EMPLOYMENT AGREEMENT

This 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 the Effective Date (defined below) and shall renew for additional one-year periods thereafter on each anniversary of the Effective 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 .   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.

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:

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 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: