**EMPLOYMENT AGREEMENT**

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the 1st dayof June, 2007, by and between Pacific Coast National Bank (the "Bank"), Pacific Coast NationalBancorp (the "Company") and Stanley M. Cruse (the "Executive"), a resident of San DiegoCounty, California (the signatories to this Agreement will be referred to jointly as the "Parties").

WITNESSETH:

             WHEREAS, the Bank is a wholly-owned subsidiary of the Company;

             WHEREAS, Bank has agreed to employ Executive, and Executive has agreed to beemployed by Bank, subject to and on the terms and conditions set forth herein; and

             WHEREAS, Bank, Company and Executive have read and understood the terms andprovisions set forth in this Agreement and have been afforded a reasonable opportunity to review thisAgreement with their respective legal counsel.

             NOW, THEREFORE, in consideration of the mutual promises and covenants set forth in thisAgreement, and for good and valuable consideration, the receipt and sufficiency of which is herebyacknowledged, Executive, Company and Bank agree as follows:

             1.             Term of Employment. This Agreement shall become effective on the later of June1, 2007 or the date on which the Bank receives a satisfactory "no-objection" letter from the Officeof the Comptroller of the Currency ("Effective Date") and shall continue in effect through May 31,2010 (the "Initial Term"), unless terminated pursuant to Section 4. At the end of the Initial Term ofthis Agreement, the Agreement shall automatically renew for successive one-year terms, unless Bankprovides written notice to Executive within ninety (90) days prior to the expiration of the thencurrent term. Such Initial Term and all subsequent terms shall be referred to herein as the "Term ofEmployment."

             2.             Duties and Authority.

                            (a)           During the Term of Employment, Executive shall serve as Executive VicePresident and Chief Credit Officer of the Bank and the Company. Executive shall perform in aprofessional manner the authorized and customary duties for the positions and such otherreasonable duties and responsibilities as the Board of Directors of Bank and/or Company (theterm "Board of Directors" as used in this Agreement shall mean the Board of Directors of Bank,unless specifically stated otherwise) may assign to Executive from time to time, in writing, whichduties shall include, but not be limited to the following:

                                           (i)             Executive shall oversee all lending functions of the Company andBank and all subsidiary lending activities related to and controlled by Bank and Company;

                                           (ii)            Executive shall carry out and implement all proper directions andinstructions of the Board of Directors that conform with reasonable and sound banking practices;

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                                          (iii)            Executive shall use his best efforts to operate Bank so as to meetthe growth and financial projections and budgets established and approved by the Board ofDirectors, assuming such projections and budgets shall be reasonable and realistically attainableunder the conditions which then exist both in bank and local and national financial markets; and

                                          (iv)            Executive shall use his best efforts to avoid any action that mightmaterially damage, harm or discredit the reputation of Bank, its shareholders, or it's Board ofDirectors.

                            (b)           Notwithstanding the provisions of Section 2(a), the duties andresponsibilities of Executive may be changed and modified from time to time by Bank at itsdiscretion. Upon changes and modifications to Executive's duties and responsibilities,Executive's employment with Bank shall continue to be governed by the terms of thisAgreement.

                            (c)           During the Term of Employment, Executive shall devote Executive's bestefforts and entire productive time, ability and attention to the lending operations of Bank andCompany, and shall not, without the written consent of Bank or Company, directly or indirectly,alone or as a partner, officer, director, stockholder, employee, or consultant of any other person,entity, association, agency, organization, or institution, engage in any other business or professionwhich would necessitate Executive's giving any portion of his time and effort to such activity.Executive shall at all times faithfully, with diligence and to the best of Executive's ability,experience, and talent, perform all the duties that may be required of and from Executive pursuantto the express and implicit terms hereof to the reasonable satisfaction of B.

                            (d)           Executive shall become informed to the best of his ability of currentdevelopments in the banking industry applicable to Bank and shall attend such banking seminars andschools as he or the Board of Directors deem appropriate to keep apprised of laws, regulations,policies and procedures that affect Bank, Company and their operations. Executive shall serve onsuch committees of Bank and/or Board of Directors as the Board of Directors may determine fromtime to time. Executive shall at all times be subject to the direction and control of the Board ofDirectors, and all acts of Executive in the performance of his duties hereunder shall be carried outin conformity with the policies, directions and limitations as from time to time established by theBoard of Directors. Executive shall not be required to change his domicile from San DiegoCounty, California in connection with the performance of his duties hereunder. Executive shall notbe required to engage in any activities or exercise any powers or authority that has the effect ofviolating any federal, state or local laws or regulations.

             3.             Compensation and Benefits. All payments of compensation to Executive shall bepayable in accordance with Bank's ordinary payroll and other policies and procedures.

                            (a)           Base Salary. During the Term of Employment, Bank shall pay Executive, ata minimum, a base salary of $140,000.00 per full calendar year ("Base Salary"), appropriatelyprorated for partial months at the commencement and end of the term of this Agreement. Bankshall review the amount of such Base Salary no less often than annually. Any salary adjustmentshall be based on: (i) Executive's performance since Executive's last review; (ii) the performanceand profitability of the Bank; and (iii) the Bank's salary policy effective at the time

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of any such salary review and adjustment. Bank shall have the right to deduct from payment of allcompensation to Executive hereunder any federal, state or local taxes required by law to bewithheld with respect to such payments and any other amounts specifically authorized to bewithheld or deducted by Executive.

                            (b)           Annual Cash Incentive Compensation. After the Bank's has achieved at leasttwo consecutive quarters of profitability, Executive, if employed on the last day of the calendaryear for which any bonus as determined by the Board of Directors is being awarded, shall beeligible for performance-based annual cash and/or stock awards as determined by the Board ofDirectors in accordance with mutually agreed upon goals and objectives established by the Boardof Directors in January of each calendar year this Agreement is in force and effect.

                            (c)           Participation in Employee Benefit Programs. Executive shall be entitled toparticipate in any benefit programs applicable to all employees of Bank or to executiveemployees of Bank in accordance with Bank policy and the provisions of said benefit plans. ThisAgreement, which provides certain additional benefits, does not preclude Executive'sparticipation in such other plans of B.

                            (d)           Executive "Personal Time Off" Allocation. Executive shall be allocated aminimum of five (5) weeks of Personal Time Off ("PTO") in accordance with Bank policy.Personal time off may be taken at any time during the year subject to the working needs of theoffice. If PTO time is unused, 50% of unused PTO time may accumulate and be used at a futuredate as deemed appropriate by Chief Executive Officer or President. If the Executive hasaccumulated PTO at time of termination, accumulated PTO time will be paid to Executive inaccordance with Bank policy and applicable law.

                            (e)           Stock Options. The Company shall grant to Executive 12,500 options topurchase shares of common stock of the Company. All stock options granted under this Sectionshall expire ten (10) years following the date of grant, have an exercise price equal to the fairmarket value of the common stock of the Company at the time of issuance, and be evidenced by astock option agreement which may contain additional terms and restrictions not inconsistent withthis Agreement or any stock option plan of the Company then in existence and under whichoptions pursuant to this Section are issued. The options granted under this Section shall vest inapproximately equal percentages as of the anniversary date of the initial grant date over the three-year period following issuance.

                            (f)           Vehicle Allowance. Bank shall pay Executive $500.00 per month for travelto and from the offices of Bank and for use in engaging in activities in the name of or for thebenefit of B. Additionally, Bank shall pay or reimburse Executive for reasonable gas andinsurance costs associated with Executive's vehicle use for Bank business.

                            (g)           Reimbursement of Expenses. During the Term of Employment, Bank shallpromptly pay all reasonable expenses incurred by Executive for all reasonable travel and otherbusiness related expenses incurred by him in performing his obligations under this Agreement inaccordance with Bank's travel and business expense policy, such expenses to be reviewed by theBoard of Directors on a periodic basis.

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                            (h)           Compensation After Termination.

                                           (i)             If the Term of Employment is terminated (i) by Bank for cause ordue to the death or disability of Executive, (ii) by Executive or (iii) through expiration of the Termof Employment, Bank shall have no further obligations hereunder or otherwise with respect toExecutive's employment from and after the termination or expiration date (except payment ofExecutive's Base Salary accrued through the date of termination or expiration) and Bank shallcontinue to have all other rights available hereunder.

                                           (ii)            If the Term of Employment is terminated by the Bank withoutcause, Executive shall be entitled to receive as severance pay (in addition to the payment of theBase Salary through the date of termination) an amount equal to Executive's Base Salary, payablewithin thirty (30) days of the end of the Term of Employment; provided, however, if the severancepayment to Executive would cause Bank to contravene any law, regulation or policy applicable toBank, Bank and Executive agree that such severance payment shall be made to the extentpermitted by law, regulation and policy, and the remainder of such severance payment shall bemade from time to time at the earliest time permitted by law, regulation and policy. After the 30thday following the end of the Term of Employment, the outstanding severance payment shall, untilpaid, bear interest per annum at the prime lending rate as published in the Southwest Edition ofThe Wall Street Journal on the 31st day following the end of the Term of Employment. Except asotherwise specifically provided herein, Bank shall have no other obligations hereunder orotherwise with respect to Executive's employment from and after the termination or expirationdate, and Bank shall continue to have all other rights available hereunder.

                                           (iii)           No termination under Section 4 shall terminate or adversely affectany rights of Executive then vested under any disability or other benefit program of Bank.

                            (i)           Fair and Adequate Compensation. Bank and Executive acknowledge thatsuch compensation and the other covenants and agreements of Bank contained herein are fair andadequate compensation for Executive's services and for the covenants described below.

             4.             Termination.

                            (a)           Death. If Executive dies during the Term of Employment and while in theemploy of Bank, this Agreement shall automatically terminate and Bank or Company shall have nofurther obligation to Executive or his estate under this Agreement (other than death benefitspayable under the benefit plans referenced in Section 3(c), except that Bank shall pay Executive'sestate that portion of Executive's base salary under Section 3(a) accrued through the date on whichExecutive's death occurred. Such payment of base salary to Executive's estate shall be made in thesame manner as other payroll obligations of the Bank.

                            (b)           Disability.

                                           (i)             Bank may terminate this Agreement if, during the Term ofEmployment, Executive shall be prevented from performing his duties hereunder by reason ofbecoming disabled. For purposes of this Agreement, the term "disabled" shall have the meaningset forth in Bank's long term disability plan or, if Bank has no long term disability plan in effect

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at the time of the Executive's disability, shall mean that Executive has become physically ormentally incapable (excluding infrequent and temporary absences due to ordinary illness) ofperforming the essential functions of his duties under this Agreement for a continuous period ofthree (3) months, as determined by Bank upon the advice of a qualified physician. In the event adispute arises between Executive and the Bank concerning Executive's physical or mental ability tocontinue or return to the performance of his duties, Executive shall submit to examination by acompetent physician mutually agreeable to both parties. The physician's opinion as to theExecutive's capability to perform his duties will be final and binding. During any period prior totermination during which the Executive fails to perform his duties as a result of incapacity due tophysical or mental illness, Executive shall continue to receive his full salary at the rate then ineffect for such period until his employment terminates pursuant to this Section 4(b), provided thatpayments so made to Executive during such period shall be reduced by the sum of the amounts, ifany, payable to Executive under any disability benefit plans of Bank that were not previouslyapplied to reduce such payment.

                                           (ii)            In the event of a termination pursuant to this Section 4(b), Bankshall be relieved of all its obligations under this Agreement, except that Bank shall pay toExecutive, or his estate in the event of his subsequent death, Executive's base salary underSection 3(a) through the date on which such termination shall have occurred, reduced during suchperiod by the amount of any benefits received by Executive under any disability policymaintained by Bank and any death benefits payable under the benefit plans referenced in Section3(c). All such payments to Executive or his estate shall be made in the same manner as otherpayroll obligations of Bank.

                            (c)           Discharge for Cause. At any time during the Term of Employment, Bankmay discharge Executive for cause and terminate this Agreement by delivering to Executive awritten notice of discharge. The notice of discharge shall set forth the reasons for Executive'stermination for cause. For purposes of this Agreement, cause shall be defined as the occurrence ofany of the following events:

                                           (i)             The determination by the Board of Directors in the exercise of itsreasonable judgment, after consultation with its legal counsel, that Executive has committed an actor acts constituting (i) a felony or other crime, whether a felony or a misdemeanor, involving moralturpitude, dishonesty or theft, (ii) dishonesty or disloyalty with respect to Bank or Company, or(iii) fraud;

                                           (ii)            The determination by the Board of Directors in the exercise of itsreasonable judgment, that (i) the Executive has failed to follow the policies adopted by the Board ofDirectors; (ii) that Executive has failed to meet the performance goals established in writing by theBoard of Directors in January of each calendar year this Agreement is in effect; or (iii) that Executive has engaged in such actions or omissions that would constituteunsafe or unsound banking practices;

                                           (iii)           The determination by the Board of Directors in the exercise of itsreasonable judgment, after consultation with its legal counsel, that Executive has committed abreach or violation of this Agreement, and fails to cure such breach or violation within

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ten (10) days after written notice to Executive by Bank specifying in reasonable detail thealleged breach or violation;

                                           (iv)            The determination by the Board of Directors, after consultation withits legal counsel, that Executive has engaged in gross misconduct in the course and scope of hisemployment with Bank including indecency, immorality, gross insubordination, dishonesty,unlawful harassment or discrimination, use of illegal drugs, or fighting; or

                                           (v)           In the event Executive is prohibited from engaging in the businessof banking by any governmental regulatory agency having jurisdiction over Bank or Company.

             For purposes of this Agreement, Executive shall not be deemed to be in breach of thisAgreement for his failure to substantially perform his duties under this Agreement where suchfailure results because Executive has becomes disabled within the meaning of Section 4(b). Insuch cases, termination of Executive shall be governed by the provisions of Section 4(b).

                            (d)           Discharge without Cause. At any time during the Term of Employment,Bank shall be entitled to terminate Executive's employment and this Agreement "without cause,"by providing him with a written notice of termination. Any termination of this Agreement which isnot for cause, as defined above in Section 4(c), or which does not result from the death or disabilityof Executive, as set forth in Sections 4(a) or 4(b) respectively, shall be deemed to be a terminationwithout cause.

                            (e)           Resignation. Executive shall be entitled to terminate this Agreement byproviding Bank with a written notice of resignation at least ninety (90) days prior to the intendedresignation date. Upon Executive's resignation, he shall be entitled to receive any base salarywhich has been earned by him through the effective date of such resignation. In lieu of havingExecutive work for Bank through the effective date of the resignation, Bank may terminate thisAgreement immediately; however, Bank shall still pay Executive amounts to which he wouldotherwise be entitled through the effective date of such resignation. Upon the effective date ofExecutive's resignation, Executive shall not be entitled to receive any other compensation orbenefits as provided in the individual benefit plans or agreements.

             5.             Non-Disclosure and Confidentiality.

                            (a)           Executive acknowledges that, by the nature of his duties, he will or mayhave access to and become informed of confidential, proprietary, and highly sensitive informationrelating to Bank and which is a competitive asset of Bank, including, without limitation,information pertaining to: (i) the identities of Bank's existing and prospective customers or clients,including names, addresses, credit status, and pricing levels; (ii) the buying and selling habits andcustoms of Bank's existing and prospective customers or clients; (iii) financial information aboutBank; (iv) product and systems specifications, concepts for new or improved products and otherproduct or systems data; (v) the identities of, and special skills possessed by, Bank's employees;(vi) the identities of and pricing information about Bank's suppliers and vendors; (vii) trainingprograms developed by Bank; (viii) pricing studies, information and analyses; (ix) current andprospective products and inventories; (x) financial models, business projections and marketstudies; (xi) Bank's financial results and business

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conditions; (xii) business plans and strategies; (xiii) special processes, procedures, and services ofBank and its suppliers and vendors; and (xiv) computer programs and software developed by Bankor its consultants.

                            (b)           The term Proprietary Information does not include information or know-how which: (i) is in Executive's possession prior to its disclosure to him by Bank (as shown bycompetent written evidence in Executive's files and records immediately prior to the time ofdisclosure); (ii) is available to the general public other than through any inaction or action(whether or not wrongful) on Executive's part; or (iii) is approved for release by writtenauthorization of the B.

                            (c)           Executive agrees not to: (i) use, at any time, any Proprietary Informationfor his own benefit and for the benefit of another; or (ii) disclose, directly or indirectly, anyProprietary Information to any person who is not a current employee of Bank, except in theperformance of the duties assigned to Executive in this Agreement, at any time prior orsubsequent to the termination of his employment with Bank, except as such disclosure may berequired by law. Executive further agrees not to make copies of any Proprietary Information,except in the performance of the duties assigned to him in this Agreement.

             6.             Return of Bank Property. Executive acknowledges that all memoranda, emails,notes, records, reports, manuals, books, papers, letters, client and customer lists, contracts, softwareprograms, information and records, drafts of instructions, guides and manuals, and otherdocumentation (whether in draft or final form), and other sales or financial information and aidsrelating to Bank's business, and any and all other documents containing Proprietary Informationfurnished to Executive by any representative of Bank or otherwise acquired or developed byExecutive in connection with his association with Bank (collectively, "Recipient Materials") shallat all times be the property of B. Within twenty-four (24) hours of the termination of hisemployment with Bank, Executive shall return to Bank any Recipient Materials which are in hispossession, custody or control.

             7.             Non-Solicitation of Employees. Executive agrees that, as part of his employmentwith Bank, he will become familiar with the salary, pay scale, capabilities, experiences, skill anddesires of the Bank's employees. Executive agrees to maintain the confidentiality of suchinformation. He further covenants and agrees that, for a period of one (1) year subsequent to thetermination of his employment with Bank, whether such termination occurs at the insistence ofhimself or Bank, he shall not recruit, hire, or attempt to recruit or hire, directly or by assistingothers, any other employees of Bank, nor shall he contact or communicate with any otheremployees of Bank for the purpose of inducing other employees to terminate their employmentwith B. For purposes of this covenant, "other employees" shall refer to employees who wereemployed by, or doing business with, Bank within twelve (12) months of the time of the attemptedrecruiting or hiring.

             8.             Independent Covenants. Executive acknowledges that the covenants set forth inSections 5 and 7 are material conditions to Bank's willingness to execute and deliver thisAgreement and to provide Executive the compensation and benefits and other considerationprovided hereunder. The parties agree that the existence of any claim or cause of action ofExecutive against Bank, whether predicated on this Agreement or otherwise, will not constitute a

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defense to the enforcement by Bank of such covenants. It is specifically acknowledged that theperiod of one (1) year following the termination of employment stated in Section 7, during which theagreements and covenants of Executive made in such sections are effective, is to be computed byexcluding from such computation any time during which Executive is in violation of any provisionof Section 7. The covenants contained in Sections 5 and 7 will not be affected by *any*breach of anyother provision hereof by any party hereto. In addition, Executive's obligations under Sections 5and 7 shall survive the termination of this Agreement and Executive's employment with B.Executive's obligations under Sections 5 and 7 are in addition to, and not in limitation orpreemption of, all other obligations of confidentiality which he may have to Bank under generallegal or equitable principles, or other Bank policies.

             9.             Remedies. In the event that Executive violates any of the provisions set forth inSections 5 and 7 of this Agreement, Executive acknowledges that Bank will suffer immediate andirreparable harm which cannot be accurately calculated in monetary damages. Consequently,Executive acknowledges and agrees that Bank shall be entitled to immediate injunctive relief,either by temporary or permanent injunction, to prevent such a violation. Executive furtheracknowledges and agrees that this injunctive relief shall be in addition to any other legal orequitable relief to which Bank would be entitled.

             10.            Early Resolution Conference. This Agreement is understood to be clear andenforceable as written and is executed by both parties on that basis. However, if at any timeExecutive seeks to challenge any provision of this Agreement as unclear, unenforceable orinapplicable to any competitive activity in which Executive intends to engage, Executive shall firstnotify the Bank in writing and meet with a representative of the Bank and a neutral mediator (if theBank elects to retain one, at its expense) to discuss the resolution of any disputes between theparties. Executive shall provide this notification at least fourteen (14) days before Executiveengages in any activity that could foreseeably fall within the scope of any of the provisions setforth in Sections 5 and 7 of this Agreement. The failure to comply with this requirement shalloperate as a waiver by the Executive to challenge the reasonable scope, clarity, applicability orenforceability of Sections 5 and 7 of this Agreement. All rights of Executive and the Bank will bepreserved if the early resolution conference requirement is complied with, even in the event that noagreement is reached as a result of the conference.

             11.            Notification of Prospective Employment. If Executive intends to acceptemployment or an association with any third party which is engaged in a business similar to thebusiness conducted by Bank or which, because of the nature of his proposed or potential positionwith the third party, may require him to use or disclose Bank's Proprietary Information, he agreesto provide Bank with notice of his intention to accept such employment or association no later thanninety (90) days prior to accepting such employment or association. Prior to accepting employmentor an association with any third party which is engaged in a business similar to the businessconducted by Bank or which, because of the nature of his proposed or potential position with thethird party, may require Executive to use or disclose Bank's Proprietary Information, he agrees toprovide a copy of this Agreement to such third party. Finally, Executive agrees that Bank may, atany time while any of the non-disclosure and/or non-solicitation covenants contained in thisAgreement are in force, provide notice of the existence of that Agreement to any third party withwhom or which he proposes to negotiate or is negotiating concerning employment or to acceptemployment, without any liability to Executive for any such notice.

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             12.            Arbitration.

                            (a)           Executive recognizes that differences may arise between him, the Bank, andthe Company during or following his employment with Bank, and that those differences may or maynot be related to his employment. Executive acknowledges that by entering into this Agreement, heanticipates gaining the benefits of a speedy, impartial dispute-resolution procedure for resolvingany and all disputes between himself, Bank, and Company. Notwithstanding Section 18 hereof,this Section 12 shall be governed by the Federal Arbitration Act and to the extent that it isinconsistent with California law, it will supersede California law relating to the arbitrability of anydisputes.

                            (b)           Executive, Company and Bank consent to the resolution by final andbinding arbitration of any claim, controversy, or dispute ("claim(s)") among Executive, Companyand Bank, whether or not such claims arise out of or relate to his employment by Bank, inaccordance with the Employment Arbitration Rules of the American Arbitration Association ineffect on the date the claim or controversy arises. The claims covered by this Section include, butare not limited to, claims for wages or other compensation due; claims for breach of any contract orcovenant (express or implied); tort claims (including, but not limited to, invasion of privacy,intentional infliction of emotional distress, assault, battery, fraud, negligence, gross negligence,negligent hiring or retention); claims of discrimination (including, but not limited to, race, gender,sexual harassment, religion, national origin, age, marital status, or medical condition, handicap ordisability); claims for benefits (except where an employee benefit or pension plan specifies that itsclaims procedure shall culminate in an arbitration procedure different from this one); and claimsfor violation of any federal, state, or other governmental law, statute, regulation, or ordinance,except claims excluded in the following paragraph.

                            (c)           Executive, Company and Bank understand that claims for workers'compensation or unemployment compensation benefits are not covered by this Agreement.Moreover, although Executive is prohibited from filing a lawsuit concerning claims covered bythis Agreement, Executive understands that this Section shall not prohibit him from filing acharge or complaint with any governmental agency. Finally, Executive understands that thisSection 12 does not apply with respect to disputes relating to the operation of and theenforcement of Sections 5 and 7 hereof.

                            (d)           Any party may initiate an arbitration proceeding by delivery of writtennotice to the other party hereto. Resolution of such dispute shall be resolved by a majority vote of apanel of three arbitrators. Within thirty (30) days after giving or receiving a demand forarbitration, Bank and Executive shall each select one arbitrator. Such arbitrators shall be freelyselected and the parties shall not be limited in their selection to any prescribed list. Thearbitrators chosen by Bank, Company and Executive shall, by mutual consent, select the thirdarbitrator. Except as otherwise agreed upon by the Parties, the arbitration shall convene in SanClemente, California.

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                            (e)           The decision of the arbitrators shall be in writing and presented in separatefindings of fact and law. The award of the arbitrators shall be final and binding on the parties fromwhich no appeal maybe taken and an order confirming the award or judgment upon the award maybe entered into in any court having jurisdiction there over.

                            (f)           Prior to the appointment of the arbitrator, Bank, Company or Executivemay seek provisional remedies, including, without limitation, temporary restraining orders andpreliminary injunctions. After the appointment of the arbitrators, the arbitrators shall have soleauthority to grant such provisional remedies as the arbitrators, in their sole discretion, deemnecessary or appropriate.

                            (g)           The arbitrators shall have the authority to award any relief permitted byrelevant federal or state statute, including, without limitation, back wages, front wages, actualdamages, compensatory damages, punitive damages, attorneys' fees, and costs associated with thearbitration proceeding. The arbitrators, in the award, may assess the fees and expenses of thearbitrators and of the arbitration proceeding and the witness and attorney's fees of the parties or anypart thereof, against either Bank, Company or Executive or any of them, taking into account thecircumstances of the case. Except as assessed by the arbitrators in the award, Bank, Company andExecutive shall each bear their own costs in connection with the arbitration proceeding.Notwithstanding the foregoing, Bank shall bear 100% of the aggregate fees and expenses of thearbitrators.

                            (h)           Executive, Company and Bank acknowledge and agree that a party making aclaim pursuant to or arising under this Section must give written notice of such claim within one(1) year of the occurrence of the event or conduct giving rise to the claim. Failure to give notice ofany claim within one (1) year shall constitute a waiver of the claim, even if there is a federal or statestatute of limitations which would have given more time to pursue the claim.

                            (i)           Except with respect to claims described in Section 12(c), Executive,Company and Bank acknowledge and agree that the arbitrators, and not any federal, state, or localcourt or agency, shall have exclusive authority to resolve any dispute relating to the interpretation,applicability, enforceability or formation of this Agreement, including, but not limited to, anyclaim that all or any part of this Agreement is void or voidable. Such arbitrators shall havejurisdiction to hear and rule on pre-hearing disputes, and are authorized to hold pre-hearingconferences by telephone or in person as the arbitrator deems necessary. The arbitrators shall havethe authority to entertain a motion to dismiss and/or a motion for summary judgment by any partyand shall apply the standards governing such motions under the Federal Rules of Civil Procedure.The arbitrators shall apply the substantive law (and the law of remedies, if applicable) of the statein which the claim arose, or federal law, or both, as applicable to the claim(s) asserted. TheFederal Rules of Evidence shall apply to the arbitration proceeding.

             13.            Goodwill. Executive acknowledges that Bank will, over a period of time, develop,significant relationships and goodwill between itself and its clients and customers by providingsuperior products and services. Executive further acknowledges that these relationships and thisgoodwill are a valuable asset belonging solely to Bank. Executive understands that Bank agrees tocompensate him, as well as to reimburse him for reasonable and necessary business expensesincurred, while he builds and/or maintains business relationships

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and goodwill with Bank's current and prospective clients and customers on a personal level.Executive acknowledges that the responsibility to build and maintain business relationships andgoodwill with current and prospective clients and customers creates a special relationship of trust andconfidence between him, Bank, and its clients and customers.

             14.            Change in Control. Upon a Change in Control, the Bank shall pay to Executive acash lump sum payment equal to 199% of his Base Amount as defined in section 280G(b)(3) ofthe Internal Revenue Code of 1986, as amended ("Change in Control Payment"); provided,however, if the Change in Control Payment to Executive would cause the Bank to contravene anylaw, regulation or policy applicable to the Bank, the Bank and Executive agree that such Changein Control Payment shall be made to the extent permitted by law, regulation and policy, and theremainder of such Change in Control Payment shall be made from time to time at the earliest timepermitted by law, regulation and policy. For purposes of this Agreement, "Change in Control"means:

                            (a)           a change in the ownership of the capital stock of the Bank or the Company,whereby a corporation, person, or group acting in concert (other than the current members of theboards of directors of the Company or the Bank or any of their descendants, the Company, theBank, or any savings, pension or other benefit plan for the benefit of the employees of theCompany or the Bank or subsidiaries thereof)(a "Person") as described in Section 14(d)(2) of theSecurities Exchange Act of 1934, as amended ("Exchange Act"), holds or acquires, directly orindirectly, beneficial ownership (within the meaning of Rule 13d-3 promulgated under theExchange Act) of a number of shares of capital stock of the Company or the Bank whichconstitutes fifty percent (50%) or more of the combined voting power of the Company's or theBank's then outstanding capital stock entitled to vote generally in the election of directors;

                            (b)           the persons who were members of the board of directors of the Companyor the Bank immediately prior to a tender offer, exchange offer, contested election or anycombination of the foregoing, cease to constitute a majority of the board of directors of theCompany or the Bank, as applicable;

                            (c)           the consummation by the board of directors of the Company or the Bank ofa merger, consolidation or reorganization plan involving the Company or the Bank in which theCompany or the Bank, as applicable, is not the surviving entity, or a sale of all or substantially allof the assets of the Company or the B. For purposes of this Agreement, a sale of all orsubstantially all of the assets of the Company or the Bank shall be deemed to occur if any Personacquires (or during the 12-month period ending on the date of the most recent acquisition by suchPerson, has acquired) gross assets of the Company or the Bank, as applicable, that have anaggregate fair market value equal to fifty percent (50%) or more of the fair market value of all ofthe respective gross assets of the Company or the Bank immediately prior to such acquisition oracquisitions;

                            (d)           a tender offer or exchange offer is made by any Person which is successfullycompleted and results in such Person beneficially owning (within the meaning of Rule 13d-3promulgated under the Exchange Act) either fifty percent (50%) or more of the Company's orBank's outstanding shares of common stock or shares of capital stock having fifty

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percent (50%) or more of the combined voting power of the Company's or Bank's then outstandingcapital stock (other than an offer made by the Company or the Bank), and sufficient shares areacquired under the offer to cause such person to own fifty percent (50%) or more of the votingpower;

                            (e)           a dissolution or liquidation of the Company or the Bank; or

                            (f)           any other transactions or series of related transactions occurring whichhave substantially the same effect as the transactions specified in clauses (a) - (f);

provided however that, a shareholder or shareholders may make the following transfers and suchtransfers shall be deemed not to be a Change in Control: (i) to any trust described in section1361(c)(2) of the Code and that is created solely for the benefit of any shareholder or any spouse orlineal descendant of any shareholder; (ii) to any individual by bona fide gift; (iii) to any spouse orformer spouse pursuant to the terms of a decree of divorce; or (iv) to any officer or employee of theCompany or the Bank pursuant to any stock option plan established by the shareholders of theCompany or the B.

             15.            Notices. All notices, requests, consents and other communications to be given ordelivered hereunder or by reason of the provisions of this Agreement shall be in writing and shall bedeemed to have been properly served if (a) delivered personally, (b) delivered by a recognizedovernight courier service, (c) sent by certified or registered mail, return receipt requested and firstclass postage prepaid, or (d) sent by facsimile transmission followed by a confirmation copydelivered by recognized overnight courier service the next day. Such notices, requests, consentsand other communications shall be sent to the respective parties as follows: (i) if to Executive:Stanley M. Cruse, 701 Avenida Amigo, San Marcos, CA, 92069 (ii) if to Bank or Company: ChiefExecutive Officer, Pacific Coast National Bank, 905 Calle Amanecer, San Clemente, CA 92673.Any Party hereto may designate a different address by providing written notice of such new addressto the other Parties. Date of service of such notice shall be (i) the date such notice is personallydelivered or sent by facsimile transmission (with issuance by the transmitting machine of aconfirmation of a successful transmission), (ii) three (3) business days after the date of mailing ifsent by certified or registered mail or (iii) one business day after the date of delivery to the overnightcourier if sent by overnight courier.

             16.            Severability. The Parties acknowledge that each covenant and/or provision of thisAgreement shall be enforceable independently of every other covenant and/or provision.Furthermore, Executive, Bank and Company acknowledge that, in the event any covenant and/orprovision of this Agreement is determined to be unenforceable for any reason, the remainingcovenants and/or provisions will remain effective, binding and enforceable.

             17.            Complete Agreement Modification. The Parties acknowledge and agree that thisAgreement constitutes the complete and entire agreement between the parties; that each executed thisAgreement based upon the express terms and provisions set forth herein; that, in acceptingemployment with Bank, Executive has not relied on any representations, oral or written, which arenot set forth in this Agreement; that no previous agreement, either oral or written, shall have anyeffect on the terms or provisions of this Agreement; and that all previous agreements, either oral orwritten, are expressly superseded and revoked by this Agreement. The provisions hereof

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may not be altered, amended, modified, waived, or discharged in any way whatsoever, except bywritten agreement executed by Executive and Bank. No waiver shall be deemed a continuingwaiver or a waiver of any subsequent breach or default, either of a similar or different nature,unless expressly so stated in writing.

             18.            Governing Law. This Agreement shall be construed and enforced in accordancewith, and all questions concerning the construction, validity, interpretation and performance ofthis Agreement shall be governed by, the laws of the State of California, without giving effect toprovision thereof regarding conflict of laws.

             19.            Counterparts. This Agreement may be executed in multiple original counterparts,each of which shall be deemed an original, but all of which together shall constitute one and thesame instrument.

             20.            Prior Agreements. Executive represents that his service as an employee of Bankwill not violate any agreement: (i) he has made that prohibits him from disclosing any informationhe acquired prior to his becoming employed by Bank; or (ii) he had made that prohibits him fromaccepting employment with Bank or that will interfere with his compliance with the terms of thisAgreement. Executive further represents that he has not previously, and will not in the future,disclose to Bank any proprietary information or trade secrets belonging to any previous employer.Executive acknowledges that Bank has instructed him not to disclose to it any proprietaryinformation or trade secrets belonging to any previous employer.

             21.            Voluntary Agreement. The Parties acknowledge that each has carefully read thisagreement, that each has had an opportunity to consult with his or its attorney concerning themeaning, import and legal significance of this Agreement, that each understands its terms, that allunderstandings and agreements between Executive and Bank relating to the subjects covered in thisAgreement are contained in it, and that each has entered into the Agreement voluntarily and notin reliance on any promises or representations by the other than those contained in thisAgreement.

             22.            Restrictions Upon Funding. The Bank shall have no obligation to set aside, earmarkor entrust any fund or money with which to pay its obligations under this Agreement. TheExecutive or any successor-in-interest to Executive shall be and remain simply a general creditorof the Bank in the same manner as any other creditor having a general unsecured claim. Forpurposes of the Code, the Bank intends this Agreement to be an unfunded, unsecured promise topay on the part of the B. For purposes of Employee Retirement Income Security Act of 1974, asamended ("ERISA"), the Bank intends that this Agreement not be subject to ERISA. If it isdeemed subject to ERISA, it is intended to be an unfunded arrangement for the benefit of a selectmember of management, who is a highly compensated employee of the Bank for the purpose ofqualifying this Agreement for the "top hat" plan exception under sections 201(2), 301(a)(3) and401(a)(1) of ERISA. At no time shall the Executive have or be deemed to have any lien nor right,title or interest in or to any specific investment or to any assets of the B. If the Bank elects toinvest in a life insurance, disability or annuity policy upon the life of Executive, the Executive shallassist the Bank by freely submitting to a physical examination and supplying such additionalinformation necessary to obtain such insurance or annuities.

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             23.            Interpretation. When a reference is made in this Agreement to a Section, suchreference shall be to a Section of this Agreement unless otherwise indicated. The headingscontained in this Agreement are for convenience of reference only and shall not affect in any waythe meaning or interpretation of this Agreement. Whenever the words "include", "includes" or"including" are used in this Agreement, they shall be deemed to be followed by the words "withoutlimitation." The words "hereof', "herein" and "hereunder" and words of similar import when usedin this Agreement shall refer to this Agreement as a whole and not to any particular provision inthis Agreement. Each use herein of the masculine, neuter or feminine gender shall be deemed toinclude the other genders. Each use herein of the plural shall include the singular and vice versa, ineach case as the context requires or as is otherwise appropriate. The word "or" is used in theinclusive sense. Any agreement or instrument defined or referred to herein or in any agreement orinstrument that is referred to herein means such agreement or instrument as from time to timeamended, modified or supplemented, including by waiver or consent. References to a person arealso to its permitted successors or assigns.

[Signature Page Follows]

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[Signature Page to Employment Agreement]

             IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date firstwritten above, to be effective as of the Effective Date.

| EXECUTIVE:/s/ Stanley M. CruseStanley M. Cruse701 Avenida AmigoSan Marcos, CA 92069 BANK:PACIFIC COAST NATIONAL BANK |
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