EXHIBIT 10.3

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is entered into effective
July 1, 2005, by and between IndyMac Bank F.S.B. (“Employer”) and Terrence O.
Hughes (“Officer”).

     1. Term. Employer agrees to employ Officer and Officer agrees to serve
Employer and its affiliates, in accordance with the terms and conditions of this
Agreement, for a period of three (3) years, commencing on the date first set
forth above, unless Officer’s employment is earlier terminated as herein
provided.

     2. Position, Duties and Responsibilities. Officer shall serve as an
Executive Vice President of Employer, or of one of Employer’s affiliated
companies, as determined by Employer. Officer agrees to devote Officer’s
full-time best efforts to the business and affairs of Employer and its
affiliates, to perform such executive and managerial duties as may be assigned
to Officer, and to diligently promote the business, affairs and interests of
Employer and its affiliates. If so requested by Employer, Officer agrees to
serve concurrently, and without additional compensation, as an officer of both
Employer and of one or more of Employer’s affiliates, including its
subsidiaries.

     3. Outside Affiliations. During the term of this Agreement, Officer shall
not compete, either directly or indirectly, with the business of Employer or its
affiliates. Except as otherwise provided in this Agreement, Officer may make and
manage personal business investments of Officer’s choice and may serve in any
capacity with any civic, educational or charitable organization, or with any
governmental entity or trade association, provided that such activities do not
interfere with or conflict with Officer’s duties under this Agreement. Officer
may not sit on the board of directors of any civic, educational or charitable
organization without first obtaining Employer’s written consent.

     4. Compensation and Benefits. In consideration of the performance of
Officer’s duties under this Agreement, Employer or its affiliates shall provide
to Officer the compensation set forth below. All compensation paid to Officer by
Employer or by any of its affiliates shall be aggregated in determining whether
Officer has received the benefits described herein, but without prejudice to the
allocation of costs among the entities to which Officer renders services under
this Agreement.

          4.1 Base Salary. Employer shall pay to Officer a base salary at the
annual rate set forth in Appendix A. Officer’s base salary shall be payable in
equal installments no less frequently than every month. Employer may, in its
sole discretion, increase Officer’s base salary during the term of this
Agreement, but Employer will not decrease Officer’s base salary below the amount
set forth in Appendix A.

          4.2 Incentive Compensation. For each calendar year during the term of
this Agreement, Employer shall pay to Officer an incentive compensation award in
an amount to be determined pursuant to the then-applicable Incentive Plan set
forth in Appendix A. The terms of the Incentive Plan shall be agreed upon by
Employer and Officer during the first quarter of each

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new calendar year during the term of this Agreement. Any incentive compensation
award payable to Officer pursuant to the Incentive Plan shall be paid no later
than thirty (30) days after completion and publication of the applicable audited
financial statements for the relevant calendar year or calendar quarter. Except
as otherwise provided herein, any incentive compensation award described in the
Incentive Plan, and Officer’s base salary to the extent that the incentive
compensation award is a percentage of Officer’s base salary, shall be prorated
to the extent that Officer is employed for less than twelve (12) full months
during the relevant calendar year.

          4.3 Stock Options and Restricted Stock. During the term of this
Agreement, Employer’s public company affiliate, IndyMac Bancorp, Inc., or any
successor public company (“Public Company”), may grant to Officer stock options
and/or restricted stock for such number of shares of the Public Company’s common
stock as the Compensation Committee of the Board of Directors of the Public
Company (“Compensation Committee”) in its sole discretion determines, taking
into account Officer’s and the Public Company’s performance and the competitive
practices then prevailing regarding the granting of stock options. Subject to
the foregoing, it is anticipated that the number of shares in respect of each
annual stock option and/or restricted stock grant, if any, shall be granted
according to the Public Company’s annual equity incentive plan and the
management of the plan for Officer’s of a similar level, as of the time of the
grant. The stock options and/or restricted stock herein described shall be
granted at the same time as the Public Company grants stock options and/or
restricted stock to its other officers.

          All stock options and restricted stock granted herein: (i) shall be
granted pursuant to the Public Company’s current stock option plan, or such
other stock option plan or plans as may come into effect during the term of this
Agreement, (ii) shall be priced and shall vest in accordance with the terms set
by the Compensation Committee or as otherwise set forth in this Agreement, and
(iii) shall be subject to such other reasonable terms and conditions as may be
determined by the Compensation Committee and set forth in the agreement or other
document evidencing the award.

          The effect of Officer’s termination on the vesting of any stock
options or restricted stock granted under this Agreement is described in
Section 5.2. In the event that vested options held by Officer immediately after
such termination represent shares of common stock in an amount equal to or
greater than 500,000, then the maximum period for the exercise of any options
shall be twelve (12) months. In the event that vested options held by Officer
immediately after such termination represent shares of common stock in an amount
equal to or greater than 100,000 but less than 500,000, then the maximum period
for the exercise of any options shall be six (6) months. In the event that
vested options held by Officer immediately after such termination represent
shares of common stock in an amount less than 100,000, then the maximum period
for their exercise shall be three (3) months.

          4.4 Additional Benefits. Officer shall be entitled to paid vacation,
subject to Employer’s vacation policies in effect from time to time. Officer
shall also be entitled to participate in Employer’s life and medical insurance
plans, and in any stock purchase, executive compensation, pension,
profit-sharing, deferred compensation, or other benefit or bonus plans that are
offered to Employer’s employees generally, or to officers of Employer at a level
similar

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to Officer’s level, subject to the terms and conditions, including any
applicable eligibility requirements, of any such plan. This Agreement shall not
affect or otherwise modify the provisions of any other compensation, retirement
or other benefit program or plan of Employer.

     5. Termination of Employment. This Agreement, the compensation and benefits
provided under this Agreement, and Officer’s employment with Employer, are
terminable as herein provided.

          5.1 Grounds for Termination. Employer may, in its sole and absolute
discretion, terminate this Agreement and Officer’s employment on the following
grounds:

                    5.1.1 Disability. In the event of Officer’s inability to
perform his or her duties (with or without reasonable accommodation) because of
illness, injury or similar incapacity for four (4) consecutive calendar months,
or for shorter periods aggregating eighty (80) or more business days in any
twelve (12)-month period and upon a finding by Employer, in its sole discretion,
that allowing Officer to remain on a leave status beyond that period of time
will result in an undue hardship to the Employer (“Disability”), this Agreement
and Officer’s employment may be terminated by Employer by giving Notice of
Termination as provided in Section 9.1.

                    5.1.2 Death. In the event of Officer’s death during the term
of this Agreement (“Death”), this Agreement and Officer’s employment shall
immediately and automatically terminate.

                    5.1.3 Cause. Employer may terminate this Agreement and
Officer’s employment by giving Notice of Termination at any time for cause.
“Cause” means any act or omission to act by Officer which constitutes, in the
sole discretion of Employer, (i) a material breach of this Agreement that is
committed in bad faith or without reasonable belief that such act or omission is
in the best interests of Employer, (ii) negligence or misconduct resulting in a
material loss to Employer, (iii) gross negligence, (iv) an intentional and
material failure to perform Officer’s assigned duties, (v) fraud, theft or
dishonesty, (vi) willful violation of any law, rule or regulation of a
governmental authority, other than traffic violations, (vii) regular alcohol or
drug abuse, (viii) violation of the Company’s Code of Conduct, (ix) such other
conduct as is reasonably likely to cause Employer public disgrace or disrepute,
or (x) entry of an order by any state or federal regulatory agency either
removing Officer from Officer’s position with Employer or its affiliates or
prohibiting Officer from participating in the conduct of the affairs of Employer
or any of its affiliates.

                    5.1.4 Poor Performance. Employer may terminate this
Agreement and Officer’s employment by giving Notice of Termination at any time
for poor performance. “Poor Performance” means a failure of Officer to properly
meet, in the sole discretion of Employer, the duties and responsibilities of
Officer’s position in a competent fashion.

                    5.1.5 No Cause. Employer may, in its sole and absolute
discretion, terminate this Agreement and Officer’s employment by giving Notice
of Termination at any time for no reason, or for any reason whatsoever other
than Death, Disability, Cause or Poor Performance (“No Cause”).

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                    5.1.6 Resignation. Should Officer voluntarily resign
Officer’s employment, either by giving Notice of Termination during the term of
this Agreement or otherwise (“Resignation”), Officer’s employment shall
terminate immediately, unless Officer and Employer mutually agree on a later
effective date of termination.

     5.2 Benefits Upon Termination. Notwithstanding any other agreements to the
contrary, the following benefits shall be the only termination benefits Officer
is entitled to from Employer.

                    5.2.1 Disability. Regardless of Officer’s position or years
of service with Employer or its affiliates, in the event that Officer’s
employment terminates by reason of Disability, as defined in Section 5.1.1,
Officer shall be entitled to receive (i) all accrued but unpaid vacation
benefits as of the Termination Date, as defined in Section 9.1, (ii) any other
benefits already vested as of the Termination Date under any of Employer’s
applicable stock option, pension, bonus or other similar plans in which Officer
participated immediately prior to termination (“Vested Benefits”), (iii) the
immediate vesting, to the extent not otherwise vested, of all outstanding stock
options or similar awards previously granted to Officer under Section 4.3, and
(iv) Officer’s incentive compensation award for the year in which Officer became
disabled, prorated to the Termination Date. Officer shall also be entitled to
receive the following benefits for a period of time commencing from the
Termination Date and continuing for the number of months remaining in the term
of this Agreement, or until Officer’s death, whichever first occurs:
(v) continuation of Officer’s base salary, reduced by 50%, minus the amount of
any cash payments due to Officer under the terms of Employer’s disability
insurance or other disability benefit plan funded by Employer or Employer’s
tax-qualified Defined Benefit Pension Plan, all subject to Section 5.2.8, and
(vi) continuation of benefits substantially equivalent to the life, disability
and medical insurance policies maintained by Employer on behalf of Officer and
Officer’s spouse and dependents, if any, immediately prior to the Notice of
Termination, but then only to the extent that Officer is not entitled to
comparable benefits from other employment.

                    5.2.2 Death. Regardless of Officer’s position or years of
service with Employer or its affiliates, in the event of Officer’s Death, as
defined in Section 5.1.2, Employer shall pay to such person or persons as
Officer shall have designated in writing or, in the absence of such a
designation, to Officer’s estate, (i) all accrued but unpaid vacation benefits
as of the date of Death, (ii) any Vested Benefits, (iii) to the extent not
otherwise vested, all outstanding stock options or similar awards previously
granted to Officer, which will vest immediately upon Officer’s Death, and
(iv) Officer’s incentive compensation award for the year in which Death occurs,
prorated to date of Death. Employer shall also, within forty-five (45) days
following Officer’s Death, pay to Officer’s designee or to Officer’s estate an
amount equal to two times Officer’s last annual base salary. Employer shall
also, for a period of twelve (12) months following the date of Officer’s Death,
pay the cost of any continued coverage under Employer’s group medical insurance
plan for the benefit of Officer’s spouse and dependents, if any, should they
elect continued coverage under COBRA, provided they were covered under the plan
immediately prior to Officer’s Death.

                    5.2.3 Cause. Regardless of Officer’s position or years of
service with Employer or its affiliates, in the event of Officer’s termination
for Cause, as defined in Section 5.1.3, Officer shall be entitled to payment of
Officer’s base salary through the

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Termination Date, to any accrued but unpaid vacation benefits, and to any other
Vested Benefits, but to no other payments or benefits whatsoever.

                    5.2.4 Poor Performance. In the event of Officer’s
termination for Poor Performance, as defined in Section 5.1.4, the benefits
payable to Officer shall depend upon Officer’s position and years of continuous
service to Employer or its affiliates. If Officer had five (5) or fewer years of
continuous service as of the Termination Date, Officer shall be entitled to
payment of Officer’s base salary through the Termination Date, and to
continuation of Officer’s base salary, reduced by 50%, for the lesser of one
year or the number of months remaining in the term of this Agreement as of the
Termination Date, subject to Section 5.2.8.

                    If Officer had more than five (5) years of continuous
service as of the Termination Date, or if Officer is a director, officer or
principal stockholder of Employer or of any of its affiliates as described in
Section 16(a) of the Exchange Act (“Section 16 Employee”), Officer shall be
entitled to payment of Officer’s base salary through the Termination Date, and
to continuation of Officer’s base salary for the lesser of one year or the
number of months remaining in the term of this Agreement as of the Termination
Date, subject to Section 5.2.8, and to the additional benefit described in
Section 5.2.9, if allowed by law.

                    Regardless of Officer’s position or years of service,
Officer shall also be entitled to any accrued but unpaid vacation benefits, to
any other Vested Benefits, and to Officer’s incentive compensation award for the
year in which Officer was terminated, prorated to the Termination Date, but to
no other payments or benefits whatsoever.

                    5.2.5 No Cause. In the event Officer’s employment is
terminated for No Cause, as defined in Section 5.1.5, Officer shall be entitled
to (a) payment of Officer’s base salary through the Termination Date, (b) to
continuation of Officer’s base salary, increased by 100%, for six months and
then continuation of Officer’s base salary for an additional six months,
provided however that in the event that termination under this Section 5.2.5
occurs within the last twelve months of the term of this Agreement, the
Officer’s salary continuation benefits shall be reduced prorate by the number of
months remaining in the term of this Agreement as of the Termination Date. All
payments under this section 5.2.5 shall be subject to Section 5.2.8, and to the
additional benefit described in Section 5.2.9, if allowed by law and by this
Agreement.

                    Regardless of Officer’s position or years of service,
Officer shall also be entitled to any accrued but unpaid vacation benefits, to
any other Vested Benefits, to Officer’s incentive compensation award for the
year in which Officer was terminated, prorated to the Termination Date, and to
the immediate vesting, to the extent not otherwise vested, of all outstanding
stock options or similar awards previously granted to Officer under Section 4.3,
but only to the extent that any such outstanding stock options or similar awards
would, by their terms, vest within one (1) year of the Termination Date. In
addition, Officer shall be entitled, for a period of twelve (12) months
following the Termination Date, to continuation of benefits substantially
equivalent to the life, disability and medical insurance policies maintained by
Employer on behalf of Officer and Officer’s spouse, or domestic partner, and
dependents, if any, immediately prior to the Notice of Termination, but only to
the extent that Officer is not entitled to comparable benefits from other
employment.

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                    5.2.6 Resignation. In the event of Officer’s Resignation, as
defined in Section 5.1.6, Officer shall be entitled to payment of Officer’s base
salary through the Termination Date, to any accrued but unpaid vacation
benefits, and to any other Vested Benefits, but to no other payments or benefits
whatsoever.

                    5.2.7 Change in Control.

                    5.2.7.1 Determination of Change in Control. For purposes of
this section 5.2.7, “Company” shall mean any of the Employer, IndyMac Resources,
Inc., IndyMac Intermediate Holdings, Inc. or IndyMac Bancorp, Inc. Subject to
Section 5.2.7.2, a “Change in Control” shall be deemed to occur for purposes of
this Agreement upon the occurrence of any one of the following events:

(A) An acquisition of any common stock or other “Voting Securities” (as
hereinafter defined) of the Company by any “Person” (as the term person is used
for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)), immediately after which such Person has
“Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty five percent (25%) or more of the then outstanding
shares of the Company’s common stock or the combined voting power of the
Company’s then outstanding Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Voting Securities which are acquired
in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. For purposes of this Plan,
(1) “Voting Securities” shall mean the Company’s outstanding voting securities
entitled to vote generally in the election of directors and (2) a “Non-Control
Acquisition” shall mean an acquisition by (a) the Company or any of its
Subsidiaries, (b) an employee benefit plan (or a trust forming a part thereof)
maintained by (x) the Company, or (y) any corporation or other Person of which a
majority of its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Company (for purposes of the definition
in this subsection 5.2.7.1, a “Subsidiary”), or (c) any Person in connection
with a “Non-Control Transaction” (as hereinafter defined).

(B) The individuals who, as of the Effective Date, were members of the Board of
Directors of IndyMac Bancorp, Inc. (the “Incumbent Board”), cease for any reason
to constitute at least a majority of the members of the Board; provided,
however, that if the election, or nomination for election by the Company’s
common stockholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for purposes of this
Agreement be considered as a member of the Incumbent Board; provided further,
however, that no individual shall be considered a member of the Incumbent Board
if such individual initially assumed office as a result of either an actual or
threatened “Election Contest” (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board (a “Proxy Contest”) including
by reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or

(C) The consummation of:

  (1)   A merger, consolidation, or reorganization involving the Company or the
sale or other disposition of all or substantially all of the assets of the
Company to any Person or Persons other than a transfer to a Subsidiary, (a
“Business Transaction”), unless such Business Transaction is a “Non-Control
Transaction.” A “Non Control Transaction” shall mean a Business Transaction
where:

  (a)   the stockholders of the Company, immediately before such Business
Transaction, own directly or indirectly immediately following such Business
Transaction more than sixty percent (60%) of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such merger,
consolidation or reorganization or purchasing

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      such assets or stock (the “Surviving Corporation”) in substantially the
same proportion as their ownership of the Voting Securities immediately before
such Business Transaction;     (b)   the individuals who were members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such Business Transaction constitute at least a majority of the members of
the board of directors of the Surviving Corporation, or in the event that,
immediately following the consummation of such Business Transaction, a
corporation beneficially owns, directly or indirectly, a majority of the Voting
Securities of the Surviving Corporation, the board of directors of such
corporation; and     (c)   no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation or any Subsidiary,
or (iv) any Person who, immediately prior to such Business Transaction had
Beneficial Ownership of twenty-five percent (25%) or more of the then
outstanding Voting Securities or common stock of the Company, has Beneficial
Ownership of twenty-five percent (25%) or more of the combined voting power of
the Surviving Corporation’s then outstanding Voting Securities or its common
stock; or

  (D)   The Company’s stockholders approve a complete liquidation or dissolution
of the Company.

                    Notwithstanding the foregoing provisions of this subsection
5.2.7.1, a Change in Control shall not be deemed to occur solely because any
Person (the “Subject Person”) acquired Beneficial Ownership of more than the
permitted amount of the then outstanding common stock or Voting Securities as a
result of the acquisition of common stock or Voting Securities by the Company
which, by reducing the number of shares of common stock or Voting Securities
then outstanding, increases the proportional number of shares Beneficially Owned
by the Subject Person; provided, however, that if a Change in Control would
occur (but for the operation of this sentence) as a result of the acquisition of
common stock or Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional common stock or Voting Securities which increases the percentage
of the then outstanding common stock or Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.

                    5.2.7.2 Notwithstanding the provisions of this section
5.2.7.2, the Board, in the exercise of its reasonable discretion, may, but need
not, make an affirmative determination prior to the consummation of a Business
Transaction (as defined in subsection 5.2.7.1 (C)) that, in light of all
circumstances, such Business Transaction will be not be treated as a Change in
Control for purposes of this Agreement, by reason of it being in essence a
“combination of equals” or for any other reason. In making any such
determination, the Board shall give due consideration, without limitation, to
the likely effect of such transaction(s) on the makeup of the stockholder base,
the Board and the senior management of the Company.

                    5.2.7.3 Effect of Change of Control. As used herein, a
“Change in Control” shall be deemed to have occurred if any person or entity
other than IndyMac Bank Corp., Inc. becomes the beneficial owner, as defined in
Rule 13d-3 under the Exchange Act, of more than 50% of the combined voting power
of the outstanding stock of Employer, or acquires all or substantially all of
the assets of Employer.

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                    If a Change in Control should occur during the term of this
Agreement, and should Officer’s employment be terminated within one (1) year
following the Change in Control (i) by reason of Officer’s Disability or Death,
or (ii) either for No Cause or because this Agreement expires and is not renewed
by Employer or its successor on terms that are substantially comparable to the
terms of this Agreement, then all outstanding stock options or similar awards
previously granted to Officer under Section 4.3 that have not already vested
shall vest on the Termination Date.

                    If a Change in Control should occur during the term of this
Agreement, and should Officer’s employment continue without termination beyond
the first anniversary of the Change in Control, then all outstanding stock
options or similar awards previously granted to Officer under Section 4.3 that
have not already vested shall vest upon the first anniversary of the Change in
Control.

                    If a Change in Control should occur during the term of this
Agreement, and should Officer’s employment be terminated within two (2) years
following the Change in Control either for No Cause or because this Agreement
expires and is not renewed by Employer or its successor on terms that are
substantially comparable to the terms of this Agreement, then Officer shall be
entitled, in addition to the foregoing and in lieu of any other benefits
described elsewhere in this Agreement, to (i) any accrued but unpaid vacation
benefits, (ii) any other Vested Benefits, (iii) payment of Officer’s base salary
through the Termination Date, (iv) continuation of Officer’s base salary,
increased by 100%, for a period of twelve (12) months following the Termination
Date, (v) payment of Officer’s incentive compensation award, without proration,
for the year in which Officer was terminated, also increased by 100%, within
fifteen (15) days of Officer’s Termination Date, (vi) the additional benefit
described in Section 5.2.9, if allowed by law, and (vii) continuation, for a
period of twelve (12) months following the Termination Date, of benefits
substantially equivalent to the life, disability and medical insurance policies
maintained by Employer on behalf of Officer and Officer’s spouse and dependents,
if any, immediately prior to the Notice of Termination, but only to the extent
that Officer is not entitled to comparable benefits from other employment.

                    5.2.8 Other Employment. Employer’s obligation to pay salary
continuation benefits to Officer in the event of Officer’s termination for
Disability, Poor Performance or No Cause shall immediately cease in the event
that Officer obtains employment for compensation (whether as an employee,
independent contractor, consultant or otherwise) with any person or entity.

                    5.2.9 Excise Tax. In the event it should be determined that
any payment or distribution by Employer as the result of Officer’s termination
due to Poor Performance or No Cause would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code, the affected payments or
distributions shall include gross-up for any excise taxes due under Section 280G
of the Code or similar “golden parachute” provisions, plus any excise, income,
or payroll taxes owed on the excise payment amount. In order to be eligible for
this benefit, Officer must have had more than five (5) years of continuous
service to Employer or its affiliates as of the Termination Date, or must be a
Section 16 Employee. If the law prohibits any form of the foregoing benefit,
then Employer and Officer understand and agree that this Section 5.2.9 is of no
effect.

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                    5.2.10 Release of Claims. Employer’s obligation to pay any
salary continuation, benefits continuation or other non-vested benefits in the
event of the termination of Officer’s employment due to Disability, Poor
Performance or No Cause, as defined in Sections 5.1.1, 5.1.4 and 5.1.5, is
expressly conditional upon Officer first executing a general release of all
claims or causes of action, whether known or unknown, that Officer may have or
hold against Employer including, but not limited to, any claims for breach of
contract, for employment discrimination or harassment, for wrongful termination
or for other tortious conduct in connection with Officer’s employment or its
termination. Such release agreement shall be prepared by Employer, and shall
include an express waiver by Officer of California Civil Code section 1542.

     6. No Solicitation, Non-Competition and Confidentiality. In order to
receive and retain the salary continuation, benefits continuation or other
non-vested benefits payable to Officer in the event of termination by reason of
Disability, Poor Performance or No Cause, as defined in Sections 5.1.1, 5.1.4
and 5.1.5, Officer agrees to the following:

          6.1 Non-Competition. During employment and (a) if the termination is
by reason of Disability or Poor Performance, for a period of three (3) months
after termination of employment, or (b) if the termination is by reason of No
Cause, for a period of six (6) months after termination of employment, Officer
shall not engage in any business, whether as an employee, consultant, partner,
principal, agent, representative or stock holder (other than as a holder of less
than one percent (1%) equity interest), or in any other corporate or
representative capacity, with any other business that is engaged in any activity
that competes with the business of Employer or its affiliates, as conducted as
of the date of the termination of Officer’s employment.

          6.2 No Solicitation. During employment and for a period of one
(1) year after termination of employment, Officer shall not:

                    6.2.1 Solicit, or cause to be solicited, any customers of
Employer or its affiliates for purposes of promoting or selling any products or
services competitive with those of Employer or its affiliates;

                    6.2.2 Solicit business from, or perform services for, any
company or other business entity which at any time during the two (2) year
period immediately preceding Officer’s termination of employment with Employer
was a client of Employer or its affiliates; or

                    6.2.3 Solicit for employment, offer, or cause to be offered
employment, either on a full time, part-time or consulting basis, to any person
who was employed by Employer or its affiliates on the date Officer’s employment
terminated, unless Officer shall have received the prior written consent of
Employer.

     6.3 Basis for Non-Competition and Non-Solicitation Agreements. Officer
understands and agrees that the non-competition and non-solicitation agreements
contained in sections 6.1 and 6.2 above are necessary to Employer because
Officer has access to, and in order to protect the confidentiality of,
Employer’s “Confidential Information” (as that term is defined in section 6.4
below) from intentional and/or inadvertent disclosure or use upon or after the

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termination of Officer’s employment with Employer.

          6.4 Confidentiality. Officer hereby acknowledges and agrees that
Employer and its affiliates have developed and own valuable information related
to their business, personnel and customers including, but not limited to,
concepts, ideas, customer lists, business lists, business and strategic plans,
financial data, accounting procedures, secondary marketing and hedging models,
trade secrets, computer programs and plans, and information related to officers,
directors, employees and agents. Officer hereby agrees that all such
information, and all codes, concepts, copies and forms relating to such
information, Employer’s plans and intentions with respect thereto, and any
information provided by Employer or its affiliates to Officer with respect to
any of the foregoing, shall be considered “Confidential Information” for the
purpose of this Agreement. Officer acknowledges and agrees that all such
Confidential Information is a valuable asset of Employer, and if developed by
Officer, is developed by Officer in the course of Officer’s employment with
Employer, and is the sole property of Employer. Officer agrees that Officer will
not divulge or otherwise disclose, directly or indirectly, any Confidential
Information concerning the business or policies of Employer or any of its
affiliates which Officer may have learned as a result of Officer’s employment
during the term of this Agreement or prior thereto as an employee, officer or
director of or consultant to Employer or any of its affiliates, except to the
extent such use or disclosure is (i) necessary or appropriate to the performance
of this Agreement and in furtherance of Employer’s best interests, (ii) required
by applicable law or in response to a lawful inquiry from a governmental or
regulatory authority, (iii) lawfully obtainable from other sources, or
(iv) authorized by Employer.

          6.5 Reimbursement. If any part of this Section 6 is determined to be
invalid or unenforceable for any reason by a court of competent jurisdiction,
then Officer and Employer agree that these covenants shall be of no effect, that
Officer shall immediately return to Employer the salary continuation, benefits
continuation or other non-vested compensation described in Section 5.2 that has
been paid to Officer after termination of Officer’s employment, and that Officer
shall not be entitled to any further sums from Employer.

     7. Reimbursement of Business Expenses. During the term of this Agreement,
Employer shall promptly reimburse to Officer all business expenses reasonably
incurred by Officer in the performance of Officer’s duties under this Agreement
to the extent that such expenditures meet Internal Revenue Code requirements for
deductibility by Employer for federal income tax purposes, or are otherwise in
compliance with the rules and policies of Employer and are substantiated by
Officer in accordance with applicable requirements of the Code and Treasury
Regulations, and the applicable rules and policies of Employer.

     8. Indemnity. To the extent permitted by applicable law and by Employer’s
articles, bylaws or other governing instruments, Employer shall defend and
indemnify Officer and hold Officer harmless for any acts or decisions made by
Officer in good faith and while performing approved services for Employer or its
affiliates, and Employer shall use reasonable efforts to obtain coverage for
Officer under liability insurance policies then in effect which cover the other
officers or directors of Employer.

     9. Miscellaneous.

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          9.1 Notice of Termination and Termination Date. Any termination of
this Agreement by Employer or by Officer (including any Resignation) shall be
communicated by a written Notice of Termination to the other party, stating the
specific termination provision in this Agreement relied upon, if any, and
setting forth in reasonable detail the facts and circumstances, if applicable,
claimed to provide a basis for termination. The effective date of termination
(“Termination Date”) shall be (i) the date specified in the Notice of
Termination, or (ii) in the event of Officer’s Death, the date of Death, or
(iii) in the event of Officer’s resignation without providing Notice of
Termination, Officer’s last day of employment, or (iv) in the event of a Change
in Control, either the date specified in the Notice of Termination or the last
day of the term of this Agreement should same not be renewed on substantially
comparable terms within two (2) years following the Change in Control.

          9.2 Successorship. This Agreement shall inure to the benefit of and
shall be binding upon Employer, its successors and assigns. This Agreement may
not be assigned without the prior written consent of the parties, other than in
connection with a merger or sale of Employer or the sale of substantially all
the assets of Employer, or similar transaction. Notwithstanding the foregoing,
Employer may, without Officer’s consent, assign, whether by assignment
agreement, merger, operation of law or otherwise, this Agreement to the Public
Company or to any successor or affiliate of Employer or the Public Company,
subject to such assignee’s express assumption of all obligations of Employer
hereunder. The failure of any successor to or assignee of the Employer’s
business and/or assets in such transaction to expressly assume all obligations
of Employer hereunder shall be deemed a termination for No Cause, pursuant to
Section 5.1.5.

          9.3 Notices. Any notices provided for in this Agreement shall be sent
to Employer at its corporate headquarters, Attention: General Counsel, with a
copy to the Human Resources department at the same address, or to such other
address as Employer may from time to time in writing designate, and to Officer
at such address as Officer may from time to time in writing designate (or
Officer’s business address of record in the absence of such designation). All
notices shall be deemed to have been given two (2) business days after they have
been deposited as certified mail, return receipt requested, postage paid and
properly addressed to the designated address of the party to receive the
notices.

          9.4 Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter; provided, however, that all provisions of Employer’s Employee Handbook
and any other written personnel policies of Employer shall be incorporated
herein by this reference, and Officer hereby expressly acknowledges that all
provisions of the Employee Handbook and other written policies are applicable to
Officer’s employment relationship with Employer, except to the extent that any
such provisions directly conflict with any term contained in this Agreement;
PROVIDED, FURTHER, THAT OFFICER HEREBY EXPRESSLY ACKNOWLEDGES THAT OFFICER HAS
EXECUTED EMPLOYER’S STANDARD MUTUAL AGREEMENT TO ARBITRATE CLAIMS CONCURRENTLY
HEREWITH, WHICH REQUIRES THAT ANY DISPUTE UNDER THIS AGREEMENT WILL BE
ARBITRATED. No modifications or amendments of this Agreement shall be valid
unless made in writing and signed by the parties hereto.

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          9.5 Waiver. The waiver of the breach of any term or of any condition
of this Agreement shall not be deemed to constitute the waiver of any other
breach of the same or any other term or condition.

          9.6 California Law. This Agreement shall be construed and interpreted
in accordance with the laws of California, without reference to its conflict of
laws principles.

          9.7 Injunctive Relief. Employer and Officer acknowledge that the
services Officer is obligated to render under the provisions of this Agreement
are of a special, unique, unusual, extraordinary and intellectual character,
which gives this Agreement peculiar value to Employer. The loss of these
services cannot be reasonably or adequately compensated in damages in an action
at law and it would be difficult (if not impossible) to replace these services.
By reason thereof, if either party violates any of the material provisions of
this Agreement, the parties shall, in addition to any other rights and remedies
available under this Agreement, or under applicable law or the Mutual Agreement
to Arbitrate Claims, be entitled to seek injunctive relief, as permitted by law,
from a court or tribunal of competent jurisdiction, restraining the other from
committing or continuing any violation of this Agreement. The provisions hereof
shall survive the expiration, suspension or termination, for any reason, of this
Agreement.

          9.8 Severability. If any provision of this Agreement is held invalid
or unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect, and if any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.

          9.9 Regulatory Intervention. Notwithstanding anything in this
Agreement to the contrary, this Agreement is subject to the following terms and
conditions:

                    9.9.1 If Officer is suspended and/or temporarily prohibited
from participating in the conduct of Employer’s affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1)), Employer’s obligations hereunder shall be suspended as of
the date of service unless stayed by appropriate proceedings. If the charges in
the notice are dismissed, Employer shall (i) pay Officer all or part of the
compensation withheld while Employer’s contract obligations were suspended, and
(ii) reinstate any of Employer’s obligations which were suspended.

                    9.9.2 If Officer is removed and/or permanently prohibited
from participating in the conduct of Employer’s affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(4) and (g)(1)), all obligations of Employer under this Agreement shall
terminate as of the effective date of the order, but Officer’s vested rights
shall not be affected.

                    9.9.3 If Employer is in default (as defined in
Section 3(x)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813 (x)(1)),
all obligations under this Agreement shall terminate as of the date of default,
but Officer’s vested rights shall not be affected.

                    9.9.4 All obligations under this Agreement shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of Employer, (i) by the Office of Thrift
Supervision (“OTS”) at the time the Federal Deposit

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Insurance Corporation (“FDIC”) enters into an agreement to provide assistance to
or on behalf of Employer under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act (12 U.S.C. 1823 (c)); or (ii) by the OTS at the
time the OTS approves a supervisory merger to resolve problems related to
operation of Employer or when Employer is determined by the OTS to be in an
unsafe or unsound condition. Any rights of Officer that shall have vested under
this Agreement shall not be affected by such action.

                    9.9.5 With regard to the provisions of this Section 9.9:

                         (i) Employer agrees to use its best efforts to oppose
any such notice of charges as to which there are reasonable defenses;

                         (ii) In the event the notice of charges is dismissed or
otherwise resolved in a manner that will permit Employer to resume its
obligations to pay compensation hereunder, Employer will promptly make such
payment hereunder; and

                         (iii) During the period of suspension, the vested
rights of the contracting parties shall not be affected except to the extent
precluded by such notice.

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                    9.9.6 Any payments made to Officer by Employer pursuant to
this Agreement, or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder.

EMPLOYER:

                 
By:
          Dated:    
 
 
 
         
 
 
            Michael W. Perry            
 
            Chairman and Chief Executive Officer            

OFFICER:

                 
 
          Dated:                  
Name:
  Terrence O. Hughes            

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APPENDIX A

ANNUAL INCENTIVE PLAN

         
Officer Name:
  Terrence O. Hughes
Annual Base Rate for 2005:
  $ 400,000  
Target Bonus for 2005:
  $ 250,000  

Annual Incentive Awards:

1. Officer shall be eligible for an Annual Incentive Award based on the
applicable year’s compensation plan to be agreed upon between Officer and
Officer’s Senior Manager.

Other Terms Applicable to Compensation and Benefits for Calendar Year 2005.

1. For 2005, Officer’s Actual Target Bonus shall be $125,000, as a result of
Officer’s July 1, 2005 start date.

2. For purposes of determining Officer’s equity incentive grants for 2005,
expected to be granted in March 2006, Officer’s base salary and actual bonus for
2005 shall be annualized.

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