Document:

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                    PLACER CAPITAL CO. 1999 STOCK OPTION PLAN

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<TABLE>
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                                 TABLE OF CONTENTS
<S>    <C>                                                                    <C>
1.     PURPOSE.................................................................1

2.     DEFINITIONS.............................................................1

       (A)      "AFFILIATE"....................................................1

       (B)      "BOARD OF DIRECTORS"...........................................1

       (C)      "CODE".........................................................1

       (D)      "COMMITTEE"....................................................1

       (E)      "COMPANY"......................................................1

       (F)      "EFFECTIVE DATE"...............................................1

       (G)      "EMPLOYEE".....................................................1

       (H)      "EXCHANGE ACT".................................................2

       (I)      "EXERCISE PRICE"...............................................2

       (J)      "FAIR MARKET VALUE"............................................2

       (K)      "ISO"..........................................................2

       (L)      "NONSTATUTORY OPTION"..........................................2

       (M)      "OPTION".......................................................2

       (N)      "OPTIONEE".....................................................2

       (O)      "PAYROLL EMPLOYEE".............................................2

       (P)      "PLAN".........................................................3

       (Q)      "SERVICE"......................................................3

       (R)      "SHARE"........................................................3

       (S)      "STOCK"........................................................3

       (T)      "STOCK OPTION AGREEMENT".......................................3

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       (U)      "SUBSTITUTE OPTION"............................................3

       (V)      "TERMINATING EVENT"............................................3

       (W)      "VESTING EVENT"................................................4

       (X)      "TOTAL AND PERMANENT DISABILITY"...............................4

3.     ADMINISTRATION..........................................................4

       (A)      COMMITTEE MEMBERSHIP...........................................4

       (B)      COMMITTEE PROCEDURES...........................................4

       (C)      COMMITTEE RESPONSIBILITIES.....................................4

4.     ELIGIBILITY.............................................................5

       (A)      GENERAL RULES..................................................5

       (B)      TEN-PERCENT STOCKHOLDERS.......................................6

       (C)      ATTRIBUTION RULES..............................................6

       (D)      OUTSTANDING STOCK..............................................6

5.     STOCK SUBJECT TO PLAN...................................................6

       (A)      BASIC LIMITATION...............................................6

       (B)      ADDITIONAL SHARES..............................................6

6.     TERMS AND CONDITIONS OF OPTIONS.........................................7

       (A)      STOCK OPTION AGREEMENT.........................................7

       (B)      NUMBER OF SHARES...............................................7

       (C)      EXERCISE PRICE.................................................7

       (D)      WITHHOLDING TAXES..............................................7

       (E)      EXERCISABILITY.................................................7

       (F)      TERM...........................................................8

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       (G)      TRANSFERABILITY................................................9

       (H)      NO RIGHTS AS A SHAREHOLDER.....................................9

       (I)      MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.................9

       (J)      SUBSTITUTE OPTIONS.............................................9

7.     PAYMENT FOR SHARES.....................................................10

       (A)      GENERAL RULE..................................................10

       (B)      SURRENDER OF STOCK............................................10

       (C)      EXERCISE/SALE.................................................10

       (D)      EXERCISE/PLEDGE...............................................10

       (E)      WITHHOLDING TAXES.............................................10

8.     ADJUSTMENT UPON CHANGES IN CAPITALIZATION..............................11

       (A)      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION....................11

       (B)      RESERVATION OF RIGHTS.........................................11

9.     TERMINATING EVENTS.....................................................11

10.    SECURITIES LAWS........................................................12

11.    NO RETENTION RIGHTS....................................................12

12.    DURATION AND AMENDMENTS................................................12

       (A)      TERM OF THE PLAN..............................................12

       (B)      RIGHT TO AMEND OR TERMINATE THE PLAN..........................13

       (C)      EFFECT OF AMENDMENT OR TERMINATION............................13
</TABLE>

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                    PLACER CAPITAL CO. 1999 STOCK OPTION PLAN

1.   PURPOSE. The purpose of the Plan is to offer selected employees, directors
and consultants an opportunity to acquire a proprietary interest in the success
of the Company, or to increase such interest, by purchasing Shares of the
Company's Common Stock. The Plan provides both for the grant of Nonstatutory
Options as well as ISOs intended to qualify under Section 422 of the Code.

2.   DEFINITIONS.

     (a) "Affiliate" shall mean any corporation which controls, is controlled
by, or is under common control with, the Company. A corporation that attains the
status of an Affiliate on a date after the adoption of the Plan shall be
considered an Affiliate commencing as of such date.

     (b) "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (d) "Committee" shall mean a committee of the Board of Directors, as
described in Section 3(a), or in the absence of such a committee, the Board of
Directors.

     (e) "Company" shall mean California Community Bancshares, a California
corporation.

     (f) "Effective Date" shall mean the earlier of the date of adoption of the
Plan by the Board of Directors of the Company or the approval of the Plan by the
shareholders of the Company in the manner required by applicable law or
regulation.

     (g) "Employee" shall mean:

          (i) Any individual who is a full- or part-time salaried or hourly
     employee (i.e., paid in accordance with normal payroll procedures) of the
     Company or of an Affiliate (a "Payroll Employee");

          (ii) A member of the Board of Directors or a member of the Board of
     Directors of any Affiliate; and

          (iii) An independent contractor who performs services for the Company
     or an Affiliate and who is not a member of the Board of Directors.

Service as an independent contractor or member of the Board of Directors shall
be considered employment for all purposes of the Plan, except as provided in
Section 4(a).

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     (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

     (i) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.

     (j) "Fair Market Value" shall mean the market price of Stock, determined by
the Committee as follows:

          (i) If Stock was traded over-the-counter on the date in question but
     was not traded on the NASDAQ system or the NASDAQ National Market System,
     then the Fair Market Value shall be equal to the mean between the last
     reported representative bid and asked prices quoted for such date by the
     principal automated inter-dealer quotation system on which Stock is quoted
     or, if Stock is not quoted on any such system, by the "Pink Sheets"
     published by the National Quotation Bureau, Inc.;

          (ii) If Stock was traded over-the-counter on the date in question and
     was traded on the NASDAQ system or the NASDAQ National Market System, then
     the Fair Market Value shall be equal to the last transaction price quoted
     for such date by the NASDAQ system or the NASDAQ National Market System;

          (iii) If Stock was traded on a stock exchange on the date in question,
     then the Fair Market Value shall be equal to the closing price reported by
     the applicable composite transactions report for such date; and

          (iv) If none of the foregoing provisions is applicable, then the Fair
     Market Value shall be determined by the Committee in good faith on such
     basis as it deems appropriate. In all cases, the determination of Fair
     Market Value by the Committee shall be conclusive and binding on all
     persons.

     (k) "ISO" shall mean an employee incentive stock option described in
Section 422(b) of the Code.

     (l) "Nonstatutory Option" shall mean a stock option not described in
Sections 422(b) or 423(b) of the Code.

     (m) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.

     (n) "Optionee" shall mean an individual who holds an Option.

     (o) "Payroll Employee" shall have the meaning ascribed in paragraph (f)
hereof.

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     (p) "Plan" shall mean this California Community Bancshares 1999 Stock
Option Plan, as it may be amended from time to time.

     (q) "Service" shall mean service as an Employee.

     (r) "Share" shall mean one share of Stock, as adjusted in accordance with
Section 8 (if applicable).

     (s) "Stock" shall mean the Common Stock of the Company.

     (t) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to his or her Option.

     (u) "Substitute Option" shall mean an option described in Section 6(j).

     (v) "Terminating Event" shall mean the occurrence of any of the following
events:

          (i) the consummation of a plan of dissolution or liquidation of the
     Company;

          (ii) the consummation of a plan of reorganization, merger or
     consolidation involving the Company, except for a reorganization, merger or
     consolidation where (A) the shareholders of the Company immediately prior
     to such reorganization, merger or consolidation own directly or indirectly
     at least 50% of the combined voting power of the outstanding voting
     securities of the corporation resulting from such reorganization, merger or
     consolidation (the "Surviving Corporation") in substantially the same
     proportion as their ownership of voting securities of the Company
     immediately prior to such reorganization, merger or consolidation and the
     individuals who were members of the Incumbent Board immediately prior to
     the execution of the agreement providing for such reorganization, merger or
     consolidation constitute at least 50% of the members of the board of
     directors of the Surviving Corporation, or a corporation beneficially
     directly or indirectly owning a majority of the voting securities of the
     Surviving Corporation, or (C) the Company is reorganized, merged or
     consolidated with a corporation in which any shareholder owning at least
     50% of the combined voting power of the outstanding voting securities of
     the Company immediately prior to such reorganization, merger or
     consolidation, owns at least 50% of the combined voting power of the
     outstanding voting securities of the corporation resulting from such
     reorganization, merger or consolidation.

          (iii) the sale of all or substantially all of the assets of the
     Company to another Person;

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          (iv) the acquisition of beneficial ownership of stock representing
     more than fifty percent (50%) of the voting power of the Company then
     outstanding by another Person.

     (w) "Vesting Event" shall mean the approval by the shareholders of the
Company of any matter, plan or transaction which would constitute a Terminating
Event, or if any Terminating Event occurs without shareholder approval, the
occurrence of such Terminating Event.

     (x) "Total and Permanent Disability" shall mean as defined in Section
22(e)(3) of the Code.

3.   ADMINISTRATION.

     (a) Committee Membership. The Board of Directors shall have the authority
to administer the Plan but may delegate its administrative powers under the
Plan, in whole or in part, to one or more committees of the Board of Directors.
With respect to the participation of Employees who are subject to Section 16 of
the Exchange Act, the Plan may be administered by a committee composed solely of
two or more members of the Board of Directors who qualify as "nonemployee
directors" as defined in Securities and Exchange Commission Rule 16b-3 under the
Exchange Act. With respect to the participation of Employees who may be
considered "covered employees" under Section 162(m) of the Code, the Plan may be
administered by a committee composed solely of two or more members of the Board
of Directors who qualify as "outside directors" as defined by the Internal
Revenue Service for plans intended to qualify for an exemption under Section
162(m)(4)(C) of the Code. If the committee members meet both such
qualifications, then one committee may administer the Plan both with respect to
Employees who are subject to Section 16 of the Exchange Act or who are
considered to be "covered employees" under Section 162(m) of the Code. The Board
of Directors may appoint a separate committee, consisting of one or more members
of the Board of Directors who do not meet such qualifications. Such committee
may administer the Plan with respect to Employees who are not officers of the
Company or members of the Board of Directors, may grant Options under the Plan
to such Employees and may determine the timing, number of Shares and other terms
of such grants.

     (b) Committee Procedures.The Board of Directors shall designate one of the
members of any Committee appointed under paragraph (a) as chairman. Any such
Committee may hold meetings at such times and places as it shall determine. The
acts of a majority of the Committee members present at meetings at which a
quorum exists, or acts reduced to or approved in writing by all Committee
members, shall be valid acts of the Committee.

     (c) Committee Responsibilities. Subject to the provisions of the Plan, any
such Committee shall have full authority and discretion to take the following
actions:

          (i) To interpret the Plan and to apply its provisions;

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          (ii) To adopt, amend or rescind rules, procedures and forms relating
     to the Plan;

          (iii) To authorize any person to execute, on behalf of the Company,
     any instrument required to carry out the purposes of the Plan;

          (iv) To determine when Options are to be granted under the Plan;

          (v) To select the Optionees;

          (vi) To determine the number of Shares to be made subject to each
     Option;

          (vii) To prescribe the terms and conditions of each Option, including
     (without limitation) the Exercise Price, to determine whether such Option
     is to be classified as an ISO or as a Nonstatutory Option, and to specify
     the provisions of the Stock Option Agreement relating to such Option;

          (viii) To amend any outstanding Stock Option Agreement, subject to
     applicable legal restrictions and to the consent of the Optionee who
     entered into such agreement;

          (ix) To prescribe the consideration for the grant of each Option under
     the Plan and to determine the sufficiency of such consideration; and

          (x) To take any other actions deemed necessary or advisable for the
     administration of the Plan.

Notwithstanding the foregoing, the Committee shall annually deliver financial
statements of the Company to all Optionees to whom such delivery is required by
Section 260.140.46 of the California Code of Regulations, or successor statute
or regulation.

All decisions, interpretations and other actions of the Committee shall be final
and binding on all Optionees, and all persons deriving their rights from an
Optionee. No member of the Committee shall be liable for any action that he or
she has taken or has failed to take in good faith with respect to the Plan or
any Option.

4.   ELIGIBILITY.

     (a) General Rules. Only Employees shall be eligible for designation as
Optionees by the Committee. In addition, only Payroll Employees of the Company
or an Affiliate shall be eligible for the grant of ISOs.

     (b) Ten-Percent Stockholders. An Employee who owns more than 10 percent of
the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for the grant of an ISO
unless:

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          (i) The Exercise Price is at least 110 percent of the Fair Market
     Value of a Share on the date of grant; and

          (ii) Such ISO by its terms is not exercisable after the expiration of
     five years from the date of grant.

     (c) Attribution Rules. For purposes of Subsection (b) above, in determining
stock ownership, an Employee shall be deemed to own the stock owned, directly or
indirectly, by or for such Employee's brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which such Employee holds an option shall not be counted.

     (d) Outstanding Stock. For purposes of Subsection (b) above, "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.

5.   STOCK SUBJECT TO PLAN.

     (a) Basic Limitation. Shares reserved for issuance pursuant to the exercise
of Options granted under the Plan shall be authorized but unissued Shares. The
aggregate number of Shares which may be issued pursuant to the exercise of
Options granted under the Plan shall be 1,590,000, all of which maybe issued
pursuant to the exercise of ISOs or Nonstatutory Options granted under the Plan.
In no event shall options be granted for a number of Shares which exceeds the
number of Shares reserved for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan. At no time shall the total
number of Shares issuable upon exercise of all outstanding Options and the total
number of Shares provided for under any stock bonus or similar plan of the
Company exceed thirty percent (30%) of the then outstanding Shares of the
Company's Common Stock, calculated in accordance with the conditions and
exclusions of Rule 260.140.45 of the California Code of Regulations, or
successor statute or regulation.

     (b) Additional Shares. In the event that any outstanding option granted
under this Plan, including Substitute Options, for any reason expires or is
canceled or otherwise terminated, the Shares allocable to the unexercised
portion of such option shall become available for the purposes of this Plan.

6.   TERMS AND CONDITIONS OF OPTIONS.

     (a) Stock Option Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement executed by the Optionee and the Company.

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Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.

     (b) Number of Shares. Each Stock Option Agreement shall specify the number
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 8. The Stock Option Agreement shall also
specify whether the Option is an ISO or a Nonstatutory Option.

     (c) Exercise Price. Each Stock Option Agreement shall specify the exercise
Price. The Exercise Price of an Option shall not be less than 100 percent of the
Fair Market Value of a Share on the date of grant, except as otherwise provided
in Section 4(b) with respect to ISOs and Section 6(i) with respect to Substitute
Options. The Exercise Price shall be payable in a form described in Section 7.

     (d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection
with the disposition of Shares acquired by exercising an Option. The Committee
may permit the Optionee to satisfy all or part of his or her tax obligations
related to the Option by having the Company withhold a portion of any Shares
that otherwise would be issued to him or her or by surrendering any Shares that
previously were acquired by him or her. Such Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
The payment of taxes by assigning Shares to the Company, if permitted by the
Committee, shall be subject to such restrictions as the Committee may impose.

     (e) Exercisability. Each Stock Option Agreement shall specify the date when
all or any installment of the Option is to become exercisable. The vesting of
any Option shall be determined by the Committee in its sole discretion; provided
however, that:

          (i) Upon the occurrence of a Vesting Event, the Option shall become
     immediately exercisable as to all Shares covered by such Option, whether or
     not previously vested;

          (ii) In the event that an Optionee's Service terminates, the Option
     shall be exercisable only to the extent the Option was vested as of the
     date of such termination, unless otherwise specified in the Optionee's
     Stock Option Agreement; and

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          (iii) Options granted to Payroll Employees other than officers of the
     Company shall vest at the rate of at least 20 percent of the shares subject
     thereto per year over five (5) years from the date of grant of the Option.

     (f) Term. Each Stock Option Agreement shall specify the term of the Option.
No Option shall have a term exceeding 10 years from the date of grant. Subject
to the preceding sentence, the Committee in its sole discretion shall determine
when an Option is to expire. In the event that the Optionee's Service
terminates:

          (i) As a result of such Optionee's death or Total and Permanent
     Disability, the term of the Option shall expire twelve months (or such
     other period specified in the Optionee's Stock Option Agreement) after such
     death or Total and Permanent Disability but not later than the original
     expiration date specified in the Stock Option Agreement PROVIDED, HOWEVER,
     that the expiration of the term of a Nonstatutory Option may be extended
     for such further period as the Committee, in its sole discretion, may
     determine, to a date not later than the original expiration date specified
     in the Stock Option Agreement.

          (ii) As a result of termination by the Company for cause, the term of
     the Option shall expire immediately upon the Company's dispatch to Employee
     of notice or advice of such termination, and thereafter neither the
     Employee nor the Employee's estate shall be entitled to exercise the Option
     with respect to any Shares whatsoever, whether or not after such
     termination the Employee may receive payment from the Company for vacation
     pay, for services rendered prior to termination, for services for the day
     on which termination occurred, for salary in lieu of notice or for other
     benefits. For purposes of this Paragraph (ii), "cause" shall mean an act of
     embezzlement, fraud, dishonesty or breach of fiduciary duty to the Company
     or its shareholders, disclosure of any of the secrets or confidential
     information of the Company, the inducement of any client or customer of the
     Company to break any contract with the Company, or the inducement of any
     principal for whom the Company acts as agent to terminate such agency
     relationship, the engagement of any conduct which constitutes unfair
     competition with the Company, the removal of Optionee from office by any
     court or bank regulatory agency, or such other similar acts which the
     Committee in its discretion reasonably determines to constitute good cause
     for termination of Optionee's Service. As used in this Paragraph (ii),
     Company includes Subsidiaries of the Company.

          (iii) As a result of termination for any reason other than Total and
     Permanent Disability, death or cause, the term of the Option shall expire
     three months (or such other period specified in the Optionee's Stock Option
     Agreement) after such termination, but not later than the original
     expiration date specified in the Stock Option Agreement PROVIDED, HOWEVER,
     that the expiration of the term of a Nonstatutory Option may be extended
     for such further period as the Committee,

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     in its sole discretion, may determine, to a date not later than the
     original expiration date specified in the Stock Option Agreement.

     (g) Transferability. During an Optionee's lifetime, such Optionee's Options
shall be exercisable only by him or her and shall not be transferable. In the
event of an Optionee's death, such Optionee's Option(s) shall not be
transferable other than by will or by the laws of descent and distribution, by
instrument to an inter vivos or testamentary trust in which the options are to
be passed to beneficiaries upon the death of the trustor/settlor, or by gift to
"immediate family," as that term is defined in 17 C.F.R. 240.16a-1(e) or
successor statute or regulation thereto.

     (h) No Rights as a Shareholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided in
Section 8.

     (i) Modification, Extension and Renewal of Options. Within the limitations
of the Plan, the Committee may modify, extend or renew outstanding Options or
may accept the cancellation of outstanding Options (to the extent not previously
exercised) in return for the grant of new Options at the same or a different
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, impair such Optionee's rights or increase
his or her obligations under such Option.

     (j) Substitute Options. If the Company at any time should succeed to the
business of another corporation through merger or consolidation, or through the
acquisition of stock or assets of such corporation, Options may be granted under
the Plan in substitution of options previously granted by such corporation to
purchase shares of its stock which options are outstanding at the date of the
succession ("Surrendered Options"). The Committee shall have discretion to
determine the extent to which such Substitute Options shall be granted, the
persons to receive such Substitute Options, the number of Shares to be subject
to such Substitute Options, and the terms and conditions of such Substitute
Options which shall, to the extent permissible within the terms and conditions
of the Plan, be equivalent to the terms and conditions of the Surrendered
Options. The exercise Price may be determined without regard to Section 6(c);
provided however, that the Exercise Price of each Substitute Option shall be an
amount such that, in the sole and absolute judgment of the Committee (and if the
Substitute Options are to be ISO's, in compliance with Section 424(a) of the
Code), the economic benefit provided by such Substitute Option is not greater
than the economic benefit represented by the Surrendered Option as of the date
of the succession.

7.   PAYMENT FOR SHARES.

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     (a) General Rule. The entire Exercise Price of Shares issued under the Plan
shall be payable in lawful money of the United States of America in cash or by
certified check, official bank check, or the equivalent thereof acceptable to
the Company at the time when such Shares are purchased, except as follows:

          (i) ISOs. In the case of an ISO granted under the Plan, payment shall
     be made only pursuant to the express provisions of the applicable Stock
     Option Agreement. However, the Committee (in its sole discretion) may
     specify in the Stock Option Agreement that payment may be made pursuant to
     Subsections (b), (c) or (d) below.

          (ii) Nonstatutory Options. In the case of a Nonstatutory Option
     granted under the Plan, the Committee (in its sole discretion) may accept
     payment pursuant to Subsections (b), (c), or (d) below.

     (b) Surrender of Stock. To the extent that this Subsection (b) is
applicable, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than 6 months
and which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.

     (c) Exercise/Sale. To the extent that this Subsection (c) is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.

     (d) Exercise/Pledge. To the extent that this Subsection (d) is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved
by the Company, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of all or part of the exercise Price and any
withholding taxes.

     (e) Withholding Taxes. The Company shall have the right upon the exercise
of an option to deduct any sums required to be withheld under federal, state or
local tax laws or regulations. The Company may condition the issuance of Shares
upon exercise of any Option upon the payment by the Optionee of any sums
required to be withheld under applicable laws or regulations. The Company has no
duty to advise any Optionee of the existence of any tax or any amounts which may
be withheld.

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8.   ADJUSTMENT UPON CHANGES IN CAPITALIZATION.

     (a) Adjustments Upon Changes in Capitalization. If the outstanding shares
of Stock are increased, decreased, or changed into or exchanged for a different
number or kind of shares or securities of the Company, through a reorganization,
merger, recapitalization, reclassification, stock split, reverse stock split,
stock dividend, stock consolidation, or otherwise, without consideration to the
Company, an appropriate and proportionate adjustment shall be made in the number
and kind of Shares as to which Stock Options may be granted. A corresponding
adjustment changing the number or kind of Shares subject to Options and the
exercise price per Share allocated to unexercised Options, or portions thereof,
which shall have been granted prior to any such change, shall likewise be made.
Any such adjustment, however, in an outstanding Option shall be made without
change in the total price applicable to the unexercised portion of the Option,
but with a corresponding adjustment in the price for each Share subject to the
Option. Any adjustment under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final and conclusive. No fractional shares of Stock shall be issued or
made available under the Plan on account of any such adjustment, and fractional
share interests shall be disregarded and the fractional share interest shall be
rounded down to the nearest whole number.

     (b) Reservation of Rights. Except as provided in this Section 8, an
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend or any other increase
or decrease in the number of shares of stock of any class. Any issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or Exercise Price of Shares subject to
an Option. The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.

9.   TERMINATING EVENTS.

     Not less than thirty (30) days prior to the occurrence of a Terminating
Event, the Committee or the Board shall notify each Optionee of the pendency of
the Terminating Event. Upon the effective date of the Terminating Event, the
Plan shall automatically terminate and all Options theretofore granted shall
terminate, unless provision is made in connection with such transaction for the
continuance of the Plan and/or assumption of Options theretofore granted, or
substitution for such Options with new stock options covering stock of a
successor corporation, or a parent or subsidiary corporation thereof, solely at
the discretion of such successor corporation or parent or subsidiary
corporation, with appropriate adjustments as to number and kind of shares and
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. If the Plan and unexercised
Options shall terminate pursuant to the preceding sentence, all persons shall
have the right to exercise the Options then outstanding and not exercised at
such time prior to the consummation of the transaction

                                       11
<PAGE>

causing such termination as the Company shall designate, unless the Board shall
have provided for the cancellation of such Options in exchange for a cash
payment equal to the excess of the Fair Market Value of the Stock as of the date
of the Terminating Event over the exercise price of such Options.

10.  SECURITIES LAWS.

     Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange on which the Company's
securities may then be listed.

     All Options granted under the Plan are subject to the requirement that if
at any time the Board of Directors or the Committee shall determine in its
discretion that the listing or qualification of the Shares subject thereto on
any securities exchange or under any applicable law, or the consent or approval
of any governmental regulatory body, or if, in the opinion of counsel to the
Company, compliance with any state or federal securities laws is necessary or
desirable as a condition of or in connection with the issuance of Shares under
the Option, the Optionee's right to exercise any and all Options shall be
suspended and the Options may not be exercised in whole or in part unless such
listing, qualification, consent, approval, or compliance shall have been
effected or obtained free of any condition not acceptable to the Board of
Directors or the Committee.

11.  NO RETENTION RIGHTS.

     Neither the Plan nor any Option shall be deemed to give any individual the
right to remain an employee or consultant of the Company or a Affiliate. The
Company and its Affiliates reserve the right to terminate the Service of any
employee or consultant at any time, with or without cause, subject to applicable
laws and a written employment agreement (if any).

12.  DURATION AND AMENDMENTS.

     (a) Term of the Plan. The Plan, as set forth herein, shall become effective
as of the Effective Date. The Plan, if not extended, shall terminate
automatically ten years after the Effective Date. It may be terminated on any
earlier date pursuant to Subsection(b) below.

     (b) Right to Amend or Terminate the Plan. The Board of Directors may amend,
suspend or terminate the Plan at any time and for any reason. An amendment of
the Plan shall be subject to the approval of the Company's shareholders only to
the extent required by applicable laws or regulations.

                                       12
<PAGE>

     (c) Effect of Amendment or Termination. No Shares shall be issued or sold
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Share previously issued or any Option previously
granted under the Plan.

                                       13<PAGE>

                                                                    Exhibit 10.5

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT (the "Agreement") is made and entered into as of the 4th
day of May, 1999 (the "Agreement Effective Date"), by and among THE BANK OF
ORANGE COUNTY, a California state-chartered banking corporation (the "Bank"),
CALIFORNIA FINANCIAL BANCORP, a California corporation ("Bancorp") (Bank and
Bancorp are jointly and severally referred to herein as "Employers") and HARVEY
FERGUSON (the "Employee") (collectively, the "parties"):

         WHEREAS, Employee has been employed by Bank as the President and Chief
Executive Officer pursuant to that certain Employment Agreement dated December
31, 1998 (the "Bank Employment Agreement");

         WHEREAS, Bank and Employee desire, as of the Agreement Effective Date,
to cancel and to terminate the Bank Employment Agreement;

         WHEREAS, the parties hereto desire to enter into a new agreement, as of
the Agreement Effective Date, for the purpose of continuing the services of
Employee for Bank as its President and Chief Executive Officer, and further
retaining the services of Employee for Bancorp as its Interim Vice-Chairman and
Chief Executive Officer, and in the near future after he is no longer its
Interim Vice-Chairman, as its President and Chief Executive Officer;

         NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:

1.       EMPLOYMENT AND DUTIES. Employers and Employee hereby enter into this
         Agreement upon the terms and conditions hereinafter set forth. Employee
         is hereby employed, at the

                                      -1-
<PAGE>

         pleasure of the Board of Directors of the Bank (the "Bank Board"), as
         the President and Chief Executive Officer of Bank. Employee shall
         perform the customary duties of a President and Chief Executive Officer
         of a California state-chartered banking corporation and such attendant
         duties as may, from time to time, be reasonably requested of Employee
         by the Bank Board. Employee is hereby further employed, at the pleasure
         of the Board of Directors of the Bancorp (the "Bancorp Board"), as the
         Interim Vice-Chairman and Chief Executive Officer of Bancorp and in the
         near future after he is no longer Interim Vice-Chairman of Bancorp, as
         the President and Chief Executive Officer of Bancorp. Employee shall
         perform the customary duties of a Vice-Chairman and Chief Executive
         Officer, and when so appointed, of a President of a bank holding
         company and such attendant duties as may, from time to time, be
         reasonably requested of Employee by the Bancorp Board. In connection
         with Employee's employment as President of Bank and Bancorp, Employee's
         duties shall include, if so elected, serving without compensation on
         the Boards of Directors of Employers (the "Boards").

2.       EXTENT OF SERVICES.

         a)       Employee shall devote Employee's full time, ability and
                  attention to the business of Employers during the term of this
                  Agreement, and shall neither directly nor indirectly render
                  any services of a business, commercial or professional nature
                  to any other person, firm, corporation or organization for
                  compensation without the prior written consent of the Boards
                  or Chairmen of the Boards.

         b)       Nothing contained herein shall be construed to prevent
                  Employee from investing Employee's assets in any form or
                  manner which does not in any manner or for any

                                      -2-
<PAGE>

                  amount of time interfere with Employee's performance of
                  services on behalf of Employers.

3.       TERM OF EMPLOYMENT. Subject to prior termination of this Agreement as
         hereinafter provided, Employers hereby employ Employee, and Employee
         hereby accepts employment with Employers, for a period beginning on the
         Agreement Effective Date and ending May 4, 2002 (the "Employment
         Term").

4.       COMPENSATION AND BENEFITS. In consideration of Employee's services to
         Employers during the Employment Term, Employers agree to compensate
         Employee, subject to such limitations as may exist under any applicable
         state or federal banking law or regulation, as follows:

         a)       BASE COMPENSATION. Employers shall pay or cause to be paid to
                  Employee a base compensation of $ 165,000 per year, payable in
                  conformity with Employers' normal payroll procedures (the
                  "Base Salary"), and prorated for any partial calendar year in
                  which this Agreement is in effect.

         b)       BONUS. Employee shall be eligible to receive an annual bonus
                  for each fiscal year of Employers, and shall be prorated for
                  any partial fiscal year of employment. The bonus will be
                  awarded by the Boards, in their sole discretion, based on
                  reasonable performance goals and administrative procedures
                  established by the Boards.

         c)       GENERAL EXPENSES. Employers shall, upon submission and
                  approval of written statements and bills in accordance with
                  the then regular procedures of Employers,

                                      -3-
<PAGE>

                  pay or reimburse Employee for any and all necessary, customary
                  and usual expenses incurred by him while traveling for or on
                  behalf of Employers, and any and all other necessary,
                  customary or usual expenses (including entertainment) incurred
                  by Employee for or on behalf of Employers in the normal course
                  of business, as determined to be appropriate by Employers.

         d)       INSURANCE.

                  i)       Employee shall be entitled to participate in such
                           group life insurance, health and long-term disability
                           plans as are provided by Employers to their employees
                           and/or senior executives, with such terms, conditions
                           and contributions as Employers generally provide
                           their other employees and/or senior executives;
                           provided, however, there shall be no duplication of
                           such benefits due to Employee being eligible for the
                           same benefit at both Bank and Bancorp. Employee shall
                           have the right, in Employee's discretion, to
                           designate the beneficiary or beneficiaries of any
                           such insurance.

                  ii)      Employers shall continue to pay Employee's cancer
                           insurance premiums during the Employment Term.

         e)       AUTOMOBILE ALLOWANCE. During the Employment Term , Employee
                  shall be entitled to an automobile allowance of $600 per month
                  (less any customary withholding and employment taxes). Except
                  for this automobile allowance, Employers shall not be
                  obligated to pay any other expenditure with respect to the
                  ownership, registration, operation, insurance or maintenance
                  of Employee's automobile.

                                      -4-
<PAGE>

         f)       VACATION. Employee shall accrue four (4) weeks' paid vacation
                  leave per year, pro rated on a daily basis for any partial
                  calendar year in which this Agreement is in effect. Such
                  vacation leave shall be taken at such time or times as are
                  mutually agreed upon by Employee and the Boards and in
                  accordance with Employers' vacation leave policy, provided,
                  that at least two (2) weeks of such vacation shall be taken
                  consecutively each year. Employee acknowledges that the
                  requirement of two (2) consecutive weeks of vacation each year
                  is required by sound banking practice. For each calendar year,
                  the Boards shall decide, in their discretion, either (i) to
                  pay Employee for any unused vacation time for such calendar
                  year or (ii) to carry over any unused vacation time for such
                  calendar year to the next calendar year, provided, however,
                  that Employee shall accrue no additional vacation time at any
                  time that the Employee has accrued and unused vacation time of
                  six (6) weeks.

         g)       OTHER BENEFITS. Employee shall be entitled to participate
                  during the Employment Term in such other benefits of
                  Employers, including bonus programs, if any, as Employers now
                  or hereafter shall provide for their employees and/or senior
                  executives generally, in accordance with the applicable terms
                  and conditions thereof.

5.       TERMINATION OF AGREEMENT. This Agreement may be terminated with or
         without cause during the Employment Term in accordance with this
         Section 5. In the event of such termination, Employee shall be released
         from all obligations under this Agreement, except that Employee shall
         remain subject to Sections 7, 8, 9(b), 9(c), 13, 15 and 18, and

                                      -5-
<PAGE>

         Employers shall be released from all obligations under this Agreement,
         except as otherwise provided in this Section 5 and Sections 9(b), 13,
         15 and 18.

         a)       EARLY TERMINATION BY EMPLOYERS WITHOUT CAUSE OR BY EMPLOYEE
                  UPON CHANGE IN TITLE. This Agreement and Employee's employment
                  may be terminated (i) by Employers without cause, for any
                  reason whatsoever, in the sole, absolute and unreviewable
                  discretion of Employers, upon written notice by the Boards to
                  Employee; or (ii) by Employee in the event that Employers
                  change Employee's titles or duties from those contemplated
                  under Section 1 of this Agreement. In the event of termination
                  pursuant to this Section 5(a), Employee shall receive a single
                  sum severance payment equal to twelve (12) months of his then
                  current Base Salary, less customary withholdings, payable
                  within two (2) days of such termination. Employers shall also
                  pay, for a period not to exceed twelve (12) months of coverage
                  following such termination of employment, Employee's premiums
                  for continuation of his group medical insurance coverage
                  (referred to as "COBRA") or, if COBRA is not available, for
                  individual coverage purchased by Employee. Such severance pay
                  and payment of medical coverage premiums shall constitute
                  liquidated damages in lieu of any and all claims by Employee
                  against Employers, and shall be in full and complete
                  satisfaction of any and all rights which Employee may enjoy
                  hereunder, and are expressly conditioned upon receipt by
                  Employers of a full and unconditional release (in the form of
                  Exhibit A) from Employee of any and all liability of Employers
                  or any of their affiliates, directors, officers, employees and
                  agents, arising out of this Agreement or out of

                                      -6-
<PAGE>

                  the employment relationship or termination of the employment
                  relationship between Employee and Employers.

         b)       EARLY TERMINATION BY EMPLOYERS FOR CAUSE. This Agreement and
                  Employee's employment may be terminated for cause by Employers
                  upon written notice to Employee, and Employee shall not be
                  entitled to receive compensation or other benefits for any
                  period after termination for cause. "For cause" pursuant to
                  this Agreement shall include, but not be limited to: (i) any
                  act of dishonesty; (ii) any breach of this Agreement or any
                  breach of a fiduciary duty (involving personal profit); (iii)
                  any neglect of, or negligence in carrying out, those duties
                  contemplated under Section 1 of this Agreement; (iv) any
                  willful violation of any law, rule or regulation, which, by
                  virtue of bank regulatory restrictions imposed as a result
                  thereof, would have a material adverse effect on the business
                  or financial prospects of Employers; (v) any commission of any
                  crime (other than a traffic violation or similar offense);
                  (vi) any failure by Employee to qualify at any time during the
                  Employment Term for a fidelity bond as described in Section 6
                  of this Agreement; or (vii) the requirement to comply with any
                  final cease-and-desist order or written agreement with any
                  applicable state or federal bank regulatory authority which
                  requests or orders Employee's dismissal or limits Employee's
                  employment duties. Termination for cause by Employers shall
                  not constitute a waiver of any remedies which may otherwise be
                  available to Employers under law, equity, or this Agreement.

         c)       EARLY TERMINATION BY EMPLOYEE. Employee may terminate this
                  Agreement upon ninety (90) days' written notice to Employers.
                  Except as otherwise provided

                                      -7-
<PAGE>

                  below by Section 5(f), Employee shall not be entitled to
                  receive compensation or other benefits under this Agreement
                  for any period after such early termination by Employee.

         d)       DEATH DURING EMPLOYMENT. This Agreement and all benefits
                  hereunder shall terminate immediately upon the death of
                  Employee, provided that such termination of benefits shall not
                  operate to prejudice or forfeit the rights of any beneficiary
                  or beneficiaries of any life insurance policy on the life of
                  Employee obtained pursuant to Section 4(d) hereof.

         e)       AUTOMATIC TERMINATION UPON CLOSURE OR TAKE-OVER. This
                  Agreement shall terminate automatically if Bank is closed or
                  taken over by the California Department of Financial
                  Institutions or by any other supervisory authority.

         f)       MERGER OR CORPORATE DISSOLUTION.

                  i)       In the event of a (a) merger in which neither Bank
                           nor Bancorp is the surviving corporation a majority
                           of the capital stock of which is not owned by the
                           sole shareholder of either Bank or Bancorp or an
                           affiliate thereof; (b) a transfer of all or
                           substantially all of the assets of Employers; (c) any
                           other corporate reorganization in which there is a
                           change in ownership of the outstanding shares of
                           Employers wherein more than fifty percent (50%) of
                           the outstanding shares of Employers are transferred
                           to any other partnership, corporation, trust or
                           business entity (a "Change in Control"); or (d) the
                           dissolution of Employers, this Agreement shall not be
                           terminated, but instead, the surviving or resulting
                           corporation, the

                                      -8-
<PAGE>

                           transferee of Employers' assets, or Employers shall
                           be bound by and shall have the benefit of the
                           provisions of this Agreement. Notwithstanding the
                           foregoing, in the event of a Change in Control and in
                           the event that, during the twelve month period
                           following such Change in Control, Employee terminates
                           employment with Employers (pursuant to Section 5(c)
                           above) following a reduction in the Employee's duties
                           or title, or a reduction in the Base Salary, Employee
                           shall receive a single sum severance payment equal to
                           twelve (12) months of his then current Base Salary,
                           less customary withholdings and taxes. Such severance
                           pay shall constitute liquidated damages in lieu of
                           any and all claims by Employee against Employers, and
                           shall be in full and complete satisfaction of any and
                           all rights which Employee may enjoy hereunder, and
                           are expressly conditioned upon receipt by Employers
                           of a full and unconditional release (in the form of
                           Exhibit A) from Employee of any and all liability of
                           Employers or any of their affiliates, directors,
                           officers, employees and agents, arising out of this
                           Agreement or out of the employment relationship or
                           termination of the employment relationship between
                           Employee and Employers.

                  ii)      Notwithstanding anything to the contrary provided
                           herein, if neither of the Employers is the surviving
                           entity in any transaction referred to in this Section
                           5(f) hereof and said transaction is in any manner the
                           result of any action taken at the direction of any
                           supervisory authority whatsoever, then in such event
                           this Agreement shall terminate immediately upon the

                                      -9-
<PAGE>

                           consummation of such transaction and Employee agrees
                           that all rights, duties, obligations, and benefits
                           herein contained shall thereupon terminate and that
                           Employee shall be entitled to no further compensation
                           or benefits from Employers save and except those
                           rights, duties, obligations, benefits and/or
                           compensation accrued and/or earned prior to the date
                           of such termination.

6.       FIDELITY BOND. Employee agrees that he will furnish all information and
         take any other steps necessary to enable Employers to obtain or
         maintain a fidelity bond conditional on the rendering of a true account
         by Employee of all moneys, goods, or other property which may come into
         the custody, charge or possession of Employee during the term of
         Employee's employment. The surety company issuing the bond and the
         amount of the bond must be acceptable to Employers and satisfy all
         banking laws and regulations. All premiums on the bond are to be paid
         by Employers. If Employee cannot qualify for a fidelity bond at any
         time during the term of this Agreement, Employers shall have the option
         to terminate this Agreement immediately, which shall constitute a
         termination for cause as defined in Section 5(b) hereof.

7.       PRINTED MATERIAL. All written or printed materials which shall include,
         but not be limited to, computer software, programs and files, used by
         Employee in performing duties for Employers are, and shall remain, the
         property of Employers, provided that any materials which belonged
         personally to Employee prior to his employment with Employers are, and
         shall remain, the property of Employee. Upon termination of Employee's
         employment with Employers, Employee shall return such applicable
         written or printed materials to Employers.

                                      -10-
<PAGE>

8.       DISCLOSURE OF INFORMATION. Employee recognizes and acknowledges that
         Employers possess trade secrets and other confidential and/or
         proprietary information concerning their business affairs and methods
         of operation which constitute valuable, confidential, and unique assets
         of their businesses and that of their affiliates ("Proprietary
         Information"), which Employers have developed through a substantial
         expenditure of time and money and which are and will continue to be
         utilized in Employers' businesses and which are not generally known in
         the trade. At any time before or after termination of this Agreement,
         Employee agrees not to disclose to anyone any Proprietary Information
         and not to make use of any Proprietary Information for his own purposes
         or for the benefit of anyone other than Employers under any
         circumstances. For purposes of this Section 8, Proprietary Information
         includes, without limitation, all information regarding products,
         services, processes, know-how, customers, suppliers, product and/or
         service development, business and capital plans, research, finances,
         marketing, pricing, costs and any other confidential matters relating
         to Employers or any affiliate of Employers. Employee recognizes and
         acknowledges that all financial information concerning any of
         Employers' customers, products or financial results is strictly
         confidential, and Employee shall not, at any time before or after
         termination of this Agreement, disclose to anyone any such information
         or any part thereof, for any reason or purpose whatsoever except to the
         extent that such information is already otherwise publicly available or
         to the extent such disclosure is required by Employee in order to
         comply with judicial process or applicable regulations of any state or
         federal bank regulatory agency.

         Employee hereby acknowledges the particular value to Employers of this
         Section 8, the loss of which cannot be reasonably or adequately
         compensated in an action at law or in

                                      -11-
<PAGE>

         arbitration. Therefore, Employee expressly agrees that Employers, in
         addition to any other rights or remedies that Employers shall possess,
         shall be entitled to injunctive and other equitable relief to prevent
         or remedy a breach of this Section 8 by Employee, without the necessity
         of posting any bond.

         Employee's obligation under this Section 8 shall survive the
         termination of this Agreement and/or the termination of employment.

9.       NON-COMPETITION BY EMPLOYEE:  CONSULTING AGREEMENT.

         a)       Employee shall not, during the Employment Term, directly or
                  indirectly, either as an employee, employer, consultant,
                  agent, principal, partner, shareholder, corporate officer,
                  director, or in any other individual or representative
                  capacity, engage or participate in any competing bank or
                  financial institution or financial services business without
                  the prior written consent of the Boards; provided, however,
                  Employee shall not be restricted by this Section from owning
                  securities of corporations listed on a national securities
                  exchange or regularly traded by national securities dealers so
                  long as such investment does not exceed one percent of the
                  market value of the outstanding securities of such
                  corporation.

         b)       In the event that this Agreement is terminated pursuant to
                  Section 5(a) or Section 5(c) hereof within twelve (12) months
                  after the Agreement Effective Date (the "Early Termination
                  Date"), Employee agrees to provide consulting services and not
                  to compete with Employers under the terms and conditions set
                  forth in the Consulting and Non-Competition Agreement attached
                  hereto as Exhibit B ("Consulting Agreement").

                                      -12-
<PAGE>

         c)       Notwithstanding anything to the contrary set forth elsewhere
                  in this Agreement, Employee agrees that (i) the Consulting
                  Agreement shall take effect only in the event of and upon the
                  termination of Employee's employment with Employers pursuant
                  to Section 5(a) or 5(c) of this Agreement; and (ii) the
                  obligation of the Employers to pay fees under the Consulting
                  Agreement is wholly independent of and shall in no way effect
                  the provisions set forth in Section 5(a) and/or 5(c)
                  including, without limitation, the severance pay and medical
                  coverage payment provisions set forth in Section 5(a) or the
                  provision in Section 5(c) which provides that, except as
                  provided in Section 5(f), Employee shall not be entitled to
                  receive compensation or other benefits under this Agreement
                  for any period after early termination by Employee pursuant to
                  Section 5(c).

10.      NOTICES. Any notices to be given hereunder by either party to the other
         may be effected in writing either by personal delivery or by mail,
         registered or certified, postage prepaid with return receipt requested.
         Notices to Employers shall be given to Bancorp at its then current
         principal office, c/o Chairman of the Bancorp Board of Directors.
         Notices to Employee shall be sent to Employee's then current personal
         residence. Notices delivered personally shall be deemed communicated as
         of actual receipt; mailed notices shall be deemed communicated as of
         five (5) calendar days after mailing.

11.      ENTIRE AGREEMENT. This Agreement supersedes any and all other
         agreements, either oral or in writing, between the parties hereto with
         respect to the employment of Employee by Employers (including without
         limitation the Bank Employment Agreement, which is hereby cancelled and
         terminated) and contains all of the covenants, rights, obligations and
         agreements between the parties with respect to such employment. Each
         party to this

                                      -13-
<PAGE>

         Agreement acknowledges that no representations, inducements, promises
         or agreements, oral or otherwise, have been made by any party, or
         anyone acting on behalf of any party, which are not embodied herein,
         and that no other agreement, statement or promise not contained in this
         Agreement shall be valid and binding. Any modification of this
         Agreement will be effective only if it is in writing signed by all
         parties to the Agreement.

12.      SEVERABILITY. In the event that any term or condition contained in this
         Agreement shall, for any reason, be held by a court of competent
         jurisdiction to be invalid, illegal or unenforceable in any respect,
         such invalidity, illegality or unenforceability shall not affect any
         other term or condition of this Agreement, but this Agreement shall be
         construed as if such invalid or illegal or unenforceable term or
         condition had never been contained herein.

13.      CHOICE OF LAW AND FORUM. This Agreement shall be governed by and
         construed in accordance with the laws of the State of California,
         except to the extent preempted by the laws of the United States. Any
         action or proceeding brought upon, or arising out of, this Agreement or
         its termination shall be brought in a forum located within the County
         of Orange, State of California, and Employee hereby agrees to be
         subject to service of process in California.

14.      WAIVER. The parties hereto shall not be deemed to have waived any of
         their respective rights under this Agreement unless the waiver is in
         writing and signed by such waiving party. No delay in exercising any
         rights shall be a waiver nor shall a waiver on one occasion operate as
         a waiver of such right on a future occasion.

                                      -14-
<PAGE>

15.      INDEMNIFICATION. Employers shall indemnify Employee, to the maximum
         extent permitted under the articles of incorporation and bylaws of
         Employers and governing laws and regulations, against expenses
         (including attorneys' fees), judgments, fines and amounts paid in
         settlement actually and reasonably incurred by Employee in connection
         with any threatened or pending action, suit or proceeding to which
         Employee is made a party by reason of his position as an officer or
         agent of Employers or by reason of his service at the request of
         Employers, if Employee acted in good faith in the course and scope of
         his employment and in a manner believed to be in or not opposed to the
         best interests of Employers. If available at rates determined by
         Employers, in their sole discretion, to be reasonable, Employers shall
         endeavor to apply for and obtain directors' and officers' liability
         insurance to indemnify and insure Employers and Employee from such
         liability or loss.

         Notwithstanding the foregoing, in any administrative proceeding or
         civil action initiated by any federal or state banking agency,
         Employers may only reimburse, indemnify or hold harmless Employee if
         Employers are in compliance with any applicable statute, rule,
         regulation or policy of the Federal Deposit Insurance Corporation, the
         California Department of Financial Institutions, or any other state or
         federal bank regulatory agency which then has jurisdiction over
         Employers regarding permissible indemnification payments.

16.      ASSIGNMENT. Neither this Agreement nor any of the rights or benefits
         hereunder shall be subject to execution, attachment or similar process,
         nor may this Agreement or any rights or benefits hereunder be assigned,
         transferred, pledged or hypothecated without the

                                      -15-
<PAGE>

         written consent of both parties hereto, except as provided in Sections
         4(d) and 5(d) hereof.

17.      CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph headings used
         herein are for convenience and ready reference only and are not a part
         of this Agreement and shall not be used in the construction or
         interpretation thereof.

18.      ARBITRATION. Any controversy or claim arising out of or relating to
         this Agreement, or breach of this Agreement, shall be settled by
         arbitration in accordance with the Employment Arbitration Rules of the
         American Arbitration Association, and judgment on the award rendered by
         the arbitrators may be entered in any court having jurisdiction. There
         shall be three arbitrators, one to be chosen directly by each party,
         and the third arbitrator to be selected by the two arbitrators so
         chosen. If any arbitration proceeding is brought for the enforcement of
         this Agreement or because of an alleged dispute, breach or default in
         connection with this Agreement, (i) the non-prevailing party shall pay
         the fees of the arbitrators and all other costs of the arbitration,
         including the cost of any record or transcripts of the arbitrations and
         administrative fees; and (ii) the prevailing party shall be entitled to
         recover reasonable attorney's fees and any other costs and expenses
         incurred in that action or proceeding, in addition to any other relief
         to which it or he may be entitled.

19.      WITHHOLDING. Any payments provided for hereunder shall be paid net of
         any applicable withholding required under federal, state or local law
         and any additional withholding to which you have agreed.

                                      -16-
<PAGE>

EXECUTED as of the 5th day of May, 1999.

EMPLOYERS:                                       EMPLOYEE:

THE BANK OF ORANGE COUNTY

/s/ Frank Harrison
--------------------------------------
By: Chairman of the Board of Directors
                                                 /s/ Harvey Ferguson
                                                 -------------------------------
                                                             Harvey Ferguson

CALIFORNIA FINANCIAL BANCORP

/s/ Richard W. Decker, Jr.
--------------------------------------
By: Chairman of the Board of Directors

                                      -17-
<PAGE>

                                    EXHIBIT A

                                RELEASE AGREEMENT

         This Release Agreement ("Release") was given to me, Harvey Ferguson
("Employee"), this _____day of _________ , _______, by THE BANK OF ORANGE COUNTY
(the "Bank") and CALIFORNIA FINANCIAL BANCORP (the "Bancorp") (jointly and
severally referred to as the "Employers"). At such time as this Release becomes
effective and enforceable (i.e., the revocation period discussed below has
expired), and assuming such Employee is otherwise eligible for payments under
the terms of that certain Employment Agreement between Employee and Employers
dated May 4, 1999 (the "Agreement"), Employers agree to pay Employee pursuant
to the terms of the Agreement an amount equal to $ ________ (minus customary
payroll deductions and any outstanding obligations owed by the Employee to
Employers).

         In consideration of the receipt of the promise to pay such amount,
Employee hereby agrees, for himself or his heirs, executors, administrators,
successors and assigns (hereinafter referred to as the "Releasors"), to fully
release and discharge Employers and their officers, directors, employees,
agents, insurers, underwriters, subsidiaries, parents, affiliates, successors
and assigns (hereinafter referred to as the "Releasees") from any and all
actions, causes of action, claims, obligations, costs, losses, liabilities,
damages and demands under any federal, state or local law or laws, or common
law, whether or not known, suspected or claimed, which the Releasors have, or
hereafter may have, against the Releasees arising out of or in any way related
to Employee's employment or termination of employment with Employers.

                                      -18-
<PAGE>

         It is understood and agreed that this Release extends to all such
claims and/or potential claims, and that Employee, on behalf of the Releasors,
hereby expressly waives all rights with respect to all such claims under
California Civil Code Section 1542, which provides as follows:

                  A general release does not extend to claims which the creditor
                  does not know or suspect to exist in his or her favor at the
                  time of executing the release, which if known by him or her
                  must have materially affected his or her settlement with the
                  debtor.

         It is further understood and AGREED that this Release includes claims
and rights Employee might have under the Age Discrimination in Employment Act
("ADEA"). The Employee's waiver of rights under the ADEA does not extend to
claims or rights that might arise after the date this Release is executed. The
monies to be paid to the Employee in this Release are in addition to any sums to
which he would be entitled without signing this Release. For a period of seven
(7) days following execution-of this Release, Employee may revoke the terms of
this Release by a written document received by the Bancorp on or before the end
of the seven (7) day period. The Release will not be final until said revocation
period has expired. No payments will be made under the Agreement if the Employee
revokes this Release.

         Employee executes this Release without reliance on any representation
by any Releasee. Employee acknowledges that he has read and does understand the
provisions of the Release set forth in the preceding paragraph, that he has had
an opportunity to consult with an attorney prior to executing this Release, that
he was given twenty-one (21) days in which to consider entering into this
Release, that he affixes his signature hereto voluntarily and without coercion,
and that no promise or inducement has been made other than those set out in this
Release. This document

                                      -19-
<PAGE>

does not constitute, and shall not be admissible as evidence of, an admission by
any Releasee as to any fact or matter.

         In case any part of this Release is later deemed to be invalid, illegal
or otherwise unenforceable, Employee agrees that the legality and enforceability
of the remaining provisions of this Release will not be affected in any way.

Dated:  _____ __ , __________                          _________________________
                                                            Harvey Ferguson

                                      -20-
<PAGE>

                                    EXHIBIT B

                    CONSULTING AND NON-COMPETITION AGREEMENT

         THIS CONSULTING AND NON-COMPETITION AGREEMENT (the "Agreement") is made
and entered into as of this 4th day of May, 1999, by and among THE BANK OF
ORANGE COUNTY, a California state-chartered banking corporation (the "Bank"),
CALIFORNIA FINANCIAL BANCORP, a California corporation ("Bancorp") (Bank and
Bancorp are jointly and severally referred to herein as the "Companies") and
HARVEY FERGUSON ("Consultant") (collectively, the "Parties").

                                    RECITALS

         A. Bank entered into an Agreement and Plan of Reorganization and Merger
as of July 28, 1998 ("Merger Agreement"), whereby Bank was merged with CFB
Merger Co., with Bank being the surviving entity, by a statutory merger (the
"Merger");

         B. Consultant was the record and beneficial owner of 2129 shares of
common stock of Bank and the holder of vested options to purchase 10,000 shares
of common stock of Bank;

         C. Bank continued its business and operations following the Merger and
pursuant to the Merger Agreement, Consultant received substantial consideration
from Bank for said common shares and vested options;

         D. Bank entered into an Employment Agreement with Consultant effective
  as of December 31, 1998 (the "Bank Employment Agreement") to act as President
  and Chief Executive Officer of Bank following the Merger;

                                      -21-
<PAGE>

         E. The Bank Employment Agreement was cancelled and terminated effective
May 4, 1999;

         F. The Parties entered into a new employment agreement with Consultant
  effective as of May 4, 1999 (the "Employment Agreement") to act as President
  and Chief Executive Officer of Bank and Interim Vice-Chairman and Chief
  Executive Officer of Bancorp, and in the near future after he is no longer
  Interim Vice-Chairman, as the President and Chief Executive Officer of
  Bancorp.

         G. The Companies desire to obtain the services of Consultant in the
event that Consultant's employment with the Companies is terminated under the
Employment Agreement within twelve (12) months after the effective date of the
Employment Agreement, either (1) by the Companies "without cause" or (2) by
Consultant voluntarily, and Consultant desires in such event to provide personal
services to the Companies;

         H. Consultant's knowledge of the Companies and the banking industry is
so valuable that assurance of his continued availability to provide information
and advice to the Companies is desired following the Merger;

         I.  The Companies desire to retain Consultant to serve on an
independent contractor basis; and

         J. Consultant will perform such consulting services and not compete
with the Companies' business in order to protect said business and goodwill
following the Merger, provided the Companies agree to pay Consultant fees in
accordance with the terms and conditions hereinafter set forth.

                                      -22-
<PAGE>

         In consideration of the services to be performed in the future as well
as the mutual promises and covenants herein contained, it is agreed as follows:

         1. CONSULTANT SERVICES; BANK'S RESPONSIBILITIES.

                  (a) CONSULTANT'S SERVICES. In the event that the Employment
Agreement is terminated pursuant to Section 5(a) or Section 5(c) of the
Employment Agreement within twelve (12) months after the effective date of the
Employment Agreement (the "Early Termination Date"), Consultant agrees to
provide consulting services as requested by the Companies including, but not
limited to, in the areas of strategic planning and business development (the
"Consulting Services") for the Term (as defined in Section 2 below). In
performing the Consulting Services, the Companies shall not obligate the
Consultant to devote more than an average of two (2) hours per week in providing
the Consulting Services. At the request of the Companies, the Consulting
Services may be provided by telephone or at a site or sites other than at the
offices of the Companies.

                  (b) THE COMPANIES' RESPONSIBILITIES. The Companies shall
cooperate with the Consultant and provide all information and direction
necessary to accomplish the purposes of this Agreement. The Companies shall
provide all administrative facilities and support necessary for the
accomplishment of the Consulting Services.

         2. TERM. Subject to the provisions for termination provided in
paragraph 6, the term of this Agreement shall begin as of the Early Termination
Date and shall end upon the expiration of eighteen (18) months after the Early
Termination Date (the "Term").

                                      -23-
<PAGE>

         3. FEES. The Companies agree to pay to Consultant, and Consultant
agrees to accept as full payment for the performance of services hereunder and
for Consultant complying with the non-competition provision in Section 8 below,
a monthly fee in an amount of $8,305 per month payable within five (5) business
days of the month immediately following each such month during which the
Consulting Services are rendered and the Consultant complies with Section 8. The
Companies shall pay such fees without withholding any Federal or state or local
taxes.

         4. EXPENSES. Consultant shall not be reimbursed for the expenses
incurred or paid by him in the provision of Consulting Services under this
Agreement; provided, however, that the Companies shall, upon submission and
approval of written statements and bills in accordance with the then regular
procedures of the Companies, pay or reimburse Consultant for any and all
necessary, customary and usual expenses incurred by him while traveling for or
on behalf of the Companies, and any and all other necessary, customary or usual
expenses (including entertainment) incurred by Consultant for or on behalf of
the Companies in the normal course of business, as determined to be appropriate
by the Companies.

         5. INDEPENDENT CONTRACTOR. The Companies and the Consultant acknowledge
that during the Term the Consultant will not be an employee of the Companies and
will be working as an independent contractor for the Companies. Accordingly,
Consultant shall be responsible for payment of all taxes including federal,
state and local taxes arising out of Consultant's activities in accordance with
this Agreement, including by way of illustration but not limitation, federal and
State income tax, Social Security tax, Unemployment Insurance taxes, and any
other taxes or business license fees as required. Consultant shall not earn any
additional medical, dental, life insurance, retirement benefits, paid vacations
or sick leave or any other employee benefits as a result of his providing
Consulting Service to the Companies.

                                      -24-
<PAGE>

         6. TERMINATION OF AGREEMENT. If this Agreement is terminated pursuant
to this paragraph 6, the Companies shall have no further liability to Consultant
other than for fees or expenses incurred as of the date of termination but not
yet paid.

                  (a) TERMINATION BY THE COMPANIES FOR CAUSE. This Agreement and
Consultant's services hereunder may be terminated for cause by the Companies
upon written notice to Consultant, and Consultant shall not be entitled to
receive compensation or other benefits for any period after termination for
cause. "For cause" pursuant to this Agreement shall include, but not be limited
to: (i) any act of dishonesty; (ii) any breach of this Agreement or any breach
of a fiduciary duty (involving personal profit); (iii) any neglect of duties or
negligence in carrying out duties; (iv) any willful violation of any law, rule
or regulation, which, by virtue of bank regulatory restrictions imposed as a
result thereof, would have a material adverse effect on the business or
financial prospects of the Companies; (v) any commission of any crime (other
than a traffic violation or similar offense); or (vi) the requirement to comply
with any final cease-and-desist order or written agreement with any applicable
state or federal bank regulatory authority which requests or orders Consultant's
dismissal or limits Consultant's duties. Termination for cause by the Companies
shall not constitute a waiver of any remedies which may otherwise be available
to the Companies under law, equity, or this Agreement.

                  (b) TERMINATION BY DEATH OR DISABILITY. The Companies may
terminate this Agreement by written notice to Consultant if, during the term of
this Agreement, Consultant shall become incapable of fulfilling obligations
hereunder because of death, injury or physical or mental illness. Termination
for reason of disability shall be effective immediately as of the date of said
notice.

                                      -25-
<PAGE>

                  (c) TERMINATION BY CONSULTANT WITHOUT CAUSE. Consultant may
terminate this Agreement without cause by giving the Companies ninety (90) days
written notice of said termination.

         7. INDEMNIFICATION. To the extent permitted by law and the Bank's
articles and by-laws, the Bank shall indemnify, defend and hold Consultant
harmless against any and all claims as may be asserted by any third party
against Consultant based on the performance of Consultant's services under the
terms of this Agreement.

         8. NON-COMPETITION. Consultant shall not, during the Term, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, shareholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any competing bank or
financial institution or financial services business for any bank or financial
institution or financial services business that has an office within 30 miles of
the head office or any branch of the Companies. Consultant hereby acknowledges
the particular value to the Companies of this Section 8, the loss of which
cannot be reasonably or adequately compensated in an action at law or in
arbitration. Therefore, Consultant expressly agrees that the Companies, in
addition to any and all other rights or remedies that the Companies shall
possess, shall be entitled to injunctive and other equitable relief to prevent
or remedy a breach of this Section 8 by Consultant, without the necessity of
posting any bond. Consultant's obligation under this Section 8 shall survive the
termination of this Agreement; provided that in the event of a breach of this
Section 8, the Companies will not have any obligation to continue to pay the
monthly fee under Section 3.

         9. MISCELLANEOUS.

                                      -26-
<PAGE>

                  (a) ENTIRE AGREEMENT. Except with respect to the Employment
Agreement, this Agreement supersedes any and all other agreements between
Consultant and the Companies, either oral or in writing, among the parties
hereto with respect to the retention of Consultant by the Companies and contains
all of the promises and agreements among the Parties with respect to such
retention. Each party acknowledges that no representations, promises or
agreements, oral or otherwise, have been made by any party or anyone acting on
behalf of a party which are not embodied herein, and that no other agreement,
statement, representation or promise with respect to such retention not
contained in this Agreement shall be valid or binding. Any modification, waiver
or amendment of this Agreement will be effective only if it is in writing and
signed by the party to be charged.

         Notwithstanding anything to the contrary set forth elsewhere in this
Agreement, Consultant agrees that (i) this Agreement shall take effect only in
the event of and upon the termination of Consultant's employment with the
Companies pursuant to the Section 5(a) or 5(c) of the Employment Agreement; and
(ii) the obligation of the Companies to pay Consulting Fees pursuant to this
Agreement is wholly independent of and shall in no way effect the provisions set
forth in the Employment Agreement.

                  (b) ARBITRATION. Except as provided in Sections 8 and 9(d),
any controversy or claim arising out of or relating to this Agreement, or breach
of this Agreement, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction. There shall be three arbitrators, one to be chosen directly
by each party, and the third arbitrator to be selected by the two arbitrators so
chosen. If any arbitration proceeding is brought for the enforcement of this
Agreement or because of an alleged dispute, breach or

                                      -27-
<PAGE>

default in connection with this Agreement, (i) the non-prevailing party shall
pay the fees of the arbitrators and all other costs of the arbitration,
including the cost of any record or transcripts of the arbitrations and
administrative fees; and (ii) the prevailing party shall be entitled to recover
reasonable attorney's fees and any other costs and expenses incurred in that
action or proceeding, in addition to any other relief to which it or he may be
entitled.

                  (c) CHOICE OF LAW AND FORUM. This Agreement shall be governed
by and construed in accordance with the laws of the State of California, except
to the extent preempted by the laws of the United States. Any action or
proceeding brought upon, or arising out of, this Agreement or its termination
shall be brought in a forum located within the County of Orange, State of
California, and Consultant hereby agrees to be subject to service of process in
California.

                  (d) DISCLOSURE OF INFORMATION. Consultant recognizes and
acknowledges that the Companies possess trade secrets and other confidential
and/or proprietary information concerning the Companies' business affairs and
methods of operation which constitute valuable, confidential, and unique assets
of the Companies' business ("Proprietary Information"), which the Companies have
developed through a substantial expenditure of time and money and which are and
will continue to be utilized in the Companies' business operations and which are
not generally known in the trade. At any time before or after termination of
this Agreement, Consultant agrees not to disclose to anyone any Proprietary
Information for any reason or purpose whatsoever and not to make use of any
Proprietary Information for his own purposes or for the benefit of anyone other
than the Companies under any circumstances. For purposes of this paragraph 9(d),
Proprietary Information includes, without limitation, all information regarding
services, processes, know-how, service development, business plans, strategic
plans,

                                      -28-
<PAGE>

labor relations, research, finances, marketing, assessments, costs, benefits,
and any other confidential matters relating to the Companies. Consultant hereby
acknowledges the particular value to Bank of this paragraph 9(d), the loss of
which cannot be reasonably or adequately compensated in an action at law or in
arbitration. Therefore, Consultant expressly agrees that the Companies, in
addition to any other rights or remedies that the Companies shall possess, shall
be entitled to injunctive and other equitable relief to prevent or to remedy a
breach of this paragraph 9(d) by him, without the necessity of posting any bond.

                  (e) SEVERABILITY. In the event that any term or condition
contained in this Agreement shall, for any reason, be held by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other term
or condition of this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable term or condition had never been contained
herein. It is the intention of the Parties that the non-competition covenants in
Section 8 shall be enforced to the greatest extent (but to no greater extent) in
time, area, and degree of participation as is permitted by the law of that
jurisdiction whose law is found to be applicable to any act allegedly in breach
of the covenants. It being the purpose of this Agreement to govern competition
by Consultant, the covenants in Section 8 shall be governed by and construed
according to that law (from among those jurisdictions arguably applicable to
this Agreement and those in which a breach of said Section is alleged to have
occurred or to be threatened) which best gives them effect.

         IN WITNESS WHEREOF, the parties hereto have executed this Consulting
and Non-Competition Agreement as of this 4th day of May, 1999, in the City of
Newport Beach, California.

                                      -29-
<PAGE>

                                               CONSULTANT:

DATED: May 5, 1999                          /s/ Harvey Ferguson
                                            -------------------------------
                                               HARVEY FERGUSON

                                            THE BANK OF ORANGE COUNTY

DATED: May 5, 1999                 By:      /s/ Frank Harrison
                                            -------------------------------
                                            Chairman of the Board of Directors

                                             CALIFORNIA FINANCIAL BANCORP

DATED: May 4, 1999                 By:      /s/ Richard W. Decker, Jr.
                                            -------------------------------
                                            Chairman of the Board of Directors

                                      -30-

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