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exhibit10_1.htm

    
      

    

     

     

    
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       877
North 8th West, Riverton, WY  82501 
USA                
Ph: (307) 856-9271  Fx: (307)
857-3050                
www.usnrg.com
 

       
 

      For Immediate
Release
 

       
 

      U.S. ENERGY CORP. ANNOUNCES INVESTMENT IN GEOTHERMAL
ENTITY
 

       
 

      RIVERTON, Wyoming – December
22, 2008 – U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) today announced
that it has invested $3.445 million in Standard Steam Trust LLC (“SST”), a
private geothermal exploration and development company based in Denver,
Colorado.  Current capitalization of
SST (with other partners) is $13.8 million (25% USE), which now includes
approximately 60,000 acres of BLM, state and fee leases in seven prospect areas
in three states.  Acreage
accumulation is ongoing, with 15,216 acres (included in the figure above)
acquired at the December 19, 2008 BLM lease sale in Utah.  Such acreage accumulation will continue
and substantial additional capital is expected to be raised in 2009.  
 

       
 

      Today there are 66
geothermal-powered electrical generation plants in the United States, providing
2960 MW of base load (constant) power to utilities, which represents less than
1% of the electrical generation nationwide.  Twenty-six states have implemented
mandatory renewable energy portfolio standards, requiring utilities to be
generating from 5% to 33% of their power from renewable sources.  The deadlines for compliance with these
standards take effect from 2009 to 2025 depending on the state.  
 

       
 

      Geothermal plants are “zero
emission” and thus meet the renewable energy mandates.  The plants use existing technology to
circulate hot water from wells through binary or flash heat exchangers to
produce the power to drive turbines. All the water is injected back into the
earth to recharge the resource.
 

       
 

      Geothermal
power offers a number of advantages over other alternative energy sources,
including continuous and reliable output, as geothermal is not weather
dependent.  It is the only base load
renewable power source.  Additional
advantages include minimal pricing volatility, limited environmental impact,
high sustainability and improved security of supply. When viewed over the life
of the project, geothermal is among the least expensive options when compared
with both fossil fuel and alternative energy.  Initial infrastructure costs are
substantially lower than some other alternative forms of production, and nominal
energy inputs are required once the power plants are in production.
 

       
 

      We intend to advance each
individual prospect through the exploration and feasibility stages before
determining whether to: 1) sell a prospect to a utility, 2) bring an industry
partner on a joint venture basis, or 3) pursue further financing with
institutional capital to further advance revenue generating capabilities, which
may include the operation of power plants. 
The first phase of the project (through 2009) will be assembling a
portfolio of industrial scale prospects with a total targeted power resource of
approximately 2,000 MW; individual prospects are targeted at 100 to 500 MW.  The second phase is expected to be
completed in 2010, consisting of early science of geology, geophysics and
temperature gradient drilling.  The
third phase of work is scheduled for 2011 and will consist of production well
drilling on one of the prospects to quantify the geothermal resource present
there.  Permitting and construction
would follow beginning as early as the end of 2011.  
 

       
 

      “Meeting the growing
renewable portfolio standards at both the state and federal levels is driving
considerable interest in the geothermal space, and we expect interest to grow
substantially in the next few years. 
We will be working closely with our partners to assemble a strong
portfolio of assets and a clear 
 

       
 

       
 

       
 

      
        
           

        

        
           

          
            

          

        

        
           

          
            Press
Release

            December
22, 2008 

            Page
2 of 3

          

        

      

       
 

       
 

       
 

      strategic plan to create
value in both the near and mid- term,” stated Keith Larsen, CEO of U.S. Energy
Corp.  
 

       
 

       
 

      “After spending considerable
time reviewing the renewable energy sector, we firmly believe that our entry
into geothermal provides our company with a strong position in a market that has
tremendous growth potential,” said Mark Larsen, President of U.S. Energy
Corp.  “Geothermal is a renewable
subsurface fuel, and our partners are applying their extensive experience in
modern oil and gas plays to geothermal exploration.  This sector shows significant promise at
a time when carbon management is playing an increasing role in the generation of
clean energy in our nation,” he added.
 

       
 

      * * * *
*
 

       
 

       
 

      
        
           

        

        
           

          
            

          

        

        
           

          
            Press
Release

            December
22, 2008 

            Page 3
of 3

          

        

      

      * * * * *
 

       
 

      About U.S.
Energy Corp.
 

       
 

      U.S. Energy Corp. is a diversified natural resource
company with interests in molybdenum, oil and gas, and real estate.  The Company is headquartered in
Riverton, Wyoming and its common stock is listed on The NASDAQ Capital Market
under the symbol “USEG”.
 

       
 

      * * * * *
 

       
 

       
 

       
 

      Disclosure
Regarding Mineral Resources Under SEC and Canadian Regulations; and
Forward-Looking Statements
 

       
 

      The Company
owns or may come to own stock in companies which are traded on foreign
exchanges, and may have agreements with some of these companies to acquire
and/or develop the Company’s mineral properties.  An example is Sutter Gold Mining
Inc.  These other companies are
subject to the reporting requirements of other
jurisdictions.
 

       
 

      United States
residents are cautioned that some of the information available about our mineral
properties, which is reported by the other companies in foreign jurisdictions,
may be materially different from what the Company is permitted to disclose in
the United States.
 

       
 

      This news
release includes statements which may constitute “forward-looking” statements,
usually containing the words “believe,” “estimate,” “project,” “expect," or
similar expressions.  These
statements are made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. 
Forward-looking statements inherently involve risks and uncertainties
that could cause actual results to differ materially from the forward-looking
statements.  Factors that would
cause or contribute to such differences include, but are not limited to, future
trends in mineral prices, the availability of capital, competitive factors, and
other risks.  By making these
forward-looking statements, the Company undertakes no obligation to update these
statements for revision or changes after the date of this
release.
 

       
 

      For further
information on the differences between the reporting limitations of the United
States, compared to reports filed in foreign jurisdictions, and also concerning
forward-looking statements, please see the Company’s Form 10-K (“Disclosure
Regarding Forward-Looking Statements”; “Disclosure Regarding Mineral Resources
under SEC and Canadian Regulation”; and “Risk Factors”); and similar disclosures
in the Company’s Forms 10-Q.
 

       
 

       
 

      * * * * *
 

       
 

      For further
information, please contact:
 

       
 

      Reggie Larsen
 

      Director of Investor
Relations
 

      U.S. Energy Corp. 
 

      (800) 776-9271
 

      Reggie@usnrg.com
 

       
 

      Nick
Hurst
 

      The
Equicom Group
 

      Investor Relations
 

      (403) 538-4845
 

      nhurst@equicomgroup.comexhibit10-1.htm

    Exhibit 10.1

      
        

      

    

     

    Amended
      and Restated Employment Agreement

    

    This
      Amended and Restated Employment Agreement (this “Agreement”) is made among
      Vineyard National Bancorp (“Company”), Vineyard Bank, National Association
      (“Bank”) and Glen C. Terry (“Executive”).  In order to create an
      enforceable agreement for employment of Executive, the parties agree as
      follows:

    

    1. 
      Employment and
      Duties.  Executive shall be employed as the President and Chief
      Executive Officer of both Bank and Company throughout the Term (as defined
      below). Executive shall render executive and management services of the type
      customarily provided by persons employed in similar capacities in the community
      bank industry and shall have all other powers and duties prescribed by Bank’s
      and Company’s respective governing instruments or Board of
      Directors.  Executive shall devote his reasonable best efforts and a
      majority of his business time to the performance of his duties hereunder and
      the
      advancement of the business and affairs of Bank and
      Company.  Executive shall observe and comply with the policies and
      rules of Bank and Company unless such compliance is inconsistent with the terms
      of this Agreement.

    

    2. 
      Location and
      Facilities.  Executive will operate from Bank’s and Company’s
      principal administrative offices or such other sites as Bank’s or Company’s
      Board of Directors may reasonably request.  Bank and Company shall
      provide working facilities and staff customary for Executive’s position and as
      are necessary to perform Executive’s duties.

    

    3. Term.  Executive’s
      employment shall initially be for a one-year term commencing on September 12,
      2008 (the “Start Date”) and shall renew for additional one-year periods
      thereafter on each anniversary of the Start Date unless at least thirty (30)
      days prior notice is provided by any party that it does not wish to
      renew.  Notwithstanding anything to the contrary in this Agreement,
      any party may terminate Executive’s employment at any time in accordance with
      this Agreement or applicable law.  The period of such initial term and
      any renewal period(s) through the date of termination of Executive’s employment
      shall be referred to as the “Term.”

    

    4. Base
      Compensation.

    

    
      	
              a.  

            	
              Base
                Salary.  During the Term, Executive shall receive a base salary
                at an annualized rate of Three Hundred Sixty Thousand dollars ($360,000),
                less any deductions and withholding required by law and less any
                Executive-authorized payroll deductions, payable in accordance with
                regular payroll practices.  Executive’s base annualized salary
                rate may be adjusted upward annually without further modification
                of this
                Agreement upon approval of the Boards of Directors of both Bank and
                Company.

            

    

     

    
      	
              b.  

            	
              Responsibility
                for Payments Generally.  Responsibility for all cash payments
                due Executive under this Agreement (such as base salary, the cash
                portion
                of any Annual Bonus pursuant to Section 7, and any Severance Payment
                pursuant to Section 15) shall be apportioned between Bank and Company,
                which apportionment shall be determined by Company in its discretion
                from
                time to time in accordance with applicable accounting and regulatory
                requirements.  Upon any Change of Control, the responsibility
                for all cash payments due Executive under this Agreement shall be
                apportioned 100% to, and shall be the sole responsibility of, the
                Bank or
                its successor.

            

    

    

    5. Benefit
      Plans.  During the Term, Executive shall be entitled to
      participate in such welfare benefit, pension benefit, ESOP or other stock
      compensation, and other benefit plans or programs maintained by Bank or Company
      for which Executive is eligible in accordance with Bank or Company policy,
      as
      the case may be, and subject to the terms and conditions of such benefits,
      plans
      and programs.  Nothing in this Agreement shall affect Bank’s or
      Company’s right to change insurance carriers and to adopt, amend, terminate or
      modify such benefits, plans and programs at any time.

     

    6. Vacation
      and Other
      Leave.  During the Term, Executive shall be entitled to
      vacation, paid time off, sick leave and other paid or unpaid leave benefits
      in
      accordance with Bank and Company policies for senior executives or as otherwise
      approved by the Boards of Directors of both Bank and Company.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    7. Bonus
      Compensation.
      In addition to base salary, Executive shall be eligible during the Term
      beginning in calendar year 2009 for an annual bonus at a target of eighty
      percent (80%) of Executive’s annualized base salary rate (the “Annual
      Bonus”).  Executive must be employed on December 31 of a calendar year
      to be eligible for an Annual Bonus for that calendar year, except as otherwise
      provided in this Agreement.  Whether to pay an Annual Bonus and the
      amount of any Annual Bonus if paid shall be determined in the discretion of
      Bank’s and Company’s respective Board of Directors (or any committee(s) thereof)
      based on the attainment of reasonable performance-based criteria established
      by
      them so long as (a) Executive’s target Annual Bonus is eighty percent of his
      annualized base salary rate, and (b) the criteria are established to and do
      achieve qualified performance-based compensation status under Internal Revenue
      Code section 162(m), 26 U.S.C. § 162(m).  The performance-based
      criteria may include, but are not limited to, management of Bank’s balance sheet
      and product pricing, growth in financial products offered by Bank, adherence
      to
      internal controls, management of credit risk, internal and external audit
      results, customer service quality, “back office” support quality, maintenance of
      appropriate operating policies and procedures, efficient integration of acquired
      companies, and capital management policies.  The specific criteria for
      each calendar year shall be set by agreement between Executive and both Bank’s
      and Company’s Boards of Directors.  A portion of any Annual Bonus
      awarded will be in the form of stock option grants, as described in Section
      8(b)
      below.  Any Annual Bonus awarded shall be paid (or granted in the case
      of any stock options grants) no later than March 15 of the year following the
      year for which it was awarded.

     

    8. Stock
      Option
      Grants.  Company shall grant the following stock options to
      Executive as provided below and when legally permissible under one or more
      plans
      maintained by Company:

    

    
      	
              a.  

            	
              Initial
                Grant.  As soon as possible after the Effective Date, the
                parties anticipate closing of a proposed capital raise involving
                renegotiation and settlement of various Bank debts, issuance of
                convertible senior secured notes, and issuance of additional shares
                of
                Company common stock (the “Capital Raise”).  Company shall grant
                Executive an option to purchase shares of Company common stock with
                an
                aggregate option exercise price equal to One Hundred Eighty Thousand
                dollars ($180,000), as promptly as practicable following close of
                the
                Capital Raise, with an option exercise price equal to the fair market
                value of the Company’s common stock at the time of
                grant.  Executive recognizes that such grants will be made under
                a new stock option plan to be adopted by the Company, which plan
                is
                subject to shareholder approval.

            

    

    

    
      	
              b.  

            	
              Annual
                Bonus Grants.  Sixty percent (60%) of any Annual Bonus awarded
                pursuant to Section 7 above will be paid in the form of options to
                purchase shares of Company common stock with an aggregate option
                exercise
                price equal to sixty percent (60%) of such Annual Bonus, granted
                as soon
                as practicable following the date such Annual Bonus is
                granted.  The option exercise price shall be equal to the
                shares’ fair market value at the time of
                grant.

            

    

    

    The
      parties agree that any such options awarded shall be for a term of ten years
      and
      shall vest in installments of one-third per year over a period of three
      years.  The parties also agree that, to the maximum extent permitted
      by law, each option will qualify as an “incentive stock option” within the
      meaning of Internal Revenue Code section 422, 26 U.S.C. §
422.   Bank and Company shall take all steps necessary to ensure
      compliance with Section 422.  This Section 8 shall not prohibit any
      other grants that Bank or Company may, in their discretion, make to Executive
      during the Term.

    

    9. Vesting
      of Options Upon
      Change of Control.  The option agreements covering any Company
      stock options granted to Executive pursuant to Section 8 shall provide that
      all
      options will vest immediately upon any Change of Control.  "Change of
      Control" shall mean either: (a) a consolidation or merger of Company with or
      into any other corporation or other entity or other corporate reorganization,
      in
      which the holders of equity interests of Company immediately prior to such
      consolidation, merger or reorganization own equity interests of the entity
      surviving such merger, consolidation or reorganization representing less than
      fifty percent (50%) of the combined voting power of the outstanding securities
      of such entity immediately after such consolidation, merger or reorganization,
      or (b) a sale of all or substantially all of the assets of Company
      (including a sale of the Bank) to an entity or person that is not an affiliate
      of Company.  The option agreements shall also provide for vesting of
      all options upon termination of Executive’s employment without Cause (as defined
      below) or upon Executive’s resignation from employment for Good Reason (as
      defined below).  Upon termination of Executive’s employment for any
      other reason, vesting of any stock options shall immediately cease, and any
      unvested options shall immediately be forfeited.

     

    10. Expenses.  Bank
      or Company shall reimburse Executive for reasonable out-of-pocket expenses
      incurred by him during the Term in the discharge of his duties under this
      Agreement in accordance with Bank and Company policy.  All
      reimbursable expenses shall be documented in reasonable detail and submitted
      in
      a format consistent with Bank’s or Company’s expense reporting
      policies.

    

    11. Automobile.  During
      the Term, Bank or Company shall pay Executive an automobile allowance of One
      Thousand Two-Hundred Fifty dollars ($1,250) per month, less any deductions
      and
      withholding required by law.  Executive shall be responsible for
      insurance, maintenance, and any other costs associated with any automobile
      operated by him, and he shall not be eligible for any further reimbursement
      or
      allowance for mileage, gasoline, or other automobile-related
      expenses.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    12. Additional
      Reimbursements.  Bank or Company shall also reimburse Executive
      for the following expenses incurred by him during the Term:

    

    
      	
              a.  

            	
              Country
                club membership, at full equity membership level, and monthly dues
                (including minimum mandatory periodic expenditures) up to One Thousand
                dollars ($1,000) per month; provided,
that
                (i)
                Executive’s country club membership fees shall not be reimbursed hereunder
                unless at least 75% of the amounts paid for membership (other than
                monthly
                dues) are fully refundable to Executive by such country club upon
                the
                termination of Executive’s membership at such country club, with Executive
                having provided reasonably satisfactory evidence to Bank and Company
                of
                the refundable nature of such country club membership fees, (ii)
                reimbursement for country club membership (other than monthly dues)
                shall
                not exceed One Hundred Thousand dollars ($100,000), and (iii) upon
                the
                termination of Executive’s membership with any country club for which
                Executive has received reimbursement hereunder or the termination
                of
                Executive’s employment with Bank and Company, Executive shall promptly
                remit to Bank and Company all amounts refunded to him (or in the
                case of a
                termination of employment, the amount that would be refundable to
                him at
                the time of such termination if he terminates the country club membership
                then) by any country club for membership
                fees;

            

    

    

    
      	
              b.  

            	
              Reasonable
                health club membership dues and, if necessary, initiation
                fees;

            

    

    

    
      	
              c.  

            	
              Reasonable
                costs charged by a professional mover for moving Executive’s and his
                family’s tangible personal property (such as household furniture and
                personal effects) from their current residence to their new residence
                provided, that, Executive shall obtain at least two (2) estimates
                from
                professional movers;

            

    

     

    
      	
              d.  

            	
              Once
                weekly round-trip airfare between Southern California and Northern
                California during the first 180 (180) days of the Term;
                and

            

    

    

    
      	
              e.  

            	
              Reasonable
                expenses for a hotel or other accommodation for up to the first 180
                (180)
                days during the Term while
                relocating.

            

    

    

    13. Indemnification.  Executive
      has entered into the standard form of director and officer indemnification
      agreement entered into by directors and officers of Bank and
      Company.  Executive shall retain all rights he may have under
      California Labor Code § 2802.

    

    14. Bank
      Transaction.  Notwithstanding anything to the contrary in this
      Agreement, Bank and Company shall have the option, from the Effective Date,
      not
      to continue Executive as President and Chief Executive Office of Bank and
      Company, respectively, as long as a successful Bank Transaction has not
      occurred.  If Bank and Company exercise such option, Executive shall
      receive a lump-sum payment in the amount of One Hundred Eighty Thousand dollars
      ($180,000) and Executive’s employment and this Agreement (except for Section 17)
      shall terminate.  Such payment, if made, shall be less any deductions
      and withholding required by law and shall be in lieu of any other payments
      pursuant to this Agreement.  An amount equal to the $180,000 payment
      has been deposited with a qualified escrow agent at Bank’s and Company’s
      expense.  Immediately upon a Bank Transaction, the $180,000 shall
      revert to and be released to Bank and Company (in proportion to their funding
      obligations under this Agreement), Executive’s employment shall continue as
      President and Chief Executive Officer, and this Agreement shall continue under
      its express terms.  For purposes of this Section, a “Bank Transaction”
means the closing of a sale of Bank involving a capital investment into
      Bank.

     

    
      15. Termination
        and Termination
        Pay.  Executive’s employment under this Agreement may be
        terminated at any time in the following circumstances (in addition to the
        circumstance set forth in Section 14 above):

      

      
        	
                a.  

              	
                Executive’s
                  employment shall terminate immediately upon Executive’s death or
                  Disability, in which event Executive or his estate shall be entitled
                  to
                  receive only the following:  (i) any unpaid base salary and
                  automobile allowance due as of the termination date; (ii) any amounts
                  or
                  benefits owing to Executive under the then-applicable benefit plans
                  or
                  policies; (iii) any accrued but unused vacation, paid time off,
                  and sick
                  leave as of the termination date pursuant to Bank and Company policy;
                  and
                  (iv) any unreimbursed business expenses due in accordance with
                  Section 10
                  (collectively, the “Accrued Benefits”).  Subject to the parties’
                  rights and obligations under the Americans with Disabilities Act
                  and the
                  California Fair Employment and Housing Act, “Disability” means the
                  inability to perform material duties with or without reasonable
                  accommodation by reason of illness, physical or mental disability
                  or other
                  similar incapacity, which inability shall continue for at least
                  ninety
                  (90) consecutive days or more than one-hundred twenty (120) days
                  in any
                  12-month period.

              

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                b.  

              	
                Executive’s
                  employment may be terminated for “Cause” at any time without advance
                  notice if Executive (i) is convicted of any felony or any crime
                  involving
                  moral turpitude, dishonesty, or fraud, (ii) commits any illegal
                  or
                  dishonest act that results in termination of coverage for Executive
                  under
                  Bank’s or Company’s Blanket Bond or similar security devices, as
                  distinguished from termination of coverage as to Bank or Company
                  as a
                  whole, (iii) is finally removed or suspended from office by the
                  Comptroller of the Currency or other regulatory agency having valid
                  jurisdiction, (iv) breaches any material obligation in this Agreement
                  or
                  any other agreement between him and Company and/or Bank, (v) commits
                  any
                  act of fraud, willful misconduct, breach of fiduciary duty, embezzlement,
                  or dishonesty that materially injures Bank and/or Company or materially
                  damages Bank’s and/or Company’s reputation(s), (vi) is the personal target
                  of a cease and desist order or willfully violates a cease and desist
                  order, or (vii) fails to correct a material failure to perform,
                  failure to
                  follow a lawful directive of Company’s or Bank’s respective Board of
                  Directors, or habitual neglect of duty after written notice from
                  Bank’s or
                  Company’s Board of Directors specifying the failure(s) and providing a
                  reasonable opportunity of up to thirty (30) days to cure the
                  failure(s).  If terminated for Cause, Executive shall receive
                  only the Accrued Benefits.

              

      

       

      
        	
                c.  

              	
                Executive’s
                  employment may be terminated without cause upon thirty (30) days’ notice
                  to Executive.  If terminated without cause, Executive shall be
                  entitled to receive the Accrued Benefits and the Severance
                  Payment.  “Severance Payment” shall mean a payment equal to
                  twelve (12) months of Executive’s then-current annual base salary;
                  provided, however, that if none of the
                  conditions enumerated in 12 C.F.R. §§ 359.1(f)(1)(ii)(2)(A) through
                  (E) exists at the time of termination with respect to the Company
                  or the
                  Bank (or with respect to the Bank or its successor if such termination
                  occurs after a Change of Control), then “Severance Payment” shall
                  mean a payment equal to (i) two (2) times Executive’s then-current annual
                  base salary, plus (ii) a Pro-Rata Bonus.  A “Pro-Rata Bonus”
                  means:  (x) if Executive is terminated during the first six
                  months of the calendar year, a cash payment equal to 50% of the
                  target
                  Annual Bonus for the then-current calendar year, and (y) if Executive
                  is
                  terminated during the second six months of the calendar year, a
                  cash
                  payment equal to the target Annual Bonus for the then-current calendar
                  year multiplied by a fraction whose numerator is the number of
                  full months
                  he was employed during the calendar year of termination and whose
                  denominator is 12.  The Severance Payment shall be less any
                  deductions and withholding required by
                  law.

              

      

       

      
        	
                d.  

              	
                Executive
                  may resign employment under this Agreement for Good
                  Reason.  “Good Reason” shall exist if, without Executive’s
                  express written consent, Company or Bank breaches any of their
                  respective
                  material obligations under this Agreement.  Without limitation,
                  such a material breach shall be deemed to occur upon any of the
                  following:

              

      

      

      
        	
                i.  

              	
                Material
                  reduction by Bank and Company in Executive’s responsibilities or
                  authority, or a requirement that Executive report to any person
                  or group
                  other than the Chairmen, the Boards of Directors of Bank and/or
                  Company,
                  or any committee(s) thereof;

              

      

      

      
        	
                ii.  

              	
                Assignment
                  to Executive by Bank’s and Company’s Boards of Directors of duties
                  materially inconsistent with the duties identified in Section 1
                  above;
                  or

              

      

      

      
        	
                iii.  

              	
                Material
                  reduction in base salary rate contrary to the terms of this Agreement
                  or,
                  following a Change of Control, a material reduction in salary below
                  the
                  amount to which Executive was entitled prior to the Change of
                  Control.

              

      

      

      None
        of
        the foregoing shall constitute Good Reason unless and until Executive provides
        written notice to Bank and Company identifying the asserted grounds for Good
        Reason and such asserted grounds for Good Reason is not cured within thirty
        (30)
        days of Bank’s and Company’s receipt of notice from Executive.  If
        Executive resigns for Good Reason, he shall be entitled to receive the Accrued
        Benefits.  In addition, Executive shall receive the Severance Payment
        provided in Section 15(c) above.

      

      
        	
                e.  

              	
                During
                  the one (1) year period following a Change of Control, Executive
                  may
                  voluntarily terminate employment under this Agreement.  Such
                  voluntary termination by him shall constitute resignation for Good
                  Reason
                  and shall entitle Executive to receive the Accrued Benefits and
                  the
                  Severance Payment provided in Section 15(c)
                  above.

              

      

      

      
        	
                f.  

              	
                Executive
                  may resign employment under this Agreement without Good Reason
                  upon thirty
                  (30) days’ notice to either Bank or Company.  Upon resignation
                  without Good Reason, Executive shall be entitled to receive only
                  the
                  Accrued Benefits.

              

      

      

      
        	
                g.  

              	
                Except
                  as expressly set forth in this Agreement or as provided by applicable
                  law,
                  Executive shall be due no other payments or benefits from Company
                  or Bank
                  upon termination of
                  employment.

              

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    16. Gross-Up
      Payments.  If any amounts payable to Executive are “excess
      parachute payments” under Internal Revenue Code section 280G, 26 U.S.C. § 280G,
      and are subject to excise tax under Internal Revenue Code section 4999, 26
      U.S.C. § 4999 (or any similar tax or assessment), then Executive shall receive
      from Company an additional payment to offset the excise tax liability (“Gross-Up
      Payment”).  The parties intend that Executive will receive an amount
      sufficient to place Executive in the same after-tax position that Executive
      would have occupied if no amounts payable were excess parachute
      payments.  The Gross-Up Payment shall be made (net of all applicable
      withholding taxes, including the taxes required to be withheld under Section
      4999 or any similar law or regulation) no later than fourteen (14) days prior
      to
      the last date Executive may pay the excise taxes without additional penalty
      or
      interest.

     

    17. Confidentiality.  Executive
      will have access to confidential, proprietary and trade secret information
      (collectively, “Confidential Information”) during the course of employment under
      this Agreement.  Confidential Information includes any non-public
      information belonging to Bank or Company and the subject of reasonable efforts
      to maintain its confidentiality, such as operating methods, business methods,
      discoveries, processes, patents, business plans, financial or budget
      information, research plans and results, regulatory compliance plans, proposals
      (including without limitation the identities of any persons or entities
      submitting proposals), projects, the terms of any transaction, and information
      regarding past, present, and future customers or employees.  Confidential
      Information can exist in any form, including oral or written statements,
      information remembered, information stored electronically, and information
      embodied in objects or processes.  Executive shall hold all
      Confidential Information as confidential.  Furthermore, Executive
      shall not during the Term or thereafter, without prior written permission from
      the Boards of Directors of both Bank and Company or as necessary in the
      performance of his duties during the Term, publish, disclose, or transfer to
      anyone outside of Company or Bank, or use in any other business, any
      Confidential Information.

     

    18. Unfair
      Competition and
      Non-Solicitation of Employees.  Executive agrees that,
      following termination of or resignation from his employment for any reason,
      Executive shall not engage in unfair competition against Bank or
      Company.  Executive shall not, during the two (2) year period
      following the termination of or
      resignation from his employment for any reason, solicit, persuade, or
      induce any individual who is employed by Bank or Company to:  (a)
      terminate or refrain from continuing such employment, or (b) become an employee
      or consultant of any individual or entity other than Bank or
      Company.

    

    19. Notice.  Notices
      under this Agreement shall be in writing and shall be personally delivered,
      sent
      via United States Mail or transmitted by facsimile.  Such notices
      shall be deemed received by a party (a) upon the date of personal delivery
      to
      Executive or to Bank’s or Company’s main administrative office, (b) three (3)
      business days after placement, postage-prepaid, in the United States Mail,
      or
      (c) one (1) business day after transmission by facsimile.  Any party
      may designate or change its address and facsimile number for notice under this
      Agreement so long as the designation or change is transmitted in writing to
      and
      received in advance by all parties.

     

    20. Controlling
      Law.  This Agreement shall be governed by the laws of the
      United States and, to the extent not preempted by such laws, the laws of the
      State of California.

    

    21. Reduction
      or Delay of
      Compensation or Benefit/Section 409A.

    

    a.           
      If payment of any compensation or benefit provided under this Agreement violates
      applicable law, the compensation or benefit shall be reduced to the maximum
      amount allowed by law and the parties shall if permitted by law meet and confer
      in good faith to establish lawful replacement compensation or benefits. If
      applicable law requires that any compensation or benefit provided under this
      Agreement be delayed, then the compensation or benefit shall be delayed as
      required by law until payment is lawful.

    

    b.           
      With respect to payments under this Agreement, for purposes of Section 409A
      of
      the Internal Revenue Code of 1986, as amended (“Section 409A”), each severance
      payment (if there is more than one payment) will be considered one of a series
      of separate payments.

    

    c.           
      Executive will be deemed to have terminated employment for purposes of
      determining the timing of any payments that are classified as deferred
      compensation only upon a “separation from service” within the meaning of Section
      409A.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    d.           
      If at the time of Executive’s separation from service, (i) Executive is a
      specified employee (within the meaning of Section 409A and using the
      identification methodology selected by Bank or Company from time to time),
      and
      (ii) the Board of Directors (or committee thereof) of Bank or Company makes
      a
      good faith determination that an amount payable hereunder constitutes deferred
      compensation (within the meaning of Section 409A) the payment of which is
      required to be delayed pursuant to the six-month delay rule set forth in Section
      409A in order to avoid taxes or penalties under Section 409A, then Bank or
      Company will not pay such amount on the otherwise scheduled payment date but
      will instead pay it in a lump sum on the first business day after such six-month
      period, together with interest for the period of delay, compounded annually,
      equal to the prime rate (as published in the Wall Street Journal) in effect
      as
      of the dates the payment should otherwise have been provided.

    

    e.           
      Any amount that Executive is entitled to be reimbursed under this Agreement
      will
      be reimbursed to Executive as promptly as practical and in any event not later
      than the last day of the calendar year after the calendar year in which the
      expenses are incurred, and the amount of the expenses eligible for reimbursement
      during any calendar year will not affect the amount of expenses eligible for
      reimbursement in any other calendar year.

     

    f.           
      To the extent Executive would be subject to the additional 20% tax imposed
      on
      certain deferred compensation arrangements pursuant to Section 409A as a
      result of any provision of this Agreement, such provision shall be deemed
      amended to the minimum extent necessary to avoid application of such tax and
      the
      parties shall promptly execute any amendment reasonably necessary to implement
      this Section 21(f)  Executive, Bank and Company agree to
      cooperate to make such amendments to the terms of this Agreement as may be
      necessary to avoid the imposition of penalties and additional taxes under
      Section 409A to the extent possible; provided however, that Bank and
      Company both agree that any such amendment shall provide Executive with
      economically equivalent payments and benefits, and Executive agrees that any
      such amendment will not materially increase the cost to, or liability of, Bank
      or Company with respect to any payments.

     

    22. Construction.  This
      Agreement shall be deemed mutually drafted and shall not be strictly construed
      in favor of any party.

    

    23. Severability.  Any
      invalid provision of this Agreement shall be deemed severed and shall not affect
      the continued operation of the Agreement’s remaining provisions.

    

    24. Entire
      Agreement.  This document contains the entire agreement of the
      parties.  It supersedes any other agreements, whether oral or in
      writing, between the parties with respect to the employment of Executive as
      President and Chief Executive Officer of Bank and Company, except for any
      indemnification agreements of the type referenced in Section 13
      above.  Specifically, this Agreement supersedes and renders null and
      void the September 12, 2008 Employment Agreement among Executive, Bank, and
      Company.  This Agreement may be modified only by express written
      agreement signed by Executive and authorized representatives of Bank and
      Company.

    

    25. Effective
      Date.  The “Effective Date” of this Agreement shall be the date
      of this Agreement.

    

    26.           
      Counterparts.  This
      Agreement may be executed in one or more counterparts, all of which together
      shall constitute one and the same instrument.

    

    

    [SIGNATURE
      PAGE FOLLOWS]

    
 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Dated:
      December 17,
      2008                                                                           
Vineyard National Bancorp

    

    _/s/   
      Douglas M. Kratz __________________________________

    

    Name,
      Title:   Douglas M. Kratz,
      Chairman_____________________

    

    

    Dated:
      December 17,
      2008                                                                           
Vineyard Bank, National Association

    

    _/s/  James
      G. LeSieur___________________________________

    

    Name,
      Title:__James G. LeSieur, Vice
      Chairman_____________________

    

    Dated:  December
      17, 2008

    

    _/s/  Glen
      C.
      Terry__________________________________

    Glen
      C. Terry

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