Exhibit 10.1

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June 21, 2006

 
Re: Two Year Change Of Control

Dear Tina Patricia Sandoval:
 
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 Retention Benefit specified in Section 4.
 
1.  Term of Agreement. This Agreement will begin on the date hereof and will
continue in effect through December 31, 2006. Beginning on January 1, 2007, 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.
 
 
 

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2.  Change in Control. For purposes of this Agreement, a “Change in Control”
shall mean:
 
(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 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; or
 
(ii) The sale, transfer or other disposition of all or substantially all of the
Company’s assets.
 
(iii) 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, Retention Payment Following Change in Control.
 
(i)  If you are employed by the Bank immediately prior to a Change in Control,
unless you have been Unreasonably Uncooperative (as hereinafter defined) you
will be entitled to receive the Retention Benefit on the earlier of (A) the 90th
day following the Change in Control; or (B) as soon as practicable (but not more
than ten days) following the first occurrence on or after the Change in Control
of any of the following: (1) the termination of your employment by the Bank
(without regard to the reason of the termination of your employment), (2) your
duties, title, responsibilities or compensation being meaningfully reduced by
the Bank, or (3) your being required to perform your duties at a location that
is more than 25 miles from their original location. In the event that you have
been Unreasonably Uncooperative, you will forfeit your right to receive any
benefit hereunder. For purposes hereof you will be deemed to have been
“Unreasonably Uncooperative” if and only if the Bank’s Chief Executive Officer
immediately prior to the Change in Control, in his sole discretion, provides you
and the Bank with written notice that he has made an affirmative determination
that you have been unreasonably uncooperative with the Bank during the period
immediately prior to and immediately following the Change in Control. In making
such determination, the Bank’s Chief Executive Officer immediately prior to the
Change in Control will take into account all factors that he, in his sole
discretion, deems relevant, including, but not limited to, (i) your position,
duties and title prior to the Change in Control and (ii) the potential desire of
the new beneficial owners of the Bank to replace some or all of the Bank’s
management team with other personnel and to have the old management team
reasonably assist them in the transition. The determination of the Bank’s Chief
Executive Officer immediately prior to the Change in Control with respect
thereto shall be binding, even though such determination may be somewhat
subjective.
 
 
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4.  Retention Benefit. The “Retention 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-month period; (ii) the average of the two most recent
annual incentive bonuses paid to you prior to the Change in Control; and (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 the Change in Control.
 
5.  Accelerated Vesting of Restricted Shares and Stock Options. Upon a Change in
Control, to the extent that it has not yet vested, any award to you under any of
the Company’s Restricted Share Plans that has not previously terminated and any
stock option granted to you under the Company’s 1997 Incentive Stock Option Plan
(or any other stock option plan adopted by the Company) that has not previously
terminated, shall fully and immediately vest.
 
6.  Parachute Tax. Notwithstanding anything in this Agreement to the contrary,
the amount of any payment to be received by you pursuant to this Agreement
(including the accelerated vesting provided for in Section 5) will be reduced
(but not below zero) by the amount, if any, necessary to prevent any part of any
payment or benefit received or to be received by the you in connection with a
Change in Control, (whether payable or provided pursuant to this Agreement (but
without regard to this Section 6) or any other agreement, contract, plan or
arrangement with the Bank, any person whose action results in such Change in
Control or any member of an “affiliated group” (as defined in Section 280G(d)(5)
of the Internal Revenue Code of 1986, as amended (the “Code”)) which includes
the Bank) (such foregoing payments or benefits referred to collectively as the
“Total Payments”), from being treated as an “excess parachute payment” within
the meaning of Section 280G(b)(I) of the Code, but only if and to the extent
such reduction will also result in, after taking into account all applicable
state and Federal taxes (computed at the highest applicable marginal rate)
including any taxes payable pursuant to Section 4999 of the Code, a greater
after-tax benefit to you than the after-tax benefit to you of the Total Payments
computed without regard to any such reduction. For purposes of the foregoing,
(i) no portion of the Total Payments will be taken into account which in the
opinion of nationally-recognized tax counsel selected by you (“Tax Counsel”)
does not constitute a “parachute payment” within the meaning of
Section 280G(b)(2) of the Code; (ii) any reduction in payments pursuant to this
Agreement will be computed by taking into account, in accordance with Section
280G(b)(4) of the Code, that portion of the Total Payments which is reasonable
compensation, within the meaning of Section 280G(b)(4) of the Code, in the
opinion of Tax Counsel; (iii) the value of any non-cash benefits or of any
deferred or accelerated payments or benefits included in the Total Payments will
be determined by Tax Counsel in accordance with the principles of Section
280G(d)(3) and (4) of the Code and the Treasury Regulations thereunder; and (iv)
in the event of any uncertainty as to whether a reduction in Total Payments to
the Executive is required pursuant hereto, the Bank will initially make all
payments otherwise required to be paid to you hereunder, and any amounts so paid
which are ultimately determined not to have been payable hereunder either (x)
upon our mutual agreement, or (y) upon Tax Counsel furnishing you with its
written opinion setting forth the amount of such payments not to have been so
payable under this Section 6, or (z) in the event a portion of the Total
Payments shall be determined by a court or an Internal Revenue Service
proceeding to have otherwise been an “excess parachute payment,” the amount so
determined in (x), (y) or (z) shall be repaid by you to the Bank within ten (10)
business days after the time of such mutual agreement, such opinion is so
furnished to you, or of such determination, as applicable. All fees and expenses
of any Tax Counsel or accounting firm selected under this Section 6 shall be
borne solely by the Bank.
 
 
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7.  Withholding Taxes. The Bank may withhold from all payments due you hereunder
all taxes that the Bank 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.
 
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.
 
 
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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.
 
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.
 
 
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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: _/s/ Norman Morales________________
 
Name: Norman Morales
 
Title: President and Chief Executive Officer
 
Section 5 Consented and Agreed to by
 
Vineyard National Bancorp
 
 
 
By:__/s/ Norman Morales______________
 
Name: Norman Morales
 
Title: President and Chief Executive Officer
 
Agreed to this 21st day of June, 2006.
 

 

 
  Tina Patricia Sandoval                  /s/ Tina Patricia Sandoval      __June
26, 2006_______
 
EMPLOYEE NAME    Signature         Date
 
 
 
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