On May 16, 1998, at 1900 hours Pacific daylight time, a Piper PA-28R-201, N36574, collided with a Beech 95-B55, N4421W, while entering the traffic pattern at the Hollister, California, airport. The Beech was in the traffic pattern turning from crosswind to downwind at the time of the collision. Both aircraft were operated by California In Nice, Inc., of San Jose, California, under 14 CFR Part 91 as instructional flights. Both aircraft sustained substantial damage to their left wings and were able to land without further incident. The flight instructors and private pilots in their respective aircraft were not injured. Visual meteorological conditions existed for the instructional flights and no flight plans were filed. The instructor pilot in N4421W stated that this was an instructional flight that had departed the Reid-Hillview airport in San Jose at 1800 the day of the accident. The purpose of the flight was to conduct high altitude maneuvers followed by traffic pattern procedures at the accident airport. Both the instructor and private pilot of N4421W stated that they heard N36574 radio that they were passing over the airport. The instructor visually confirmed that N36574 had flown overhead. N4421W then reported that they were taking the active runway for left closed traffic. After taxiing to the active runway, the instructor radioed traffic that they were on the takeoff roll. Both the instructor and private pilot stated that on the upwind leg, they heard N36574 announce that they were on a 45-degree entry for runway 24. The instructor stated that he looked for the traffic. At 700 feet above ground level (agl) the student turned crosswind, and he announced that fact on the radio. After turning on to the crosswind leg, the instructor still had not found N36574 yet, and he was still looking. Before turning to the downwind leg, the instructor attempted to contact N36574, but received no response. As the student was turning to the downwind, the instructor saw N36574 and he took the controls for evasive maneuver to avoid the other airplane. The instructor stated that the other airplane appeared to be just underneath the right wing of his airplane. Both the instructor and student felt a "bump" and he leveled the wings and noticed damage to the left wing. They made a mayday call and successfully landed on the runway. The instructor pilot and private pilot in N36574 stated that they had taken off from Reid-Hillview at 1825 for an aircraft checkout combined with recurrent training, including high altitude work and traffic pattern procedures. After completing the high altitude work, both pilots decided to practice traffic pattern procedures at the accident airport. Approximately 5 miles from the airport, the private pilot radioed for airport advisories on the UNICOM frequency. He received an advisory, which stated that the winds were favoring runway 24 with left traffic. The student stated that he repeated the information and radioed his intention to cross over the airport and re-enter the pattern on a left 45-degree entry. The instructor reported that prior to turning inbound for the 45-degree entry, the pilots in N4421W radioed that they were on the takeoff roll and would remain in the pattern. The instructor stated that he attempted to locate them from their current position, but was unable to see the approach end of runway 24 or N4421W. He stated that his view was obstructed by a building, so he returned his attention to the cockpit to monitor the student's cockpit procedures. The student then radioed that he had turned inbound for entry on the 45. Both pilots still were unable to locate N4421W. The instructor stated that the pilot of N4421W asked for their current position. He stated that the student reported that they were on the 45 for the downwind. The instructor stated that after that call was made, he saw N4421W at their 10 o'clock position and his student made a turn southbound to avoid the other airplane. Subsequently, there was a corresponding bump and noise of the two airplanes colliding. The student said that he informed the instructor that they had been hit, and he leveled the airplane on a southeast heading. Following an assessment of the damage, the instructor assumed control and landed the airplane after N4421W without further incident.