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                     EXECUTIVE SALARY CONTINUATION AGREEMENT

         THIS EXECUTIVE SALARY CONTINUATION AGREEMENT ("Agreement") is made and
entered into this 23rd day of July, 1999, by and between Coast Bancorp, a
California corporation and Coast Commercial Bank, a California banking
corporation on the one hand (collectively the "Bank"), their successors or
assigns, and Richard Hofstetter on the other hand (the "Executive").

                              W I T N E S S E T H:

         WHEREAS, the Executive is employed by the Bank as its Senior Vice
President; and

         WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, and his reputation and contact in the banking industry are so
valuable that assurance of his continued service is essential for the future
growth and profitability of the Bank and it is in the best interests of the Bank
to arrange terms of continued employment for the Executive so as to reasonably
assure his remaining in the Bank's employment during his lifetime or until the
age of retirement; and

         WHEREAS, it is the desire of the Bank that the Executive's services be
retained as herein provided; and

         WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or his beneficiaries certain
benefits in accordance with the terms and conditions hereinafter set forth;

         NOW, THEREFORE, in consideration of the services to be performed in the
future as well as the mutual promises and convenants herein contained, it is
hereby agreed as follows:


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                                   ARTICLE 1.

         1.1 BENEFICIARY. The term Beneficiary shall mean the person or persons
whom the Executive shall designate in writing to receive the benefits provided
hereunder.

         1.2. DISABILITY. If the Executive is covered by a Bank-sponsored
disability insurance policy, the definition of disability shall be as defined in
such policy without regard to any waiting period. If Executive is not covered by
a Bank-sponsored disability policy, the term disability shall mean the inability
of the Executive to perform the duties and responsibilities of his position with
the Bank in a normal and regular manner, due to mental or physical illness or
injury, for a period of ninety (90) consecutive days, or for fifty percent (50%)
or more of the normal working days during a period of one hundred eighty (180)
consecutive days. Determination of the Executive's disability shall be made by
the Bank's Board of Directors, which determination shall not be unreasonable or
arbitrary and shall be supported by medical opinion. In the event Executive is
also a director of the Bank, the Executive shall be ineligible to participate in
such disability determination. Executive shall, if requested by the Bank's Board
of Directors, submit to a mental or physical examination to assist the Board of
Directors in making its determination of disability hereunder. The psychiatrist
or physician performing such examination shall be selected by the Bank and
Executive, or the Executive's representative if Executive is not able to
participate in such selection.

         1.3 NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and
Plan Administrator of this plan shall be the Bank.

         1.4 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if (i)


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a tender offer shall be made and consummated for the ownership of 25% or more
of the outstanding voting securities of the Bank; (ii) the Bank shall be
merged or consolidated with another bank or corporation and as a result of
such merger or consolidation less then 75% of the outstanding voting
securities of the surviving or resulting bank or corporation shall be owned
in the aggregate by the former shareholders of the Bank, other than
affiliates (within the meaning of the Securities Exchange Act of 1934) of the
party to such merger or consolidation, as the same shall have existed
immediately prior to such merger or consolidation; (iii) the Bank shall sell
substantially all of its assets to another bank or corporation which is not a
wholly owned subsidiary; or (iv) a person, within the meaning of Section 3
(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, shall acquire 25% or more of the outstanding
voting securities of the Bank (whether directly, indirectly, beneficially or
of record). For purposes hereof, ownership of voting securities shall take
into account and shall include ownership as determined by applying the
provisions of Rule 13d-3(d)(1)(I) (as in effect on the date hereof) pursuant
to the Securities Exchange Act of 1934.

         1.5 CAUSE. The term "Cause" shall mean any act of personal dishonesty,
willful misconduct, embezzlement, fraud, intentional failure to comply with the
Bank's policies, willful violation of any banking law, rule or regulation, or
material breach of any provision of this Agreement.

                                   ARTICLE 2.

         2.1 EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive will
continue in the employ of the Bank in such capacity and with such duties and
responsibilities as may be assigned to him, and with such compensation as may be
determined from time to time by the Board of Directors of the


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Bank.

         2.2 FULL EFFORTS. Executive shall devote his full business time and
efforts to the business and affairs of the Bank or the successor to the Bank by
which Executive is then employed pursuant to this Agreement; provided, however,
this provision shall not preclude Executive from serving as a director or member
of a committee of any other organization involving no conflict of interest with
the interests of the Bank, from engaging in charitable and community activities,
and from managing his personal investments, provided that such activities do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.

         2.3 FRINGE BENEFIT. The salary continuation benefits provided by this
Agreement are granted by the Bank as a fringe benefit to the Executive and are
not part of any salary reduction plan or any arrangement deferring a bonus or
salary increase. The Executive has no option to take any current payment or
bonus in lieu of these salary continuation benefits.

                                   ARTICLE 3.

         3.1 RETIREMENT. Executive shall be entitled to receive the benefit set
forth in Section 3.2 of this Agreement beginning on the first day of the month
next following his attainment of age sixty-two (62) or upon such later date as
may be mutually agreed upon by the Executive and the Bank ("Retirement Date").

         3.2 PAYMENT. The Bank agrees that upon such Retirement Date it will pay
to the Executive the annual sum of Fifty Thousand Dollars ($50,000), payable in
equal monthly installments on the first day of each month following such
Retirement Date until the Executive dies, subject to the conditions and
limitations set forth in this Agreement. This amount shall be


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adjusted upward annually on the anniversary of the first payment at the rate
of two percent (2%) per year based upon the previous year's amount.

         3.3 VESTING. Executive shall become vested immediately as to thirty
percent (30%) of the benefit and shall vest at the rate of an additional ten
percent (10%) each year on December 31st while in the Bank's employ beginning on
December 31, 2000, until vested in full.

         3.4 EARLY RETIREMENT. Executive shall be entitled to early retirement
anytime after he attains age fifty-five (55), if fully vested. In the event of
Executive's early retirement, he shall be entitled to receive the benefit set
for the in Section 3.2, reduced by five percent (5%) for each year that
Executive elects to receive the benefit prior to the Retirement Date.

                                   ARTICLE 4.

         4.1 DEATH PRIOR TO OR AFTER RETIREMENT. In the event the Executive
should at any time after the date of this Agreement but prior to his Retirement
Date, or upon the Executive's death after his Retirement Date, the Bank shall
pay to the Executive's designated Beneficiary an amount equal to the accumulated
salary continuation obligation on the books of the Bank for the benefit of the
Executive. Said amount shall be paid to the Executive's designated Beneficiary
in a lump sum within three (3) months of the Executive's date of death. If a
valid Beneficiary Designation is not in effect, the payments shall be made to
the Executive's surviving spouse or, if none, said payments shall be made to the
duly qualified personal representative, executor or administrator of Executive's
estate. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if it is determined
that the Executive has made any material misstatement of fact on any application
for life insurance purchased by the Bank.


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         4.2 DISABILITY PRIOR TO RETIREMENT. In the event the Executive should
become disabled while actively employed by the Bank at any time after the date
of this Agreement but prior to her Retirement Date, the Executive shall become
fully vested. In the event of disability, Executive then may elect to receive
payments either pursuant to the provisions of Section 3.2 regarding retirement
or Section 3.4 regarding early retirement.

                                   ARTICLE 5.

         5.1 TERMINATION OF EMPLOYMENT. The Bank reserves the right to terminate
the employment of the Executive at any time prior to his Retirement Date. In the
event that Executive's employment is terminated for cause, as defined above,
then Executive shall not be entitled to any benefits pursuant to this Agreement.
In the event that the employment of the Executive's disability, death or cause,
then Executive shall be entitled to the vested portion of the benefit pursuant
to Article 3 of this Agreement.

         5.2 TERMINATION OF EMPLOYMENT DUE TO A CHANGE OF CONTROL. Anything
hereinabove the contrary notwithstanding, if, within two (2) years after a
change of control: (i) the Executive's employment with the Bank is terminated;
(ii) Executive's annual compensation and benefits are reduced from their levels
on the date of a Change of Control of the Bank; (iii) Executive's duties,
responsibilities and authority are reduced from those of his then position on
the date of a Change of Control of the Bank; or (iv) the situs of Executive's
employment is changed more than 50 miles, then in such event, Executive shall
become fully vested.

                                   ARTICLE 6.

         6.2 NONASSIGNABLE. Neither the Executive, her spouse, nor any other
beneficiary under this Agreement shall have any power or right to transfer,
assign, anticipate, hypothecate,


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mortgage, commute, modify, or otherwise encumber in advance any of the
benefits hereunder, nor shall any of said benefits be subject to seizure for
the payment of any debts, judgments, alimony or separate maintenance, owed by
the Executive or his beneficiary or any of them, or be transferable by
operation of law in the event of a bankruptcy, insolvency or otherwise.

                                   ARTICLE 7.

         7.1 CLAIMS PROCEDURE. The Bank shall notify the Executive or
Executive's beneficiary in writing, within sixty (60) days of written
application for benefits, of eligibility or non-eligibility for benefits under
the Agreement. If the Bank determines that the Executive or Executive's
beneficiary is not eligible for benefits or full benefits, a notice shall be
sent setting forth: (1) the specific reasons for denial; (2) a specific
reference to the provisions of the Agreement on which the denial is based; (3) a
description of any additional information or material necessary for the claimant
to perfect his claim, and a description of why it is needed; and (4) an
explanation of the Agreement's claim review procedure and other appropriate
information as to the steps to be taken if the Executive or Executive's
beneficiary wishes to have the claim reviewed. If the Bank determines that there
are special circumstances requiring additional time to make a decision, the Bank
shall notify the Executive or Executive's beneficiary of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to one additional period of up to sixty (60) days.

         7.2 REVIEW PROCEDURE. If Executive or Executive's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Executive or
Executive's beneficiary believes that he is entitled to greater or different
benefits, the Executive or Executive's beneficiary shall have the opportunity to
have such claim reviewed by the Bank by filing a petition for review with the


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Bank within sixty (60) days after receipt of the notice issued by the Bank. Said
petition shall state the specific reasons which the Executive or Executive's
beneficiary believes, entitle him to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Bank of the petition, the
Bank shall afford the Executive or Executive's beneficiary (and counsel, if any)
an opportunity to present his position to the Bank orally or in writing, and the
Executive or Executive's beneficiary (or counsel) shall have the right to review
the pertinent documents. The Bank shall notify the Executive or Executive's
beneficiary of its decision in writing within the sixty (60) day period, stating
specifically the basis of its decision, written within the sixty (60) day
period, stating specifically the basis of its decision, written in a manner
calculated to be understood by the Executive or Executive's beneficiary and the
specific provisions of the Agreement on which the decision is based. If, because
of the need for a hearing, the sixty (60) day period is not sufficient, the
decision may be deferred for one additional period of up to sixty (60) days at
the election of the Bank, but notice of this deferral shall be given to the
Executive or Executive's beneficiary.

                                   ARTICLE 8.

         8.1 UNSECURED GENERAL CREDITOR. The Executive's rights are limited to
the right to receive payments as provided in this Agreement and the Executive's
position with respect thereto is that of a general unsecured creditor of the
Bank.

                                   ARTICLE 9.

         9.1 REORGANIZATION. The Bank shall not voluntarily engage in a Change
of Control of the Bank unless and until such succeeding or continuing
corporation, bank, firm, or person agrees to assume and discharge the
obligations of the Bank under this Agreement. Upon the


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occurrence of such event, the term "Bank" as used in this Agreement shall be
deemed to refer to such successor or survivor corporation, bank, firm or
person.

                                   ARTICLE 10.

         10.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive, or
restrict the right of the Executive to terminate his employment.

                                   ARTICLE 11.

         11.1 LIQUIDATED DAMAGES. The parties hereto, before entering into this
Agreement, have been concerned with the fact that substantial damages will be
suffered by the Executive in the event that the Bank shall fail to perform
according to this Agreement. In the event of nonperformance by the Bank for a
period of thirty (30) days or more from the time any such payment was scheduled
to be made pursuant to this Agreement, executive shall immediately be entitled
to liquidated damages of Five Thousand Dollars ($5,000.) for each payment not
made on a timely basis. This provision shall not be applicable in the event that
such nonpayment is the result of prohibition of such payment by law, regulation
or order of a banking regulatory agency.

                                   ARTICLE 12.

         12.1 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and obligations of
this Agreement shall be binding upon and inure to the benefit of the successors,
assigns, heirs and personal representative of the parties hereto. Executive may
not assign this Agreement or any of the Executive's rights hereunder except with
the prior written consent of the Bank.

         12.2 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to


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any circumstance, is judged by a court to be void or unenforceable, in whole
or in part, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or
the validity or enforceability of this Agreement.

         12.3 APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues collateral hereto shall be governed by the laws of the State
of California applicable to contracts performed entirely therein. Executive and
Bank each consent to the jurisdiction of, and any action concerning this
Agreement shall be brought and tried in, the United States District Court for
the Northern District of California or the Superior or Municipal Court for the
County of Santa Cruz.

         12.4 WAIVER. A waiver by either party of any of the terms or conditions
of this Agreement in any one instance shall not be deemed or construed to be a
waiver of such terms or conditions for the future, or of any subsequent breach
thereof. All remedies, rights, undertakings, obligations, and agreements
contained in this Agreement shall be cumulative, and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either party.

         12.5. (a) ATTORNEY'S FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees an other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.

         12.5 (b) WAIVER OF JURY TRIAL. THE BANK AND EXECUTIVE EACH


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HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR
ARISING OUT OF OR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION
OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS AGREEMENT.

         12.6 HEADINGS. The headings in this Agreement are for convenience only
and shall not in any manner affect the interpretation or construction of the
Agreement or any of its provisions.

         12.7. NOTICE. Any notice or other communication to be given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served, or if mailed, upon deposit in the United
States mail, first class postage prepaid, express or certified, return receipt
requested, and properly addressed to the parties as follows: if to Executive at
his last address shown in the Bank's records, if to Bank:

                                    Coast Commercial Bank
                                    740 Front Street, Suite 240
                                    Santa Cruz, CA  95060
                                    Attn: Chairman

Either party may designate a new address for purposes of this Section 12.7 by
giving the other notice of the new address as provided herein.

                            Signature page follows.


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         IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Santa Cruz, California, the day and year first above written.

COAST COMMERCIAL BANK                       EXECUTIVE

BY: /s/ BRUCE H. KENDALL
   -------------------------------
ITS: SENIOR VICE PRESIDENT & CFO            /s/ RICHARD HOFSTETTER
    ------------------------------          ------------------------------
                                            Richard Hofstetter

COAST BANCORP

BY: /s/ BRUCE H. KENDALL
   -------------------------------

ITS: SENIOR VICE PRESIDENT & CFO
    ------------------------------


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