved by a vote of at least two-thirds of the directors then still
         in office who were directors at the beginning of such period) cease for
         any reason to constitute at least a majority of the Board of Directors.

Notwithstanding the foregoing provisions of this Section 9(c), a "Change of
Control" will not be deemed to have occurred solely because of the acquisition
of securities of the Bank (or any reporting requirement under the Act relating
thereto) by an employee benefit plan maintained by the Bank for its employees.

         (d) "Disability" means that Executive has been unable to perform the
              ----------
essential functions of Executive's job under this Agreement, with or without
reasonable accommodation, for a period of three (3) consecutive months as the
result of Executive's incapacity due to physical or mental illness.

         (e) "Good Reason" means any of (i) a material reduction in Executive's
              -----------
compensation under Section 5 hereof or benefits under Section 7 hereof, (ii) a
material reduction in the Executive's title or responsibilities, (iii) a
relocation of Executive's principal office so that Executive's one-way commute
distance from Executive's residence is increased by more than forty (40) miles
or (iv) failure of the Bank's successor to assume and perform this Agreement as
contemplated by Section 14(a) hereof.

         10. Non-Competition Clause. In addition to Executive's obligations as
             ----------------------
an executive and whether or not Executive remains an executive of the Bank,
Executive agrees that during the period beginning on the Commencement Date and
ending upon termination of employment with the Bank, however caused, the
Executive will not, without the prior written consent of the Bank, engage,
directly or indirectly, in any business that competes with the Bank for
customers or prospective customers of the Bank.

         11. Locations of Performance. Executive's services shall be performed
             ------------------------
primarily in Solano, Yolo and Sacramento Counties, California. The parties
acknowledge, however, that Executive may be required to travel in connection
with the performance of Executive's duties hereunder.

         12.   Proprietary Information.
               -----------------------

         (a) Executive agrees to comply fully with the Bank's policies relating
to non-disclosure of the Bank's trade secrets and proprietary information and
processes, including information regarding the Bank's customers and prospective
customers. Without limiting the generality of the foregoing, Executive will not,
during the term of Executive's employment by the Bank, disclose any such
secrets, information, or processes to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever, nor shall
Executive make use of any such property for Executive's own purposes or for the
benefit of any person, firm, corporation, or other entity (except the Bank)
under any circumstances during or after the term of Executive's employment,
provided that after the term of Executive's employment, this provision shall not
apply to secrets, information, and processes that are then in the public domain
(provided that Executive was not responsible, directly or indirectly, for such
secrets, information, or processes entering the public domain without the Bank's
consent).

         (b) Executive hereby sells, transfers, and assigns to the Bank all of
the entire right, title, and interest of Executive in and to all inventions,
ideas, disclosures, and improvements, whether patented or unpatented, and
copyrightable material, to the extent made or conceived by Executive, solely or
jointly, during the term of this Agreement, except to the extent prohibited by
Section 2870 of the California Labor Code, a copy of which is attached hereto as
Exhibit A. Executive shall communicate promptly and disclose to the Bank, in
such form as the Bank requests, all information, details, and data pertaining to
the aforementioned inventions, ideas, disclosures, and improvements; and,
whether during the term hereof or thereafter, Executive shall execute and
deliver to the Bank such formal transfers and assignments and such other papers
and documents as may be required of Executive to permit the Bank to file and
prosecute any patent applications relating to such inventions, ideas,
disclosures, and improvements and, as to copyrightable material, to obtain
copyright thereon.
<PAGE>

         (c) Trade secrets, proprietary information, and processes shall not be
deemed to include information which is:

             (i)   known to Executive at the time of the disclosure;

             (ii)  publicly known (or becomes publicly known) without the fault
                   or negligence of Executive;

             (iii) received from a third party without restriction and without
                   breach of this Agreement;

             (iv)  approved for release by written authorization of the Bank; or

              (v)  required to be disclosed by law; provided, however, that in
                   the event of a proposed disclosure pursuant to this
                   subsection 12(c)(v), the recipient shall give the Bank prior
                   written notice before such disclosure is made.

         (d) Executive agrees that in the event that Executive's employment
terminates for any reason, Executive shall promptly deliver to the Bank all
property belonging to the Bank, including all documents and materials of any
nature pertaining to Executive's employment with the Bank.

         13. Employment Taxes. All payments made pursuant to this Agreement
             ----------------
shall be subject to withholding of applicable taxes.

        14.  Successors.
             ----------

         (a) Bank's Successors. The Bank shall require any successor to all or
             -----------------
substantially all of the Bank's business and/or assets and liabilities (whether
by purchase, merger, consolidation, reorganization, liquidation or otherwise) to
assume and expressly agree to perform this Agreement in the same manner and to
the same extent as the Bank would be required to perform if there were no
succession. The Bank's failure to obtain an assumption agreement in form and
substance reasonably acceptable to Executive by the effective date of such
succession shall constitute a breach of the Bank's obligations to Executive
under this Agreement as of the effective date of such succession and shall
entitle Executive to all of the payments and other benefits described in Section
8(b) hereof.

         (b) Executive's Successors. This Agreement and all rights of the
             ----------------------
Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, it being agreed by
Executive that Executive cannot assign or make subject to an option any of
Executive's rights, including rights to payments and benefits, under this
Agreement

         15. Notices. Any notice required or permitted to be given under this
             -------
Agreement shall be sufficient if in writing and sent by registered mail to
Executive at Executive's residence maintained on the Bank's records, or to the
Bank at its executive offices, or such other addresses as either party shall
notify the other in accordance with the above procedure.

         16. Force Majeure. Neither party shall be liable to the other for any
             -------------
delay or failure to perform hereunder, which delay or failure is due to causes
beyond the control of said party, including, but not limited to: acts of God;
acts of the public enemy; acts of the United States of America, or any State,
territory, or political subdivision thereto or of the District of Columbia;
fires; floods; epidemics; quarantine restrictions; strikes; or freight
embargoes. Notwithstanding, the foregoing provisions of this Section 16, in
every case the delay or failure to perform must be beyond the control and
without the fault or negligence of the party claiming excusable delay.

         17. Integration. This Agreement and any attachments, schedules, and
             -----------
exhibits hereto represent the entire agreement and understanding between the
parties as to the subject matter hereof and supersede all prior or
contemporaneous agreements, whether written or oral regarding Executive's
employment at the Bank and all rights, privileges and benefits related thereto.
Without limiting the generality of the foregoing, Executive acknowledges and
agrees that effective on the Commencement Date, the terms and conditions of this
Agreement will supplant any different terms and conditions that previously
existed or governed Executive's employment with the Bank. No waiver, alteration,
or modification of any of the provisions of this Agreement shall be binding
unless in writing and signed by duly authorized representatives of the parties
hereto.

         18. Waiver. Failure or delay on the part of either party hereto to
             ------
enforce any right, power, or privilege hereunder shall not be deemed to
constitute a waiver thereof. Additionally, a waiver by either party of a breach
of any promise hereof by the other party shall not operate as or be construed to
constitute a waiver of any subsequent waiver by such other party.

         19. Savings Clause. If any term, covenant, or condition of this
             --------------
Agreement or the application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant, or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant, or condition of this Agreement shall
be valid and enforced to the fullest extent permitted by law.
<PAGE>

         20. Authority to Contract. The Bank warrants and represents that it has
             ---------------------
full authority to enter into this Agreement and to consummate the transactions
contemplated hereby and that this Agreement is not in conflict with any other
agreement to which the Bank is a party or by which it may be bound. The Bank
further warrants and represents that the individuals executing this Agreement on
behalf of the Bank have the full power and authority to bind the Bank to the
terms hereof and have been authorized to do so in accordance with the Bank's
corporate organization.

         21. Dispute Resolution.
             ------------------

         (a) Any controversy or claim between Bank and Executive arising from or
relating to this Agreement or any agreement or instrument delivered under or in
connection with this Agreement, including any alleged dispute, breach, default,
or misrepresentation in connection with any of the provisions of this Agreement,
shall, at the option of Executive or Bank, be submitted to arbitration, using
either the American Arbitration Association ("AAA") or Judicial Arbitration and
Mediation Services, Inc. ("JAMS") in accordance with the rules of either JAMS or
AAA (at the option of the party initiating the arbitration) and Title 9 of the
U.S. Code. All statutes of limitations or any waivers contained herein which
would otherwise be applicable shall apply to any arbitration proceeding under
this Section 21(a). The parties agree that related arbitration proceedings may
be consolidated. The arbitrator shall prepare written reasons for the award.
Judgment upon the award rendered may be entered in any court having
jurisdiction.

         (b) No provision of, or the exercise of any rights under, Section 21(a)
hereof shall limit the right of any party to exercise self help remedies or to
obtain provisional or ancillary remedies, such as injunctive relief from a court
having jurisdiction before, during or after the pendency of any arbitration. The
institution and maintenance of an action for judicial relief or pursuit of
provisional or ancillary remedies or exercise of self help remedies shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration.

         (c) If any arbitration, legal action or other proceeding is brought for
the enforcement of this Agreement or any agreement or instrument delivered under
or in connection with this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.

         22. Remedies. In the event of a breach by Executive of Sections 10 or
             --------
12 of this Agreement, in addition to other remedies provided by applicable law,
the Bank will be entitled to issuance of a temporary restraining order or
preliminary injunction enforcing its rights under such Sections.

         23. Governing Law. This Agreement shall be governed by and construed in
             -------------
accordance with the laws of the State of California.

         24. Counterparts. This Agreement may be executed in counterparts, each
             ------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

         25. Advice of Counsel. Before signing this Agreement, Executive either
             -----------------
(i) consulted with and obtained advice from Executive's independent legal
counsel in respect to the legal nature and operation of this Agreement,
including its impact on executive's rights, privileges and obligations, or (ii)
freely and voluntarily decided not to have the benefit of such consultation and
advice with legal counsel.
<PAGE>

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

                          FIRST NORTHERN BANK OF DIXON

                          -------------------------
                          Owen J. Onsum,
                          President & Chief Executive Officer

                          EXECUTIVE

                          -------------------------
                          Robert M. Walker,
                          Senior Vice President/Branch Administrator

Exhibit A  -  California Labor Code Section 2870
<PAGE>

                                    EXHIBIT A
                                    ---------

                      CALIFORNIA LABOR CODE SECTION 2870

Section 2870. Application of provision providing that employee shall assign or
offer to assign rights in invention to employer.

(a) Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either;

    (i)  Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.

    (ii) Result from any work performed by the employee for the employer.

(b)  To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.

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