Exhibit 10.1

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Re:  Two Year Change Of Control

Dear:
 
Vineyard Bank (the “Bank”) considers it essential to its best interests, the
best interests of its sole shareholder, Vineyard National Bancorp (the
“Company”), and the best interests of the Company’s shareholders, to foster the
continuous employment of key management personnel.  In this connection, the Bank
recognizes that, as is the case with many businesses, the possibility of a
change in control may exist and that such possibility and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Bank, the Company
and their respective shareholders.
 
The Board of Directors of the Bank has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Bank's executive management, including yourself, to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control.
 
In order to induce you to remain in the employ of the Bank, the Bank agrees that
subject to the terms and conditions set forth in this letter agreement
("Agreement"), if a Change in Control (within the meaning of Section 2) occurs
and you are employed by the Bank immediately prior thereto, the Bank will
provide you with the Severance Benefit set forth in Section 4 and the
accelerated vesting set forth in Section 5.
 
1.  Term of Agreement.  This Agreement will begin on the date hereof and will
continue in effect through December 31,       . Beginning on January 1,      ,
and each January 1 thereafter, the Agreement will automatically be extended for
one additional year unless, not later than September 30 of the preceding year,
the Bank gives you notice that it does not wish to extend this Agreement;
provided, however, that any such notice that is given on or after a Change in
Control will not be valid unless you consent thereto in writing.
 
2.  Change in Control.  For purposes of this Agreement, a “Change in Control”
shall mean the occurrence of any one of the following:
 
(i)  The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization if more than 50% of the
combined voting power (which voting power shall be calculated by assuming the
conversion of all equity securities convertible [immediately or at some future
time] into shares entitled to vote, but not assuming the exercise of a warrant
or right to subscribe to or purchase those shares) of the continuing or
surviving entity’s (the “Surviving Entity”) securities outstanding immediately
after such merger, consolidation or other reorganization is owned, directly or
indirectly, by persons who were not shareholders of the Company immediately
prior to such merger, consolidation or other reorganization; provided, however,
that in making the determination of ownership by the shareholders of the
Company, immediately after the reorganization, equity securities which persons
own immediately before the reorganization as shareholders of another party to
the transaction shall be disregarded;
 
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(ii)  The consummation of any Person (as hereinafter defined) pursuant to a
tender or exchange offer to acquire any stock of the Company (or securities
convertible into stock) for cash, securities or other consideration, provided
that after the closing of such offer such Person would be the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act of 1934, as amended [the “1934
Act”]), directly or indirectly, of 50% or more of the combined voting power of
the then outstanding voting securities eligible to vote generally in an election
of directors of the Company (calculated as provided in Paragraph (d) of Rule
13d-3 under the 1934 Act in the case of rights to acquire stock);
 
(iii)  The consummation of a transaction whereby following such transaction the
a majority of the Board of Directors of the Company ceases to consist of
individuals who were members of the Board of Directors immediately prior to such
transaction;
 
(iv)  The sale, transfer or other disposition of all or substantially all of the
Company’s assets; or
 
(v)  The Board of Directors or the stockholders of the Company approve a plan of
complete dissolution or liquidation of the Company, or a complete dissolution or
liquidation of the Company shall occur.
 
A transaction will not constitute a Change in Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company’s securities immediately before such transaction.
 
3.  Timing of, and Conditions to, Severance Payment Following Change in
Control.  If you are employed by the Bank immediately prior to a Change in
Control, unless you have been terminated for cause (as hereinafter defined), you
will be entitled to receive the Severance Benefit set forth in Section 4 hereof
upon the occurrence of any one of the following events (each a “Second Trigger
Event”) any time during the twenty-four (24) month period following the Change
of Control: (i) the termination of your employment by the Bank, the Company, or
the Surviving Entity (except if you are terminated for cause); (ii) a material
decrease in your duties, title, responsibilities, benefits or compensation
(including, without limitation, any deferred and equity based compensation)
approved in accordance with the Compensation Committee Charter and in effect
prior to the Change of Control; provided, however, a decrease in performance
based compensation shall not constitute a Second Trigger Event if (1) the
performance based compensation arrangement available to you at the time of such
decrease is the same or substantially similar to the arrangement immediately
prior to the Change in Control, and (2) such decrease is a direct result of your
performance under the arrangement; (iii) the failure to pay you any portion of
your compensation (including, without limitation, any deferred compensation or
equity incentives); (iv) you are required to perform your duties at a location
that is more than forty (40) miles from the location set forth in your original
offer letter or you are otherwise required to commute an average of more than
forty-five (45) minutes from your primary residence to your primary job
location, or (v) any purported modification of this Agreement without your prior
written consent.  As used herein, “terminated for cause” or “cause” shall mean
the termination of your employment upon the occurrence of any one of the
following:  (i) your willful and continued failure to substantially perform your
duties for the Bank (other than such failure resulting from your disability,
death, or your termination other than for cause) after written demand is
received by you from the Bank which specifically identifies the manner in which
the Bank believes that you have not substantially performed your duties, or (ii)
your willful engagement in any of the following conduct that is demonstrably and
materially injurious to the Bank: (A) any willful act involving fraud or
dishonesty in the course of your employment with the Bank, (B) the willful
carrying out of any activity which is in violation of the Bank’s policies or
procedures or which would subject the Bank or its other officers, directors or
employees to civil or criminal liability, (C) attendance at work in a state of
intoxication or otherwise being found in possession at your workplace with any
illegal drug or substance, possession of which would amount to a criminal
offense, (D) assault or other act of violence against any person during the
course of employment, or (E) indictment of any felony or misdemeanor involving
moral turpitude.   No act or failure to act by you shall be deemed “willful”
unless done, or omitted to be done, by you not in good faith or without the
reasonable belief that your action or omission was in the best interest of the
Bank.
 
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4.  Severance Benefit.  The “Severance Benefit” payable hereunder is a lump sum
payment, payable by check, in an amount equal to the sum of:  (i) your base
salary for a twenty-four (24) month period; (ii) two (2) times the average of
the two most recent annual incentive bonuses paid to you prior to the Change in
Control (iii) the amount you would have to pay for COBRA continuation coverage
under the Bank’s group health plans for a 12-month period had your employment
terminated immediately prior to the Change in Control and you elected COBRA
continuation coverage at such time.  For purposes of clause (i) of the preceding
sentence, “base salary” means your base salary immediately prior to the Change
in Control, but disregarding any reduction of your base salary that is made in
anticipation of or after the Change in Control.  The Severance Benefit shall be
paid as soon as practical following the occurrence of a Second Trigger Event,
but in no event more than ten (10) days after the Second Trigger Event.
 
5.  Accelerated Vesting of Restricted Shares and Stock Options.  Except as
otherwise expressly provided in this Section 5, immediately upon a Change in
Control, to the extent that they have not yet vested, any and all awards to you
under any of the Company’s restricted share plans and/or incentive stock option
plans that have not previously terminated shall fully and immediately vest.
Notwithstanding the provisions of the preceding sentence, upon the first
occurrence of (i) the event described in Section 2(v) hereof, or (ii) an event
in which any individual, corporation, partnership, or other entity (“Person”),
which term shall include a “group” (within the meaning of Sections 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended), with the approval
of the incumbent directors then serving on the Company’s Board of Directors and
their formal recommendation and endorsement to the Company’s shareholders to
approve such Change in Control event, consummates a tender or exchange offer,
any and all unvested awards to you under any of the Company’s restricted share
plans and/or incentive stock option plans shall not vest until the occurrence of
a Second Trigger Event within the time period set forth in Section 3 hereof.
 
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6.  Parachute Tax.  In the event that the severance and other benefits provided
for in Sections 4 and 5 or otherwise payable to the you (i) constitute
“parachute payments” within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”) and (ii) but for this Section 6, would be
subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), then your severance benefits under Sections 4 and 5 shall either be (i)
delivered in full, or (ii) delivered as to such lesser extent which would result
in no portion of such severance benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by you
on an after-tax basis, of the greater amount of severance benefits,
notwithstanding that all or some portion of such severance benefits may be
taxable under Section 4999 of the Code.  Unless the Bank and you otherwise agree
in writing, any determination required under this Section 6 shall be made in
writing in good faith by tax counsel or the accounting firm serving as the
Bank’s tax counsel or independent public accountants immediately prior to the
Change of Control (“Tax Counsel”), in good faith consultation with and approval
by you.  In the event of a reduction in benefits hereunder, you shall have the
right to choose which benefits to reduce.  For purposes of making the
calculations required by this Section 6, Tax Counsel may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code.  You and the Bank shall furnish to Tax Counsel such
information and documents as Tax Counsel may reasonably request in order to make
a determination under this Section.  All fees and expenses of any Tax Counsel
selected under this Section 6 shall be borne solely by the Bank.
 
7.  Withholding Taxes.  The Bank, the Company or the Surviving Entity (as
applicable) may withhold from all payments due you hereunder, without
duplication, all taxes that such entity is required to withhold.
 
8.  No Mitigation.  You will not be required to mitigate the amount of any
payment provided for herein by seeking other employment or otherwise, nor will
the amount of any payment or benefit provided for herein be reduced by any
compensation earned by you as the result of employment by another employer.
 
9.  No Employment Contract.  This Agreement does not constitute a contract of
employment, it does not impose on the Bank any obligation to retain you as an
employee, and it does not prevent you from terminating your employment.  You
understand and acknowledge that you are an employee at will and that either you
or the Bank may terminate our employment relationship at any time, for any
reason, or for no reason.
 
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10.  Assignment.  Your obligations may not be delegated and, except with respect
to the designation of beneficiaries in connection with benefits payable to you
hereunder, you may not, without the Bank’s written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein.  Any such attempted delegation or disposition
shall be null and void and without effect.  This Agreement and all of the Bank’s
rights and obligations hereunder may be assigned or transferred by the Bank to
and shall be assumed by and be binding upon any successor to the Bank.  The term
“successor” means, with respect to the Bank or any of its subsidiaries, any
corporation or other business entity which, by merger, consolidation, purchase
of the assets or otherwise acquires all or a material part of the assets of the
Bank.
 
11.  Death.  This Agreement will inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.  Unless otherwise provided herein,
if you should die while any amount would still be payable to you hereunder, all
such amounts will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to your
estate.
 
12.  Notice.  For the purpose of this Agreement, notices and all other
communications provided for in the Agreement will be in writing and will be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Bank must be directed to the attention of the President,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address will be
effective only upon receipt.
 
13.  Final Expression.  This Agreement is intended to be a final expression of
our agreement with respect to the subject matter hereof and is intended as a
complete and exclusive statement of the terms and conditions thereof and
supersedes and replaces all prior negotiations and agreements between us,
whether written or oral, with respect to the subject matter hereof.
 
14.  Validity.  The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of any other provision
of this Agreement, which will remain in full force and effect.
 
15.  Amendment and Waiver.  No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and the President of the Bank.  No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
 
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16.  Governing Law.  This Agreement will be governed by and construed under the
laws of the State of California, applicable to contracts to be wholly performed
in such State, without regard to the conflict of laws principles thereof.
 
17.  Arbitration.  Any dispute or controversy arising under or in connection
with this Agreement will be settled exclusively by arbitration in California, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you will be entitled to seek specific
performance of your right to be paid during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
 
18.  Counterparts. This Agreement may be executed in several counterparts, each
of which will be deemed to be an original but all of which together will
constitute one and the same instrument.
 
[SIGNATURES ON FOLLOWING PAGE]

 
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If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Bank the enclosed copy of this letter which will then
constitute our agreement on this subject.
 
Sincerely,
 

 
By:           ____________________________
 
Norman Morales
 
President and Chief ExecutiveOfficer
 
Section 5 Consented and Agreed to by
 
Vineyard National Bancorp
 

 
By:_______________________
 
Norman Morales
 
President and Chief Executive Officer
 

 

 

 
                                                                                                                                                                          
EMPLOYEE
NAME                                                                                     Signature                       Date
 
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