exhibit10-1.htm


    Exhibit
      10.1

    
      
        

      

    

    


    
 

    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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