Exhibit 10.1.26

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into at Santa
Barbara, California effective as of October 11, 2006, by and among PACIFIC
CAPITAL BANCORP (“PCB”), PACIFIC CAPITAL BANK, N.A. (“PCBNA”), and WILLIAM S.
THOMAS, JR. (“Mr. Thomas”), with reference to the following facts:

RECITALS:

 

  A. Mr. Thomas has recently apprised PCB and PCBNA of his desire to retire from
his positions as President and Chief Executive Officer.

 

  B. PCB and PCBNA believe that it would be of benefit to secure Mr. Thomas’
continuing services as President and Chief Executive Officer until such time as
his successor is appointed, and to thereafter continue to engage Mr. Thomas for
a period of time to assist with community relations; and

 

  C. Mr. Thomas is willing to remain with PCB and PCBNA for a period of time,
and he and PCB and PCBNA wish to memorialize their understandings regarding
Mr. Thomas’ current employment.

NOW THEREFORE, in consideration of the promises and mutual agreements contained
herein, the parties hereto, intending to be legally bound, agree as follows:

 

1. EMPLOYMENT

1.1 President and CEO. PCB and PCBNA hereby employ Mr. Thomas, and Mr. Thomas
hereby accepts continued employment with PCB and PCBNA, as PCB and PCBNA’s
President and Chief Executive Officer until such time as his successor is
appointed or such earlier date as may hereafter be determined by PCB and PCBNA’s
Boards of Directors at their sole discretion (referred to hereafter as the
“Transition Date”). In such capacity, Mr. Thomas shall continue to be
responsible for performing the duties and responsibilities customarily
associated with those of a President and Chief Executive Officer of a community
bank comparable in size to PCBNA, and such other duties and responsibilities as
PCB and PCBNA’s Boards of Directors may reasonably assign from time to time.
Mr. Thomas agrees to devote his full business time and efforts to such duties,
and to diligently perform such duties to the best of his abilities through the
Transition Date.

1.2 Community Relations. On the Transition Date, Mr. Thomas agrees to formally
retire from his role as President and Chief Executive Officer, and to tender his
resignation from such officer positions. Mr. Thomas also agrees to tender his
resignation from the PCB and PCBNA Boards of Directors on the Transition Date.
From and after the Transition Date, Mr. Thomas agrees to serve as a community
relations representative for PCB and PCBNA. In such capacity, Mr. Thomas will be
responsible for assisting both entities with general community relations,

--------------------------------------------------------------------------------

including administering PCB’s charitable contributions program, and undertaking
such other community relations efforts as PCB and PCBNA may reasonably request.

 

2. COMPENSATION AND BENEFITS

2.1 Salary.

2.1.1 Salary As President and CEO. While serving as President and Chief
Executive Officer, Mr. Thomas shall receive a monthly salary of $45,833.00 (the
equivalent of $550,000.00 per year). Mr. Thomas’s salary shall be paid in equal
installments on PCB’s customary paydays, prorated for any partial pay period.

2.1.2 Salary in Community Relations Role. From and after the Transition Date,
Mr. Thomas’ salary shall be $100,000.00 per year. Mr. Thomas’ salary for his
community relations role shall similarly be paid in equal installments on PCB’s
customary paydays, prorated for any partial pay period.

2.2 No Bonus. Mr. Thomas acknowledges and agrees that he shall not be entitled
to or eligible for bonus compensation during the term of this Agreement,
including any bonus relating to services previously rendered in calendar year
2006.

2.3 Paid Vacation. During the term of this Agreement, Mr. Thomas shall continue
to accrue paid vacation on a prorated basis at the rate of four (4) weeks per
year. The accrual and use of such vacation shall be subject to PCB/PCBNA’s rules
and regulations governing paid vacation.

2.4 Group Insurance and 401(k) Benefits. Mr. Thomas shall be eligible to
participate in PCB/PCBNA’s group health, dental and vision insurance plans, and
in PCB/PCBNA’s 401(k) retirement plan during the term of this Agreement on the
same terms and conditions as may be extended to other senior officers, subject
to and in accordance with the terms and conditions of such plans. Mr. Thomas
acknowledges and agrees that he will not be covered under, or eligible to
participate in, PCB/PCBNA’s “Change in Control Plan”, from and after the
Transition Date.

2.5 Expense Reimbursements. PCB and PCBNA shall promptly reimburse Mr. Thomas
for all reasonable expenses he incurs in performing his services pursuant to
this Agreement, provided that such expenses are incurred and accounted for in
accordance with such reasonable policies and procedures as PCB and PCBNA may
establish from time-to-time.

2.6 Transition Benefit. In recognition of the benefits furnished by Mr. Thomas’
remaining with PCB and PCBNA until his successor is appointed and his offer to
facilitate PCB and PCBNA’s community relations thereafter, PCB and PCBNA agree
that on the Transition Date, Mr. Thomas shall be entitled to a payment equal to
(a) $1,100,000, less (b) the cumulative salary paid to Mr. Thomas pursuant to
this Agreement between the effective date of this Agreement and the Transition
Date. This transition benefit shall be paid in a lump sum, or in such
installments as Mr. Thomas and PCB/PCBNA may mutually agree, and shall be
subject to deductions for requisite income tax withholdings and payroll taxes.
Mr. Thomas agrees that (1) if PCB and PCBNA terminate his employment for “Cause”
prior to the Transition Date pursuant to Section 4.1.3, below, or (2) if Mr
Thomas terminates this Agreement prior to the Transition Date pursuant to
Section 4.2, below, then no payment, full or prorated, shall be due under this
Section 2.6.

 

-2-

--------------------------------------------------------------------------------

2.7 Benefits Upon Conclusion of Employment. Upon Mr. Thomas’ retirement at the
expiration of the term of this Agreement, or any earlier termination of
Mr. Thomas’ employment by PCB/PCBNA or Mr. Thomas, PCB and PCBNA will provide
Mr. Thomas with the same or equivalent post-retirement benefits that Mr. Thomas
would have received had he retired at such time as President and Chief Executive
Officer, including participation in PCB/PCBNA’s Key Employee Retirement Health
Plan, subject to the terms and conditions of such post-retirement benefit plans.

 

3. TERM

Unless sooner terminated pursuant to Section 4, below, this Agreement shall
commence effective October 11, 2006, and shall terminate on November 10, 2008.

 

4. TERMINATION

4.1 Termination By PCB/PCBNA. PCB and PCBNA shall have the right to terminate
this Agreement prior to the expiration of the term set forth above immediately
upon the occurrence of any of the following events:

4.1.1 Death. Mr. Thomas’s death.

4.1.2 Disability. PCB and PCBNA furnishing Mr. Thomas with notice of termination
due to his “Disability.” For purposes of this Agreement, “Disability shall mean
a mental or physical impairment that precludes Mr. Thomas from performing the
essential duties and responsibilities of his position, even with reasonable
accommodation of such impairment by PCB and PCBNA.

4.1.3 Cause. PCB and PCBNA furnishing Mr. Thomas with notice of termination for
“Cause.” For purposes of this Agreement, “Cause” shall mean the following:

4.1.3.1 Conviction. Mr. Thomas’s conviction of a felony.

4.1.3.2 Material Misconduct. Mr. Thomas’ willful or negligent engagement in
conduct that is materially injurious to PCB or PCBNA, financially or otherwise,
including, but not limited to, fraud, unlawful harassment of employees or other
third parties, unlawful retaliation against employees, or off-duty conduct that
materially injures the reputation or goodwill of PCB or PCBNA;

4.1.3.3 Breach. Mr. Thomas’s breach of any material term of this Agreement or
material PCB/PCBNA’s policies and procedures, as in effect from time to time; or

4.1.3.4 Continued Unsatisfactory Performance. Mr. Thomas’s failure to correct
any deficiency in the performance of his duties and responsibilities hereunder
within fifteen (15) days of receiving written notice from PCB or PCBNA of such
unsatisfactory performance.

4.1.4 Mutual Agreement. Reaching a mutual agreement with Mr. Thomas to terminate
this Agreement.

 

-3-

--------------------------------------------------------------------------------

4.2 Termination By Mr. Thomas. Mr. Thomas shall have the right to terminate this
Agreement immediately upon fifteen (15) calendar days’ notice to PCB and PCBNA.

4.3 Compensation in Event of Termination. Upon termination of this Agreement,
PCB and PCBNA shall have no further obligation to compensate Mr. Thomas except
to pay to Mr. Thomas or his estate, conservator or designated beneficiary, as
the case may be, (i) any earned but unpaid salary due under Section 2.1, above,
(ii) any unused vacation time accrued under Section 2.3, above, (iii) remaining
transition benefits, if any, otherwise due under Section 2.6, above, (iv) any
post-retirement benefits due under Section 2.7, above, and (v) any other vested
benefits to which Mr. Thomas is then entitled in accordance with the terms of
each applicable benefit plan adopted by PCB or PCBNA.

 

5. ARBITRATION OF DISPUTES

PCB, PCBNA and Mr. Thomas mutually consent to the resolution by binding
arbitration of all claims or controversies (“claims”) arising out of Mr. Thomas’
employment (or its termination). The claims covered by this agreement include,
but are not limited to, claims and disputes relating to wages or other
compensation due, claims by either party upon this Agreement, claims alleging
discrimination or harassment (for example, on the basis of age, sex, sexual
orientation, race, disability, etc.), tort claims (for example, defamation,
infliction of emotional distress, invasion of privacy, etc.), wrongful
termination in violation of public policy, claims of retaliation, and statutory
claims of any nature under federal, state, or local governmental laws, statutes,
ordinances, or regulations. This agreement to submit claims to binding
arbitration shall not cover claims for Workers’ Compensation benefits, or claims
to governmental agencies for unemployment compensation benefits. By agreeing to
submit claims to binding arbitration, Mr. Thomas does not waive his right to
file an administrative complaint with a cognizant administrative agency (for
example, the Equal Employment Opportunity Commission, the Department of Fair
Employment & Housing, or other agencies of a similar nature), but he does
knowingly waive the right to file a civil action of any nature seeking recovery
of money. Mr. Thomas understands that by agreeing to submit all claims to
binding arbitration, he is waiving any right to trial by jury or other judicial
forum that might otherwise exist. Arbitration under this Section shall be held
in Santa Barbara, California, and shall be conducted in accordance with the
then-prevailing rules of Judicial Arbitration and Mediation Services, Inc.
(“JAMS”) for the arbitration of employment disputes; provided, however, that, to
the extent the JAMS rules provide otherwise, (a) a single arbitrator shall be
used to hear the dispute; (b) the arbitration filing fees, arbitrator’s fees and
the other JAMS administrative costs unique to arbitration proceedings shall be
borne by PCB/PCBNA, (c) the parties shall be entitled to conduct discovery in
the manner provided in California Code of Civil Procedure Section 1283.05, as
the same may hereafter be amended, (d) the arbitrator’s authority to award
attorneys’ fees to the prevailing party shall not be any greater nor any less
than that which would have been afforded a court had the matter been heard
before a court, and (e) the arbitrator shall render a written decision,
including a statement of reasons for the decision, and the decision shall be
subject to limited judicial review in accordance with California Code of Civil
Procedure Section 1285. et seq., as the same may hereafter be amended. This
mutual obligation to submit disputes and claims to binding arbitration shall
survive the termination of Mr. Thomas’ employment with PCB and PCBNA, and shall
apply to any claim whether arises or is asserted during or after his employment
with PCB and PCBNA. If any part of this agreement to arbitrate is found to be
void or otherwise unenforceable, the remaining portion of this agreement to
arbitrate shall continue in full force and effect.

 

-4-

--------------------------------------------------------------------------------

6. GENERAL PROVISIONS

6.1 Amendment and Binding Effect. This Agreement may not be amended except by an
instrument in writing signed by both parties.

6.2 Assignability. Mr. Thomas’s rights and obligations under this Agreement are
personal in nature, and accordingly may not be assigned or delegated by him.
This Agreement shall inure to the benefit of and be binding upon and enforceable
by any purchaser of substantially all of PCB/PCBNA’s assets, any corporate
successor to PCB and PCBNA or any assignee of PCB and PCBNA.

6.3 Partial Invalidity. If any term or provision of this Agreement or the
application thereof to any person or circumstance is held to be invalid or
unenforceable to any extent, then the remainder of this Agreement or application
of such term or provision to person or circumstances other than those to which
it is held invalid or unenforceable shall not be affected thereby, and each term
and provision of the Agreement shall be valid and be enforced to the fullest
extent permitted by law.

6.4 Waiver. No waiver of any right hereunder shall be effective for any purpose
unless in writing, signed by the party possessing such right, nor shall any such
waiver be construed to be a waiver or any subsequent right, term or provision of
this Agreement.

6.5 Notices. Any notice required or permitted to be given under this Agreement
shall be deemed delivered either when personally delivered, or when mailed,
registered or certified mail, postage pre-paid with return receipt requested, to
the addresses set forth under the signature blocks below, or to such other
address notice of which is hereafter provided.

6.6 Governing Law. The laws of the State of California shall govern all
questions concerning the validity and operation of this Agreement and the
performance of the obligations imposed upon the parties hereunder.

6.7 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties concerning the matters discussed herein and
supercedes and replace all prior agreements and understandings, whether oral or
written. Mr. Thomas agrees that in accepting continued employment with PCB and
PCBNA he has not relied upon any representation, warranty or promise not
otherwise contained in this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of October 11, 2006.

 

    “PCB”    

PACIFIC CAPITAL BANCORP

Date: October 11, 2006    

By:

 

/s/ Edward E. Birch

       

Edward E. Birch

       

Chairman of the Board

 

-5-

--------------------------------------------------------------------------------

   

Address for Notices:

   

1021 Anacapa Street

   

Santa Barbara, CA 93101

    “PCBNA”    

PACIFIC CAPITAL BANK, N.A.

Date: October 11, 2006

   

By:

 

/s/ Edward E. Birch

       

Edward E. Birch

       

Chairman of the Board

   

Address for Notices:

   

1021 Anacapa Street

   

Santa Barbara, CA 93101

    “MR. THOMAS”

Date: October 11, 2006

   

By:

 

/s/ William S. Thomas, Jr.

       

William S. Thomas, Jr.

       

President and Chief Executive Officer

   

Address for Notices:

   

118 Pomar Lane,

   

Santa Barbara, CA 93108

 

-6-