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                      AGREEMENT AND PLAN OF REORGANIZATION

                                 BY AND BETWEEN

                             SANTA BARBARA BANCORP,


                                       AND

                            PACIFIC CAPITAL BANCORP,






                            Dated as of July 20, 1998





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                                TABLE OF CONTENTS

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ARTICLE I.            TERMS OF THE MERGER AND CLOSING...........................................................2

         SECTION 1.01 Merger of Pacific with and into SBB.......................................................2
         SECTION 1.02 Effective Date............................................................................2
         SECTION 1.03 Effects of the Merger.....................................................................2
         SECTION 1.04 Conversion of Pacific Common Stock........................................................3
         SECTION 1.05 SBB Common Stock..........................................................................4
         SECTION 1.06 Stock Options.............................................................................4
         SECTION 1.07 Exchange Procedures; Surrender of Common Certificates.....................................5
         SECTION 1.08 Articles of Incorporation.................................................................7
         SECTION 1.09 Bylaws....................................................................................7
         SECTION 1.10 Directors and Officers....................................................................7
         SECTION 1.11 Headquarters of Surviving Corporation.....................................................7
         SECTION 1.12 Tax Consequences..........................................................................7
         SECTION 1.13 Employee Benefits.........................................................................7
         SECTION 1.14 Severance Payments........................................................................8
         SECTION 1.15 Mutual Stock Option Agreements............................................................8

ARTICLE II.           THE CLOSING, THE CLOSING DATE AND THE EFFECTIVE DATE......................................8

         SECTION 2.01 Time and Place of the Closing and Closing Date............................................8
         SECTION 2.02 Actions to be Taken at the Closing by Pacific.............................................8
         SECTION 2.03 Actions to be Taken at the Closing by SBB................................................10

ARTICLE III.          REPRESENTATIONS AND WARRANTIES OF PACIFIC................................................12

         SECTION 3.01 Organization and Qualification...........................................................12
         SECTION 3.02 Execution and Delivery...................................................................13
         SECTION 3.03 Capitalization...........................................................................14
         SECTION 3.04 Compliance with Laws, Permits and Instruments............................................14
         SECTION 3.05 Financial Statements.....................................................................15
         SECTION 3.06 Undisclosed Liabilities..................................................................16
         SECTION 3.07 Litigation...............................................................................16
         SECTION 3.08 Consents and Approvals...................................................................16
         SECTION 3.09 Title to Assets..........................................................................17
         SECTION 3.10 Absence of Certain Changes or Events.....................................................17
         SECTION 3.11 Leases, Contracts and Agreements.........................................................19
         SECTION 3.12 Taxes....................................................................................20
         SECTION 3.13 Insurance................................................................................20
         SECTION 3.14 No Adverse Change........................................................................21
         SECTION 3.15 Patents, Trademarks and Copyrights.......................................................21
         SECTION 3.16 Transactions with Certain Persons and Entities...........................................21
         SECTION 3.17 Evidences of Indebtedness................................................................22

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         SECTION 3.18 Condition of Assets......................................................................22
         SECTION 3.19 Environmental Compliance.................................................................22
         SECTION 3.20 Regulatory Compliance....................................................................23
         SECTION 3.21 Securities and Exchange Commission Reports...............................................23
         SECTION 3.22 Absence of Certain Business Practices....................................................24
         SECTION 3.23 Registration Statement; Joint Proxy Statement/Prospectus.................................24
         SECTION 3.24 Dissenting Shareholders..................................................................24
         SECTION 3.25 Pooling of Interests.....................................................................24
         SECTION 3.26 Books and Records........................................................................25
         SECTION 3.27 Forms of Instruments, Etc................................................................25
         SECTION 3.28 Fiduciary Responsibilities...............................................................25
         SECTION 3.29 Guaranties...............................................................................25
         SECTION 3.30 Voting Trust or Buy-Sell Agreements......................................................25
         SECTION 3.31 Employee Relationships...................................................................25
         SECTION 3.32 Employee Benefit Plans...................................................................26
         SECTION 3.33 Interest Rate Risk Management Instruments................................................27
         SECTION 3.34 Year 2000................................................................................27
         SECTION 3.35 Representations Not Misleading...........................................................28

ARTICLE IV.            REPRESENTATIONS AND WARRANTIES OF SBB...................................................28

         SECTION 4.01 Organization and Qualification...........................................................29
         SECTION 4.02 Execution and Delivery...................................................................30
         SECTION 4.03 Capitalization...........................................................................30
         SECTION 4.04 Compliance with Laws, Permits and Instruments............................................31
         SECTION 4.05 Financial Statements.....................................................................31
         SECTION 4.06 Undisclosed Liabilities..................................................................32
         SECTION 4.07 Litigation...............................................................................32
         SECTION 4.08 Consents and Approvals...................................................................33
         SECTION 4.09 Title to Assets..........................................................................33
         SECTION 4.10 Absence of Certain Changes or Events.....................................................33
         SECTION 4.11 Leases, Contracts and Agreements.........................................................36
         SECTION 4.12 Taxes ...................................................................................36
         SECTION 4.13 Insurance ...............................................................................36
         SECTION 4.14 No Adverse Change........................................................................37
         SECTION 4.15 Patents, Trademarks and Copyrights.......................................................37
         SECTION 4.16 Transactions with Certain Persons and Entities...........................................38
         SECTION 4.17 Evidences of Indebtedness................................................................38
         SECTION 4.18 Condition of Assets......................................................................38
         SECTION 4.19 Environmental Compliance.................................................................38
         SECTION 4.20 Regulatory Compliance....................................................................39
         SECTION 4.21 Securities and Exchange Commission Reports...............................................40
         SECTION 4.22 Absence of Certain Business Practices....................................................40
         SECTION 4.23 Registration Statement; Joint Proxy Statement/Prospectus.................................40
         SECTION 4.24 Pooling of Interests.....................................................................41
         SECTION 4.25 Books and Records........................................................................41
         SECTION 4.26 Forms of Instruments, Etc................................................................41

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         SECTION 4.27 Fiduciary Responsibilities...............................................................41
         SECTION 4.28 Guaranties...............................................................................41
         SECTION 4.29 Voting Trust or Buy-Sell Agreements......................................................41
         SECTION 4.30 Employee Relationships...................................................................41
         SECTION 4.31 Employee Benefit Plans...................................................................42
         SECTION 4.32 Interest Rate Risk Management Instruments................................................43
         SECTION 4.33 Year 2000................................................................................43
         SECTION 4.34 Representations Not Misleading...........................................................44

ARTICLE V.            COVENANTS OF PACIFIC.....................................................................44

         SECTION 5.01 Best Efforts.............................................................................44
         SECTION 5.02 Merger Agreement.........................................................................45
         SECTION 5.03 Submission of Merger to Shareholders.....................................................45
         SECTION 5.04 Information for Applications and Statements..............................................45
         SECTION 5.05 Required Acts of Pacific.................................................................46
         SECTION 5.06 Prohibited Acts of Pacific...............................................................47
         SECTION 5.07 Access; Pre-Closing Investigation........................................................49
         SECTION 5.08 Director and Committee Meetings..........................................................49
         SECTION 5.09 Additional Financial Statements..........................................................50
         SECTION 5.10 Untrue Representations...................................................................50
         SECTION 5.11 Litigation and Claims....................................................................50
         SECTION 5.12 Adverse Changes..........................................................................50
         SECTION 5.13 No Negotiation with Others...............................................................50
         SECTION 5.14 Consents and Approvals...................................................................51
         SECTION 5.15 Environmental Investigation; Right to Terminate Agreement................................51
         SECTION 5.16 Restrictions on Resales..................................................................52
         SECTION 5.17 Shareholder Lists........................................................................52
         SECTION 5.18 Employee Pension Plans...................................................................52
         SECTION 5.19 Employee Welfare Benefit Plans...........................................................52
         SECTION 5.20 Director Voting..........................................................................53
         SECTION 5.21 Dividends................................................................................53
         SECTION 5.22 Non-Compete Agreements...................................................................53
         SECTION 5.23 Pooling of Interests Accounting Treatment................................................53
         SECTION 5.24 Disclosure Schedules.....................................................................53

ARTICLE VI.           COVENANTS OF SBB.........................................................................53

         SECTION 6.01 Best Efforts.............................................................................53
         SECTION 6.02 Merger Agreement.........................................................................54
         SECTION 6.03 Regulatory Approvals and Registration Statement..........................................54
         SECTION 6.04 Submission of Merger and Related Matters to Shareholders.................................55
         SECTION 6.05 Information for Applications and Statements..............................................55
         SECTION 6.06 Required Acts of SBB.....................................................................56
         SECTION 6.07 Prohibited Acts of SBB...................................................................56
         SECTION 6.08 Access; Pre-Closing Investigation........................................................58
         SECTION 6.09 Director and Committee Meeting...........................................................59
         SECTION 6.10 Additional Financial Statements..........................................................59

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         SECTION 6.11 Untrue Representations...................................................................59
         SECTION 6.12 Litigation and Claims....................................................................59
         SECTION 6.13 Adverse Change...........................................................................60
         SECTION 6.14 No Negotiation with Others...............................................................60
         SECTION 6.15 Consents and Approvals...................................................................60
         SECTION 6.16 Environmental Investigation; Right to Terminate Agreement................................60
         SECTION 6.17 Stock Options............................................................................61
         SECTION 6.18 Director and Officer Liability Insurance.................................................62
         SECTION 6.19 Dividends................................................................................62
         SECTION 6.20 Conduct of Business in the Ordinary Course...............................................62
         SECTION 6.21 Additions to SBB Board of Directors......................................................63
         SECTION 6.22 Director Voting..........................................................................63
         SECTION 6.23 Pooling of Interests Accounting Treatment................................................63
         SECTION 6.24 Disclosure Schedules.....................................................................63

ARTICLE VII.          CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PACIFIC.......................................63

         SECTION 7.01 Compliance with Representations, Warranties and Agreements...............................63
         SECTION 7.02 Shareholder Approvals....................................................................64
         SECTION 7.03 Government and Other Approvals...........................................................64
         SECTION 7.04 No Litigation............................................................................64
         SECTION 7.05 Delivery of Closing Documents............................................................64
         SECTION 7.06 Receipt of Fairness Opinion..............................................................64
         SECTION 7.07 Receipt of Pooling Opinions..............................................................65
         SECTION 7.08 Registration Statement...................................................................65
         SECTION 7.09 Federal Tax Opinion......................................................................65
         SECTION 7.10 Dissenting Shareholders..................................................................65
         SECTION 7.11 Accounting Treatment.....................................................................65
         SECTION 7.12 Bylaw Amendment..........................................................................66
         SECTION 7.13 No Material Adverse Change...............................................................66

ARTICLE VIII.         CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBB...........................................66

         SECTION 8.01 Compliance with Representations, Warranties and Agreements...............................66
         SECTION 8.02 Shareholder Approvals....................................................................66
         SECTION 8.03 Government and Other Approvals...........................................................66
         SECTION 8.04 No Litigation............................................................................67
         SECTION 8.05 Delivery of Closing Documents............................................................67
         SECTION 8.06 Receipt of Shareholder Letters...........................................................67
         SECTION 8.07 Receipt of Fairness Opinion..............................................................67
         SECTION 8.08 Dissenting Shareholders..................................................................67
         SECTION 8.09 Receipt of Pooling Opinions..............................................................68
         SECTION 8.10 Registration Statement...................................................................68
         SECTION 8.11 Federal Tax Opinion......................................................................68
         SECTION 8.12 Accounting Treatment.....................................................................68
         SECTION 8.13 No Material Adverse Change...............................................................68

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ARTICLE IX.           EXPENSES, TERMINATION AND ABANDONMENT....................................................69

         SECTION 9.01 Expenses.................................................................................69
         SECTION 9.02 Termination..............................................................................69
         SECTION 9.03 Notice of Termination....................................................................71
         SECTION 9.04 Effect of Termination....................................................................71

ARTICLE X.            NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES............................................71

         SECTION 10.01         Nonsurvival of Representations and Warranties...................................71

ARTICLE XI.           CONFIDENTIAL INFORMATION.................................................................72

         SECTION 11.01 Definition of...........................................................................72
         SECTION 11.02 Definition of...........................................................................72
         SECTION 11.03 Confidentiality.........................................................................72
         SECTION 11.04 Securities Law Concerns.................................................................73
         SECTION 11.05 Return of Subject Information...........................................................73
         SECTION 11.06 Specific Performance/Injunctive Relief..................................................73
                                                                                            
ARTICLE XII.          MISCELLANEOUS............................................................................73

         SECTION 12.01 Brokerage Fees and Commissions..........................................................73
         SECTION 12.02 Entire Agreement........................................................................74
         SECTION 12.03 Further Cooperation.....................................................................74
         SECTION 12.04 Severability............................................................................74
         SECTION 12.05 Notices.................................................................................74
         SECTION 12.06 GOVERNING LAW...........................................................................75
         SECTION 12.07 Multiple Counterparts...................................................................76
         SECTION 12.08 Certain Definitions.....................................................................76
         SECTION 12.09 Specific Performance....................................................................77
         SECTION 12.10 Attorneys' Fees and Costs...............................................................77
         SECTION 12.11 Rules of Construction...................................................................77
         SECTION 12.12 Binding Effect; Assignment..............................................................77
         SECTION 12.13 Public Disclosure.......................................................................78
         SECTION 12.14 Extension; Waiver.......................................................................78
         SECTION 12.15 Amendments..............................................................................78
         SECTION 12.16 Access; Due Diligence...................................................................79

                                    EXHIBITS

         Exhibit "A"    -     Agreement and Plan of Merger
                              
         Exhibit "B"    -     SBB Option Agreement
                              
         Exhibit "C"    -     Pacific Option Agreement
                              
         Exhibit "D"    -     Opinion Matters of Counsel to Pacific
                              
         Exhibit "E"    -     Opinion Matters of Counsel to SBB
                              
         Exhibit "F"    -     Form of Shareholder Letter
                              
         Exhibit "G"    -     Persons to Deliver Non-Compete Agreements
                              
         Exhibit "H"    -     Form of Non-Compete Agreement
                         
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                      AGREEMENT AND PLAN OF REORGANIZATION


         This AGREEMENT AND PLAN OF  REORGANIZATION  (this  "Agreement") is made
and entered into as of the 20th day of July,  1998, by and between Santa Barbara
Bancorp, a California  corporation and registered bank holding company under the
Bank Holding  Company Act of 1956,  as amended  (the "BHCA") with its  principal
offices at 1021 Anacapa Street,  Santa Barbara,  California  93101 ("SBB"),  and
Pacific Capital  Bancorp,  a California  corporation and registered bank holding
company under the BHCA with its principal  offices at 307 Main Street,  Salinas,
California 93901 ("Pacific").

                              W I T N E S S E T H:

         WHEREAS,  Pacific  is  a  California  corporation  duly  organized  and
existing under the laws of the State of California; and

         WHEREAS,  SBB is a California  corporation  duly organized and existing
under the laws of the State of California; and

         WHEREAS, SBB and Pacific desire to combine their respective businesses;
and

         WHEREAS,   in  furtherance  of  the  combination  of  their  respective
businesses,  SBB and Pacific  desire that Pacific shall be merged (the "Merger")
with and into  SBB,  under the  articles  of  incorporation  of SBB and with the
resulting  name "Pacific  Capital  Bancorp" (SBB as it will exist from and after
the Effective  Date (defined  herein) being referred to herein as the "Surviving
Corporation"),  and that (i) all of the issued and outstanding  shares of common
stock of Pacific (other than shares held by dissenting shareholders,  fractional
share  interests and as otherwise set forth herein) shall be converted  into and
exchanged  for shares of common  stock of the  Surviving  Corporation,  (ii) all
outstanding  options to acquire  common stock of Pacific shall be converted into
options to acquire common stock of the Surviving  Corporation,  and (iii) all of
the issued and  outstanding  shares of capital stock of SBB shall continue to be
issued and outstanding shares of capital stock of the Surviving Corporation, all
pursuant to an Agreement and Plan of Merger  substantially  in the form attached
hereto as Exhibit "A" (the "Merger Agreement"); and

         WHEREAS,  it is the intent of the respective Boards of Directors of SBB
and  Pacific  that the Merger be  structured  as a "merger of equals" of SBB and
Pacific and that the  Surviving  Corporation  be governed  and  operated on this
basis; and

         WHEREAS,  as a condition  to, and  immediately  after the execution of,
this Agreement, SBB and Pacific are entering into mutual stock option agreements
in substantially the forms attached hereto as Exhibit "B" and Exhibit "C".

         WHEREAS,  SBB and Pacific believe that the Merger, as provided for, and
subject  to the  terms  and  conditions  set  forth  in this  Agreement  and all
exhibits,  schedules and supplements hereto, is in the best interests of SBB and
Pacific and their respective shareholders; and

<PAGE>

         WHEREAS,  the  respective  Boards of  Directors of SBB and Pacific have
approved this Agreement and the proposed transactions substantially on the terms
and conditions set forth in this Agreement and the schedules and exhibits hereto
and have authorized the execution thereof.

         WHEREAS,  this Agreement and the Merger Agreement will be submitted for
approval of the respective  shareholders of SBB and Pacific at special  meetings
of their respective shareholders; and

         WHEREAS, the Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"); and

         WHEREAS,  SBB and Pacific desire to set forth certain  representations,
warranties  and  covenants  made by each to the  other as an  inducement  to the
execution  and  delivery of this  Agreement  and certain  additional  agreements
related to the transactions contemplated hereby.

         NOW,  THEREFORE,  for and in  consideration of the foregoing and of the
mutual representations,  warranties,  covenants and agreements contained in this
Agreement,   and  other  good  and  valuable  consideration,   the  receipt  and
sufficiency of which are hereby acknowledged,  and subject to the conditions set
forth below, the parties hereto undertake, promise, covenant and agree with each
other as follows:

                                   ARTICLE I.

                         TERMS OF THE MERGER AND CLOSING

         SECTION 1.01 Merger of Pacific with and into SBB.  Subject to the terms
and conditions of this Agreement and the Merger  Agreement,  in accordance  with
the provisions of Section 1107 of the California  General  Corporation  Law (the
"GCL"), on the Effective Date (as such term is defined in Section 1.02), Pacific
shall merge with and into SBB.  SBB shall be the  Surviving  Corporation  in the
Merger and shall continue its corporate existence under the laws of the State of
California. Upon consummation of the Merger, the separate corporate existence of
Pacific shall terminate.

         SECTION 1.02  Effective  Date.  Subject to the terms and  conditions of
this  Agreement,  upon the filing  with the  Secretary  of State of the State of
California  (the  "California  Secretary") of a duly executed  Merger  Agreement
substantially  in the form  attached  hereto as  Exhibit  "A" for the  merger of
Pacific with and into SBB and officers' certificates  prescribed by Section 1103
of the GCL, the Merger shall become  effective.  The date on which the Merger is
effective as prescribed in the Merger  Agreement  shall be referred to herein as
the "Effective Date", which the parties shall use their best efforts to cause to
occur on the Closing Date (as defined in Section 2.01(a)).

         SECTION 1.03  Effects of the Merger.  The Merger shall have the effects
provided  by this  Agreement  and as set forth in Section  1107 of the GCL.  The
Surviving  Corporation shall be the successor to each of SBB and Pacific;  shall
be subject to all the  liabilities,  obligations,  duties and  relations of each
merging party; and shall without the necessity of any conveyance,  assignment or
transfer,  become  the owner of all of the  assets of every  kind and  character

                                      -2-
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formerly  belonging to SBB and Pacific.  The name of the  Surviving  Corporation
shall be "Pacific Capital  Bancorp",  and Pacific shall provide SBB any consents
necessary  to  permit  the  Surviving  Corporation  to use  such  name as of the
Effective Date.

         SECTION 1.04      Conversion of Pacific Common Stock.

         (a) On the  Effective  Date,  by virtue of the Merger and  without  any
action on the part of the  holders  of the  following-described  security,  each
share of the common  stock,  no par value per share,  of Pacific  (the  "Pacific
Common Stock") issued and  outstanding  immediately  prior to the Effective Date
(other than shares of Pacific  Common Stock (i) as to which  dissenters'  rights
have been  perfected,  or (ii) held  directly  or  indirectly  by Pacific or SBB
(except for Trust  Account  Shares or DPC Shares as defined in Section  1.04(d))
shall be converted into the right to receive 1.935 shares (the "Exchange Ratio")
of the fully-paid,  nonassessable  and registered common stock, no par value per
share,  of SBB (the "SBB Common Stock")  (together with any cash payment in lieu
of fractional shares, as provided below, the "Merger Consideration").

         (b) No  fractional  shares of SBB Common  Stock shall be issued and, in
lieu thereof,  holders of shares of Pacific Common Stock who would  otherwise be
entitled to a fractional share interest (after taking into account all shares of
Pacific  Common Stock held by such holder) shall be paid an amount in cash equal
to the product of such fractional  share interest and the average of the closing
bid and asked price of a share of SBB Common Stock on the Nasdaq National Market
("Nasdaq") on the business day immediately preceding the Effective Date.

         (c) All of the shares of Pacific Common Stock converted into SBB Common
Stock  pursuant to this  Section 1.04 shall no longer be  outstanding  and shall
automatically  be  canceled  and  retired  and  shall  cease  to exist as of the
Effective  Date,  and  each  certificate   (each  a  "Certificate")   previously
representing any such shares of Pacific Common Stock shall thereafter  represent
the right to receive (i) a certificate  representing  the number of whole shares
of SBB Common  Stock and (ii) cash in lieu of  fractional  shares into which the
shares  of  Pacific  Common  Stock  represented  by such  Certificate  have been
converted pursuant to this Section 1.04.  Certificates  previously  representing
shares of Pacific Common Stock shall be exchanged for certificates  representing
whole shares of SBB Common Stock and cash in lieu of fractional shares issued in
consideration  therefor  upon the surrender of such  Certificates  in accordance
with Section 1.07, without any interest thereon. Such certificates  representing
whole  shares  of  SBB  Common  Stock  exchanged  for  certificates   previously
representing shares of Pacific Common Stock shall bear the name of the Surviving
Corporation.

         (d) On the Effective  Date, all shares of Pacific Common Stock that are
owned,  directly  or  indirectly,  by Pacific or SBB or any of their  respective
subsidiaries  (other than (i) shares of Pacific  Common Stock held,  directly or
indirectly,  in trust accounts,  managed accounts and the like or otherwise held
in a fiduciary  capacity that are beneficially  owned by third parties (any such
shares,  and shares of Pacific  Common Stock which are similarly  held,  whether
held  directly  or  indirectly  by  Pacific  or SBB,  as the case may be,  being
referred to herein as "Trust Account  Shares") and (ii) shares of Pacific Common
Stock held by Pacific or any of its subsidiaries in respect of a debt previously
contracted  (any such shares being referred to herein as "DPC Shares")) shall be
canceled  and shall  cease to exist  and no stock of SBB or other  consideration
shall be delivered in exchange therefor. All shares of SBB Common Stock

                                      -3-

<PAGE>

that are owned by Pacific or any of its  subsidiaries  (other than Trust Account
Shares and DPC Shares with respect to SBB Common Stock) shall be retired.

         (e) If, between the date hereof and the Effective Date, the outstanding
shares of SBB Common Stock or Pacific  Common  Stock shall have been  increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization,  reclassification,
stock  dividend,  stock split,  reverse stock split,  or other similar change in
capitalization (a "Share  Adjustment"),  then the number of shares of SBB Common
Stock into which a share of Pacific Common Stock shall be converted  pursuant to
subsection (a) above shall be appropriately and proportionately adjusted so that
each  shareholder  of Pacific shall be entitled to receive such number of shares
of SBB Common Stock as such  shareholder  would have  received  pursuant to such
Share  Adjustment  had the record date therefor been  immediately  following the
Effective Date.

         (f) If any of the  shares  of  Pacific  Common  Stock  are  "dissenting
shares" as defined  under  applicable  provisions  of Chapter 13 of the GCL, any
Certificate representing such shares shall not be converted as described in this
Section 1.04,  but from and after the Effective  Date shall  represent  only the
right to receive such value as may be  determined  pursuant to Chapter 13 of the
GCL; provided, however, that each dissenting share of Pacific Common Stock which
shall cease to be a dissenting share shall have only such rights as are provided
under the GCL.

         (g) On the Effective Date, the stock transfer books of Pacific shall be
closed,  and no transfer of Pacific Common Stock  theretofore  outstanding shall
thereafter be made.

         SECTION 1.05 SBB Common Stock.  On and after the Effective  Date,  each
share of SBB  Common  Stock  issued  and  outstanding  immediately  prior to the
Closing Date shall remain an issued and outstanding share of common stock of the
Surviving Corporation and shall not be affected by the Merger. References to SBB
Common  Stock in this  Agreement  as of and after the  Effective  Date  shall be
deemed to mean the common stock of the Surviving Corporation.

         SECTION 1.06      Stock Options.

         (a) Between the date of this  Agreement  and the Effective  Date,  each
person  holding one or more options to purchase  shares of Pacific  Common Stock
pursuant to any Pacific  Stock Option Plan (as defined in Section  6.17),  shall
continue  to have the right to  exercise  any vested  Pacific  Stock  Option (as
defined in Section 6.17) prior to the Effective Date.

         (b) On the  Effective  Date,  each  non-statutory  Pacific Stock Option
which is outstanding  and unexercised  immediately  prior thereto shall cease to
represent a right to acquire shares of Pacific Common Stock and shall be assumed
by the  Surviving  Corporation  and  converted  automatically  into an option to
purchase  shares of SBB  Common  Stock in an  amount  and at an  exercise  price
determined as provided below (and otherwise  subject to the terms of the Pacific
Stock Option Plans and the agreements evidencing grants thereunder):

                  (i) The number of shares of SBB Common  Stock to be subject to
the  converted  option  shall be equal to the product of the number of shares of
Pacific  Common  Stock  

                                      -4-

<PAGE>

subject to the original option and the Exchange Ratio (provided that such number
of shares shall be rounded to the nearest one one-hundredth of a share); and

                 (ii) The exercise price per share of SBB Common Stock under the
converted  option  shall be equal to the  exercise  price per  share of  Pacific
Common Stock under the original  option divided by the Exchange Ratio  (provided
that such exercise price shall be rounded to the nearest one  one-hundredth of a
dollar).

         (c) On the  Effective  Date,  each  Pacific  Stock  Option  which is an
"incentive  stock  option"  (as defined in Section 422 of the Code) and which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to  acquire  shares of  Pacific  Common  Stock and shall be assumed by the
Surviving  Corporation  and converted  automatically  into an option to purchase
shares of SBB Common Stock in an amount and at an exercise price determined in a
manner which is  consistent  with Section  424(a) of the Code.  The duration and
other terms of the  converted  option shall be the same as the original  option,
except that all  references  to Pacific  shall be deemed to be references to the
Surviving Corporation.

         SECTION 1.07     Exchange Procedures; Surrender of Common Certificates.

         (a) Norwest Bank Minnesota (or any successor in interest)  shall act as
the Exchange Agent in the Merger (the "Exchange Agent").

         (b) As soon as  practicable  after the Effective  Date, and in no event
later than three (3) business days thereafter,  the Exchange Agent shall mail to
each holder of record of one or more Certificates (as indicated on the certified
shareholder  list to be delivered  to SBB in  accordance  with  Section  2.02(I)
hereof,  each a "Pacific  Shareholder")  a letter of  transmittal  (which  shall
specify  that  delivery  shall be  effected,  and risk of loss and  title to the
Certificates  shall pass, only upon delivery of the Certificates to the Exchange
Agent) and  instructions  for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration into which the shares of Pacific Common
Stock represented by such Certificate or Certificates  shall have been converted
pursuant to this Agreement.

                  (i) Promptly after receipt of such Certificates and letters of
transmittal, the Exchange Agent shall review the executed letters of transmittal
in order to verify proper execution thereof.

                 (ii) Upon proper  surrender of a  Certificate  for exchange and
cancellation to the Exchange Agent, together with such properly completed letter
of transmittal,  duly executed, the holder of such Certificate shall be entitled
to receive in exchange  therefor (A) a certificate  representing  that number of
whole  shares of SBB Common  Stock to which such holder of Pacific  Common Stock
shall have become entitled pursuant to the provisions of Section 1.04, and (B) a
check  representing  the amount of any cash in lieu of  fractional  shares which
such holder has the right to receive in respect of the  Certificate  surrendered
pursuant  to  this  Section  1.07,  and the  Certificate  so  surrendered  shall
forthwith be canceled.  Until so surrendered,  each such outstanding Certificate
shall be deemed for all  purposes,  subject  only to  Chapter 13 of the GCL,  to
evidence  solely  the right to receive  such  Merger  Consideration  from SBB as
described in 

                                      -5-

<PAGE>

Section  1.04.  No  interest  will  be paid or  accrued  on any  cash in lieu of
fractional  shares or on any  unpaid  dividends  and  distributions  payable  to
holders of Certificates.

                (iii) Shareholders who do not provide properly completed letters
of  transmittal  and all  appropriate  Certificates  to the Exchange Agent shall
receive their Merger Consideration  promptly following receipt of those properly
completed  documents and appropriate  Certificates by the Exchange Agent. In the
event that a letter of  transmittal  contains an error,  is incomplete or is not
accompanied by all appropriate Certificates, then the Exchange Agent will notify
such Pacific Shareholder promptly of the need for further information.

         (c) If any certificate representing shares of SBB Common Stock is to be
issued  in a name  other  than  that in which  the  Certificate  surrendered  in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered  shall be properly  endorsed (or accompanied
by an  appropriate  instrument  of  transfer)  and  otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes  required by reason of the issuance
of a certificate  representing shares of SBB Common Stock in any name other than
that of the registered  holder of the Certificate  surrendered,  or required for
any other reason,  or shall establish to the  satisfaction of the Exchange Agent
that such tax has been paid or is not payable.

         (d) In the event that any Certificate  shall have been lost,  stolen or
destroyed,  upon  the  making  of an  affidavit  of  that  fact  by the  Pacific
Shareholder  claiming such  Certificate to be lost,  stolen or destroyed and, if
required by SBB in its sole discretion,  the posting by such person of a bond in
such amount as SBB may  determine is reasonably  necessary as indemnity  against
any claim that may be made  against it with  respect  to such  Certificate,  the
Exchange  Agent  shall  issue in  exchange  for such lost,  stolen or  destroyed
Certificate the Merger Consideration  deliverable in respect thereof pursuant to
this Agreement.

         (e) Neither the  Exchange  Agent nor any other party to this  Agreement
shall be  liable to any  holder of any  Certificates  for any  amount  paid to a
public  official  pursuant  to any  applicable  abandoned  property,  escheat or
similar laws.

         (f)  Notwithstanding  anything to the  contrary  contained  herein,  no
certificates  representing  shares of SBB Common  Stock shall be  delivered to a
Pacific  Shareholder who is an "affiliate" (as such term is used in Section 5.16
and Section  8.06) of Pacific  unless such  "affiliate"  shall have  theretofore
executed and delivered to SBB the Shareholder Letter referred to in Section 5.16
and Section 8.06 hereof.

         (g) No dividends or other  distributions of any kind which are declared
payable to the  shareholders  of record of the Surviving  Corporation  after the
Effective  Date shall be paid to persons  entitled to receive such  certificates
for SBB Common  Stock until such  persons  surrender  their  Certificates.  Upon
surrender  of such  Certificates,  the  holder  thereof  shall be paid,  without
interest,  any dividends or other  distributions  with respect to the SBB Common
Stock as to which the record  date and  payment  date  occurred  on or after the
Effective Date and before the date of surrender.

                                      -6-
<PAGE>

         (h) Notwithstanding  anything in this Agreement to the contrary,  for a
period of ninety  (90) days after the  Closing  Date,  holders  of  Certificates
representing shares of Pacific Common Stock shall be entitled to vote as holders
of  shares  of  SBB  Common  Stock   notwithstanding   that  such   Certificates
representing  Pacific  Common  Stock have not been  exchanged  for shares of SBB
Common Stock as provided in this Section 1.07.

         SECTION  1.08  Articles  of  Incorporation.  Subject  to the  terms and
conditions  of  this   Agreement,   on  the  Effective  Date,  the  Articles  of
Incorporation  of SBB shall be the Articles of  Incorporation  of the  Surviving
Corporation  until thereafter  amended in accordance with applicable law, except
that such Articles of Incorporation shall be amended to provide that the name of
the Surviving Corporation shall be "Pacific Capital Bancorp".

         SECTION  1.09  Bylaws.  Subject  to the  terms and  conditions  of this
Agreement,  on the Effective  Date, the Bylaws of SBB shall be the Bylaws of the
Surviving  Corporation  until  thereafter  amended in accordance with applicable
law.

         SECTION 1.10      Directors and Officers.

         (a) From and after the  Effective  Date,  the Board of Directors of the
Surviving  Corporation  shall  consist of the persons as set forth in the Merger
Agreement attached hereto as Exhibit "A".

         (b) From and after the  Effective  Date,  the officers of the Surviving
Corporation  shall be as set forth in the Merger  Agreement  attached  hereto as
Exhibit "A".

         SECTION 1.11  Headquarters of Surviving  Corporation.  On the Effective
Date,  the  headquarters  and  principal  executive  offices  of  the  Surviving
Corporation shall be located in Santa Barbara, California.

         SECTION  1.12 Tax  Consequences.  It is intended  that the Merger shall
constitute a  reorganization  within the meaning of Section  368(a)(1)(A) of the
Code, and that this Agreement shall  constitute a "plan of  reorganization"  for
the purpose of Section 368 of the Code.

         SECTION  1.13  Employee  Benefits.  SBB  shall,  with  respect  to each
employee of Pacific or its  Subsidiaries  at the Effective Date who continues in
employment with the Surviving Corporation or its Subsidiaries (each a "Continued
Employee"),  provide the benefits described in this Section 1.13. Subject to the
right  of  subsequent  amendment,   modification  or  termination  in  the  sole
discretion of the Surviving  Corporation as provided in Section 5.18 and Section
5.19 hereof,  each Continued  Employee shall be entitled,  as an employee of the
Surviving  Corporation  or its  Subsidiaries,  to  participate  in SBB  Employee
Benefit  Plans (as defined in Section  4.31(a)) in effect as of the date of this
Agreement,  if such  Continued  Employee  shall be eligible  and,  if  required,
selected for participation therein under the terms thereof.  Continued Employees
shall be  eligible  to  participate  on the same  basis  as  similarly  situated
employees of SBB and its Subsidiaries.  All such participation  shall be subject
to such  terms of such  plans  as may be in  effect  from  time to time and this
Section  1.13 is not  intended  to give any  Continued  Employee  any  rights or
privileges superior to those of other employees of SBB or its Subsidiaries.  The
provisions  of this  Section  1.13  shall not be deemed  or  construed  so as to
provide duplication of similar benefits but, subject to that qualification,  the
Surviving  Corporation  shall,  for purposes of

                                      -7-
<PAGE>

vesting  and any age or period  of  service  requirements  for  commencement  of
participation  with  respect  to any SBB  Employee  Plans in  which a  Continued
Employee may participate, credit each Continued Employee with his or her term of
service with Pacific and its  Subsidiaries.  Notwithstanding  the foregoing,  no
such credit for term of service with Pacific and its Subsidiaries shall be given
to any Continued  Employee with respect to participation in or benefits received
pursuant to the Santa Barbara Bank & Trust Key Employee  Retiree Health Plan and
the Santa Barbara Bank & Trust Retiree  Health Plan, but such credit shall begin
to  accrue  under  such plan  with  respect  to  Continued  Employees  as of the
Effective Date.

         SECTION 1.14 Severance  Payments.  The severance  benefits set forth in
Schedule  1.14  hereto  shall be  provided  to  employees  of Pacific who may be
terminated  (i) by Pacific on the  Effective  Date upon  confirmation  that such
employees would be entitled to the severance  benefit,  or (ii) by the Surviving
Corporation or any of its  Subsidiaries  without cause within one year following
the Effective Date.

         SECTION  1.15 Mutual  Stock  Option  Agreements.  As a condition to the
execution of this  Agreement,  SBB and Pacific are executing and delivering each
to the other an Option  Agreement in  substantially  the form attached hereto as
Exhibit "B" and Exhibit "C".

                                   ARTICLE II.

              THE CLOSING, THE CLOSING DATE AND THE EFFECTIVE DATE

         SECTION 2.01 Time and Place of the Closing and Closing Date.

         (a) On a date  mutually  agreeable to SBB and Pacific which is not less
than 10 business  days nor more than 30  calendar  days after the receipt of all
necessary  regulatory,  corporate,  shareholder  and  other  approvals  and  the
expiration  of any  mandatory  waiting  periods,  or on such other date mutually
agreeable to SBB and Pacific (herein called the "Closing  Date"), a meeting (the
"Closing")  will take place at which the parties to this Agreement will exchange
certificates,  opinions,  letters  and  other  documents  in order to  determine
whether  all of the  conditions  set  forth  in  Articles  VII and  VIII of this
Agreement  have been  satisfied or waived or whether any  condition  exists that
would permit a party to this Agreement to terminate this  Agreement.  If no such
condition  then exists,  or if no party elects to exercise any right it may have
to terminate this Agreement,  then and thereupon the  appropriate  parties shall
execute such  documents and  instruments  as may be necessary or  appropriate in
order to effect the transactions contemplated by this Agreement.

         (b) The Closing shall take place at the offices of Santa Barbara Bank &
Trust ("SBB&T"),  1021 Anacapa Street, Santa Barbara,  California  93101-2036 on
the Closing Date, or at such other place to which the parties may mutually
agree.

         SECTION  2.02  Actions to be Taken at the  Closing by  Pacific.  At the
Closing,  Pacific  shall  execute and  acknowledge,  or cause to be executed and
acknowledged   (as   appropriate),   and  deliver  to  SBB  such  documents  and
certificates  necessary or  appropriate to carry out the terms and provisions of
this Agreement, including without limitation, the following (all of such actions
constituting conditions precedent to SBB's obligations to close hereunder):

                                      -8-
<PAGE>

         A. True,  correct and complete copies of the Articles of  Incorporation
of Pacific and all amendments thereto, duly certified as of a recent date by the
California Secretary.

         B. True,  correct and complete copies of the Articles of Association of
First  National  Bank of  Central  California  and South  Valley  National  Bank
(collectively,   the  "Subsidiary  Banks")  and  all  amendments  thereto,  duly
certified as of a recent date by the Office of the  Comptroller  of the Currency
(the "OCC").

         C. True,  correct and complete copies of the Articles of  Incorporation
of the  Pacific  Subsidiaries  (as defined in Section  3.01(a)),  other than the
Subsidiary Banks, and all amendments thereto, duly certified as of a recent date
by the California Secretary.

         D. A certificate of existence, dated as of a recent date, issued by the
California  Secretary,  duly  certifying  as to the existence of Pacific and the
Pacific  Subsidiaries,  other than the Subsidiary  Banks,  under the laws of the
State of California.

         E.  Certificates to do business,  dated as of a recent date,  issued by
the OCC, duly certifying as to the authority of each of the Subsidiary  Banks to
transact the business of banking under the laws of the United States.

         F. Certificates of good standing,  dated as of a recent date, issued by
the California  Franchise Tax Board,  duly certifying as to the good standing of
Pacific and each of the Pacific Subsidiaries in the State of California.

         G.  Certificates,  dated as of a recent  date,  issued  by the  Federal
Deposit Insurance Corporation (the "FDIC"), duly certifying that the deposits of
each of the  Subsidiary  Banks are  insured by the FDIC  pursuant to the Federal
Deposit Insurance Act.

         H. A letter,  dated as of a recent date,  from the Federal Reserve Bank
of San  Francisco,  to the effect  that  Pacific is a  registered  bank  holding
company under the BHCA.

         I.  A  certificate,  dated  as of the  Closing  Date,  executed  by the
Secretary or other appropriate  executive officer of Pacific,  pursuant to which
such officer  shall  certify:  (a) the due adoption by the Board of Directors of
Pacific of corporate  resolutions  attached to such certificate  authorizing the
execution and delivery of this Agreement and the other  agreements and documents
contemplated hereby,  including,  but not limited to, the Merger Agreement,  and
the taking of all actions  contemplated hereby and thereby; (b) the due adoption
by the  shareholders  of Pacific of resolutions  authorizing  the Merger and the
execution and delivery of this Agreement and the Merger  Agreement and the other
agreements and documents  contemplated  hereby and thereby and the taking of all
actions  contemplated hereby and thereby; (c) the incumbency and true signatures
of those officers of Pacific duly  authorized to act on its behalf in connection
with the transactions  contemplated by this Agreement and to execute and deliver
this  Agreement  and the Merger  Agreement  and other  agreements  and documents
contemplated  hereby  and  thereby  and the taking of all  actions  contemplated
hereby  and  thereby  on behalf of  Pacific;  (d) that the copy of the Bylaws of
Pacific  attached to such  certificate  is true and correct and such Bylaws have
not been amended  except as  reflected in such copy;  and (e) a true and correct
copy of the list of Pacific Shareholders as of the Closing Date.


                                      -9-
<PAGE>

         J.  A  certificate,  dated  as of  the  Closing  Date,  executed  by an
executive  officer of Pacific,  pursuant to which Pacific shall certify,  to the
best knowledge of such executive  officer,  that (i) all of the  representations
and warranties made in Article III of this Agreement are true and correct in all
material  respects on and as of the date of such  certificate as if made on such
date and that, except as expressly permitted by this Agreement, there shall have
been no Material  Adverse  Change (as defined in Section  12.08(C)  hereof) with
respect to Pacific since  December 31, 1997,  and (ii) Pacific has performed and
complied in all material  respects with all of its  obligations  and  agreements
required to be performed on or prior to the Closing Date under this Agreement.

         K. Any signed Non-Compete  Agreements (as defined in Section 5.22) from
those persons  identified on Exhibit "G" attached hereto as Pacific,  consistent
with Pacific's  obligations to use its best efforts as set forth in Section 5.22
hereof, has been able to obtain on or before the Closing Date.

         L. All consents  required to be obtained by Pacific from third  parties
to consummate the transactions contemplated by this Agreement.

         M. An  opinion  of  counsel  to  Pacific  substantially  in the form of
Exhibit "D" attached hereto.

         N. All other documents required to be delivered to SBB by Pacific under
the provisions of this  Agreement,  and all other  documents,  certificates  and
instruments as are reasonably requested by SBB or its counsel.

         SECTION 2.03 Actions to be Taken at the Closing by SBB. At the Closing,
SBB shall execute and acknowledge (as  appropriate)  and deliver to Pacific such
documents and  certificates  necessary or appropriate to carry out the terms and
provisions of this Agreement,  including without limitation,  the following (all
of such actions constituting  conditions  precedent to Pacific's  obligations to
close hereunder):

         A. True, correct and complete copies of SBB's Articles of Incorporation
and all amendments thereto, duly certified as of a recent date by the California
Secretary.

         B. True,  correct and complete copies of the Articles of  Incorporation
of SBB&T, and all amendments thereto,  duly certified as of a recent date by the
Commissioner  of  Financial   Institutions  of  the  State  of  California  (the
"California Commissioner").

         C. True,  correct and complete copies of the Articles of  Incorporation
of Sanbarco  Mortgage  Company  ("Sanbarco")  and all amendments  thereto,  duly
certified as of a recent date by the California Secretary.

         D. Good standing and existence certificates for SBB and Sanbarco, dated
as of a recent date, issued by the appropriate state officials,  duly certifying
as to the  existence  and good standing of each of SBB and Sanbarco in the State
of California.

                                      -10-
<PAGE>


         E. Certificate of Existence,  dated as of a recent date,  issued by the
California Commissioner,  duly certifying as to the existence of SBB&T under the
laws of the State of California.

         F. Certificates of good standing,  dated as of a recent date, issued by
the California  Franchise Tax Board,  duly certifying as to the good standing of
SBB and each of the SBB Subsidiaries in the State of California.

         G.  Certificate,  dated as of a recent date,  issued by the FDIC,  duly
certifying  that the  deposits of SBB&T are insured by the FDIC  pursuant to the
Federal Deposit Insurance Act.

         H. A letter,  dated as of a recent date,  from the Federal Reserve Bank
of San Francisco,  to the effect that SBB is a registered  bank holding  company
under the BHCA.

         I.  A  certificate,  dated  as of the  Closing  Date,  executed  by the
Secretary or an Assistant  Secretary of SBB pursuant to which such officer shall
certify:  (a) the due  adoption by the Board of  Directors  of SBB of  corporate
resolutions attached to such certificate  authorizing the execution and delivery
of this Agreement and the other agreements and documents contemplated hereby and
the taking of all actions  contemplated hereby and thereby; (b) the due adoption
by the  shareholders  of SBB of  resolutions  authorizing  the  Merger  and  the
execution and delivery of this Agreement and the Merger  Agreement and the other
agreements and documents  contemplated  hereby and thereby and the taking of all
actions  contemplated hereby and thereby; (c) the incumbency and true signatures
of those officers of SBB duly authorized to act on its behalf in connection with
the transactions  contemplated by this Agreement and to execute and deliver this
Agreement and other agreements and documents  contemplated hereby and the taking
of all actions  contemplated  hereby and thereby on behalf of SBB,  and (d) that
the copy of the Bylaws of SBB attached to such  certificate  is true and correct
and such Bylaws have not been amended except as reflected in such copy.

         J. A  certificate,  dated as of the  Closing  Date,  executed by a duly
authorized  officer of SBB,  pursuant  to which SBB shall  certify,  to the best
knowledge of such officer,  that (i) all of the  representations  and warranties
made in  Article  IV of this  Agreement  are true and  correct  in all  material
respects on and as of the date of such  certificate  as if made on such date and
that, except as expressly permitted by this Agreement,  there shall have been no
Material  Adverse Change (as defined in Section 12.08(C) hereof) with respect to
SBB since  December 31,  1997,  and (ii) SBB has  performed  and complied in all
material  respects with all of its  obligations  and  agreements  required to be
performed on or prior to the Closing Date under this Agreement.

         K. All  consents  required to be obtained by SBB from third  parties to
consummate the transactions contemplated by this Agreement.

         L. An opinion of  counsel to SBB  substantially  in the form of Exhibit
"E" attached hereto.

         M. All other documents required to be delivered to Pacific by SBB under
the provisions of this  Agreement,  and all other  documents,  certificates  and
instruments as are reasonably requested by Pacific or its counsel.

                                      -11-
<PAGE>

                                  ARTICLE III.

                    REPRESENTATIONS AND WARRANTIES OF PACIFIC

         Pacific  hereby makes the  representations  and warranties set forth in
this Article III to SBB.

         SECTION 3.01      Organization and Qualification.

         (a)  Pacific  is  a  California  corporation  duly  organized,  validly
existing under the laws of the State of  California,  and in good standing under
all laws, rules and regulations  applicable to corporations located in the State
of  California.  Pacific is a bank holding  company  registered  under the BHCA.
Pacific has all requisite corporate power and authority (including all licenses,
franchises,  permits  and  other  governmental  authorizations  as  are  legally
required) to carry on its  business as now being  conducted,  to own,  lease and
operate its properties and assets,  including, but not limited to, as now owned,
leased or operated,  and to enter into and carry out its obligations  under this
Agreement and the Merger Agreement.  Schedule 3.01(a) sets forth a complete list
of each  Subsidiary (as defined in Section  12.08(B)) of Pacific  (collectively,
the "Pacific  Subsidiaries").  Except as set forth on Schedule 3.01(a),  Pacific
does not own or control any  Affiliate (as defined in Section  12.08(A)  hereof)
other than the Pacific Subsidiaries. True and complete copies of the Articles of
Incorporation and Bylaws of Pacific and the Pacific Subsidiaries (other than the
Subsidiary Banks), as amended to date, certified by the Secretary of Pacific and
each Pacific Subsidiary, as applicable, have been delivered to SBB.

         (b) Each of the Subsidiary Banks is a national banking association duly
organized,  validly  existing and in good standing  under the laws of the United
States of America,  and in good standing under all laws,  rules, and regulations
applicable to national banking  associations located in the State of California.
Each of the  Subsidiary  Banks has all requisite  corporate  power and authority
(including   all   licenses,   franchises,   permits   and  other   governmental
authorizations as are legally required) to carry on their respective  businesses
as now being  conducted,  to own,  lease and operate its  properties and assets,
including,  but not  limited  to, as now  owned,  leased or  operated.  True and
complete  copies  of the  Articles  of  Association  and  Bylaws  of each of the
Subsidiary  Banks,  as  amended  to date,  certified  by the  Secretary  of each
Subsidiary  Bank, have been delivered to SBB. Each of the Subsidiary Banks is an
insured  bank as defined in the  Federal  Deposit  Insurance  Act (the  "FDIA").
Neither of the  Subsidiary  Banks own or control  any  Affiliate  (as defined in
Section 12.08(A) hereof) or Subsidiary (as defined in Section 12.08(B)  hereof).
Except  for  assessability  under  12  U.S.C.  ss.55,  all  of  the  issued  and
outstanding shares of capital stock of the Subsidiary Banks are owned by Pacific
free and clear of all liens,  encumbrances,  rights of first refusal, options or
other  restrictions  of any  nature  whatsoever,  and all such  shares  are duly
authorized  and  validly  issued and are fully paid,  nonassessable  and free of
preemptive  rights of any  person.  There  are no  options,  warrants  or rights
outstanding to acquire any capital stock of the  Subsidiary  Banks and no person
or entity has any other  right to purchase  or acquire  any  unissued  shares of
stock of any of the Subsidiary Banks, nor does any such Subsidiary Bank have any
obligation of any nature with respect to its unissued shares of stock.

                                      -12-
<PAGE>

         (c) Each of Pacific Subsidiaries, other than the Subsidiary Banks, is a
California  corporation  duly organized,  validly  existing and in good standing
under the laws of the State of California,  and in good standing under all laws,
rules,  and  regulations  applicable  to  corporations  located  in the State of
California.  Each such Pacific Subsidiary has all requisite  corporate power and
authority  (including all licenses,  franchises,  permits and other governmental
authorizations as are legally required) to carry on their respective  businesses
as now being  conducted,  to own,  lease and operate its  properties and assets,
including,  but not limited  to, as now owned,  leased or  operated.  All of the
issued and outstanding  shares of capital stock of each such Pacific  Subsidiary
is owned by Pacific free and clear of all liens,  encumbrances,  rights of first
refusal,  options or other restrictions of any nature  whatsoever,  and all such
shares are duly authorized and validly issued and are fully paid,  nonassessable
and free of preemptive rights of any person.  There are no options,  warrants or
rights outstanding to acquire any capital stock of the Pacific  Subsidiaries and
no person or entity has any other  right to  purchase  or acquire  any  unissued
shares of stock of any of the Pacific  Subsidiaries,  nor does any such  Pacific
Subsidiary have any obligation of any nature with respect to its unissued shares
of stock.

         (d) Except as  required  by the  National  Bank Act,  the nature of the
business of Pacific and the Pacific Subsidiaries does not require any of them to
be licensed or qualified to do business in any jurisdiction other than the State
of California.  Except as disclosed on Schedule 3.01(d), neither Pacific nor the
Pacific Subsidiaries have any equity interest,  direct or indirect, in any other
bank or  corporation  or in any  partnership,  joint  venture or other  business
enterprise or entity,  except as acquired  through  settlement of  indebtedness,
foreclosure, the exercise of creditors' remedies or in a fiduciary capacity, and
the  business  carried on by Pacific and the Pacific  Subsidiaries  has not been
conducted  through  any other  direct or indirect  Subsidiary  or  Affiliate  of
Pacific or the Pacific Subsidiaries.

         (e) Neither Pacific nor any of Pacific  Subsidiaries  that is neither a
bank, a bank  operating  subsidiary or a bank service  corporation,  directly or
indirectly,  engages in any activity prohibited by the Board of Governors of the
Federal Reserve System (the "Federal Reserve").  Without limiting the generality
of the foregoing,  any equity investment of Pacific and each Pacific  Subsidiary
that is not a bank, a bank operating  subsidiary or a bank service  corporation,
is not prohibited by the Federal Reserve.

         (f) Neither of the Subsidiary Banks, directly or indirectly, engages in
any activity prohibited by the OCC.

         SECTION 3.02  Execution and  Delivery.  Pacific has taken all corporate
action necessary to authorize the execution, delivery and (provided the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other  agreements  and  documents  contemplated  hereby to which it is a
party, including,  but not limited to, the Merger Agreement.  This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not  limited  to, the Merger  Agreement,  have been or at Closing  will be, duly
executed by Pacific and each  constitutes and will  constitute the legal,  valid
and binding obligation of Pacific, enforceable in accordance with its respective
terms and  conditions,  except as  enforceability  may be limited by bankruptcy,
conservatorship, insolvency, moratorium, reorganization, receivership or similar
laws and judicial decisions  affecting the

                                      -13-
<PAGE>

rights of  creditors  generally  and by general  principles  of equity  (whether
applied in a proceeding at law or in equity).

         SECTION 3.03  Capitalization.  The entire  authorized  capital stock of
Pacific  consists of (i) 20,000,000  shares of Pacific  Common Stock,  4,503,945
shares of which are fully paid,  validly issued,  nonassessable and outstanding,
and  321,376  additional  shares of which have been  reserved  for  issuance  to
holders of  outstanding  Pacific  Stock  Options  (as  defined  in Section  6.17
hereto),  and (ii) 20,000,000  shares of preferred stock, no par value per share
(the "Pacific Preferred  Stock"),  of which no shares of Pacific Preferred Stock
are issued or outstanding.  Schedule 3.03 contains a list of each of the Pacific
Stock Option Plans, including (i) the number of outstanding options with respect
to each Pacific Stock Option Plan, (ii) the weighted  average exercise price per
share with respect to each Pacific Stock Option Plan, (iii) a list of all option
holders with respect to each Pacific  Stock Option Plan,  and (iv) the number of
vested and  unvested  Pacific  Stock  Options  with  respect to each such option
holder in each Pacific Stock Option Plan.  All Pacific Stock Options were issued
and,  upon  issuance  in  accordance  with the terms of the  outstanding  option
agreements,  the shares of Pacific  Common  Stock shall be issued in  compliance
with all applicable securities laws. Except as disclosed in Schedule 3.03, there
are no (i)  other  outstanding  equity  securities  of any  kind  or  character,
including but not limited to preferred stock,  (ii)  outstanding  subscriptions,
options, convertible securities,  rights, warrants, calls or other agreements or
commitments  of any kind  issued or  granted  by, or  binding  upon,  Pacific to
purchase or otherwise  acquire any security of or equity  interest in Pacific or
(iii) outstanding  subscriptions,  options, rights, warrants, calls, convertible
securities,  irrevocable  proxies or other agreements or commitments  obligating
Pacific  to issue any  shares  of,  restricting  the  transfer  of or  otherwise
relating  to shares of its  capital  stock of any  class.  All of the issued and
outstanding  shares of Pacific Common Stock have been duly  authorized,  validly
issued  and are  fully  paid and  nonassessable,  and have  not been  issued  in
violation of the preemptive rights of any person.  Such shares of Pacific Common
Stock have been issued in full  compliance  with  applicable  law.  There are no
restrictions  applicable  to the payment of  dividends  on the shares of Pacific
Common  Stock,  except  pursuant to  applicable  laws and  regulations,  and all
dividends declared prior to the date of this Agreement have been paid.

         SECTION 3.04 Compliance with Laws, Permits and Instruments.

         (a)  Except as set forth in  Schedule  3.04,  Pacific  and the  Pacific
Subsidiaries,  as applicable, are in compliance with, and are not in default (or
with the giving of notice or the passage of time will be in default)  under,  or
in violation of, (i) any provision of the Articles of Incorporation or Bylaws of
Pacific or the Pacific  Subsidiaries (other than the Subsidiary Banks), (ii) any
provision of the Articles of Association or Bylaws of the Subsidiary Banks (iii)
any material  provision  of any loan  agreement,  security or pledge  agreement,
mortgage,  indenture, lease, contract,  agreement or other instrument applicable
to Pacific or the Pacific  Subsidiaries or their respective assets,  operations,
properties  or  businesses  now  conducted or  heretofore  conducted or (iv) any
permit, concession,  grant, franchise, license,  authorization,  judgment, writ,
injunction,  order,  decree,  award,  statute,  federal,  state  or  local  law,
ordinance,  rule or regulation of any court,  arbitrator or any federal,  state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality  applicable  to  Pacific,  the  Pacific  Subsidiaries  or  their
respective  assets,  operations,  properties  or  businesses  now  conducted  or
heretofore conducted, which noncompliance or violation would, individually or in
the aggregate, 

                                      -14-
<PAGE>

reasonably  be  anticipated  to have a material  adverse  effect on the business
results of operations, financial condition or (insofar as they can reasonably be
foreseen) prospects of Pacific taken as a whole.
    
     (b) The execution,  delivery and (provided the required  regulatory and
shareholder  approvals are obtained) performance of this Agreement and the other
agreements  contemplated  hereby,  including,  but  not  limited  to the  Merger
Agreement,  and the  consummation of the  transactions  contemplated  hereby and
thereby  will not  conflict  with,  or  result,  by itself or with the giving of
notice or the  passage  of time,  in any  violation  of or  default or loss of a
benefit under,  (i) any provision of the Articles of  Incorporation or Bylaws of
Pacific and the Pacific Subsidiaries (other than the Subsidiary Banks), (ii) any
provision  of the Articles of  Association  or Bylaws of the  Subsidiary  Banks,
(iii) any  material  provision  of any  mortgage,  indenture,  lease,  contract,
agreement or other instrument applicable to Pacific, the Pacific Subsidiaries or
their  assets,  operations,  properties  or  businesses,  or  (iv)  any  permit,
concession,   grant,  franchise,   license,   authorization,   judgment,   writ,
injunction,   order,  decree,  statute,  law,  ordinance,   rule  or  regulation
applicable to Pacific,  the Pacific  Subsidiaries  or their assets,  operations,
properties or businesses.

         SECTION 3.05      Financial Statements.

         (a) Pacific has  furnished to SBB true and  complete  copies of (i) the
audited consolidated balance sheets of Pacific as of December 31, 1996 and 1997,
and the related audited consolidated statements of income,  stockholders' equity
and cash flows for the years ended  December  31, 1995,  1996 and 1997,  (ii) an
unaudited  consolidated  balance sheet of Pacific as of March 31, 1998,  and the
related unaudited  consolidated  statement of income for the three-month  period
ended March 31, 1998 (such balance sheets and the related  statements of income,
stockholders'  equity and cash flows are collectively  referred to herein as the
"Pacific Financial Statements"). Except as described in the notes to the Pacific
Financial  Statements,  the Pacific Financial  Statements fairly present, in all
material  respects,  the  consolidated  financial  position of Pacific as of the
respective  dates thereof and the results of operations and changes in financial
position of Pacific for the periods then ended,  in  conformity  with  generally
accepted  accounting  principles  ("GAAP"),  applied on a basis  consistent with
prior  periods  (subject,  in  the  case  of  the  unaudited  interim  financial
statements, to normal year-end adjustments and the fact that they do not contain
all of the footnote  disclosures  required by GAAP),  except as otherwise  noted
therein,  and the accounting records underlying the Pacific Financial Statements
accurately  and fairly  reflect in all  material  respects the  transactions  of
Pacific.   The  Pacific  Financial  Statements  do  not  contain  any  items  of
extraordinary  or  nonrecurring  income or any other  income  not  earned in the
ordinary course of business except as expressly specified therein.

         (b)  Pacific  has  furnished,  or has  caused the  Subsidiary  Banks to
furnish,  to SBB with true and complete  copies of the Report of  Condition  and
Income ("Call  Reports") for each of the Subsidiary  Banks for the periods ended
December  31,  1996,  December  31, 1997 and March 31,  1998.  Such Call Reports
fairly  presents,  in all  material  respects,  the  financial  position  of the
Subsidiary  Banks and the results of their  operations  at the dates and for the
periods  indicated in conformity  with the  Instructions  for the Preparation of
Call Reports as  promulgated  by  applicable  regulatory  authorities.  The Call
Reports do not contain any items of special or nonrecurring  income or any other
income  not  earned in the  ordinary  course  of  business  except as

                                      -15-
<PAGE>

expressly  specified  therein.  Each of the Subsidiary  Banks has calculated its
allowance for loan losses in accordance  with GAAP,  which  includes  regulatory
accounting   principles   ("RAP")  where  applicable,   as  applied  to  banking
institutions and in accordance with all applicable rules and regulations. To the
best knowledge of Pacific, the allowance for loan losses account for each of the
Subsidiary  Banks  is,  and as of the  Closing  Date  will be,  adequate  in all
material respects to provide for all losses, net of recoveries relating to loans
previously charged off, on all outstanding loans of each such Subsidiary Bank.

         SECTION 3.06  Undisclosed  Liabilities.  Neither Pacific nor any of the
Pacific  Subsidiaries  has  any  material  liability  or  obligation,   accrued,
absolute,  contingent or otherwise and whether due or to become due  (including,
without  limitation,  unfunded  obligations  under any  service  recognition  or
severance  agreement,  whether  written or oral, or Pacific  Employee  Plans (as
defined in Section 3.32 hereof) or material  liabilities  for federal,  state or
local taxes or assessments or material  liabilities under any agreement that are
not reflected in or disclosed in the Pacific  Financial  Statements,  except (i)
those  liabilities and expenses  incurred in the ordinary course of business and
consistent  with  prudent  business  practices  since  the  date of the  Pacific
Financial Statements or (ii) as disclosed on Schedule 3.06.

         SECTION 3.07  Litigation.  Except as set forth on Schedule 3.07,  there
are  no  actions,  claims,  suits,  investigations,   reviews  or  other  legal,
quasi-judicial or  administrative  proceedings of any kind or nature now pending
or, to the best knowledge of Pacific,  threatened  against or affecting Pacific,
any of the Pacific  Subsidiaries  or any of their  respective  current or former
officers and directors  (while acting in such capacity) at law or in equity,  or
by or before any federal,  state or  municipal  court or other  governmental  or
administrative department, commission, board, bureau, agency or instrumentality,
domestic  or  foreign,   that  in  any  manner  involves  Pacific,  the  Pacific
Subsidiaries  or any of their  current or former  officers or  directors  (while
acting in such capacity) or any of their  properties or capital stock that would
reasonably be anticipated to result in a Material Adverse Change with respect to
Pacific or materially and adversely affect the transactions contemplated by this
Agreement, and Pacific does not know or have any reason to be aware of any basis
for the same. No legal action, suit or proceeding or judicial, administrative or
governmental   investigation  is  pending  or,  to  the  knowledge  of  Pacific,
threatened against Pacific or any of the Pacific Subsidiaries that questions the
validity of this Agreement or the agreements contemplated hereby, including, but
not limited  to, the Merger  Agreement,  or any actions  taken or to be taken by
Pacific pursuant hereto or thereto or seeks to enjoin or otherwise  restrain the
transactions contemplated hereby or thereby.

         SECTION 3.08 Consents and Approvals. Pacific's Board of Directors (at a
meeting called and duly held) has resolved,  subject to its fiduciary  duties to
the  shareholders  of Pacific,  to recommend  approval and adoption by Pacific's
shareholders of the Merger, this Agreement and the Merger Agreement.  Except for
shareholder  and regulatory  approvals and except as disclosed in Schedule 3.08,
no approval, consent, order or authorization of, or registration, declaration or
filing with, any governmental  authority or other third party is required on the
part of Pacific in connection  with the  execution,  delivery or  performance of
this Agreement or the agreements contemplated hereby, including, but not limited
to, the Merger  Agreement,  or the  consummation by Pacific of the  transactions
contemplated hereby or thereby.

                                      -16-
<PAGE>

         SECTION  3.09  Title  to  Assets.  Pacific  and  each  of  the  Pacific
Subsidiaries has good and indefeasible title to all of its assets and properties
including,  without limitation, all personal and intangible properties reflected
in the Pacific Financial  Statements or acquired subsequent thereto,  subject to
no liens,  mortgages,  security interests,  encumbrances or charges of any kind,
except (i) as described in Schedule 3.09, (ii) as noted in the Pacific Financial
Statements,  or as set forth in the documents  delivered to SBB pursuant to this
Section 3.09, (iii) statutory liens not yet delinquent, (iv) consensual landlord
liens, (v) minor defects and  irregularities  in title and encumbrances  that do
not  materially  impair the use thereof for the purpose for which they are held,
(vi) pledges of assets in the ordinary course of business to secure public funds
deposits,  and (vii) those assets and  properties  disposed of for fair value in
the  ordinary  course  of  business  since the  dates of the  Pacific  Financial
Statements.  Schedule 3.09 includes a copy of the title policy of insurance with
respect  to each  parcel  of real  property  owned by  Pacific  and the  Pacific
Subsidiaries.

         SECTION 3.10 Absence of Certain Changes or Events.  Except as disclosed
on Schedule  3.10,  since  December 31,  1997,  Pacific,  including  the Pacific
Subsidiaries,  has conducted  its business  only in the ordinary  course and has
not,  other than in the  ordinary  course of business and  consistent  with past
practices and safe and sound banking practices:

         A. Incurred any obligation or liability,  absolute, accrued, contingent
or  otherwise,  whether  due or to  become  due,  which  individually  or in the
aggregate,  has had a  material  adverse  effect  on the  business,  results  of
operations, financial condition, or (insofar as they can reasonably be foreseen)
prospects of Pacific and the Pacific  Subsidiaries taken as a whole,  except for
deposits taken and federal funds purchased and current  liabilities for trade or
business obligations;

         B. Discharged or satisfied any lien,  charge or encumbrance or paid any
obligation or liability, whether absolute or contingent, due or to become due;

         C. Declared or made any payment of dividends or other  distribution  to
its  shareholders,  or purchased,  retired or redeemed,  or obligated  itself to
purchase,  retire  or  redeem,  any of its  shares  of  capital  stock  or other
securities;

         D. Issued,  reserved for  issuance,  granted,  sold or  authorized  the
issuance  of  any  shares  of  its  capital   stock  or  other   securities   or
subscriptions,  options,  warrants,  calls,  rights or  commitments  of any kind
relating to the issuance thereto;

         E.  Acquired any capital  stock or other equity  securities or acquired
any equity or ownership interest in any bank, corporation,  partnership or other
entity  (except (i) through  settlement  of  indebtedness,  foreclosure,  or the
exercise of creditors' remedies or (ii) in a fiduciary  capacity,  the ownership
of which does not expose it to any liability  from the  business,  operations or
liabilities of such person);

         F. Mortgaged,  pledged or subjected to lien, charge,  security interest
or any other encumbrance or restriction any of its property, business or assets,
tangible or intangible  except (i) as described in Schedule 3.09, (ii) statutory
liens not yet delinquent,  (iii) consensual  landlord liens,  (iv) minor defects
and  irregularities  in title and encumbrances that do not materially impair 

                                      -17-
<PAGE>

the use thereof  for the purpose for which they are held,  (v) pledges of assets
to secure  public  funds  deposits,  and (vi) for those  assets  and  properties
disposed of for fair value since the dates of the Pacific Financial Statements.

         G. Sold, transferred,  leased to others or otherwise disposed of any of
its assets or canceled or compromised  any debt or claim,  or waived or released
any right or claim of material value;

         H.  Terminated,  canceled or surrendered,  or received any notice of or
threat of termination or cancellation of any contract,  lease or other agreement
or  suffered  any  damage,  destruction  or  loss  (whether  or not  covered  by
insurance),  which,  in any  case or in the  aggregate,  would  have a  material
adverse effect on the business,  results of operations,  financial condition, or
(insofar  as they can  reasonably  be  foreseen)  prospects  of Pacific  and the
Pacific Subsidiaries taken as a whole;

         I. Disposed of,  permitted to lapse,  transferred or granted any rights
under, or entered into any settlement  regarding the breach or infringement  of,
any United States or foreign license or Pacific Proprietary Right (as defined in
Section 3.15 hereof) or modified any existing rights with respect thereto;

         J. Made any change in the rate of  compensation,  commission,  bonus or
other  direct  or  indirect  remuneration  payable,  or paid or agreed or orally
promised to pay,  conditionally  or otherwise,  any bonus,  extra  compensation,
pension  or  severance  or  vacation  pay,  to or for the  benefit of any of its
shareholders,  directors,  officers,  employees  or agents,  or entered into any
employment or consulting contract or other agreement with any director,  officer
or  employee or  adopted,  amended in any  material  respect or  terminated  any
pension,  employee  welfare,  retirement,  stock purchase,  stock option,  stock
appreciation  rights,   termination,   severance,   income  protection,   golden
parachute,  savings or  profit-sharing  plan  (including  trust  agreements  and
insurance  contracts  embodying  such  plans),  any  deferred  compensation,  or
collective  bargaining  agreement,  any group  insurance  contract  or any other
incentive,  welfare or employee  benefit plan or agreement  maintained by it for
the  benefit  of its  directors,  employees  or  former  employees,  except  (i)
compensation  adjustments contemplated within Pacific's 1998 budget and approved
in advance by SBB (which  approval  shall not be  unreasonably  withheld),  (ii)
employee severance benefits contemplated by Section 12.16 of this Agreement, and
(iii) periodic increases consistent with past practices;

         K.  Except  for   improvements  or  betterments   relating  to  Pacific
Properties (as defined in Section 3.19 hereof), made any capital expenditures or
capital additions or betterments in excess of an aggregate of $1,000,000;

         L. Instituted,  had instituted  against it, settled or agreed to settle
any  litigation,  action or proceeding  before any court or  governmental  body,
other than routine  collection suits instituted by it to collect amounts owed or
suits in which the amount in controversy is less than $100,000;

         M. Permitted any change, event or condition that, in any case or in the
aggregate,  has  caused  or may  result in a  Material  Adverse  Change,  or any
Material  Adverse  Change in earnings

                                      -18-
<PAGE>

or costs or relations with its employees,  agents,  depositors,  loan customers,
correspondent banks or suppliers;

         N. Except for the  transactions  contemplated  by this  Agreement or as
otherwise permitted  hereunder,  entered into any transaction,  or entered into,
modified or amended any contract or commitment;

         O.  Entered  into or given any  promise,  assurance or guarantee of the
payment,  discharge or  fulfillment  of any  undertaking  or promise made by any
person,  firm or corporation other than letters of credit issued in the ordinary
course of business;

         P. Sold, or knowingly  disposed of, or otherwise divested itself of the
ownership,  possession, custody or control, of any corporate books or records of
any nature  that,  in  accordance  with sound  business  practice,  normally are
retained  for a period of time after their use,  creation or receipt,  except at
the end of the normal retention period;

         Q. Made any, or acquiesced with any, change in any accounting  methods,
principles or material practices, except as required by GAAP or RAP;

         R. Sold  (provided,  however,  that payment at maturity is not deemed a
sale) any investment securities in a single transaction involving a book gain or
loss of more than $100,000 on such sale or purchased any investment  securities,
other than purchases of U.S. Treasury securities with a maturity of two years or
less;

         S. Made,  renewed,  extended  the  maturity  of, or altered  any of the
material  terms of any  criticized  loan to any single  borrower and his related
interests  without regard to whether such transaction was in the ordinary course
of business  or whether it was  consistent  with past or safe and sound  banking
practices; or

         T. Entered into any agreement or made any commitment whether in writing
or otherwise to take any of the types of action described in subsections A.
through S. above.

         SECTION 3.11 Leases, Contracts and Agreements. Schedule 3.11 sets forth
a complete listing of all leases, subleases,  licenses, contracts and agreements
to which  Pacific,  including any of the Pacific  Subsidiaries,  is a party (the
"Pacific  Contracts"),  and which (i) relate to real property used by Pacific in
its  operation,  (ii)  involve  payments  to or by Pacific in excess of $100,000
during  the  term  of  such  Pacific  Contracts   (exclusive  of  unfunded  loan
commitments  and  letters of credit  issued by  Pacific),  or (iii)  involve any
unfunded  loan  commitments  and letters of credit  issued by Pacific  where the
borrower's  total  direct and indirect  indebtedness  to Pacific is in excess of
$2,000,000.  True and correct copies of all such Pacific  Contracts  (other than
unfunded loan  commitments and letters of credit issued by Pacific) are included
with Schedule 3.11. For the purposes of this  Agreement,  the Pacific  Contracts
shall be deemed not to include  loans made by,  Federal  funds sold or purchased
by,  repurchase  agreements  made by, spot  foreign  exchange  transactions  of,
bankers  acceptances of or deposits by Pacific.  Except as set forth in Schedule
3.11, no participations or loans have been sold which have buy back, recourse or
guaranty provisions which create contingent or direct liabilities of Pacific. To
the  knowledge of Pacific,  all of the Pacific  Contracts  are legal,  valid and
binding  obligations  of the parties to the  Pacific  Contracts  enforceable  in
accordance with their terms,  subject to the effects of bankruptcy, 

                                      -19-
<PAGE>

insolvency,  reorganization,  moratorium  or  other  similar  laws  relating  to
creditors' rights generally and to general equitable principles, and are in full
force and  effect.  Except as  described  in Schedule  3.11,  all rent and other
payments by Pacific and any Pacific  Subsidiary under the Pacific  Contracts are
current,  there are no existing  defaults  by Pacific or any Pacific  Subsidiary
under the Pacific  Contracts  and no  termination,  condition or other event has
occurred which (whether with or without  notice,  lapse of time or the happening
or occurrence of any other event) would  constitute a default.  Pacific and each
Pacific Subsidiary has a good and indefeasible leasehold interest in each parcel
of real property leased by it free and clear of all mortgages,  pledges,  liens,
encumbrances and security interests.

         SECTION  3.12  Taxes.  Pacific  has  duly  and  timely  filed  with the
appropriate Federal,  state and local governmental  agencies all tax returns and
reports required to be filed,  including,  without limitation,  income,  excise,
property, sales, use, franchise,  value added,  unemployment,  employees' income
withholding and social  security  taxes,  imposed by the United States or by any
foreign country or by any state, municipality, subdivision or instrumentality of
the United States or of any foreign country,  or by any other taxing  authority,
and has paid, or has established adequate reserves for the payment of, all taxes
and assessments  that are or are claimed to be due,  payable or owed by Pacific,
or for  which  Pacific  may  have  liability,  whether  as a  result  of its own
activities or by virtue of its affiliation  with other entities and all interest
and penalties thereon, whether disputed or not. All such tax returns and reports
are accurately  prepared and all deposits  required by law to be made by Pacific
with respect to employees' withholding taxes have been duly made. Pacific is not
and has not been  delinquent  in the  payment of any  foreign or  domestic  tax,
assessment or governmental  charge or deposit and has no tax deficiency or claim
outstanding, proposed or assessed against it, and, to Pacific's knowledge, there
is no basis for any such  deficiency  or claim.  Except as set forth in Schedule
3.12, within the last six (6) years, Pacific's Federal income tax return has not
been audited or examined and no such audit is currently pending or, to Pacific's
knowledge,  threatened.  Pacific has not been granted any extension of time with
respect  to the date on which any tax  return  not yet filed was or is due to be
filed by or with  respect to Pacific or any waiver or  agreement  by Pacific for
the extension of time for the assessment or collection of any tax. Except as set
forth in  Schedule  3.12,  Pacific  (i) within  the past six (6) years,  has not
committed any violation of any applicable  Federal,  state, local or foreign tax
laws, and (ii) with respect to all prior years,  has not committed any violation
of any applicable  Federal,  state,  local or foreign tax laws that is likely to
result in a Material Adverse Change with respect to Pacific.

         The amounts set up as provisions  for current or deferred  taxes on the
Pacific  Financial  Statements are  sufficient in all material  respects for the
payment of all unpaid  Federal,  state,  county,  local,  foreign or other taxes
(including  any interest or penalties) of or on behalf of Pacific  applicable to
the  periods  covered by the  Pacific  Financial  Statements,  and all years and
periods  prior  thereto.  True and  complete  copies of the  Federal  income tax
returns of Pacific as filed with the  Internal  Revenue  Service (the "IRS") for
the years ended December 31, 1995, 1996, and 1997, have been delivered to SBB.

         SECTION 3.13 Insurance. Schedule 3.13 contains an accurate and complete
list and brief description of all policies of insurance,  including fidelity and
bond  insurance,  of  Pacific,  including  the  Pacific  Subsidiaries.  All such
policies (a) are valid, outstanding and enforceable except as enforceability may
be   limited   by   bankruptcy,    conservatorship,    insolvency,

                                      -20-
<PAGE>

moratorium, reorganization, receivership, or similar laws and judicial decisions
affecting the rights of creditors  generally and by general principles of equity
(whether  applied  in a  proceeding  at  law or  equity),  (b)  will  not in any
significant  respect be affected  by, and will not  terminate or lapse by reason
of, the  transactions  contemplated by this Agreement,  and (c) are presently in
full force and  effect,  no notice has been  received  of the  cancellation,  or
threatened or proposed cancellation,  of any such policy and there are no unpaid
premiums due thereon.  Pacific,  including the Pacific  Subsidiaries,  is not in
default with respect to the  provisions of any such policy and has not failed to
give any notice or present  any claim  thereunder  in a due and timely  fashion.
Except as set forth on  Schedule  3.13,  neither  Pacific nor any of the Pacific
Subsidiaries  has been  refused  any  insurance  with  respect  to its assets or
operations, nor has its insurance been limited by any insurance carrier to which
Pacific and the Pacific  Subsidiaries  has applied for any such insurance within
the  last two (2)  years.  Each  property  of  Pacific,  including  the  Pacific
Subsidiaries,  is insured for the benefit of Pacific in amounts deemed  adequate
by Pacific's  management against risks customarily  insured against.  There have
been no  claims  under  any  fidelity  bonds of  Pacific  or any of the  Pacific
Subsidiaries  within the last three (3) years,  and  Pacific is not aware of any
facts that would form the basis of a claim under such bonds.

         SECTION 3.14 No Adverse Change. Except as disclosed in the Schedules to
this Agreement or in the  representations  and  warranties  made in this Article
III, there has not been any Material Adverse Change since December 31, 1997, nor
has any event or  condition  occurred  that has resulted in, or has a reasonable
possibility  of  resulting  in the  future,  in a Material  Adverse  Change with
respect to Pacific.

         SECTION 3.15 Patents, Trademarks and Copyrights. Except as disclosed in
Schedule 3.15,  Pacific and the Pacific  Subsidiaries  do not own or require the
use of  any  patent,  patent  application,  patent  right,  invention,  process,
trademark (whether registered or unregistered), trademark application, trademark
right,  trade name,  service name,  service mark,  copyright or any trade secret
("Pacific  Proprietary  Rights") for their respective  businesses or operations,
except for licensed  computer  software.  To the  knowledge of Pacific,  neither
Pacific nor any of the Pacific  Subsidiaries  are  infringing  upon or otherwise
acting adversely to any Pacific  Proprietary  Right owned by any other person or
persons.  There is no claim or action  by any such  person  pending,  or, to the
knowledge of Pacific, threatened, with respect thereto.

         SECTION 3.16 Transactions with Certain Persons and Entities.  Except as
disclosed in Schedule 3.16, neither Pacific nor any of the Pacific  Subsidiaries
owe any amount to (excluding deposit  liabilities),  or have any loan (excluding
loans to participants  from the Pacific Capital 401(k) Plan),  contract,  lease,
commitment  or other  obligation  from or to any of the  respective  present  or
former  directors or executive  officers  (other than  compensation  for current
services not yet due and payable and  reimbursement  of expenses  arising in the
ordinary course of business) of Pacific and the Pacific  Subsidiaries,  and none
of such persons owes any amount to Pacific or the Pacific  Subsidiaries.  Except
as set forth in Schedule 3.16, there are no understandings,  agreements (whether
written or oral), instruments,  commitments,  perquisites, extensions of credit,
tax sharing or allocation agreements or other contractual agreements of any kind
between or among Pacific and the Pacific Subsidiaries, whether on its own behalf
or in its capacity as trustee or custodian for the funds of any employee benefit
plan (as defined in the Employee  Retirement  Income  Security  Act of 1974,  as
amended  ("ERISA")),  and any present or 

                                      -21-
<PAGE>

former  officers or directors of Pacific or the Pacific  Subsidiaries.  True and
correct  copies of any such  written  understandings,  agreements,  instruments,
etc., are included with Schedule 3.16.

         SECTION 3.17 Evidences of  Indebtedness.  All evidences of indebtedness
and leases that are reflected as assets of Pacific and the Pacific  Subsidiaries
are, to Pacific's best knowledge,  legal,  valid and binding  obligations of the
respective  obligors  thereof,  enforceable in accordance with their  respective
terms (except as limited by applicable bankruptcy,  insolvency,  reorganization,
moratorium and similar laws affecting  creditors  generally and the availability
of injunctive relief, specific performance and other equitable remedies) and are
not subject to any known or threatened  defenses,  offsets or counterclaims that
may be asserted against Pacific,  the Pacific Subsidiaries or the present holder
thereof,  except as  disclosed  in Schedule  3.17.  The credit files of Pacific,
including the Pacific Subsidiaries,  contain all material information (excluding
general,  local or national industry,  economic or similar  conditions) known to
Pacific that is  reasonably  required to evaluate in accordance  with  generally
prevailing  practices  in the banking  industry the  collectibility  of the loan
portfolio of Pacific  (including  loans that will be  outstanding if any of them
advances funds they are obligated to advance).  Pacific has disclosed all of the
substandard,  doubtful, loss, nonperforming or loans identified as problem loans
on the internal watch list of each of the  Subsidiary  Banks, a copy of which as
of May 31, 1998, has been provided to SBB. Except as disclosed in Schedule 3.17,
Pacific is not aware of, nor has Pacific received notice of, any past or present
conditions,  events,  activities,  practices or  incidents  that may result in a
violation of any  Environmental Law (as defined in Section 12.08(D) hereof) with
respect to any real property securing any indebtedness  reflected as an asset of
Pacific or any Pacific Subsidiary.

         SECTION 3.18 Condition of Assets.  All tangible assets used by Pacific,
including the Pacific  Subsidiaries,  are in good operating condition,  ordinary
wear and tear excepted, and conform with all applicable ordinances, regulations,
zoning and other laws, whether Federal, state or local. None of Pacific's or the
Pacific  Subsidiaries'  premises  or  equipment  are in need of  maintenance  or
repairs  other  than  ordinary  routine  maintenance  and  repairs  that are not
material in nature or cost.

         SECTION 3.19 Environmental Compliance.

         (a)  Pacific is not aware of, nor has Pacific  received  notice of, any
past or present conditions, events, activities,  practices or incidents that are
in violation of  Environmental  Laws (as defined in Section  12.08(D) hereof) or
that  may  interfere  with or  prevent  Pacific's  continued  compliance  in all
respects with all Environmental Laws.

         (b) Pacific and the Pacific  Subsidiaries  have  obtained  all permits,
licenses and authorizations that are required under any Environmental Laws.

         (c) To  Pacific's  knowledge,  no  Hazardous  Materials  (as defined in
Section  12.08(E)  hereof)  exist  on,  about,  or  within  any of  the  Pacific
Properties (as defined in this Section 3.19), nor, to Pacific's knowledge,  have
any  Hazardous  Materials  previously  existed on, about or within or been used,
generated,  stored,  transported,  disposed  of, on or released  from any of the
Pacific  Properties in violation of any Environmental Law. The use that Pacific,
including  the  Pacific  Subsidiaries,  makes and intends to make of the Pacific
Properties  will not  result in the

                                      -22-
<PAGE>


use, generation, storage, transportation,  accumulation,  disposal or release of
any Hazardous Material on, in or from any of the Pacific Properties in violation
of any Environmental Law.

         (d) There is no  action,  suit,  proceeding,  investigation  or inquiry
before any court,  administrative agency or other governmental authority pending
or, to Pacific's knowledge, threatened against Pacific or any Pacific Subsidiary
relating  in  any  way to any  Environmental  Law.  To  the  best  of  Pacific's
knowledge,  neither  Pacific nor any Pacific  Subsidiary  has any  liability for
remedial  action  under any  Environmental  Law.  Pacific has not  received  any
request  for  information  by any  governmental  authority  with  respect to the
condition,  use or  operation of any of the Pacific  Properties  nor has Pacific
received any notice of any kind from any governmental  authority or other person
with respect to any  violation of or claimed or potential  liability of any kind
under any Environmental Law (including,  without limitation,  any letter, notice
or inquiry from any person or governmental  entity informing  Pacific that it is
or may  be  liable  in any  way  under  any  Environmental  Law,  or  requesting
information to enable such a determination to be made).

         (e) As used in this  Section  3.19,  the  term  "Pacific  Property"  or
"Pacific  Properties" shall include all real property  currently owned or leased
by Pacific or any of the Pacific  Subsidiaries,  including,  but not limited to,
properties  that Pacific or any Pacific  Subsidiary has foreclosed on as well as
the Subsidiary  Banks'  respective  banking  premises and all  improvements  and
fixtures thereon. The phrase "to Pacific's knowledge" or similar phrases as used
in this  Section  3.19 shall mean the  current  actual  knowledge  of  executive
management of Pacific.

         SECTION 3.20 Regulatory    Compliance.     All    reports,     records,
registrations,  statements,  notices and other documents or information required
to be filed by  Pacific  and the  Pacific  Subsidiaries  during the last two (2)
years  with  any  federal  or  state  regulatory  authority  including,  without
limitation,  the Federal  Reserve,  the OCC, the FDIC and the IRS have been duly
and timely filed and all information and data contained in such reports, records
or other documents are true, accurate, correct and complete. Except as disclosed
on Schedule  3.20,  Pacific and the  Pacific  Subsidiaries  are not now nor have
been,  within the past six (6) years subject to any memorandum of understanding,
cease and desist order, written agreement or other formal  administrative action
with any such  regulatory  bodies.  Pacific does not believe any such regulatory
bodies have any  present  intent to place  Pacific or the  Pacific  Subsidiaries
under any new administrative action. Except as set forth on Schedule 3.20, there
are no  actions or  proceedings  pending or  threatened  against  Pacific or any
Pacific  Subsidiary by or before any such regulatory bodies or any other nation,
state  or  subdivision  thereof,  or  any  other  entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government.

         SECTION 3.21 Securities and Exchange  Commission  Reports.  Pacific has
previously made available to SBB an accurate and complete copy of each (a) final
registration  statement,  prospectus,  report,  schedule  and  definitive  proxy
statement  filed  since  January  1, 1995 by  Pacific  with the  Securities  and
Exchange  Commission  (the "S.E.C.")  pursuant to the Securities Act of 1933, as
amended (the  "Securities  Act"),  or the  Securities  Exchange Act of 1934,  as
amended  (the  "Exchange  Act"),  and  prior to the date  hereof  (the  "Pacific
Reports"),  and (b)  communication  mailed by Pacific to its shareholders  since
January  1,  1995  and  prior  to the

                                      -23-
<PAGE>

date hereof, and no such registration statement,  prospectus,  report, schedule,
proxy statement or  communication  contained any untrue  statement of a material
fact or omitted to state any  material  fact  required  to be stated  therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading,  except that  information as of a later
date shall be deemed to modify  information as of an earlier date. Since January
1, 1995,  Pacific  has timely  filed all  Pacific  Reports  and other  documents
required to be filed by it under the  Securities  Act and the Exchange Act, and,
as of their  respective  dates,  all Pacific  Reports  complied in all  material
respects with the published  rules and  regulations  of the S.E.C.  with respect
thereto.

         SECTION 3.22 Absence of Certain Business Practices. Except as set forth
on Schedule  3.22,  neither  Pacific,  any of the Pacific  Subsidiaries  nor any
officer, employee or agent of Pacific or the Pacific Subsidiaries, nor any other
person acting on their behalf, has, directly or indirectly,  within the past ten
(10) years, given or agreed to give any gift or similar benefit to any customer,
supplier,  governmental  employee or other person who is or may be in a position
to help or hinder the  business  of  Pacific  as a whole (or  assist  Pacific in
connection  with any  actual or  proposed  transaction)  that (i) would  subject
Pacific  or any of the  Pacific  Subsidiaries  to any  damage or  penalty in any
civil, criminal or governmental  litigation or proceeding,  (ii) if not given in
the past,  would have  resulted in a Material  Adverse  Change  with  respect to
Pacific,  or (iii) if not  continued  in the future  would  result in a Material
Adverse  Change  with  respect to Pacific  or would  subject  Pacific to suit or
penalty in any private or governmental litigation or proceeding.

         SECTION 3.23 Registration Statement; Joint Proxy  Statement/Prospectus.
None of the  information  supplied  or to be  supplied  by Pacific or any of its
directors,  officers,  employees  or agents for  inclusion  in the  Registration
Statement    (as   defined   in   Section    5.03(c))   or   the   Joint   Proxy
Statement/Prospectus  (as defined in Section 5.03(c)),  or any amendment thereof
or supplement thereto,  will be false or misleading with respect to any material
fact,  or omit to  state  any  material  fact  necessary  in  order  to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading,  or at the time of the Pacific Shareholders' Meeting and the SBB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material  fact  necessary  to correct any  statement in any
earlier  communication  with  respect to the  solicitation  of any proxy for the
Pacific Shareholders'  Meeting and the SBB Shareholders'  Meeting. All documents
that  Pacific is  responsible  for filing with any  regulatory  or  governmental
agency in connection  with the Merger will comply in all material  respects with
the provisions of applicable law.

         SECTION 3.24 Dissenting  Shareholders.  Except as set forth on Schedule
3.24,  Pacific has no  knowledge  of any plan or intention on the part of any of
the shareholders of Pacific to make written demand for payment of the fair value
of their  shares of Pacific  Common Stock in the manner  provided by  applicable
law.

         SECTION 3.25 Pooling of  Interests.  As of the date of this  Agreement,
Pacific has no reason to believe  that the Merger will not qualify as a "pooling
of interests" for accounting purposes.

                                      -24-
<PAGE>

         SECTION 3.26 Books and Records.  The minute  books,  stock  certificate
books and stock  transfer  ledgers of Pacific and the Pacific  Subsidiaries  (i)
have been kept accurately in the ordinary course of business,  (ii) are complete
and correct in all material respects,  (iii) reflect  transactions  representing
bona fide transactions,  and (iv) do not fail to reflect transactions  involving
the business of Pacific or the Pacific  Subsidiaries  that were required to have
been set forth therein and that have not been accurately so set forth.

         SECTION 3.27 Forms of Instruments,  Etc. Pacific will make available to
SBB upon written request copies of all standard forms of notes, mortgages, deeds
of trust and other  routine  documents  of a like  nature  used on a regular and
recurring  basis by Pacific and the Pacific  Subsidiaries in the ordinary course
of their businesses.

         SECTION  3.28  Fiduciary  Responsibilities.   Except  as  disclosed  in
Schedule 3.28,  Pacific and the Subsidiary  Banks have performed in all material
respects all of their duties as a trustee,  custodian,  guardian or as an escrow
agent in a manner that  complies in all material  respects  with all  applicable
laws, regulations, orders, agreements, instruments and common law standards.

         SECTION 3.29  Guaranties.  None of the  obligations  or  liabilities of
Pacific or the Pacific  Subsidiaries are guaranteed by any other person, firm or
corporation, nor is any outstanding obligation or liability of any other person,
firm or corporation guaranteed by Pacific or the Pacific Subsidiaries, except in
the ordinary course of business,  according to prudent business practices and in
compliance with applicable law.

         SECTION 3.30 Voting Trust or Buy-Sell Agreements.  Pacific is not aware
of any agreement between or among any of its shareholders relating to a right of
first  refusal with respect to the purchase or sale by any such  shareholder  of
capital stock of Pacific or any voting agreement or voting trust with respect to
shares of capital  stock of Pacific  (other  than that  contemplated  by Section
5.20).

         SECTION   3.31   Employee   Relationships.   Pacific  and  the  Pacific
Subsidiaries  (including their respective officers and directors while acting in
such capacities) have complied in all material respects with all applicable laws
relating to its relationships with its employees,  and Pacific believes that the
relationships  between Pacific,  including the Pacific  Subsidiaries  (including
their respective  officers and directors while acting in such  capacities),  and
its employees are good. To the knowledge of Pacific, no key executive officer or
manager  of  any  of  the  operations   operated  by  Pacific  and  the  Pacific
Subsidiaries  or any group of employees of Pacific and the Pacific  Subsidiaries
have any present plans to terminate their employment with Pacific or any Pacific
Subsidiary.  Neither  Pacific nor any of the Pacific  Subsidiaries is a party to
any oral or written  contracts  or  agreements  granting  benefits  or rights to
employees  or  any  collective  bargaining  agreement  or  to  any  conciliation
agreement  with the  Department  of  Labor,  the  Equal  Employment  Opportunity
Commission or any federal,  state or local agency that requires equal employment
opportunities  or affirmative  action in  employment.  There are no unfair labor
practice  complaints  pending  against  Pacific,  including  any of the  Pacific
Subsidiaries,  before the National Labor  Relations  Board and no similar claims
pending before any similar state, local or foreign agency.  There is no activity
or proceeding of any labor organization (or representative  thereof) or employee
group to organize any employees of Pacific, 

                                      -25-
<PAGE>

including any Pacific Subsidiary, nor of any strikes, slowdowns, work stoppages,
lockouts or threats thereof,  by or with respect to any such employees.  Pacific
and the Pacific Subsidiaries are in compliance in all material respects with all
applicable  laws  respecting  employment  and  employment  practices,  terms and
conditions of employment and wages and hours, and neither Pacific nor any of the
Pacific Subsidiaries are engaged in any unfair labor practice.

         SECTION 3.32 Employee Benefit Plans.

         (a) Set forth on Schedule 3.32(a) is a complete and correct list of all
"employee  benefit  plans" (as defined in ERISA),  all specified  fringe benefit
plans as defined in Section 6039D of the Code,  and all other bonus,  incentive,
compensation,   deferred  compensation,  profit  sharing,  stock  option,  stock
appreciation  right,  stock bonus,  stock  purchase,  employee stock  ownership,
savings,  severance,  supplemental  unemployment,  layoff,  salary continuation,
retirement,  pension,  health,  life  insurance,  disability,  group  insurance,
vacation,  holiday,  sick  leave,  fringe  benefit or welfare  plan or any other
similar  plan,  agreement,  policy or  understanding  (whether  written or oral,
qualified or nonqualified,  currently  effective or terminated),  and any trust,
escrow  or  other  agreement  related  thereto,   which  (a)  is  maintained  or
contributed  to by Pacific or any Pacific  Subsidiary,  or with respect to which
Pacific  and the  Pacific  Subsidiaries  has  any  liability,  and (b)  provides
benefits,  or  describes  policies  or  procedures  applicable  to any  officer,
employee,  service provider, former officer or former employee of Pacific or any
Pacific Subsidiary,  or the dependents of any such person, regardless of whether
funded (the "Pacific Employee Plans").

         (b) No  Pacific  Employee  Plan is a defined  benefit  plan  within the
meaning of section 3(35) of ERISA.  Pacific has  delivered or made  available to
SBB true, accurate and complete copies of the documents  comprising each Pacific
Employee  Plan, and such other  documents,  records or other  materials  related
thereto  reasonably  requested by SBB. To the best  knowledge of Pacific,  there
have been no prohibited  transactions,  breaches of fiduciary  duty or any other
breaches or violations of any law applicable to the Pacific  Employee Plans that
would  subject SBB or Pacific to any  liabilities.  Each Pacific  Employee  Plan
intended  to be  qualified  under  section  401(a)  of the  Code  has a  current
favorable  determination  letter and, to the best knowledge of Pacific, has been
operated in compliance  with  applicable  law and in accordance  with its terms.
However,  Pacific has a ruling request pending with the Internal Revenue Service
that compensation elected to be deferred by employees pursuant to the "Executive
Compensation  Deferral  Plan"  and the  transfer  and  retention  of those  sums
deferred  to the  "Executive  Compensation  Deferral  Trust"  will  result in no
current  inclusion  of the  income  to those  employees  or their  beneficiaries
pursuant to Sections 83, 451 or 402(b) of the Code. There are no pending claims,
lawsuits or actions  relating to any Pacific  Employee Plan (other than ordinary
course  claims for  benefits)  and, to the best  knowledge of Pacific,  none are
threatened. No written or oral representations have been made to any employee or
former employee of Pacific or the Pacific Subsidiaries promising or guaranteeing
any employer payment or funding for the continuation of medical, dental, life or
disability  coverage  for any period of time beyond the end of the current  plan
year  (except to the extent of  coverage  required  under  section  4980B of the
Code).  Compliance  with FAS 106 will not  create  any  material  change  to the
Pacific  Financial  Statements.  Except as required in connection with qualified
plan  amendments  required  by tax  law  changes  and  except  for  those  plans
identified  on  Schedule   3.32(b),   the   consummation  of  the   transactions
contemplated  by this  Agreement  will not  accelerate  the time of  payment  or
vesting,  

                                      -26-
<PAGE>

or increase the amount,  of compensation  due to any employee,  officer,  former
employee or former officer of Pacific or any Pacific Subsidiary.

         (c) With respect to each "employee  benefit plan" (as defined in ERISA)
maintained or contributed to or required to be contributed  to,  currently or in
the past,  by any trade or business with which Pacific is required by any of the
rules  contained  in the Code or ERISA to be treated as a single  employer  (the
"Controlled Group Plans"):

                  (i) To the knowledge of Pacific,  all  Controlled  Group Plans
that are  "group  health  plans" (as  defined  in the Code and ERISA)  have been
operated  up to the  Closing  in a manner so as to not  subject  Pacific  to any
material liability under Section 4980B of the Code; and

                 (ii)  There  is no  Controlled  Group  Plan  that is a  defined
benefit plan (as defined in Section  3(35) of ERISA),  nor has there been in the
last five (5) calendar years.

                (iii)  There is no  Controlled  Group  Plan that is a  "multiple
employer  plan" or  "multiemployer  plan" (as  either  such term is  defined  in
ERISA), nor has there been in the last five (5) calendar years.

         SECTION 3.33 Interest Rate Risk  Management  Instruments.  All interest
rate swaps,  caps,  floors and option  agreements  and other  interest rate risk
management arrangements,  whether entered into for the account of Pacific or any
Pacific  Subsidiary  or for the  account of a customer of Pacific or any Pacific
Subsidiary,  were  entered  into in the  ordinary  course of  business  and,  to
Pacific's knowledge,  in accordance with prudent banking practice and applicable
rules,   regulations   and  policies  of  any  regulatory   authority  and  with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations of Pacific or a Pacific Subsidiary  enforceable in
accordance with their terms (except as may be limited by bankruptcy, insolvency,
moratorium,  reorganization  or similar laws  affecting  the rights of creditors
generally and the availability of equitable remedies), and are in full force and
effect.  Pacific and each Pacific Subsidiary have duly performed in all material
respects all of their  material  obligations  thereunder to the extent that such
obligations to perform have accrued;  and, to Pacific's knowledge,  there are no
material  breaches,  violations or defaults or allegations or assertions of such
by any party thereunder.

         SECTION 3.34 Year 2000.

         (a) To the best of  Pacific's  knowledge,  Pacific  and the  Subsidiary
Banks are in compliance  with those certain  guidances and statements  issued by
the  Federal  Financial  Institutions   Examination  Council  (the  "FFIEC")  in
connection with the century date change that will take place on January 1, 2000,
which guidances are dated as of June 1996, May 5, 1997, December 17, 1997, March
17, 1998,  April 10, 1998, and May 13, 1998 (together with any subsequent  FFIEC
issuances  on the Year 2000,  the  "Interagency  Statements").  Pacific  and the
Subsidiary Banks have:

                  (i)  Inventoried  and  assessed  the   technologies  it  uses,
particularly its computer hardware and software,  to identify potential problems
areas related to the Year 2000;

                                      -27-
<PAGE>

                 (ii)  Developed  and  implemented  a Year 2000 Plan,  including
comprehensive  testing  plans,  to prepare its  "mission  critical"  information
technology to: (a) process  date/time data  accurately and without  interruption
(including,  but not limited to, calculating,  comparing,  and sequencing) from,
into,  and  between  the years 1999 and 2000,  and leap year  calculations;  (b)
respond to two-digit  year-date input in a way that resolves the ambiguity as to
century in a disclosed,  defined,  and predetermined  manner;  and (c) store and
provide output of date  information in ways that are  unambiguous as to century;
and

                (iii)  Commenced the  development  of, and by September 30, 1998
will have completed the development of,  contingency  plans to ensure continuity
of business in the event of: (a) failure to complete  any tasks  required by the
Year 2000 Plan, such as remediation or validation;  or (b) any externally caused
business interruption related to the century date change.

                 (iv) Taken  commercially  reasonable  steps to investigate  and
test the ability of its "mission critical"  information  technology to share and
exchange  date/time data  accurately and without  interruption or material delay
with its key vendors and suppliers.

         (b) If Pacific and the  Subsidiary  Banks have been examined by federal
or state  regulators  for Year 2000  readiness,  they have not received a rating
that would cause delay or denial of any  regulatory  approval of this  Agreement
and the transactions contemplated hereby.

         (c) Pacific's  estimate of the out-of-pocket  expenses payable to third
parties necessary to complete its consolidated  Year 2000 Compliance  efforts is
not in excess of $500,000.

         SECTION 3.35  Representations Not Misleading.  To Pacific's  knowledge,
all material  facts  relating to the business  operations,  properties,  assets,
liabilities (contingent or otherwise) and financial condition of Pacific and the
Pacific  Subsidiaries  have been disclosed to SBB in or in connection  with this
Agreement. No representation or warranty by Pacific contained in this Agreement,
nor any  statement,  exhibit or schedule  furnished to SBB by Pacific  under and
pursuant  to, or in  anticipation  of or in  connection  with,  this  Agreement,
contains or will contain on the Closing Date any untrue  statement of a material
fact or  omits or will  omit to  state a  material  fact  necessary  to make the
statements  contained  herein or therein,  in light of the  circumstances  under
which it was or will be  made,  not  misleading  and  such  representations  and
warranties  would  continue to be true and correct  following  disclosure to any
governmental authority having jurisdiction over Pacific or its properties of the
facts and circumstances upon which they were based.  Except as disclosed herein,
there is no matter  that  materially  adversely  affects  Pacific  or  Pacific's
ability to perform the transactions  contemplated by this Agreement or the other
agreements  contemplated  hereby,  or to the  knowledge of Pacific,  will in the
future result in a Material  Adverse Change with respect to Pacific,  other than
general economic  conditions.  No information material to the Merger and that is
necessary  to make the  representations  and  warranties  herein  contained  not
misleading, has been withheld by Pacific.

                                   ARTICLE IV.

                      REPRESENTATIONS AND WARRANTIES OF SBB

         SBB hereby makes the  representations  and warranties set forth in this
Article IV to Pacific.



                                      -28-
<PAGE>


         SECTION 4.01 Organization and Qualification.

         (a) SBB is a corporation,  duly organized,  validly  existing under the
laws of the State of California, and in good standing under all laws, rules, and
regulations  applicable to corporations located in the State of California.  SBB
is a bank  holding  company  registered  under the BHCA.  SBB has all  requisite
corporate power and authority (including all licenses,  franchises,  permits and
other  governmental  authorizations  as are  legally  required)  to carry on its
business as now being  conducted,  to own,  lease and operate its properties and
assets,  including,  but not limited to, as now owned, leased or operated and to
enter into and carry out its  obligations  under this  Agreement  and the Merger
Agreement.  Schedule  4.01(a) sets forth a complete list of each  Subsidiary (as
defined in Section  12.08(B))  of SBB  (collectively,  the "SBB  Subsidiaries").
Except  as set  forth on  Schedule  4.01(a),  SBB does  not own or  control  any
Affiliate  (as  defined  in  Section   12.08(A)   hereof)  other  than  the  SBB
Subsidiaries, and neither of the SBB Subsidiaries owns or controls any Affiliate
or Subsidiary.  True and complete  copies of the Articles of  Incorporation  and
Bylaws of SBB and the SBB  Subsidiaries,  as amended to date,  certified  by the
Secretary of SBB and each SBB Subsidiary, as applicable,  have been delivered to
Pacific.

         (b) SBB&T is a California banking  corporation duly organized,  validly
existing and in good standing under the laws of the State of  California.  SBB&T
has all  requisite  corporate  power  and  authority  (including  all  licenses,
franchises,  permits  and  other  governmental  authorizations  as  are  legally
required) to carry on its  business as now being  conducted,  to own,  lease and
operate its properties and assets,  including, but not limited to, as now owned,
leased or operated.  SBB&T is an insured bank as defined in the FDIA. All of the
issued and  outstanding  shares of capital  stock of SBB&T are owned by SBB free
and clear of all liens, encumbrances,  rights of first refusal, options or other
restrictions of any nature  whatsoever,  and all such shares are duly authorized
and validly  issued and are fully  paid,  nonassessable  and free of  preemptive
rights of any person.  There are no options,  warrants or rights  outstanding to
acquire  any capital  stock of the SBB&T,  and no person or entity has any other
right to  purchase or acquire any  unissued  shares of stock of SBB&T,  nor does
SBB&T have any  obligation of any nature with respect to its unissued  shares of
stock.

         (c) Each of the SBB  Subsidiaries,  other than SBB&T,  is a  California
corporation duly organized, validly existing and in good standing under the laws
of the State of  California,  and in good standing  under all laws,  rules,  and
regulations applicable to corporations located in the State of California.  Each
such SBB Subsidiary has all requisite  corporate power and authority  (including
all licenses,  franchises,  permits and other governmental authorizations as are
legally  required)  to  carry  on  their  respective  businesses  as  now  being
conducted, to own, lease and operate its properties and assets,  including,  but
not  limited  to,  as now  owned,  leased or  operated.  All of the  issued  and
outstanding  shares of capital stock of each such SBB Subsidiary is owned by SBB
free and clear of all liens,  encumbrances,  rights of first refusal, options or
other  restrictions  of any  nature  whatsoever,  and all such  shares  are duly
authorized  and  validly  issued and are fully paid,  nonassessable  and free of
preemptive  rights of any  person.  There  are no  options,  warrants  or rights
outstanding to acquire any capital stock of the SBB  Subsidiaries  and no person
or entity has any other  right to purchase  or acquire  any  unissued  shares of
stock of any of the SBB Subsidiaries,  nor does any such SBB Subsidiary have any
obligation of any nature with respect to its unissued shares of stock.



                                      -29-
<PAGE>

         (d) The nature of the business of SBB and the SBB  Subsidiaries  do not
require  any  of  them  to be  licensed  or  qualified  to do  business  in  any
jurisdiction other than the State of California. Except as disclosed on Schedule
4.01(d),  neither SBB nor any of the SBB  Subsidiaries  has any equity interest,
direct or  indirect,  in any other bank or  corporation  or in any  partnership,
joint venture or other business enterprise or entity, except as acquired through
settlement of indebtedness,  foreclosure, the exercise of creditors' remedies or
in a  fiduciary  capacity,  and  the  business  carried  on by SBB  and  the SBB
Subsidiaries  has not been  conducted  through  any  other  direct  or  indirect
Subsidiary or Affiliate of SBB or the SBB Subsidiaries.

         (e) Neither SBB nor any of the SBB Subsidiaries that is neither a bank,
a  bank  operating  subsidiary  or  a  bank  service  corporation,  directly  or
indirectly,  engages in any activity prohibited by the Federal Reserve.  Without
limiting the generality of the foregoing,  any equity investment of SBB and each
subsidiary  that is not a bank, a bank  operating  subsidiary  or a bank service
corporation, is not prohibited by the Federal Reserve.

         (f) SBB&T does not,  directly  or  indirectly,  engage in any  activity
prohibited by the Federal Reserve or the California Commissioner.

         SECTION 4.02 Execution and Delivery. SBB has taken all corporate action
necessary to  authorize  the  execution,  delivery  and  (provided  the required
regulatory and shareholder approvals are obtained) performance of this Agreement
and the other  agreements  and  documents  contemplated  hereby to which it is a
party, including,  but not limited to, the Merger Agreement.  This Agreement has
been, and the other agreements and documents contemplated hereby, including, but
not  limited  to, the Merger  Agreement,  have been or at Closing  will be, duly
executed by SBB and each  constitutes  the valid and binding  obligation of SBB,
enforceable in accordance with its respective  terms and  conditions,  except as
enforceability  may  be  limited  by  bankruptcy,  conservatorship,  insolvency,
moratorium, reorganization,  receivership or similar laws and judicial decisions
affecting the rights of creditors  generally and by general principles of equity
(whether applied in a proceeding at law or in equity).

         SECTION 4.03 Capitalization. The entire authorized capital stock of SBB
consists of 40,000,000  shares of SBB Common Stock,  15,397,463  shares of which
are fully paid,  validly issued,  nonassessable  and outstanding,  and 1,128,680
additional  shares of which  have been  reserved  for  issuance  to  holders  of
outstanding stock options to purchase shares of SBB Common Stock.  Schedule 4.03
contains a list of each plan administered by SBB or any SBB Subsidiary  pursuant
to which  options to purchase  shares of SBB Common Stock ("SBB Stock  Options")
have been or may be granted (the "SBB Stock Option  Plans"),  including  (i) the
number of outstanding  options with respect to each SBB Stock Option Plan,  (ii)
the  weighted  average  exercise  price per share with respect to each SBB Stock
Option Plan,  (iii) a list of all option  holders with respect to each SBB Stock
Option Plan,  and (iv) the number of vested and unvested SBB Stock  Options with
respect to each such option holder in each SBB Stock Option Plan.  All SBB Stock
Options  were issued and,  upon  issuance  in  accordance  with the terms of the
outstanding option agreements, the shares of SBB Common Stock shall be issued in
compliance with all applicable  securities laws. Except as disclosed in Schedule
4.03,  there  are no (i)  other  outstanding  equity  securities  of any kind or
character,  (ii) outstanding  subscriptions,  options,  convertible  securities,
rights, warrants, calls or other agreements or commitments of any kind issued or
granted by, or binding upon,  SBB to purchase or otherwise  acquire any security
of or  


                                      -30-
<PAGE>

equity  interest in SBB or (iii)  outstanding  subscriptions,  options,  rights,
warrants, calls, convertible securities, irrevocable proxies or other agreements
or commitments  obligating SBB to issue any shares of,  restricting the transfer
of or otherwise relating to shares of its capital stock of any class. All of the
issued and  outstanding  shares of SBB Common  Stock have been duly  authorized,
validly issued and are fully paid and nonassessable, and have not been issued in
violation  of the  preemptive  rights of any  person.  Such shares of SBB Common
Stock have been issued in full  compliance  with  applicable  law.  There are no
restrictions  applicable to the payment of dividends on the shares of SBB Common
Stock,  except  pursuant to applicable laws and  regulations,  and all dividends
declared prior to the date of this Agreement have been paid.

         SECTION 4.04 Compliance with Laws, Permits and Instruments.

         (a) Except as set forth in Schedule 4.04, SBB and the SBB Subsidiaries,
as  applicable,  are in  compliance  with,  and are not in default  (or with the
giving  of notice  or the  passage  of time  will be in  default)  under,  or in
violation  of, (i) any provision of the Articles of  Incorporation  or Bylaws of
SBB or any SBB  Subsidiary,  (ii) any material  provision of any loan agreement,
security or pledge agreement, mortgage, indenture, lease, contract, agreement or
other  instrument  applicable to SBB or any SBB  Subsidiary or their  respective
assets,  operations,  properties  or  businesses  now  conducted  or  heretofore
conducted  or  (iii)  any  permit,   concession,   grant,  franchise,   license,
authorization,  judgment,  writ,  injunction,  order,  decree,  award,  statute,
federal,  state  or local  law,  ordinance,  rule or  regulation  of any  court,
arbitrator or any federal,  state,  municipal or other governmental  department,
commission,  board, bureau, agency or instrumentality applicable to SBB, the SBB
Subsidiaries or their respective  assets,  operations,  properties or businesses
now conducted or heretofore  conducted,  which noncompliance or violation would,
individually  or in the aggregate,  reasonably be anticipated to have a material
adverse effect on the business,  results of operations,  financial condition, or
(insofar as they can reasonably be foreseen) prospects of SBB taken as a whole.

         (b) The execution,  delivery and (provided the required  regulatory and
shareholder  approvals are obtained) performance of this Agreement and the other
agreements  contemplated  hereby,  including  but  not  limited  to  the  Merger
Agreement,  and the  consummation of the  transactions  contemplated  hereby and
thereby,  will not  conflict  with,  or result,  by itself or with the giving of
notice or the  passage  of time,  in any  violation  of or  default or loss of a
benefit under,  (i) any provision of the Articles of  Incorporation or Bylaws of
SBB  or any  SBB  Subsidiary,  (ii)  any  material  provision  of any  mortgage,
indenture, lease, contract, agreement or other instrument applicable to SBB, the
SBB Subsidiaries or their assets, operations, properties or businesses, or (iii)
any permit,  concession,  grant, franchise,  license,  authorization,  judgment,
writ,  injunction,  order, decree,  statute, law, ordinance,  rule or regulation
applicable to SBB, the SBB Subsidiaries or their assets, operations,  properties
or businesses.

         SECTION 4.05 Financial Statements.

         (a) SBB has  furnished to Pacific  true and complete  copies of (i) the
audited consolidated balance sheets of SBB as of December 31, 1996 and 1997, and
the related audited consolidated statements of income,  stockholders' equity and
cash  flows  for the years  ended  December  31,  1995,  1996 and 1997,  (ii) an
unaudited  consolidated  balance  sheet of SBB as of  March  31,  1998,  and the
related unaudited  consolidated  statement of income for the three-month  


                                      -31-
<PAGE>

period ended March 31, 1998 (such balance  sheets and the related  statements of
income,  stockholders' equity and cash flows are collectively referred to herein
as the "SBB Financial Statements").  Except as described in the notes to the SBB
Financial  Statements,  the SBB  Financial  Statements  fairly  present,  in all
material  respects,  the  consolidated  financial  position  of  SBB  as of  the
respective  dates thereof and the results of operations and changes in financial
position of SBB for the periods then ended, in conformity with GAAP,  applied on
a basis  consistent  with prior periods  (subject,  in the case of the unaudited
interim financial  statements,  to normal year-end adjustments and the fact that
they do not contain all of the footnote disclosures required by GAAP), except as
otherwise noted therein, and the accounting records underlying the SBB Financial
Statements   accurately  and  fairly  reflect  in  all  material   respects  the
transactions  of SBB. The SBB  Financial  Statements do not contain any items of
extraordinary  or  nonrecurring  income or any other  income  not  earned in the
ordinary course of business except as expressly specified therein.

         (b) SBB has furnished,  or has caused SBB&T to furnish, to Pacific with
true and  complete  copies of the Call  Reports of SBB&T for the  periods  ended
December  31,  1996,  December  31, 1997 and March 31,  1998.  Such Call Reports
fairly presents,  in all material respects,  the financial position of SBB&T and
the  results of its  operations  at the dates and for the periods  indicated  in
conformity  with  the  Instructions  for  the  Preparation  of Call  Reports  as
promulgated  by  applicable  regulatory  authorities.  The Call  Reports  do not
contain  any items of special  or  nonrecurring  income or any other  income not
earned in the ordinary course of business except as expressly specified therein.
SBB&T has  calculated  its allowance  for loan losses in  accordance  with GAAP,
which includes RAP where applicable,  as applied to banking  institutions and in
accordance with all applicable rules and  regulations.  To the best knowledge of
SBB, the allowance  for loan losses  account for SBB&T is, and as of the Closing
Date will be, adequate in all material  respects to provide for all losses,  net
of recoveries relating to loans previously charged off, on all outstanding loans
of SBB&T.

         SECTION 4.06  Undisclosed  Liabilities.  Neither SBB nor any of the SBB
Subsidiaries  has any  material  liability  or  obligation,  accrued,  absolute,
contingent  or otherwise  and whether due or to become due  (including,  without
limitation,  unfunded  obligations  under any service  recognition  or severance
agreement, whether written or oral, or SBB Employee Plans (as defined in Section
4.31  hereof) or  material  liabilities  for  federal,  state or local  taxes or
assessments or material  liabilities  under any agreement that are not reflected
in or disclosed in the SBB Financial  Statements,  except (i) those  liabilities
and expenses  incurred in the ordinary  course of business and  consistent  with
prudent  business  practices  since the date of the SBB Financial  Statements or
(ii) as disclosed on Schedule 4.06.

         SECTION 4.07  Litigation.  Except as set forth on Schedule 4.07,  there
are  no  actions,  claims,  suits,  investigations,   reviews  or  other  legal,
quasi-judicial or  administrative  proceedings of any kind or nature now pending
or, to the best  knowledge of SBB,  threatened  against or affecting SBB, any of
the SBB Subsidiaries or any of their  respective  current or former officers and
directors  (while acting in such capacity) at law or in equity,  or by or before
any federal,  state or municipal court or other  governmental or  administrative
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  that in any manner involves SBB, the SBB  Subsidiaries or any of their
current or former  officers or directors  (while acting in such capacity) or any
of their  properties or capital stock that would  reasonably be




                                      -32-
<PAGE>

anticipated  to result in a Material  Adverse  Change  with  respect to SBB,  or
materially and adversely affect the transactions contemplated by this Agreement,
and SBB does not know or have any  reason to be aware of any basis for the same.
No legal action, suit or proceeding or judicial,  administrative or governmental
investigation is pending or, to the knowledge of SBB,  threatened against SBB or
any of the SBB Subsidiaries that questions the validity of this Agreement or the
agreements  contemplated  hereby,  including,  but not  limited  to,  the Merger
Agreement, or any actions taken or to be taken by SBB pursuant hereto or thereto
or seeks to enjoin or otherwise restrain the transactions contemplated hereby or
thereby.

         SECTION 4.08  Consents and  Approvals.  SBB's Board of Directors  (at a
meeting called and duly held) has resolved,  subject to its fiduciary  duties to
the   shareholders  of  SBB,  to  recommend   approval  and  adoption  by  SBB's
shareholders of the Merger, this Agreement and the Merger Agreement.  Except for
shareholder  and regulatory  approvals and except as disclosed in Schedule 4.08,
no approval, consent, order or authorization of, or registration, declaration or
filing with, any governmental  authority or other third party is required on the
part of SBB in connection  with the  execution,  delivery or performance of this
Agreement or the agreements contemplated hereby,  including, but not limited to,
the  Merger   Agreement,   or  the  consummation  by  SBB  of  the  transactions
contemplated hereby or thereby.

         SECTION 4.09 Title to Assets.  SBB and each of the SBB Subsidiaries has
good and  indefeasible  title to all of its  assets  and  properties  including,
without limitation,  all personal and intangible properties reflected in the SBB
Financial  Statements  or  acquired  subsequent  thereto,  subject  to no liens,
mortgages,  security interests,  encumbrances or charges of any kind, except (i)
as described in Schedule  4.09,  (ii) as noted in the SBB Financial  Statements,
(iii) statutory liens not yet delinquent,  (iv) consensual  landlord liens,  (v)
minor  defects  and  irregularities  in  title  and  encumbrances  that  do  not
materially  impair the use thereof for the purpose for which they are held, (vi)
pledges of assets in the  ordinary  course of  business to secure  public  funds
deposits,  and (vii) those assets and  properties  disposed of for fair value in
the ordinary course of business since the dates of the SBB Financial Statements.
Schedule 4.09  includes a copy of the title policy of insurance  with respect to
each parcel of real property owned by SBB and the SBB Subsidiaries.

         SECTION 4.10 Absence of Certain Changes or Events.  Except as disclosed
on Schedule 4.10, since December 31, 1997, SBB,  including the SBB Subsidiaries,
has conducted its business only in the ordinary  course and has not,  other than
in the ordinary  course of business and consistent  with past practices and safe
and sound banking practices:

         A. Incurred any obligation or liability,  absolute, accrued, contingent
or  otherwise,  whether  due or to  become  due,  which  individually  or in the
aggregate,  has had a  material  adverse  effect  on the  business,  results  of
operations, financial condition, or (insofar as they can reasonably be foreseen)
prospects of SBB and the SBB Subsidiaries taken as a whole,  except for deposits
taken and federal funds purchased and current  liabilities for trade or business
obligations;

         B. Discharged or satisfied any lien,  charge or encumbrance or paid any
obligation or liability, whether absolute or contingent, due or to become due;

                                      -33-
<PAGE>

         C. Declared or made any payment of dividends or other  distribution  to
its  shareholders,  or purchased,  retired or redeemed,  or obligated  itself to
purchase,  retire  or  redeem,  any of its  shares  of  capital  stock  or other
securities;

         D. Issued,  reserved for  issuance,  granted,  sold or  authorized  the
issuance  of  any  shares  of  its  capital   stock  or  other   securities   or
subscriptions,  options,  warrants,  calls,  rights or  commitments  of any kind
relating to the issuance thereto;

         E.  Acquired any capital  stock or other equity  securities or acquired
any equity or ownership interest in any bank, corporation,  partnership or other
entity  (except (i) through  settlement  of  indebtedness,  foreclosure,  or the
exercise of creditors' remedies or (ii) in a fiduciary  capacity,  the ownership
of which does not expose it to any liability  from the  business,  operations or
liabilities of such person);

         F. Mortgaged,  pledged or subjected to lien, charge,  security interest
or any other encumbrance or restriction any of its property, business or assets,
tangible or intangible  except (i) as described in Schedule 4.09, (ii) statutory
liens not yet delinquent,  (iii) consensual  landlord liens,  (iv) minor defects
and  irregularities  in title and encumbrances that do not materially impair the
use thereof  for the  purpose for which they are held,  (v) pledges of assets to
secure public funds deposits,  and (vi) for those assets and properties disposed
of for fair value since the dates of the SBB Financial Statements.

         G. Sold, transferred,  leased to others or otherwise disposed of any of
its assets or canceled or compromised  any debt or claim,  or waived or released
any right or claim of material value;

         H.  Terminated,  canceled or surrendered,  or received any notice of or
threat of termination or cancellation of any contract,  lease or other agreement
or  suffered  any  damage,  destruction  or  loss  (whether  or not  covered  by
insurance),  which,  in any  case or in the  aggregate,  would  have a  material
adverse effect on the business,  results of operations,  financial condition, or
(insofar  as they  can  reasonably  be  foreseen)  prospects  of SBB and the SBB
Subsidiaries taken as a whole;

         I. Disposed of,  permitted to lapse,  transferred or granted any rights
under, or entered into any settlement  regarding the breach or infringement  of,
any United  States or foreign  license or SBB  Proprietary  Right (as defined in
Section 4.15 hereof) or modified any existing rights with respect thereto;

         J. Made any change in the rate of  compensation,  commission,  bonus or
other  direct  or  indirect  remuneration  payable,  or paid or agreed or orally
promised to pay,  conditionally  or otherwise,  any bonus,  extra  compensation,
pension  or  severance  or  vacation  pay,  to or for the  benefit of any of its
shareholders,  directors,  officers,  employees  or agents,  or entered into any
employment or consulting contract or other agreement with any director,  officer
or  employee or  adopted,  amended in any  material  respect or  terminated  any
pension,  employee  welfare,  retirement,  stock purchase,  stock option,  stock
appreciation  rights,   termination,   severance,   income  protection,   golden
parachute,  savings or  profit-sharing  plan  (including  trust  agreements  and
insurance  contracts  embodying  such  plans),  any  deferred  compensation,  or
collective


                                      -34-
<PAGE>

bargaining  agreement,  any group  insurance  contract  or any other  incentive,
welfare or employee  benefit plan or agreement  maintained by it for the benefit
of its  directors,  employees  or  former  employees,  except  (i)  compensation
adjustments  contemplated  within  SBB's 1998 budget and  approved in advance by
Pacific (which approval shall not be unreasonably  withheld),  and (ii) periodic
increases consistent with past practices;

         K. Except for  improvements  or betterments  relating to SBB Properties
(as defined in Section 4.19(e) hereof), made any capital expenditures or capital
additions or betterments in excess of an aggregate of $4,000,000;

         L. Instituted,  had instituted  against it, settled or agreed to settle
any  litigation,  action or proceeding  before any court or  governmental  body,
other than routine  collection suits instituted by it to collect amounts owed or
suits in which the amount in controversy is less than $200,000;

         M. Permitted any change, event or condition that, in any case or in the
aggregate,  has  caused  or may  result in a  Material  Adverse  Change,  or any
Material  Adverse  Change in earnings or costs or relations  with its employees,
agents, depositors, loan customers, correspondent banks or suppliers;

         N. Except for the  transactions  contemplated  by this  Agreement or as
otherwise permitted  hereunder,  entered into any transaction,  or entered into,
modified or amended any contract or commitment;

         O.  Entered  into or given any  promise,  assurance or guarantee of the
payment,  discharge or  fulfillment  of any  undertaking  or promise made by any
person,  firm or corporation other than letters of credit issued in the ordinary
course of business;

         P. Sold, or knowingly  disposed of, or otherwise divested itself of the
ownership,  possession, custody or control, of any corporate books or records of
any nature  that,  in  accordance  with sound  business  practice,  normally are
retained  for a period of time after their use,  creation or receipt,  except at
the end of the normal retention period;

         Q. Made any, or acquiesced with any, change in any accounting  methods,
principles or material practices, except as required by GAAP or RAP;

         R. Sold  (provided,  however,  that payment at maturity is not deemed a
sale) any investment securities in a single transaction involving a book gain or
loss of more than $200,000 on such sale or purchased any investment  securities,
other than purchases of U.S. Treasury securities with a maturity of two years or
less;

         S. Made,  renewed,  extended  the  maturity  of, or altered  any of the
material  terms of any  criticized  loan to any single  borrower and his related
interests  without regard to whether such transaction was in the ordinary course
of business  or whether it was  consistent  with past or safe and sound  banking
practices; or

         T. Entered into any agreement or made any commitment whether in writing
or otherwise to take any of the types of action described in subsections A.
through S. above.

                                      -35-
<PAGE>

         SECTION 4.11 Leases, Contracts and Agreements. Schedule 4.11 sets forth
a complete listing of all leases, subleases,  licenses, contracts and agreements
to which  SBB,  including  any of the SBB  Subsidiaries,  is a party  (the  "SBB
Contracts"), and which (i) relate to real property used by SBB in its operation,
(ii) involve payments to or by SBB in excess of $200,000 during the term of such
SBB  Contracts  (exclusive of unfunded  loan  commitments  and letters of credit
issued by SBB), or (iii) involve any unfunded  loan  commitments  and letters of
credit issued by SBB where the borrower's total direct and indirect indebtedness
to SBB is in  excess  of  $4,000,000.  True and  correct  copies of all such SBB
Contracts  (other than unfunded loan commitments and letters of credit issued by
SBB) are included with Schedule  4.11. For the purposes of this  Agreement,  the
SBB Contracts  shall be deemed not to include loans made by,  Federal funds sold
or  purchased  by,   repurchase   agreements  made  by,  spot  foreign  exchange
transactions of, bankers  acceptances of or deposits by SBB. Except as set forth
in Schedule 4.11, no participations or loans have been sold which have buy back,
recourse or guaranty provisions which create contingent or direct liabilities of
SBB. To the knowledge of SBB, all of the leases, subleases,  licenses, contracts
and  agreements to which SBB or any SBB  Subsidiary is a party are legal,  valid
and  binding  obligations  of the  parties  to  such  contracts  enforceable  in
accordance with their terms,  subject to the effects of bankruptcy,  insolvency,
reorganization,  moratorium or other similar laws relating to creditors'  rights
generally and to general equitable principles, and are in full force and effect.
Except as described in Schedule 4.11, all rent and other payments by SBB and any
SBB Subsidiary under such contracts are current,  there are no existing defaults
by SBB or any SBB Subsidiary under such contracts, and no termination, condition
or other event has occurred which (whether with or without notice, lapse of time
or the happening or  occurrence of any other event) would  constitute a default.
SBB and each SBB Subsidiary has a good and  indefeasible  leasehold  interest in
each  parcel of real  property  leased  by it free and  clear of all  mortgages,
pledges, liens, encumbrances and security interests.

         SECTION 4.12 Taxes.  SBB has duly and timely filed with the appropriate
Federal,  state and local  governmental  agencies  all tax  returns  and reports
required to be filed, including,  without limitation,  income, excise, property,
sales, use, franchise, value added, unemployment,  employees' income withholding
and  social  security  taxes,  imposed by the  United  States or by any  foreign
country or by any state,  municipality,  subdivision or  instrumentality  of the
United States or of any foreign country,  or by any other taxing authority,  and
has paid, or has established adequate reserves for the payment of, all taxes and
assessments  that are or are  claimed to be due,  payable or owed by SBB, or for
which SBB may have  liability,  whether as a result of its own  activities or by
virtue of its  affiliation  with other  entities and all interest and  penalties
thereon,  whether  disputed  or not.  All  such  tax  returns  and  reports  are
accurately  prepared  and all  deposits  required  by law to be made by SBB with
respect to employees'  withholding taxes have been duly made. SBB is not and has
not been delinquent in the payment of any foreign or domestic tax, assessment or
governmental  charge or deposit and has no tax deficiency or claim  outstanding,
proposed or assessed against it, and, to SBB's knowledge,  there is no basis for
any such deficiency or claim.  Except as set forth in Schedule 4.12,  within the
last six (6) years,  SBB's  Federal  income  tax return has not been  audited or
examined  and no such  audit  is  currently  pending  or,  to  SBB's  knowledge,
threatened.  SBB has not been granted any  extension of time with respect to the
date on which any tax  return not yet filed was or is due to be filed by or with
respect to SBB or any waiver or agreement  by SBB for the  extension of time for
the  assessment or collection of any tax.  Except as set forth in Schedule 4.12,
SBB (i) within the past six (6) years,  has not  committed  any violation of any
applicable  Federal,  state, local or



                                      -36-
<PAGE>

foreign tax laws,  and (ii) with respect to all prior years,  has not  committed
any violation of any applicable  Federal,  state, local or foreign tax laws that
is likely to result in a Material Adverse Change with respect to SBB.

         The amounts set up as provisions  for current or deferred  taxes on the
SBB Financial Statements are sufficient in all material respects for the payment
of all unpaid Federal,  state, county,  local, foreign or other taxes (including
any  interest or  penalties)  of or on behalf of SBB  applicable  to the periods
covered  by the SBB  Financial  Statements,  and all  years  and  periods  prior
thereto.  True and complete  copies of the Federal  income tax returns of SBB as
filed with the IRS for the years ended December 31, 1995,  1996, and 1997,  have
been delivered to Pacific.

         SECTION 4.13 Insurance. Schedule 4.13 contains an accurate and complete
list and brief description of all policies of insurance,  including fidelity and
bond insurance,  of SBB,  including the SBB Subsidiaries.  All such policies (a)
are valid,  outstanding and enforceable  except as enforceability may be limited
by  bankruptcy,   conservatorship,   insolvency,   moratorium,   reorganization,
receivership,  or similar laws and judicial  decisions  affecting  the rights of
creditors  generally and by general  principles of equity (whether  applied in a
proceeding  at law or  equity),  (b)  will  not in any  significant  respect  be
affected  by, and will not  terminate  or lapse by reason  of, the  transactions
contemplated by this Agreement,  and (c) are presently in full force and effect,
no notice has been  received  of the  cancellation,  or  threatened  or proposed
cancellation,  of any such policy and there are no unpaid  premiums due thereon.
SBB,  including  the SBB  Subsidiaries,  is not in default  with  respect to the
provisions  of any such  policy and has not failed to give any notice or present
any  claim  thereunder  in a due and  timely  fashion.  Except  as set  forth on
Schedule 4.13, neither SBB nor any SBB Subsidiary has been refused any insurance
with respect to its assets or operations,  nor has its insurance been limited by
any insurance  carrier to which SBB and the SBB Subsidiaries has applied for any
such insurance  within the last two (2) years.  Each property of SBB,  including
the SBB  Subsidiaries,  is insured  for the  benefit  of SBB in  amounts  deemed
adequate by SBB's management  against risks customarily  insured against.  There
have  been  no  claims  under  any  fidelity  bonds  of SBB  or  any of the  SBB
Subsidiaries  within the last three (3) years, and SBB is not aware of any facts
that would form the basis of a claim under such bonds.

         SECTION 4.14 No Adverse Change. Except as disclosed in the Schedules to
this Agreement or in the representations and warranties made in this Article IV,
there has not been any Material  Adverse Change since December 31, 1997, nor has
any event or  condition  occurred  that has  resulted  in,  or has a  reasonable
possibility  of  resulting  in the  future,  in a Material  Adverse  Change with
respect to SBB.

         SECTION 4.15 Patents, Trademarks and Copyrights. Except as disclosed in
Schedule 4.15, SBB and the SBB Subsidiaries do not own or require the use of any
patent, patent application, patent right, invention, process, trademark (whether
registered or unregistered), trademark application, trademark right, trade name,
service  name,  service  mark,  copyright or any trade secret ("SBB  Proprietary
Rights") for their  respective  businesses  or  operations,  except for licensed
computer  software.  To the  knowledge  of SBB,  neither  SBB nor any of the SBB
Subsidiaries  are  infringing  upon or  otherwise  acting  adversely  to any SBB
Proprietary  Right owned by any other  person or  persons.  There is no claim or
action by any such person pending, or, to the knowledge of SBB, threatened, with
respect thereto.

                                      -37-
<PAGE>

         SECTION 4.16 Transactions with Certain Persons and Entities.  Except as
disclosed in Schedule 4.16,  neither SBB nor any of the SBB Subsidiaries owe any
amount to (excluding deposit liabilities),  or have any loan (excluding loans to
participants from the Santa Barbara Bank & Trust 401(k) Plan), contract,  lease,
commitment or other obligation from or to any of the present or former directors
or executive  officers (other than compensation for current services not yet due
and payable and  reimbursement  of expenses  arising in the  ordinary  course of
business)  of SBB and the SBB  Subsidiaries,  and none of such  persons owes any
amount to SBB or the SBB  Subsidiaries.  Except as set forth in  Schedule  4.16,
there are no understandings,  agreements (whether written or oral), instruments,
commitments,  perquisites,  extensions  of credit,  tax  sharing  or  allocation
agreements or other contractual  agreements of any kind between or among SBB and
the SBB Subsidiaries, whether on its own behalf or in its capacity as trustee or
custodian  for the funds of any employee  benefit plan (as defined in ERISA) and
any present or former officers or directors of SBB or the SBB Subsidiaries. True
and correct copies of any such written understandings,  agreements, instruments,
etc., are included with Schedule 4.16.

         SECTION 4.17 Evidences of  Indebtedness.  All evidences of indebtedness
and leases that are reflected as assets of SBB and the SBB Subsidiaries  are, to
SBB's best  knowledge,  legal,  valid and binding  obligations of the respective
obligors thereof,  enforceable in accordance with their respective terms (except
as limited by applicable bankruptcy, insolvency, reorganization,  moratorium and
similar laws affecting  creditors  generally and the  availability of injunctive
relief,  specific  performance and other equitable remedies) and are not subject
to any  known or  threatened  defenses,  offsets  or  counterclaims  that may be
asserted against SBB, the SBB Subsidiaries or the present holder thereof, except
as  disclosed  in Schedule  4.17.  The credit  files of SBB,  including  the SBB
Subsidiaries,  contain all material  information  (excluding  general,  local or
national  industry,  economic  or  similar  conditions)  known  to SBB  that  is
reasonably  required  to  evaluate  in  accordance  with  generally   prevailing
practices in the banking  industry the  collectibility  of the loan portfolio of
SBB (including loans that will be outstanding if any of them advances funds they
are obligated to advance).  SBB has disclosed all of the substandard,  doubtful,
loss,  nonperforming  or loans identified as problem loans on the internal watch
list of SBB&T, a copy of which as of May 31, 1998, has been provided to Pacific.
Except as disclosed in Schedule  4.17, SBB is not aware of, nor has SBB received
notice of, any past or present  conditions,  events,  activities,  practices  or
incidents that may result in a violation of any Environmental Law (as defined in
Section  12.08(D)  hereof)  with  respect  to any  real  property  securing  any
indebtedness reflected as an asset of SBB or any SBB Subsidiary.

         SECTION 4.18 Condition  of Assets.  All  tangible  assets  used by SBB,
including the SBB Subsidiaries,  are in good operating condition,  ordinary wear
and tear  excepted,  and conform with all  applicable  ordinances,  regulations,
zoning and other laws, whether Federal,  state or local.  Except as set forth on
Schedule 4.18, none of SBB's or the SBB Subsidiaries'  premises or equipment are
in need of maintenance or repairs other than ordinary  routine  maintenance  and
repairs that are not material in nature or cost.

         SECTION 4.19 Environmental Compliance.

         (a) Except as set forth on Schedule  4.19(a),  SBB is not aware of, nor
has SBB received notice of, any past or present conditions,  events, activities,
practices or incidents that are 


                                      -38-
<PAGE>

in violation of  Environmental  Laws (as defined in Section 12.08(D) or that may
interfere  with or prevent SBB's  continued  compliance in all respects with all
Environmental Laws.

         (b) SBB and the SBB  Subsidiaries  have obtained all permits,  licenses
and authorizations that are required under any Environmental Laws.

         (c) Except as set forth on Schedule  4.19(c),  to SBB's  knowledge,  no
Hazardous  Materials (as defined in Section 12.08(E) hereof) exist on, about, or
within any of the SBB  Properties  (as defined in this  Section  4.19),  nor, to
SBB's knowledge,  have any Hazardous  Materials  previously existed on, about or
within or been used, generated, stored, transported, disposed of, on or released
from any of the SBB  Properties in violation of any  Environmental  Law. The use
that SBB,  including the SBB Subsidiaries,  makes and intends to make of the SBB
Properties  will not  result in the use,  generation,  storage,  transportation,
accumulation,  disposal or release of any Hazardous  Material on, in or from any
of the SBB Properties in violation of any Environmental Law.

         (d) There is no  action,  suit,  proceeding,  investigation  or inquiry
before any court,  administrative agency or other governmental authority pending
or, to SBB's knowledge, threatened against SBB or any SBB Subsidiary relating in
any way to any  Environmental  Law. To the best of SBB's knowledge,  neither SBB
nor  any  SBB  Subsidiary  has any  liability  for  remedial  action  under  any
Environmental  Law.  SBB has not  received  any request for  information  by any
governmental authority with respect to the condition, use or operation of any of
the SBB  Properties  nor has SBB  received  any  notice  of any  kind  from  any
governmental  authority  or other  person with  respect to any  violation  of or
claimed  or  potential  liability  of  any  kind  under  any  Environmental  Law
(including, without limitation, any letter, notice or inquiry from any person or
governmental  entity  informing SBB that it is or may be liable in any way under
any Environmental Law, or requesting  information to enable such a determination
to be made).

         (e) As used in this  Section  4.19,  the term  "SBB  Property"  or "SBB
Properties" shall include all real property  currently owned or leased by SBB or
any of the SBB Subsidiaries,  including, but not limited to, properties that SBB
or any SBB Subsidiary has  foreclosed on as well as SBB&T's  respective  banking
premises  and all  improvements  and  fixtures  thereon.  The  phrase  "to SBB's
knowledge"  or  similar  phrases  as used in this  Section  4.19  shall mean the
current actual knowledge of executive management of SBB.

         SECTION   4.20   Regulatory   Compliance.    All   reports,    records,
registrations,  statements,  notices and other documents or information required
to be filed by SBB and the SBB  Subsidiaries  during the last two (2) years with
any federal or state regulatory  authority  including,  without limitation,  the
Federal  Reserve,  the FDIC, the California  Commissioner  and the IRS have been
duly and timely filed and all  information  and data  contained in such reports,
records or other documents are true, accurate,  correct and complete.  Except as
disclosed on Schedule  4.20, SBB and the SBB  Subsidiaries  are not now nor have
been,  within the past six (6) years subject to any memorandum of understanding,
cease and desist order, written agreement or other formal  administrative action
with any such regulatory bodies. SBB does not believe any such regulatory bodies
have any  present  intent  to place  SBB or the SBB  Subsidiaries  under any new
administrative  action.  Except  as set  forth on  Schedule  4.20,  there are no
actions or proceedings  




                                      -39-
<PAGE>

pending or  threatened  against SBB or any SBB  Subsidiary by or before any such
regulatory  bodies or any other nation,  state or  subdivision  thereof,  or any
other  entity  exercising  executive,   legislative,   judicial,  regulatory  or
administrative functions of or pertaining to government.

         SECTION  4.21  Securities  and  Exchange  Commission  Reports.  SBB has
previously  made  available to Pacific an accurate and complete copy of each (a)
final registration statement,  prospectus, report, schedule and definitive proxy
statement  filed  since  January 1, 1995 by SBB with the S.E.C.  pursuant to the
Securities  Act or the  Exchange  Act,  and prior to the date  hereof  (the "SBB
Reports"), and (b) communication mailed by SBB to its shareholders since January
1,  1995 and  prior  to the date  hereof,  and no such  registration  statement,
prospectus,  report,  schedule,  proxy statement or communication  contained any
untrue  statement  of a  material  fact or omitted  to state any  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier  date.  Since  January 1,  1995,  SBB has timely  filed all SBB
Reports and other documents  required to be filed by it under the Securities Act
and the  Exchange  Act,  and,  as of their  respective  dates,  all SBB  Reports
complied in all material  respects with the published  rules and  regulations of
the S.E.C. with respect thereto.

         SECTION 4.22 Absence of Certain Business Practices. Except as set forth
on Schedule 4.22, neither SBB, the SBB Subsidiaries nor any officer, employee or
agent of SBB or the SBB  Subsidiaries,  nor any  other  person  acting  on their
behalf,  has, directly or indirectly,  within the past ten (10) years,  given or
agreed  to  give  any  gift  or  similar  benefit  to  any  customer,  supplier,
governmental  employee or other person who is or may be in a position to help or
hinder the  business  of SBB as a whole (or assist  SBB in  connection  with any
actual or  proposed  transaction)  that (i) would  subject SBB or any of the SBB
Subsidiaries  to any damage or penalty in any civil,  criminal  or  governmental
litigation or proceeding,  (ii) if not given in the past, would have resulted in
a Material  Adverse Change with respect to SBB, or (iii) if not continued in the
future,  would result in a Material  Adverse Change with respect to SBB or would
subject  SBB to suit or penalty in any  private or  governmental  litigation  or
proceeding.

         SECTION 4.23 Registration Statement; Joint Proxy  Statement/Prospectus.
None  of  the  information  supplied  or to be  supplied  by  SBB  or any of its
directors,  officers,  employees  or agents for  inclusion  in the  Registration
Statement    (as   defined   in   Section    5.03(c))   or   the   Joint   Proxy
Statement/Prospectus  (as defined in Section 5.03(c)),  or any amendment thereof
or supplement thereto,  will be false or misleading with respect to any material
fact,  or omit to  state  any  material  fact  necessary  in  order  to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading,  or at the time of the Pacific Shareholders' Meeting and the SBB
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material  fact  necessary  to correct any  statement in any
earlier  communication  with  respect to the  solicitation  of any proxy for the
Pacific Shareholders'  Meeting and the SBB Shareholders'  Meeting. All documents
that SBB is responsible for filing with any regulatory or governmental agency in
connection  with the  Merger  will  comply  in all  material  respects  with the
provisions of applicable law.



                                      -40-
<PAGE>

         SECTION 4.24 Pooling of  Interests.  As of the date of this  Agreement,
SBB has no reason to believe  that the Merger  will not qualify as a "pooling of
interests" for accounting purposes.

         SECTION 4.25 Books and Records.  The minute  books,  stock  certificate
books and stock transfer  ledgers of SBB and the SBB  Subsidiaries (i) have been
kept  accurately  in the  ordinary  course of  business,  (ii) are  complete and
correct in all material respects,  (iii) reflect transactions  representing bona
fide transactions,  and (iv) do not fail to reflect  transactions  involving the
business  of SBB or the SBB  Subsidiaries  that were  required  to have been set
forth therein and that have not been accurately so set forth.

         SECTION  4.26 Forms of  Instruments,  Etc.  SBB will make  available to
Pacific upon written  request copies of all standard forms of notes,  mortgages,
deeds of trust and other  routine  documents  of a like nature used on a regular
and recurring  basis by SBB and the SBB  Subsidiaries  in the ordinary course of
their businesses.

         SECTION  4.27  Fiduciary  Responsibilities.   Except  as  disclosed  in
Schedule  4.27,  SBB and the SBB  Subsidiaries  have  performed  in all material
respects all of their duties as a trustee,  custodian,  guardian or as an escrow
agent in a manner that  complies in all material  respects  with all  applicable
laws, regulations, orders, agreements, instruments and common law standards.

         SECTION 4.28 Guaranties.  None of the obligations or liabilities of SBB
or the SBB Subsidiaries are guaranteed by any other person, firm or corporation,
nor is any  outstanding  obligation  or liability of any other  person,  firm or
corporation  guaranteed by SBB or the SBB  Subsidiaries,  except in the ordinary
course of business,  according to prudent  business  practices and in compliance
with applicable law.

         SECTION 4.29 Voting Trust or Buy-Sell  Agreements.  SBB is not aware of
any agreement  between or among any of its  shareholders  relating to a right of
first  refusal with respect to the purchase or sale by any such  shareholder  of
capital  stock of SBB or any voting  agreement  or voting  trust with respect to
shares of capital stock of SBB.

         SECTION  4.30  Employee  Relationships.  SBB and  the SBB  Subsidiaries
(including  their  respective  officers  and  directors  while  acting  in  such
capacities)  has  complied in all material  respects  with all  applicable  laws
relating to its  relationships  with its  employees,  and SBB believes  that the
relationships  between SBB,  including  the SBB  Subsidiaries  (including  their
respective  officers  and  directors  while acting in such  capacities)  and its
employees are good. To the knowledge of SBB, no key executive officer or manager
of any of the operations  operated by SBB and the SBB  Subsidiaries or any group
of employees of SBB and the SBB Subsidiaries have any present plans to terminate
their employment with SBB or any SBB Subsidiary.  Neither SBB nor any of the SBB
Subsidiaries is a party to any oral or written contracts or agreements  granting
benefits or rights to employees or any collective bargaining agreement or to any
conciliation  agreement  with the  Department  of Labor,  the  Equal  Employment
Opportunity Commission or any federal, state or local agency that requires equal
employment  opportunities  or  affirmative  action in  employment.  There are no
unfair labor practice  complaints  pending against SBB, including any of the SBB
Subsidiaries,  before the


                                      -41-
<PAGE>

National Labor  Relations Board and no similar claims pending before any similar
state, local or foreign agency.  There is no activity or proceeding of any labor
organization  (or  representative  thereof)  or employee  group to organize  any
employees of SBB, including any SBB Subsidiary,  nor of any strikes,  slowdowns,
work  stoppages,  lockouts or threats  thereof,  by or with  respect to any such
employees.  SBB and the  SBB  Subsidiaries  are in  compliance  in all  material
respects  with  all  applicable  laws   respecting   employment  and  employment
practices,  terms and conditions of employment and wages and hours,  and neither
SBB nor any of the SBB Subsidiaries are engaged in any unfair labor practice.

         SECTION 4.31 Employee Benefit Plans.

         (a) Set forth on Schedule  4.31 is a complete  and correct  list of all
"employee  benefit  plans" (as defined in ERISA),  all specified  fringe benefit
plans as defined in Section 6039D of the Code,  and all other bonus,  incentive,
compensation,   deferred  compensation,  profit  sharing,  stock  option,  stock
appreciation  right,  stock bonus,  stock  purchase,  employee stock  ownership,
savings,  severance,  supplemental  unemployment,  layoff,  salary continuation,
retirement,  pension,  health,  life  insurance,  disability,  group  insurance,
vacation,  holiday,  sick  leave,  fringe  benefit or welfare  plan or any other
similar  plan,  agreement,  policy or  understanding  (whether  written or oral,
qualified or nonqualified,  currently  effective or terminated),  and any trust,
escrow  or  other  agreement  related  thereto,   which  (a)  is  maintained  or
contributed  to by SBB or any SBB  Subsidiary,  or with respect to which SBB and
the SBB Subsidiaries has any liability,  and (b) provides benefits, or describes
policies or procedures  applicable to any officer,  employee,  service provider,
former  officer  or  former  employee  of  SBB  or any  SBB  Subsidiary,  or the
dependents of any such person,  regardless of whether  funded (the "SBB Employee
Plans").

         (b) No SBB Employee  Plan is a defined  benefit plan within the meaning
of section 3(35) of ERISA.  SBB has delivered or made available to Pacific true,
accurate and complete copies of the documents comprising each SBB Employee Plan,
and such other documents,  records or other materials related thereto reasonably
requested by Pacific To the best knowledge of SBB, there have been no prohibited
transactions,  breaches of fiduciary duty or any other breaches or violations of
any law  applicable  to the SBB  Employee  Plans that would  subject  SBB to any
liabilities.  Each SBB  Employee  Plan  intended to be qualified  under  section
401(a) of the Code has a current favorable determination letter and, to the best
knowledge of SBB, has been operated in  compliance  with  applicable  law and in
accordance  with its terms.  There are no pending  claims,  lawsuits  or actions
relating  to any SBB  Employee  Plan  (other  than  ordinary  course  claims for
benefits) and, to the best knowledge of SBB, none are threatened.  No written or
oral representations have been made to any employee or former employee of SBB or
the SBB  Subsidiaries  promising or guaranteeing any employer payment or funding
for the  continuation of medical,  dental,  life or disability  coverage for any
period of time beyond the end of the current  plan year (except to the extent of
coverage  required under section 4980B of the Code).  SBB is in compliance  with
FAS 106.  Except as  required  in  connection  with  qualified  plan  amendments
required by tax law changes,  the consummation of the transactions  contemplated
by this  Agreement  will not  accelerate  the time of  payment  or  vesting,  or
increase  the amount,  of  compensation  due to any  employee,  officer,  former
employee or former officer of SBB or any SBB Subsidiary.



                                      -42-
<PAGE>

         (c) With respect to each "employee  benefit plan" (as defined in ERISA)
maintained or contributed to or required to be contributed  to,  currently or in
the past,  by any trade or  business  with which SBB is  required  by any of the
rules  contained  in the Code or ERISA to be treated as a single  employer  (the
"Controlled Group Plans"):

                  (i) To the knowledge of SBB, all  Controlled  Group Plans that
are "group  health  plans" (as defined in the Code and ERISA) have been operated
to the Closing in a manner so as to not subject  SBB to any  material  liability
under Section 4980B of the Code; and

                 (ii)  There  is no  Controlled  Group  Plan  that is a  defined
benefit plan (as defined in Section  3(35) of ERISA),  nor has there been in the
last five (5) calendar years.

                (iii)  There is no  Controlled  Group  Plan that is a  "multiple
employer  plan" or  "multiemployer  plan" (as  either  such term is  defined  in
ERISA), nor has there been in the last five (5) calendar years.

         SECTION 4.32 Interest Rate Risk  Management  Instruments.  All interest
rate swaps,  caps,  floors and option  agreements  and other  interest rate risk
management arrangements,  whether entered into for the account of SBB or any SBB
Subsidiary or for the account of a customer of SBB or any SBB  Subsidiary,  were
entered  into in the ordinary  course of business  and, to SBB's  knowledge,  in
accordance with prudent banking practice and applicable  rules,  regulations and
policies of any  regulatory  authority  and with  counterparties  believed to be
financially responsible at the time and are legal, valid and binding obligations
of SBB or an SBB Subsidiary  enforceable in accordance  with their terms (except
as may be limited  by  bankruptcy,  insolvency,  moratorium,  reorganization  or
similar laws affecting the rights of creditors generally and the availability of
equitable  remedies),  and are in full  force  and  effect.  SBB  and  each  SBB
Subsidiary  have duly  performed in all material  respects all of their material
obligations  thereunder  to the extent  that such  obligations  to perform  have
accrued; and, to SBB's knowledge, there are no material breaches,  violations or
defaults or allegations or assertions of such by any party thereunder.

         SECTION 4.33 Year 2000.

         (a) To the best of SBB's  knowledge,  SBB and SBB&T  are in  compliance
with those certain  guidances and  statements  issued by the FFIEC in connection
with the  century  date  change  that will take place on January 1, 2000,  which
guidances are dated as of June 1996, May 5, 1997,  December 17, 1997,  March 17,
1998,  April 10, 1998,  and May 13, 1998  (together  with any  subsequent  FFIEC
issuances on the Year 2000, the "Interagency Statements").
SBB and SBB&T have:

                  (i)  Inventoried  and  assessed  the   technologies  it  uses,
particularly its computer hardware and software,  to identify potential problems
areas related to the Year 2000;

                 (ii)  Developed  and  implemented  a Year 2000 Plan,  including
comprehensive  testing  plans,  to prepare its  "mission  critical"  information
technology to: (a) process  date/time data  accurately and without  interruption
(including,  but not limited to, calculating,  comparing,  and sequencing) from,
into,  and  between  the years 1999 and 2000,  and leap year  calculations;  (b)
respond to two-digit  year-date input in a way that resolves the ambiguity as to
century in a



                                      -43-
<PAGE>

disclosed,  defined, and predetermined  manner; and (c) store and provide output
of date information in ways that are unambiguous as to century; and

                (iii)  Commenced the  development  of, and by September 30, 1998
will have completed the development of,  contingency  plans to ensure continuity
of business in the event of: (a) failure to complete  any tasks  required by the
Year 2000 Plan, such as remediation or validation;  or (b) any externally caused
business interruption related to the century date change.

                 (iv) Taken  commercially  reasonable  steps to investigate  and
test the ability of its "mission critical"  information  technology to share and
exchange  date/time data  accurately and without  interruption or material delay
with its key vendors and suppliers.

         (b) If SBB and SBB&T have been examined by federal or state  regulators
for Year 2000 readiness, neither has received a rating that would cause delay or
denial  of any  regulatory  approval  of this  Agreement  and  the  transactions
contemplated hereby.

         (c) SBB's  estimate  of the out-of  -pocket  expenses  payable to third
parties to complete  its  consolidated  Year 2000  Compliance  efforts is not in
excess of $1,300,000.

         SECTION 4.34  Representations Not Misleading.  To SBB's knowledge,  all
material  facts  relating  to  the  business  operations,   properties,  assets,
liabilities (contingent or otherwise) and financial condition of SBB and the SBB
Subsidiaries  have been  disclosed  to  Pacific  in or in  connection  with this
Agreement. No representation or warranty by SBB contained in this Agreement, nor
any  statement,  exhibit  or  schedule  furnished  to  Pacific  by SBB under and
pursuant  to, or in  anticipation  of or in  connection  with,  this  Agreement,
contains or will contain on the Closing Date any untrue  statement of a material
fact or  omits or will  omit to  state a  material  fact  necessary  to make the
statements  contained  herein or therein,  in light of the  circumstances  under
which it was or will be  made,  not  misleading  and  such  representations  and
warranties  would  continue to be true and correct  following  disclosure to any
governmental  authority  having  jurisdiction  over SBB or its properties of the
facts and circumstances upon which they were based.  Except as disclosed herein,
there is no matter that  materially  adversely  affects SBB or SBB's  ability to
perform the transactions  contemplated by this Agreement or the other agreements
contemplated  hereby, or to the knowledge of SBB, will in the future result in a
Material  Adverse  Change  with  respect  to SBB,  other than  general  economic
conditions.  No information material to the Merger and that is necessary to make
the  representations  and warranties  herein contained not misleading,  has been
withheld by SBB.

                                   ARTICLE V.

                              COVENANTS OF PACIFIC

         Pacific hereby makes the covenants set forth in this Article V to SBB.

         SECTION 5.01 Best Efforts. Pacific will use its best efforts to perform
and  fulfill all  conditions  and  obligations  on its part to be  performed  or
fulfilled under this Agreement and to cause the consummation of the transactions
contemplated  hereby  in  accordance  with  the  terms  and  conditions  of this
Agreement.



                                      -44-
<PAGE>

         SECTION 5.02 Merger  Agreement.  Pacific will,  as soon as  practicable
after the execution of this Agreement,  duly authorize and enter into the Merger
Agreement,  the form of which is attached hereto as Exhibit "A", and perform all
of its obligations thereunder.

         SECTION 5.03 Submission of Merger to Shareholders.  Pacific shall:

         (a) Duly call,  give notice of,  con
vene and hold,  on a date  mutually
selected  by  Pacific  and SBB,  a meeting  of its  shareholders  (the  "Pacific
Shareholders'  Meeting") as soon as practicable for the purpose of approving and
adopting the Merger and the Merger Agreement and the  transactions  contemplated
hereby and thereby as required by the GCL;

         (b) Not impose a requirement  that the holders of more than the minimum
required   percentage   (as  set  forth  in   Pacific's   current   Articles  of
Incorporation, current Bylaws or pursuant to provisions of the GCL requiring the
lowest  percentage  vote) of the Pacific  Common  Stock  entitled to vote on the
Merger and the Merger Agreement approve the Merger and the Merger Agreement;

         (c) Cooperate and assist SBB in (i) preparing a Registration  Statement
on Form S-4  relating  to the  shares  of SBB  Common  Stock to be issued to the
Shareholders  of  Pacific  as  the  Merger   Consideration   (the  "Registration
Statement")  and  a  Joint  Proxy  Statement/Prospectus,   including  letter  to
shareholders,  notice of  special  meeting,  proxy  statement  and form of proxy
(collectively,  the  "Joint  Proxy  Statement/Prospectus")  and (ii)  filing the
Registration Statement and the Joint Proxy Statement/Prospectus  (forming a part
of the Registration Statement) with the S.E.C.,  including furnishing to SBB all
information  concerning  Pacific that SBB may  reasonably  request in connection
with   preparation   of   such   Registration    Statement   and   Joint   Proxy
Statement/Prospectus;

         (d) Subject to the  fiduciary  duties of the Pacific Board of Directors
to  the   shareholders   of   Pacific,   (i)   include   in  the   Joint   Proxy
Statement/Prospectus  the  recommendation of the Pacific Board of Directors that
the  shareholders  of Pacific  vote in favor of the approval and adoption of the
Merger and the Merger  Agreement and the  transactions  contemplated  hereby and
thereby,  (ii) use its best efforts to obtain such  shareholder  approval of the
Merger  and the  Merger  Agreement,  and (iii)  perform  such  other acts as may
reasonably be requested by SBB to ensure that such  shareholder  approval of the
Merger and the Merger Agreement is obtained; and

         (e)  Cause  the Joint  Proxy  Statement/Prospectus  to be mailed to the
shareholders of Pacific as soon as practicable.

         SECTION 5.04 Information for Applications and Statements.  Pacific will
promptly,  but in no event later than ten (10)  business days after receipt of a
request by SBB,  furnish to SBB all information,  data and documents  concerning
Pacific,  including,  but not limited to,  financial  statements,  required  for
inclusion in any  application or statement to be made by SBB to, or filed by SBB
with, any governmental body in connection with the transactions  contemplated by
this  Agreement  (including  the  Registration  Statement  and the  Joint  Proxy
Statement/Prospectus),  or in connection with any other transactions  during the
pendency  of this  Agreement,  and  Pacific  represents  and  warrants  that all
information so furnished for such statements and applications  shall be true and
correct in all material  respects and shall not omit 


                                      -45-
<PAGE>

any  material  fact  required  to be stated  therein  or  necessary  to make the
statements made, in light of the  circumstances  under which they were made, not
misleading.  Pacific shall  otherwise  fully cooperate with SBB in the filing of
any  applications  or other documents  necessary to consummate the  transactions
contemplated by this Agreement.

         SECTION 5.05  Required Acts of Pacific.  Prior to the Closing,  Pacific
shall,  and, as  applicable,  shall cause the Pacific  Subsidiaries  to,  unless
otherwise permitted in writing by SBB:

         (a) Operate only in the ordinary course of business and consistent with
prudent banking practices;

         (b)  Except  as  required  by  prudent  business  practices,   use  all
reasonable  efforts to preserve its business  organization  intact and to retain
its present  customers,  depositors and employees,  and to maintain all offices,
machinery,  equipment,  materials,  supplies,  inventories,  vehicles  and other
properties owned, leased or used by it (whether under its control or the control
of others),  in good  operating  condition  and repair,  ordinary  wear and tear
excepted;

         (c)  Perform  all  of  its  obligations  under  contracts,  leases  and
documents relating to or affecting its assets,  properties and business,  except
such obligations as Pacific may in good faith reasonably dispute;

         (d)  Maintain in full force and effect all  insurance  policies  now in
effect or renewals thereof and, except as required by prudent business practices
that do not  jeopardize  insurance  coverage,  give all  notices and present all
claims under all insurance  policies in due and timely fashion,  and Pacific and
the  Pacific  Subsidiaries  shall  have the  authority  to  purchase  a rider to
Pacific's  existing  policy of  directors'  and  officers'  liability  insurance
providing for the continuation of coverage  provided by such policy for a period
of 36 months  following  the  Effective  Date with respect to actions  occurring
prior to the Effective  Date to the extent that such coverage is obtainable  for
an aggregate premium not to exceed $125,000;

         (e) File all reports required to be filed with governmental authorities
and observe and  conform,  in all material  respects,  to all  applicable  laws,
rules,  regulations,  ordinances,  codes, orders,  licenses and permits,  except
those being contested in good faith by appropriate proceedings;

         (f) Timely file all tax returns required to be filed by it and promptly
pay all taxes, assessments,  governmental charges, duties,  penalties,  interest
and fines that become due and  payable,  except  those being  contested  in good
faith by appropriate proceedings;

         (g) Withhold from each payment made to each of its employees the amount
of all taxes  (including,  but not limited to, federal income taxes,  FICA taxes
and state and local income and wage taxes) required to be withheld therefrom and
pay the same to the proper tax receiving officers; and

         (h) Account for all transactions  and prepare all financial  statements
of Pacific in accordance with GAAP (unless otherwise  instructed by RAP in which
instance account for such transaction in accordance with RAP).

                                      -46-
<PAGE>

         SECTION 5.06 Prohibited Acts of Pacific. Prior to the Closing,  Pacific
and,  as  applicable,  the  Pacific  Subsidiaries  shall not,  without the prior
written consent of SBB:

         (a) Take any action that would reasonably be anticipated to result in a
Material Adverse Change with respect to Pacific;

         (b) Take or fail to take any  action  that  would  cause or permit  the
representations  and  warranties  made in Article III hereof to be inaccurate at
the time of the Closing or preclude Pacific from making such representations and
warranties at the time of the Closing;

         (c) Change its Articles of  Incorporation  or Bylaws or its  authorized
capital  stock,  or change the  Articles of  Association,  Bylaws or  authorized
capital stock of any Pacific Subsidiary;

         (d) Except as  explicitly  permitted  hereunder or in  accordance  with
applicable law, engage in any  transaction  with any affiliated  person or allow
such persons to acquire any assets from Pacific or any Pacific Subsidiary except
in the form of wages,  salaries,  fees for legal services and  reimbursement  of
expenses and by loans secured by liquid collateral having a fair market value at
least equal to the principal balance due on such loan to its officers, directors
and employees in the ordinary course of business;

         (e)  Discharge or satisfy any lien,  charge or  encumbrance  or pay any
obligation or liability,  whether absolute or contingent,  due or to become due,
except in the  ordinary  course of  business  consistent  with  prudent  banking
practices  and  except  for   liabilities   incurred  in  connection   with  the
transactions contemplated hereby;

         (f) Except as provided in Section 5.21,  declare or make any payment of
dividends or other  distributions  to its  shareholder,  or purchase,  retire or
redeem, or obligate itself to purchase,  retire or redeem,  any of its shares of
capital stock or other securities;

         (g) Issue, reserve for issuance,  grant, sell or authorize the issuance
of any  shares  of its  capital  stock or  other  securities  or  subscriptions,
options,  warrants,  calls,  rights or  commitments  of any kind relating to the
issuance  thereto  (except for the issuance of Pacific  Common Stock pursuant to
the valid exercise of Pacific Stock Options,  as defined in Section 6.17 hereof,
which are outstanding on the date of this Agreement);

         (h)  Grant any new stock  options  or  accelerate  the  vesting  of any
existing stock options, except as provided in this Agreement;

         (i)  Accelerate  the  vesting of pension or other  benefits in favor of
employees of Pacific or any Pacific Subsidiary;

         (j) Acquire any capital stock or other equity securities or acquire any
equity or  ownership  interest in any bank,  corporation,  partnership  or other
entity  (except (i) through  settlement  of  indebtedness,  foreclosure,  or the
exercise of creditors' remedies or (ii) in a fiduciary  capacity,  the ownership
of which does not expose it to any liability  from the  business,  operations or
liabilities of such person);

                                      -47-
<PAGE>

         (k)  Mortgage,  pledge  or  subject  to lien or  charge,  or grant  any
security  interest or any other  encumbrance or restriction any of its property,
business or assets,  tangible or  intangible  except in the  ordinary  course of
business and consistent with prudent banking practices;

         (l) Sell, transfer,  lease to others or otherwise dispose of any of its
assets or cancel or compromise any debt or claim,  or waive or release any right
or claim of  material  value,  except in the  ordinary  course of  business  and
consistent with past practices and safe and sound banking principles;

         (m) Make any change in the rate of compensation,  commission,  bonus or
other direct or indirect remuneration payable, or pay or agree or orally promise
to pay,  conditionally or otherwise,  any bonus, extra compensation,  pension or
severance  or vacation  pay,  to or for the benefit of any of its  shareholders,
directors,  officers,  employees  or  agents,  or enter into any  employment  or
consulting  contract  (other than as  contemplated  by this  Agreement) or other
agreement with any director, officer or employee or adopt, amend in any material
respect or terminate any pension, employee welfare,  retirement, stock purchase,
stock  option,  stock  appreciation  rights,   termination,   severance,  income
protection,  golden parachute,  savings or profit-sharing  plan (including trust
agreements  and  insurance   contracts   embodying  such  plans),  any  deferred
compensation,  or collective bargaining agreement,  any group insurance contract
or any other incentive, welfare or employee benefit plan or agreement maintained
by it for the benefit of its directors,  employees or former  employees,  except
(i) employee severance benefits contemplated by Section 12.16 of this Agreement,
and (ii) in the ordinary  course of business and consistent  with past practices
and safe and sound banking principles;

         (n)  Except  for  improvements  or  betterments   relating  to  Pacific
Properties, make any capital expenditures or capital additions or betterments in
excess of an aggregate of $1,000,000;

         (o) Hire or employ any person as a replacement for an existing position
with an annual  salary  equal to or greater  than  $60,000 or hire or employ any
person for any newly created position;

         (p) Sell or  knowingly  dispose of, or otherwise  divest  itself of the
ownership,  possession, custody or control, of any corporate books or records of
any nature  that,  in  accordance  with sound  business  practice,  normally are
retained  for a period of time after their use,  creation or receipt,  except at
the end of the normal retention period;

         (q) Make any, or acquiesce with any, change in any accounting  methods,
principles  or  material  practices,  except as  required  by changes in GAAP as
concurred in by Pacific's independent auditors;

         (r) Sell any  investment  securities in a transaction  involving a book
gain or loss of more than  $100,000  on such  sale or  purchase  any  investment
securities other than purchases of U.S.  Treasury  securities with a maturity of
two years or less (and  only  after  giving  notice to SBB of any  purchases  in
excess of $5,000,000);

         (s) Make,  renew,  extend the maturity of, or alter any of the material
terms of any loan,  other than classified  loans (which are addressed in Section
5.06(t),  to any single  borrower and his or her related  interests in excess of
the principal amount of $2,000,000;  provided,



                                      -48-
<PAGE>

however,  that SBB shall be deemed to have given its consent  under this Section
5.06(s) unless SBB objects to such  transaction no later than 48 hours (weekends
and  bank  holidays  shall  not  count)  after  actual  receipt  by  SBB  of all
information relating to the making, renewal or alteration of such loan;

         (t) Make,  renew,  extend the maturity of, or alter any of the material
terms of any  classified  loan to any  single  borrower  and his or her  related
interests in excess of the principal amount of $250,000; provided, however, that
SBB shall be deemed to have given its consent under this Section  5.06(t) unless
SBB  objects  to such  transaction  no later  than 48 hours  (weekends  and bank
holidays  shall  not  count)  after  actual  receipt  by SBB of all  information
relating to the making, renewal or alteration of such loan; or

         (u) Create any new branches or enter into any acquisitions or leases of
real property, including both new leases and lease extensions.

         SECTION  5.07  Access;  Pre-Closing   Investigation.   Subject  to  the
provisions  of  Article  XI,  Pacific  shall  afford  the  officers,  directors,
employees,   attorneys,   accountants,   investment   bankers   and   authorized
representatives  of SBB full  access to the  properties,  books,  contracts  and
records  of  Pacific  and the  Pacific  Subsidiaries,  permit  SBB to make  such
inspections  (including  without  limitation  with  regard  to  such  properties
physical  inspection  of the surface and  subsurface  thereof and any  structure
thereon  pursuant to Section 5.15) as they may require and furnish to SBB during
such period all such information concerning Pacific and the Pacific Subsidiaries
and its affairs as SBB may reasonably  request,  in order that SBB may have full
opportunity to make such reasonable  investigation as it shall desire to make of
the  affairs  of  Pacific  and  the  Pacific  Subsidiaries,  including,  without
limitation,  access  sufficient  to verify the absence of any  Material  Adverse
Change  with  respect  to  Pacific,  the  accuracy  of the  representations  and
warranties  made by Pacific in this  Agreement,  the value of the assets and the
liabilities of Pacific and the satisfaction of the conditions precedent to SBB's
obligations described in Article VIII of this Agreement.  SBB shall use its best
efforts not to disrupt  the normal  business  operations  of the Pacific and the
Pacific  Subsidiaries.  Pacific  agrees at any time,  and from time to time,  to
furnish to SBB as soon as practicable,  any additional  information that SBB may
reasonably request.

         SECTION 5.08 Director and Committee Meetings. Pacific shall give notice
to two (2)  designees of SBB and shall invite such persons to attend all regular
and special  meetings of the Board of  Directors  of Pacific and all regular and
special  meetings  of any  board or  senior  management  committee  of  Pacific,
provided, however, that Pacific reserves the right to exclude such invitees from
any portion of any such meeting at any time.  Such invitees  shall be designated
by  SBB  subject  to  the  consent  of  Pacific,  which  consent  shall  not  be
unreasonably withheld. In addition, Pacific shall provide SBB with copies of the
minutes of all regular and special meetings of the Board of Directors of Pacific
and  minutes  of all  regular  and  special  meetings  of any  board  or  senior
management  committee  of Pacific  (except  portions of such  minutes  which are
devoted to the  discussion  of this  Agreement or the Merger or which,  upon the
advise of counsel,  are otherwise  privileged).  Copies of such minutes shall be
provided  to SBB  within  five  (5)  business  days  following  the date of such
meeting.

                                      -49-
<PAGE>

         SECTION 5.09 Additional  Financial  Statements.  Pacific shall promptly
furnish  SBB with true and  complete  copies of (i) Call  Reports of each of the
Subsidiary Banks for the quarter ended June 30, 1998 and each quarter thereafter
until the Effective Date, (ii) monthly directors' reports of Pacific,  and (iii)
unaudited month-end financial statements of Pacific.

         SECTION 5.10 Untrue Representations.  Pacific shall promptly notify SBB
in writing if Pacific  becomes aware of any fact or condition that makes untrue,
or shows to have been untrue, in any material respect, any schedule or any other
information  furnished  to SBB or any  representation  or  warranty  made  in or
pursuant to this  Agreement or that results in Pacific's  failure to comply with
any covenant, condition or agreement contained in this Agreement.

         SECTION 5.11  Litigation and Claims.  Pacific shall promptly notify SBB
in  writing  of any  litigation,  or of any  claim,  controversy  or  contingent
liability that is expected to become the subject of litigation,  against Pacific
or any Pacific  Subsidiary  or affecting any of their  respective  properties if
such  litigation or potential  litigation  would, in the event of an unfavorable
outcome,  result in a Material  Adverse  Change  with  respect to  Pacific,  and
Pacific shall  promptly  notify SBB of any legal  action,  suit or proceeding or
judicial,  administrative  or  governmental  investigation,  pending  or, to the
knowledge of Pacific,  threatened against Pacific or any Pacific Subsidiary that
questions  or is  likely to  question  the  validity  of this  Agreement  or the
agreements  contemplated  hereby,  including,  but not  limited  to,  the Merger
Agreement  or any  actions  taken or to be taken by Pacific  pursuant  hereto or
thereto or seeks to enjoin or otherwise  restrain the transactions  contemplated
hereby or thereby.

         SECTION 5.12 Adverse  Changes.  Pacific  shall  promptly  notify SBB in
writing if any change or development shall have occurred or, to the knowledge of
Pacific,  been  threatened  (or any  development  shall  have  occurred  or been
threatened involving a prospective change) in the business, financial condition,
operations or prospects of Pacific or the Pacific  Subsidiaries  that has or may
reasonably be expected to have or lead to a Material Adverse Change with respect
to Pacific or that would adversely affect, prevent or delay the obtaining of any
regulatory  approval for the  consummation of the  transactions  contemplated by
this  Agreement.  Notwithstanding  the  disclosure  to SBB of any  such  change,
Pacific shall not be relieved of any liability to SBB pursuant to this Agreement
for, nor shall the providing of such  information  by Pacific to SBB be deemed a
waiver by SBB of,  the  breach of any  representation  or  warranty  of  Pacific
contained in this Agreement.

         SECTION 5.13 No  Negotiation  with Others.  Until the Effective Date or
the  earlier  termination  of this  Agreement,  Pacific  shall not,  directly or
indirectly,  nor  shall it permit  any of its  officers,  directors,  employees,
representatives or agents to, directly or indirectly: (i) encourage,  solicit or
initiate discussions or negotiations with, or (ii) except upon advice of counsel
to the extent required to fulfill the fiduciary  duties owed to the shareholders
of Pacific, entertain, discuss or negotiate with, or provide any information to,
or cooperate with, any corporation, partnership, person or other entity or group
(other than SBB or its Affiliates or associates or officers, partners, employees
or other  authorized  representatives  of SBB or such  Affiliates or associates)
concerning any merger, tender offer or other takeover offer, sale of substantial
assets,  sale of  shares  of  capital  stock or  similar  transaction  involving
Pacific.  As soon as practicable  following  receipt of any unsolicited  written
offer,  Pacific will communicate to SBB the terms of any proposal or request for
information.



                                      -50-
<PAGE>

         SECTION 5.14 Consents and Approvals. Pacific shall use its best efforts
to obtain at the earliest practicable time all consents and approvals from third
parties necessary to consummate the transactions contemplated by this Agreement.

         SECTION 5.15 Environmental Investigation; Right to Terminate Agreement.

         (a) SBB and its consultants,  agents and representatives shall have the
right, to the same extent that Pacific has such right, but not the obligation or
responsibility,  to inspect any Pacific Property, including, without limitation,
conducting  asbestos  surveys  and  sampling,   environmental   assessments  and
investigation,  and other environmental  surveys and analyses including soil and
ground  sampling  ("Environmental  Inspections")  at any time on or prior to the
date which is forty-five (45) calendar days from the date of this Agreement. SBB
shall notify Pacific prior to any physical  inspections of the Pacific Property,
and Pacific may place reasonable  restrictions on the time of such  inspections.
If,  as a result of any such  Environmental  Inspection,  further  investigation
("secondary  investigation") including,  without limitation, test borings, soil,
water and  other  sampling  is deemed  desirable  by SBB,  SBB shall (i)  notify
Pacific of any Pacific Property for which it intends to conduct such a secondary
investigation  and the  reasons  for  such  secondary  investigation,  and  (ii)
commence such  secondary  investigation,  on or prior to the date which is sixty
(60) calendar days from the date of this  Agreement.  SBB shall give  reasonable
notice to  Pacific  of such  secondary  investigations,  and  Pacific  may place
reasonable time and place restrictions on such secondary investigations.

         (b) SBB shall have the right to  terminate  this  Agreement  if (i) the
factual substance of any warranty or representation set forth in Section 3.19 is
not true  and  accurate;  (ii) the  results  of such  Environmental  Inspection,
secondary  investigation  or other  environmental  survey are disapproved by SBB
because  the  environmental   inspection,   secondary   investigation  or  other
environmental   survey   identifies   violations  or  potential   violations  of
Environmental  Laws;  (iii)  Pacific  has  refused  to allow SBB to  conduct  an
Environmental  Inspection  or  secondary  investigation  in a  manner  that  SBB
reasonably considers  necessary;  (iv) the Environmental  Inspection,  secondary
investigation  or other  environmental  survey  identifies  any past or  present
event,  condition  or  circumstance  that  would or  potentially  would  require
remedial or cleanup  action by Pacific that would  result in a Material  Adverse
Change;  (v) the  Environmental  Inspection,  secondary  investigation  or other
environmental  survey identifies the presence of any underground or above ground
storage  tank in, on or under any  Pacific  Property  that is not shown to be in
compliance with all Environmental Laws applicable to the tank either now or at a
future  time  certain,  or that has had a release  of  petroleum  or some  other
Hazardous  Material  that has not been  cleaned  up to the  satisfaction  of the
relevant governmental  authority or any other party with a legal right to compel
cleanup; or (vi) the Environmental Inspection,  secondary investigation or other
environmental survey identifies the presence of any asbestos-containing material
in, on or under any Pacific  Property,  the  removal of which would  result in a
Material  Adverse Change.  On or prior to the date which is ninety (90) calendar
days from the date of this Agreement,  SBB shall advise Pacific in writing as to
whether SBB intends to terminate this Agreement in accordance  with Section 9.02
because  SBB  disapproves  of  the  results  of  the  Environmental  Inspection,
secondary  investigation or other environmental  survey.  Pacific shall have the
opportunity  to correct  any  objected  to  violations  or  conditions  to SBB's
reasonable satisfaction prior to the date which is one hundred and fifteen (115)
calendar days from the date of this  Agreement.  In the event that Pacific fails
to demonstrate  its  satisfactory  correction of the 



                                      -51-
<PAGE>

violations  or  conditions  to SBB, SBB may terminate the Agreement on or before
the date which is one hundred and  twenty-five  (125) days from the date of this
Agreement.

         (c) Pacific agrees to make available to SBB and its consultants, agents
and  representatives  all documents and other material relating to environmental
conditions of any Pacific Property including, without limitation, the results of
other  environmental  inspections  and  surveys.  Pacific  also  agrees that all
engineers  and  consultants  who prepared or furnished  such reports may discuss
such reports and information  with SBB and shall be entitled to certify the same
in favor of SBB and its  consultants,  agents and  representatives  and make all
other data available to SBB and its consultants, agents and representatives.

         (d) For  purposes  of this  Section,  the term  "Pacific  Property"  or
"Pacific Properties" shall have the same meaning given in Section 3.19(e).

         SECTION 5.16 Restrictions on Resales. At least forty (40) days prior to
the Closing Date,  Pacific shall deliver to SBB a list  identifying  each person
who may  reasonably be deemed an  "affiliate"  of Pacific  within the meaning of
such term as used in Rule 145 under the Securities Act. Pacific shall obtain and
deliver to SBB, not less than  thirty-one  (31) days prior to the Closing  Date,
the signed  agreement,  in the form of  Exhibit  "F"  hereto  (the  "Shareholder
Letter"),  of each  "affiliate" of Pacific,  and of any person who may become an
"affiliate"  of  Pacific  after  the  date  of  this  Agreement,  regarding  (i)
compliance  with the provisions of such Rule 145, and (ii)  compliance  with the
requirements  of  Accounting  Principles  Board  Opinion  No. 16  regarding  the
disposition  of shares of Pacific Common Stock or SBB Common Stock (or reduction
of risk with respect thereto) until such time as the financial  results covering
at  least  thirty  (30)  days  of  post-Merger  combined  operations  have  been
published.  Pacific  shall  notify  all  "affiliates"  as far in  advance  as is
reasonably  practicable of the date on which the thirty (30) day period prior to
the Closing Date is likely to begin.

         SECTION  5.17  Shareholder  Lists.  After  the date of this  Agreement,
Pacific shall from time to time make  available to SBB, upon request,  a list of
its  shareholders  and their  addresses,  a list  showing all  transfers  of the
Pacific Common Stock and such other  information  as SBB may reasonably  request
regarding both the ownership and prior transfers of the Pacific Common Stock.

         SECTION  5.18  Employee  Pension  Plans.  Pacific  agrees the  employee
pension  plans of Pacific,  including  the Pacific  Capital  401(k) Plan and the
Pacific  Employee  Stock  Ownership  Plan  (collectively,  the "Pacific  Pension
Plans") may be frozen,  modified or merged into similar  employee  pension plans
maintained by SBB or SBB&T,  including  the Santa Barbara Bank & Trust  Employee
Stock Ownership Plan and the Santa Barbara Bank & Trust 401(k) Plan, on or after
the Effective  Date, as  determined  by the  Surviving  Corporation  in its sole
discretion,  subject to  compliance  with  applicable  law,  so long as any such
action  preserves the rights of the  participants  in such Pacific Pension Plans
(including, without limitation, vesting rights).

         SECTION  5.19  Employee  Welfare  Benefit  Plans.  Pacific  agrees that
Pacific's  employee  welfare benefit plans, as defined in Section 3(1) of ERISA,
may be  terminated,  modified or merged into SBB's  welfare  benefit plans on or
after the Effective Date, as



                                      -52-
<PAGE>

determined  by the  Surviving  Corporation  in its sole  discretion,  subject to
compliance with  applicable law so long as any such action  preserves the rights
of participants in such plans.

         SECTION 5.20  Director  Voting.  Pacific  shall use its best efforts to
have each of its directors  agree to vote,  or cause to be voted,  all shares of
Pacific  Common Stock  beneficially  owned by them at the Pacific  Shareholders'
Meeting in favor of the Merger.  Subject to such  directors'  fiduciary  duties,
each such director shall execute such  documents as are reasonably  necessary to
evidence  their  determination  to vote their shares of Pacific  Common Stock in
favor of the Merger at the Pacific Shareholders' Meeting.

         SECTION 5.21 Dividends. Pacific shall not declare, set aside or pay any
dividend in respect of the Pacific  Common Stock or make any other  distribution
to shareholders (including, without limitation, any stock dividend, dividends in
kind or other distribution), whether in cash, stock or other property, after the
date of this  Agreement,  except  that  Pacific  may declare and pay its regular
quarterly  dividend on the Pacific Common Stock not to exceed $0.25 per share at
approximately  the same  time  during  each  quarter  which it has  historically
declared and paid such dividend;  provided,  however, that Pacific and SBB shall
cooperate  with each other to  coordinate  the record and payment dates of their
respective  dividends  for the quarter in which the  Effective  Date occurs such
that the holders of Pacific Common Stock shall receive a quarterly dividend from
either Pacific or SBB, but not from both with respect to such quarter.

         SECTION 5.22 Non-Compete Agreements. Prior to the Closing Date, Pacific
shall use its best  efforts to cause each of the persons  identified  on Exhibit
"G" to enter into an agreement not to compete with the Surviving  Corporation to
be dated as of the Closing Date and to become  effective on the  Effective  Date
(each a  "Non-Compete  Agreement").  The form of the  Non-Compete  Agreement  is
attached as Exhibit "G" hereto.

         SECTION 5.23 Pooling of Interests Accounting Treatment.  Pacific shall,
and shall use its best efforts to cause its  directors  and officers to, use all
commercially  reasonable  efforts  not  inconsistent  with  the  terms  of  this
Agreement to structure and consummate the Merger and all actions related thereto
in a manner that will qualify the Merger for "pooling of  interests"  accounting
treatment  as  determined  by  SBB's  independent  accounting  firm  and  by any
securities  regulatory  body  which  shall  review the  Registration  Statement,
including without limitation, the S.E.C.

         SECTION 5.24  Disclosure  Schedules.  Pacific agrees at or prior to the
Closing to provide SBB with  supplemental  Schedules  to be delivered by Pacific
pursuant to this Agreement  reflecting any material  changes thereto between the
date of this Agreement and the Closing Date.

                                   ARTICLE VI.

                                COVENANTS OF SBB

         SBB hereby makes the covenants set forth in this Article VI to Pacific.

         SECTION 6.01 Best Efforts. SBB will use its best efforts to perform and
fulfill all conditions and  obligations on its part to be performed of fulfilled
under  this  Agreement  and  to 


                                      -53-
<PAGE>

cause the  consummation of the  transactions  contemplated  hereby in accordance
with the terms and conditions of this Agreement.

         SECTION 6.02 Merger  Agreement.  SBB will, as soon as practicable after
the execution of this Agreement,  enter into the Merger  Agreement,  the form of
which is attached  hereto as Exhibit  "A",  and  perform all of its  obligations
thereunder.

         SECTION 6.03 Regulatory Approvals and Registration Statement.

         (a) SBB, with the cooperation of Pacific,  shall promptly file or cause
to be filed applications for all regulatory approvals required to be obtained by
SBB in connection with this Agreement and the transactions  contemplated hereby,
including but not limited to the necessary  applications  for the prior approval
of the  Merger by the  Federal  Reserve  under the BHCA.  SBB shall use its best
efforts to obtain all such  regulatory  approvals and any other  approvals  from
third parties at the earliest practicable time.

         (b) SBB shall  reserve and make  available  for issuance in  connection
with the  Merger and in  accordance  with the terms of this  Agreement,  the SBB
Common Stock for the Merger  Consideration  and shall,  with the  cooperation of
Pacific,  file with the S.E.C. the Registration  Statement,  which  Registration
Statement will contain the Joint Proxy  Statement/Prospectus,  and SBB shall use
its best efforts to cause the Registration Statement to become effective. At the
time the Registration  Statement becomes effective,  the Registration  Statement
shall comply in all material  respects with the provisions of the Securities Act
and the published  rules and regulations  thereunder,  and shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated  therein or  necessary  to make the  statements  therein  not false or
misleading,  and at the time of mailing  thereof to the  shareholders of SBB and
Pacific,  at the time of the SBB  Shareholders'  Meeting  (as defined in Section
6.04) and the Pacific Shareholders' Meeting and on the Effective Date, the Joint
Proxy  Statement/Prospectus  included as part of the Registration  Statement, as
amended or  supplemented  by any amendment or supplement,  shall not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not false or misleading.

         (c) SBB  shall  timely  file  all  documents  required  to  obtain  all
necessary  Blue Sky permits  and  approvals,  if any,  required to carry out the
transactions  contemplated  by this Agreement,  shall pay all expenses  incident
thereto and shall use its best efforts to obtain such permits and approvals on a
timely basis.

         (d)  SBB  shall  promptly  and  properly   prepare  and  file  (i)  any
application  required  to list on Nasdaq the  shares of SBB  Common  Stock to be
issued pursuant to the Merger,  and (ii) any filings required under the Exchange
Act, relating to the Merger and the transactions contemplated herein.

         (e) SBB shall keep Pacific reasonably informed as to the status of such
applications and filings, and SBB shall promptly furnish Pacific and its counsel
with  copies of all such  regulatory  filings and all  correspondence  for which
confidential treatment has not been requested.

                                      -54-
<PAGE>

         (f) SBB shall not take any action at any time after the Effective  Date
which  would  cause the Merger not to  qualify  as a  reorganization  within the
meaning of Section 368 of the Code.

         SECTION 6.04 Submission of Merger and Related Matters to  Shareholders.
SBB shall:

         (a) Duly call,  give notice of,  convene and hold,  on a date  mutually
selected  by  SBB  and  Pacific,   a  meeting  of  its  shareholders  (the  "SBB
Shareholders'  Meeting") as soon as practicable for the purpose of (i) approving
and  adopting  the  Merger  and  the  Merger   Agreement  and  the  transactions
contemplated  hereby and thereby as required by the GCL, and (ii)  approving and
adopting an amendment to the Bylaws of SBB to increase the number of  authorized
directors  who may  serve on the  Board  of  Directors  of SBB to not more  than
fifteen (15) persons (the "Bylaw Amendment");

         (b) Not impose a requirement  that the holders of more than the minimum
required  percentage (as set forth in SBB's current  Articles of  Incorporation,
current  Bylaws or  pursuant  to  provisions  of the GCL  requiring  the  lowest
percentage  vote) of the SBB Common Stock entitled to vote on the Merger and the
Merger  Agreement  and the Bylaw  Amendment  approve  the  Merger and the Merger
Agreement and the Bylaw Amendment;

         (c) Subject to the  fiduciary  duties of the SBB Board of  Directors to
the shareholders of SBB, (i) include in the Joint Proxy Statement/Prospectus the
recommendation  of the SBB Board of Directors that the  shareholders of SBB vote
in favor of the approval and adoption of the Merger and the Merger Agreement and
the transactions  contemplated hereby and thereby and the Bylaw Amendment,  (ii)
use its best efforts to obtain such  shareholder  approval of the Merger and the
Merger Agreement and the Bylaw  Amendment,  and (iii) perform such other acts as
may reasonably be requested by Pacific to ensure that such shareholder  approval
of the Merger and the Merger Agreement and the Bylaw Amendment is obtained; and

         (d)  Cause  the Joint  Proxy  Statement/Prospectus  to be mailed to the
shareholders of SBB as soon as practicable.

         SECTION 6.05  Information for  Applications  and  Statements.  SBB will
promptly,  but in no event later than ten (10)  business days after receipt of a
request by  Pacific,  furnish to Pacific  all  information,  data and  documents
concerning SBB, including,  but not limited to, financial  statements,  required
for inclusion in any application or statement to be made by Pacific to, or filed
by Pacific  with,  any  governmental  body in connection  with the  transactions
contemplated  by this Agreement,  or in connection  with any other  transactions
during the pendency of this Agreement,  and SBB represents and warrants that all
information so furnished for such statements and applications  shall be true and
correct in all material  respects and shall not omit any material  fact required
to be stated therein or necessary to make the  statements  made, in light of the
circumstances  under which they were made, not  misleading.  SBB shall otherwise
fully  cooperate  with  Pacific  in the  filing  of any  applications  or  other
documents  necessary  to  consummate  the  transactions   contemplated  by  this
Agreement.

                                      -55-
<PAGE>

         SECTION 6.06  Required  Acts of SBB.  Prior to the Closing,  SBB shall,
and,  as  applicable,  shall cause the SBB  Subsidiaries  to,  unless  otherwise
permitted in writing by Pacific:

         (a) Operate only in the ordinary course of business and consistent with
prudent banking practices;

         (b)  Except  as  required  by  prudent  business  practices,   use  all
reasonable  efforts to preserve its business  organization  intact and to retain
its present  customers,  depositors and employees,  and to maintain all offices,
machinery,  equipment,  materials,  supplies,  inventories,  vehicles  and other
properties owned, leased or used by it (whether under its control or the control
of others),  in good  operating  condition  and repair,  ordinary  wear and tear
excepted;

         (c)  Perform  all  of  its  obligations  under  contracts,  leases  and
documents relating to or affecting its assets,  properties and business,  except
such obligations as SBB may in good faith reasonably dispute;

         (d)  Maintain in full force and effect all  insurance  policies  now in
effect or renewals thereof and, except as required by prudent business practices
that do not  jeopardize  insurance  coverage,  give all  notices and present all
claims under all insurance policies in due and timely fashion;

         (e) File all reports required to be filed with governmental authorities
and observe and  conform,  in all material  respects,  to all  applicable  laws,
rules,  regulations,  ordinances,  codes, orders,  licenses and permits,  except
those being contested in good faith by appropriate proceedings;

         (f) Timely file all tax returns required to be filed by it and promptly
pay all taxes, assessments,  governmental charges, duties,  penalties,  interest
and fines that become due and  payable,  except  those being  contested  in good
faith by appropriate proceedings;

         (g) Withhold from each payment made to each of its employees the amount
of all taxes  (including,  but not limited to, federal income taxes,  FICA taxes
and state and local income and wage taxes) required to be withheld therefrom and
pay the same to the proper tax receiving officers; and

         (h) Account for all transactions  and prepare all financial  statements
of SBB in  accordance  with GAAP (unless  otherwise  instructed  by RAP in which
instance account for such transaction in accordance with RAP).

         SECTION 6.07 Prohibited Acts of SBB. Prior to the Closing,  SBB and, as
applicable, the SBB Subsidiaries shall not, without the prior written consent of
Pacific:

         (a) Take any action that would reasonably be anticipated to result in a
Material Adverse Change with respect to SBB;

         (b) Take or fail to take any  action  that  would  cause or permit  the
representations and warranties made in Article IV hereof to be inaccurate at the
time of the  Closing  or  preclude  SBB from  making  such  representations  and
warranties at the time of the Closing;

                                      -56-
<PAGE>

         (c) Except as contemplated  by this  Agreement,  change its Articles of
Incorporation or Bylaws or its authorized  capital stock, or change the Articles
of Incorporation, Bylaws or authorized capital stock of any SBB Subsidiary;

         (d) Except as  explicitly  permitted  hereunder or in  accordance  with
applicable law, engage in any  transaction  with any affiliated  person or allow
such persons to acquire any assets from SBB or any SBB Subsidiary  except in the
form of wages,  salaries,  fees for legal services and reimbursement of expenses
and by loans  secured by liquid  collateral  having a fair market value at least
equal to the principal  balance due on such loan to its officers,  directors and
employees in the ordinary course of business;

         (e)  Discharge or satisfy any lien,  charge or  encumbrance  or pay any
obligation or liability,  whether absolute or contingent,  due or to become due,
except in the  ordinary  course of  business  consistent  with  prudent  banking
practices  and  except  for   liabilities   incurred  in  connection   with  the
transactions contemplated hereby;

         (f) Except as provided in Section 6.19,  declare or make any payment of
dividends or other  distributions  to its  shareholder,  or purchase,  retire or
redeem, or obligate itself to purchase,  retire or redeem,  any of its shares of
capital stock or other securities;

         (g) Except as  required  pursuant to the terms of this  Agreement,  and
except for the  issuance of SBB Common Stock  pursuant to the valid  exercise of
SBB Stock Options,  as defined in Section 4.03 hereof,  which are outstanding on
the  date of  this  Agreement,  issue,  reserve  for  issuance,  grant,  sell or
authorize the issuance of any shares of its capital stock or other securities or
subscriptions,  options,  warrants,  calls,  rights or  commitments  of any kind
relating to the issuance thereto;

         (h)  Grant any new stock  options  or  accelerate  the  vesting  of any
existing stock options, except as provided in this Agreement;

         (i)  Accelerate  the  vesting of pension or other  benefits in favor of
employees of SBB or any SBB Subsidiary;

         (j) Acquire any capital stock or other equity securities or acquire any
equity or  ownership  interest in any bank,  corporation,  partnership  or other
entity  (except (i) through  settlement  of  indebtedness,  foreclosure,  or the
exercise of creditors' remedies or (ii) in a fiduciary  capacity,  the ownership
of which does not expose it to any liability  from the  business,  operations or
liabilities of such person);

         (k)  Mortgage,  pledge  or  subject  to lien or  charge,  or grant  any
security  interest or any other  encumbrance or restriction any of its property,
business or assets,  tangible or  intangible  except in the  ordinary  course of
business and consistent with prudent banking practices;

         (l) Sell, transfer,  lease to others or otherwise dispose of any of its
assets or cancel or compromise any debt or claim,  or waive or release any right
or claim of  material  value,  except in the  ordinary  course of  business  and
consistent with past practices and safe and sound banking principles;

                                      -57-
<PAGE>

         (m) Make any change in the rate of compensation,  commission,  bonus or
other direct or indirect remuneration payable, or pay or agree or orally promise
to pay,  conditionally or otherwise,  any bonus, extra compensation,  pension or
severance  or vacation  pay,  to or for the benefit of any of its  shareholders,
directors,  officers,  employees  or  agents,  or enter into any  employment  or
consulting  contract  (other than as  contemplated  by this  Agreement) or other
agreement with any director, officer or employee or adopt, amend in any material
respect or terminate any pension, employee welfare,  retirement, stock purchase,
stock  option,  stock  appreciation  rights,   termination,   severance,  income
protection,  golden parachute,  savings or profit-sharing  plan (including trust
agreements  and  insurance   contracts   embodying  such  plans),  any  deferred
compensation,  or collective bargaining agreement,  any group insurance contract
or any other incentive, welfare or employee benefit plan or agreement maintained
by it for the benefit of its directors, employees or former employees, except in
the ordinary  course of business and consistent with past practices and safe and
sound banking principles;

         (n) Except for improvements or betterments  relating to SBB Properties,
make any capital  expenditures or capital  additions or betterments in excess of
an aggregate of $2,000,000;

         (o) Hire or employ any person as a replacement for an existing position
with an annual salary equal to or greater than $120,000;

         (p) Sell or  knowingly  dispose of, or otherwise  divest  itself of the
ownership,  possession, custody or control, of any corporate books or records of
any nature  that,  in  accordance  with sound  business  practice,  normally are
retained  for a period of time after their use,  creation or receipt,  except at
the end of the normal retention period;

         (q) Make any, or acquiesce with any, change in any accounting  methods,
principles  or  material  practices,  except as  required  by changes in GAAP as
concurred in by SBB's independent auditors;

         (r) Make,  renew,  extend the maturity of, or alter any of the material
terms of any loan,  other than classified  loans (which are addressed in Section
6.07(s),  to any single  borrower and his or her related  interests in excess of
the principal  amount of $4,000,000;  provided,  however,  that Pacific shall be
deemed to have given its  consent  under this  Section  6.07(r)  unless  Pacific
objects to such  transaction no later than 48 hours  (weekends and bank holidays
shall not count) after actual receipt by Pacific of all information  relating to
the making, renewal or alteration of such loan; or

         (s) Make,  renew,  extend the maturity of, or alter any of the material
terms of any  classified  loan to any  single  borrower  and his or her  related
interests in excess of the principal amount of $500,000; provided, however, that
Pacific  shall be deemed to have given its consent  under this  Section  6.07(s)
unless Pacific objects to such  transaction no later than 48 hours (weekends and
bank  holidays  shall  not  count)  after  actual  receipt  by  Pacific  of  all
information relating to the making, renewal or alteration of such loan.

         SECTION  6.08  Access;  Pre-Closing   Investigation.   Subject  to  the
provisions of Article XI, SBB shall afford the officers,  directors,  employees,
attorneys,  accountants,  investment  bankers and authorized  representatives of
Pacific full access to the properties,  books,

                                      -58-
<PAGE>

contracts and records of SBB and the SBB  Subsidiaries,  permit  Pacific to make
such  inspections  as they may require and furnish to Pacific during such period
all such information  concerning SBB and the SBB Subsidiaries and its affairs as
Pacific may reasonably  request, in order that Pacific may have full opportunity
to make such reasonable  investigation as it shall desire to make of the affairs
of  SBB  and  the  SBB  Subsidiaries,   including,  without  limitation,  access
sufficient to verify the absence of any Material  Adverse Change with respect to
SBB,  the accuracy of the  representations  and  warranties  made by SBB in this
Agreement,  the  value  of  the  assets  and  the  liabilities  of SBB  and  the
satisfaction of the conditions precedent to Pacific's  obligations  described in
Article VII of this Agreement. Pacific shall use its best efforts not to disrupt
the normal business  operations of the SBB and the SBB Subsidiaries.  SBB agrees
at any  time,  and  from  time  to  time,  to  furnish  to  Pacific  as  soon as
practicable, any additional information that Pacific may reasonably request.

         SECTION 6.09 Director and Committee  Meeting.  SBB shall give notice to
two (2) designees of Pacific and shall invite such persons to attend all regular
and  special  meetings  of the Board of  Directors  of SBB and all  regular  and
special meetings of any board or senior management  committee of SBB,  provided,
however,  that SBB reserves the right to exclude such  invitees from any portion
of any such meeting at any time.  Such  invitees  shall be designated by Pacific
subject to the consent of SBB, which consent shall not be unreasonably withheld.
In addition, SBB shall provide Pacific with copies of the minutes of all regular
and special meetings of the Board of Directors of SBB and minutes of all regular
and special  meetings of all regular and special meetings of any board or senior
management  committee of SBB (except  portions of such minutes which are devoted
to the discussion of this  Agreement or the Merger or which,  upon the advise of
counsel, are otherwise privileged).  Copies of such minutes shall be provided to
Pacific within five (5) business days following the date of such meeting.

         SECTION  6.10  Additional  Financial  Statements.  SBB  shall  promptly
furnish  Pacific with true and complete  copies of (i) Call Reports of SBB&T for
the quarter ended June 30, 1998 and each quarter  thereafter until the Effective
Date,  (ii) monthly  directors'  reports of SBB, and (iii)  unaudited  month-end
financial statements of SBB.

         SECTION 6.11 Untrue Representations.  SBB shall promptly notify Pacific
in writing if SBB becomes aware of any fact or condition  that makes untrue,  or
shows to have been untrue,  in any material  respect,  any schedule or any other
information  furnished to Pacific or any  representation  or warranty made in or
pursuant to this  Agreement or that results in SBB's  failure to comply with any
covenant, condition or agreement contained in this Agreement.

         SECTION 6.12  Litigation and Claims.  SBB shall promptly notify Pacific
in  writing  of any  litigation,  or of any  claim,  controversy  or  contingent
liability that is expected to become the subject of  litigation,  against SBB or
any SBB  Subsidiary  or affecting  any of their  respective  properties  if such
litigation  or  potential  litigation  would,  in the  event  of an  unfavorable
outcome,  result in a Material Adverse Change with respect to SBB, and SBB shall
promptly  notify  Pacific of any legal  action,  suit or proceeding or judicial,
administrative  or governmental  investigation,  pending or, to the knowledge of
SBB,  threatened  against  SBB or any SBB  Subsidiary  that  questions  or might
question the validity of this Agreement or the agreements  contemplated  hereby,
including,  but not limited to, the Merger Agreement, or any 



                                      -59-
<PAGE>

actions  taken or to be taken by SBB  pursuant  hereto  or  thereto  or seeks to
enjoin or otherwise restrain the transactions contemplated hereby or thereby.

         SECTION 6.13  Adverse  Change.  SBB shall  promptly  notify  Pacific in
writing if any change or development shall have occurred or, to the knowledge of
SBB, been threatened (or any development  shall have occurred or been threatened
involving a prospective change) in the business, financial condition, operations
or  prospects  of SBB or the SBB  Subsidiaries  that  has or may  reasonably  be
expected to have or lead to a Material  Adverse  Change  with  respect to SBB or
that would  adversely  affect,  prevent or delay the obtaining of any regulatory
approval  for  the  consummation  of  the  transactions   contemplated  by  this
Agreement.  Notwithstanding  the  disclosure to Pacific of any such change,  SBB
shall not be relieved of any  liability  to Pacific  pursuant to this  Agreement
for, nor shall the providing of such  information  by SBB to Pacific be deemed a
waiver by Pacific  of,  the  breach of any  representation  or  warranty  of SBB
contained in this Agreement.

         SECTION 6.14 No  Negotiation  with Others.  Until the Effective Date or
the  earlier  termination  of  this  Agreement,   SBB  shall  not,  directly  or
indirectly,  nor  shall it permit  any of its  officers,  directors,  employees,
representatives or agents to, directly or indirectly: (i) encourage,  solicit or
initiate discussions or negotiations with, or (ii) except upon advice of counsel
to the extent required to fulfill the fiduciary  duties owed to the shareholders
of SBB, entertain,  discuss or negotiate with, or provide any information to, or
cooperate with, any  corporation,  partnership,  person or other entity or group
(other than Pacific or its  Affiliates  or  associates  or  officers,  partners,
employees or other authorized  representatives  of Pacific or such Affiliates or
associates) concerning any merger, tender offer or other takeover offer, sale of
substantial  assets,  sale of shares of  capital  stock or  similar  transaction
involving SBB (unless any such  transaction  is expressly  conditioned  upon the
performance by SBB of all of SBB's obligations under this Agreement). As soon as
practicable  following  receipt  of any  unsolicited  written  offer,  SBB  will
communicate to Pacific the terms of any proposal or request for information.

         SECTION 6.15 Consents and Approvals.  SBB shall use its best efforts to
obtain all consents and approvals from third parties necessary to consummate the
transactions contemplated by this Agreement at the earliest practicable time.

         SECTION 6.16 Environmental Investigation; Right to Terminate Agreement.

         (a) Pacific and its consultants,  agents and representatives shall have
the right, to the same extent that SBB has such right, but not the obligation or
responsibility,  to inspect any SBB  Property,  including,  without  limitation,
conducting  asbestos  surveys  and  sampling,   environmental   assessments  and
investigation,  and other environmental  surveys and analyses including soil and
ground  sampling  ("Environmental  Inspections")  at any time on or prior to the
date which is forty-five  (45)  calendar  days from the date of this  Agreement.
Pacific shall notify SBB prior to any physical  inspections of the SBB Property,
and SBB may place reasonable  restrictions on the time of such inspections.  If,
as  a  result  of  any  such  Environmental  Inspection,  further  investigation
("secondary  investigation") including,  without limitation, test borings, soil,
water and other  sampling  is deemed  desirable  by Pacific,  Pacific  shall (i)
notify SBB of any SBB  Property for which it intends to conduct such a secondary
investigation  and the  reasons  for  such  secondary  investigation,  and  (ii)
commence such  secondary  investigation,  on or prior to the date 



                                      -60-
<PAGE>

which is sixty (60) calendar days from the date of this Agreement. Pacific shall
give  reasonable  notice to SBB of such  secondary  investigations,  and SBB may
place reasonable time and place restrictions on such secondary investigations.

         (b) Pacific shall have the right to terminate this Agreement if (i) the
factual substance of any warranty or representation set forth in Section 4.19 is
not true  and  accurate;  (ii) the  results  of such  Environmental  Inspection,
secondary investigation or other environmental survey are disapproved by Pacific
because  the  environmental   inspection,   secondary   investigation  or  other
environmental   survey   identifies   violations  or  potential   violations  of
Environmental  Laws;  (iii) SBB has  refused  to allow  Pacific  to  conduct  an
Environmental  Inspection  or secondary  investigation  in a manner that Pacific
reasonably considers  necessary;  (iv) the Environmental  Inspection,  secondary
investigation  or other  environmental  survey  identifies  any past or  present
event,  condition  or  circumstance  that  would or  potentially  would  require
remedial  or  cleanup  action by SBB that  would  result in a  Material  Adverse
Change;  (v) the  Environmental  Inspection,  secondary  investigation  or other
environmental  survey identifies the presence of any underground or above ground
storage  tank  in,  on or  under  any SBB  Property  that is not  shown to be in
compliance with all Environmental Laws applicable to the tank either now or at a
future  time  certain,  or that has had a release  of  petroleum  or some  other
Hazardous  Material  that has not been  cleaned  up to the  satisfaction  of the
relevant governmental  authority or any other party with a legal right to compel
cleanup; or (vi) the Environmental Inspection,  secondary investigation or other
environmental survey identifies the presence of any asbestos-containing material
in,  on or under  any SBB  Property,  the  removal  of which  would  result in a
Material  Adverse Change.  On or prior to the date which is ninety (90) calendar
days from the date of this Agreement,  Pacific shall advise SBB in writing as to
whether  Pacific  intends to terminate this Agreement in accordance with Section
9.02 because Pacific disapproves of the results of the Environmental Inspection,
secondary  investigation  or other  environmental  survey.  SBB  shall  have the
opportunity  to correct any objected to  violations  or  conditions to Pacific's
reasonable satisfaction prior to the date which is one hundred and fifteen (115)
calendar  days from the date of this  Agreement.  In the event that SBB fails to
demonstrate  its  satisfactory  correction  of the  violations  or conditions to
Pacific,  Pacific may terminate the Agreement on or before the date which is one
hundred and twenty-five (125) days from the date of this Agreement.

         (c) SBB agrees to make available to Pacific and its consultants, agents
and  representatives  all documents and other material relating to environmental
conditions of any SBB Property  including,  without  limitation,  the results of
other environmental  inspections and surveys. SBB also agrees that all engineers
and  consultants who prepared or furnished such reports may discuss such reports
and information  with Pacific and shall be entitled to certify the same in favor
of Pacific and its consultants,  agents and  representatives  and make all other
data available to Pacific and its consultants, agents and representatives.

         (d) For  purposes  of this  Section,  the term "SBB  Property"  or "SBB
Properties" shall have the same meaning given in Section 4.19(e).

         SECTION 6.17 Stock Options.

         (a) On the Effective Date, each  outstanding  option to purchase shares
of Pacific  Common  Stock (a  "Pacific  Stock  Option")  issued  pursuant to the
Pacific Capital Bancorp 1984 


                                      -61-
<PAGE>

Stock Option Plan,  the Pacific  Capital  Bancorp 1994 Stock Option Plan and the
Pacific Capital Bancorp 1991 Directors Stock Option Plan (together, the "Pacific
Stock Option Plans"),  whether or not exercisable or vested, shall be assumed by
SBB as  hereinafter  provided.  Each  Pacific  Stock  Option  shall be deemed to
constitute  an option to  acquire,  on the same  terms  and  conditions  as were
applicable  under such Pacific  Stock  Option,  the number of full shares of SBB
Common Stock calculated in accordance with the provision of Section 1.06(b).  In
no event shall SBB be required to issue  fractional  shares of SBB Common  Stock
upon the exercise of a converted option.

         (b) SBB shall  reserve and make  available  for issuance in  connection
with the Merger and in accordance with the terms of this Agreement the number of
full shares of SBB Common Stock  calculated in accordance with Section  1.06(b).
As soon as  practicable  after the  Effective  Date,  SBB shall  deliver to each
holder of Pacific Stock Options  appropriate notices setting forth such holders'
rights pursuant to the Pacific Stock Option Plans, and the agreements evidencing
the grants of such Pacific Stock  Options  shall  continue in effect on the same
terms and  conditions  (subject to the  conversion  required by Section  1.06(b)
after giving effect to the Merger and the assumption by SBB as set forth above).
To the extent  necessary to effectuate  the provisions of this Section 6.17, SBB
may deliver new or amended agreements reflecting the terms of each Pacific Stock
Option  assumed by SBB and amend the Pacific  Stock  Option Plans to reflect the
terms hereof.

         (c) As soon as  practicable  after the Effective  Date,  SBB shall file
with the S.E.C. a registration  statement on an appropriate form with respect to
the shares of SBB Common Stock subject to such converted options,  and shall use
its best efforts to maintain the effectiveness of such registration statement or
registration   statements   (and  maintain  the  status  of  the  prospectus  or
prospectuses   with  respect  thereto)  for  so  long  as  such  options  remain
outstanding.

         SECTION  6.18  Director  and  Officer  Liability  Insurance.  Upon  the
Effective  Date,  any  executive  officer or director of Pacific who becomes and
officer  or  director  of SBB  (including  any  subsidiaries  thereof)  shall be
included in SBB's director and officer insurance policy.

         SECTION 6.19  Dividends.  SBB shall not  declare,  set aside or pay any
dividend in respect of the SBB Common  Stock or make any other  distribution  to
shareholders (including,  without limitation,  any stock dividend,  dividends in
kind or other distribution), whether in cash, stock or other property, after the
date  of  this  Agreement,  except  that  SBB may  declare  and pay its  regular
quarterly  dividend  on the SBB  Common  Stock not to exceed  $0.18 per share at
approximately  the same  time  during  each  quarter  which it has  historically
declared and paid such dividend;  provided,  however, that SBB and Pacific shall
cooperate  with each other to  coordinate  the record and payment dates of their
respective  dividends  for the quarter in which the  Effective  Date occurs such
that the holders of Pacific Common Stock shall receive a quarterly dividend from
either Pacific or SBB, but not from both with respect to such quarter.

         SECTION  6.20  Conduct of Business in the  Ordinary  Course.  Except as
specifically  provided for in this Agreement,  SBB shall conduct its business in
the ordinary course as heretofore conducted.  For purposes of this Section 6.20,
the  ordinary  course of 


                                      -62-
<PAGE>

business  shall  consist  of the  banking  and  related  business  as  presently
conducted by SBB and the SBB Subsidiaries.

         SECTION 6.21 Additions to SBB Board of Directors.  SBB shall,  prior to
the Effective Date,  take all action  necessary to effect the Bylaw Amendment so
as to permit the number of directors of the Surviving Corporation  identified on
Schedule One to Exhibit "A" hereto to be designated.

         SECTION 6.22  Director  Voting.  SBB shall use its best efforts to have
each of its  directors  agree to vote,  or cause to be voted,  all shares of SBB
Common  Stock  beneficially  owned by them at the SBB  Shareholders'  Meeting in
favor of the Merger.  Subject to such  directors'  fiduciary  duties,  each such
director shall execute such  documents as are  reasonably  necessary to evidence
their  determination  to vote their  shares of SBB Common  Stock in favor of the
Merger at the SBB Shareholders' Meeting.

         SECTION 6.23 Pooling of Interests Accounting Treatment.  SBB shall, and
shall use its best  efforts  to cause its  directors  and  officers  to, use all
commercially  reasonable  efforts  not  inconsistent  with  the  terms  of  this
Agreement to structure and consummate the Merger and all actions related thereto
in a manner that will qualify the Merger for "pooling of  interests"  accounting
treatment  as  determined  by  SBB's  independent  accounting  firm  and  by any
securities  regulatory  body  which  shall  review the  Registration  Statement,
including without limitation, the S.E.C.

         SECTION  6.24  Disclosure  Schedules.  SBB  agrees  at or  prior to the
Closing to provide  Pacific with  supplemental  Schedules to be delivered by SBB
pursuant to this Agreement  reflecting any material  changes thereto between the
date of this Agreement and the Closing Date.

                                  ARTICLE VII.

               CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PACIFIC

         All  obligations  of Pacific  under this  Agreement  are subject to the
fulfillment (or, if legally permissible,  waiver by Pacific), prior to or at the
Closing, of each of the following conditions:

         SECTION  7.01   Compliance   with   Representations,   Warranties   and
Agreements.

         (a) All representations and warranties made by SBB in this Agreement or
in any document or schedule delivered to Pacific pursuant hereto shall have been
true and  correct  in all  material  respects  when  made and  shall be true and
correct in all material  respects as of the Closing Date with the same force and
effect  as if such  representations  and  warranties  were made at and as of the
Closing  Date,  except  with  respect to those  representations  and  warranties
specifically made as of an earlier date (in which case such  representations and
warranties shall be true as of such earlier date).

         (b) SBB shall have performed or complied in all material  respects with
all agreements, terms, covenants and conditions required by this Agreement to be
performed or complied with by SBB prior to or at the Closing.

                                      -63-
<PAGE>

         SECTION 7.02 Shareholder Approvals. The holders of at least the minimum
required  percentage  of SBB Common Stock and Pacific  Common Stock  entitled to
vote on the Agreement,  the Merger  Agreement and the Merger shall have approved
the Agreement,  the Merger Agreement and the Merger, and the holders of at least
the minimum  required  percentage  of SBB Common  Stock  entitled to vote on the
Bylaw Amendment shall have approved the Bylaw Amendment.

         SECTION 7.03 Government and Other Approvals. SBB and Pacific shall have
received  approvals,  acquiescence  or  consents,  all on terms  and  conditions
mutually acceptable to SBB and Pacific, of the transactions contemplated by this
Agreement,  and the Merger Agreement,  from all necessary  governmental agencies
and  authorities  and other  third  parties,  including  but not  limited to the
S.E.C.,  and the Federal Reserve,  and all applicable waiting periods shall have
expired,  and SBB and Pacific  shall have received the approvals and consents of
all third parties required to consummate this Agreement and the other agreements
contemplated hereby, including, but not limited to, the Merger Agreement and the
transactions   contemplated   hereby  and  thereby.   Such   approvals  and  the
transactions  contemplated hereby shall not have been contested or threatened to
be  contested  by any Federal or state  governmental  authority  or by any other
third party  (except  shareholders  asserting  statutory  dissenters'  appraisal
rights) by formal proceedings.

         SECTION 7.04 No  Litigation.  No action  shall have been taken,  and no
statute,  rule,  regulation  or order  shall  have  been  promulgated,  enacted,
entered,  enforced or deemed  applicable to this Agreement,  the Merger,  or the
transactions  contemplated  hereby or thereby by any  Federal,  state or foreign
government  or  governmental  authority  or by any court,  domestic  or foreign,
including the entry of a preliminary or permanent  injunction,  that would:  (a)
make this Agreement or any other agreement contemplated hereby,  including,  but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby  illegal,  invalid or  unenforceable,  (b) require the  divestiture of a
material portion of the assets of SBB, (c) impose material limits in the ability
of any  party  to this  Agreement  to  consummate  the  Agreement  or any  other
agreement  contemplated  hereby,  including,  but not  limited  to,  the  Merger
Agreement,  or the transactions  contemplated  hereby or thereby,  (d) otherwise
result  in a  Material  Adverse  Change,  or (e) if the  Agreement  or any other
agreement  contemplated  hereby,  including,  but not  limited  to,  the  Merger
Agreement,  or the transactions  contemplated hereby or thereby are consummated,
subject  Pacific or subject any officer,  director,  shareholder  or employee of
Pacific to criminal or civil liability. No action or proceeding before any court
or  governmental   authority,   domestic  or  foreign,   by  any  government  or
governmental  authority or by any other  person,  domestic or foreign,  shall be
threatened, instituted or pending that would reasonably be expected to result in
any of the consequences referred to in clauses (a) through (e) above.

         SECTION 7.05 Delivery of Closing Documents. Pacific shall have received
all  documents  required to be received from SBB on or prior to the Closing Date
as set  forth in  Section  2.03  hereof,  all in form and  substance  reasonably
satisfactory to Pacific.

         SECTION  7.06  Receipt of Fairness  Opinion.  The Board of Directors of
Pacific shall have  received,  on or before the date of the mailing of the Joint
Proxy  Statement/Prospectus,  from its investment advisor, Van Kasper & Company,
an  unqualified  written  opinion to the  effect  that the Merger is fair to the
shareholders of Pacific from a financial point of view.

                                      -64-
<PAGE>

         SECTION 7.07 Receipt of Pooling  Opinions.  Pacific shall have received
an opinion  letter,  dated as of the Closing  Date,  from KPMG Peat Marwick LLP,
independent public accountants for Pacific, to the effect that Pacific qualifies
as an  entity  that may be a party  to a  business  combination  for  which  the
"pooling of interests"  method of accounting would be available under Accounting
Principles Board Opinion No. 16 ("APB 16").  Pacific shall have also received an
opinion  letter,  dated  as of the  Closing  Date,  from  Arthur  Andersen  LLP,
independent  public  accountants  for SBB,  to the effect  that the Merger  will
qualify for "pooling of interests"  accounting  treatment under APB 16 if closed
and consummated in accordance with this Agreement. In addition, there shall have
been no  determination  by any  court,  tribunal,  regulatory  agency  or  other
governmental  entity, that the Merger fails or will fail to qualify for "pooling
of interests" accounting treatment.

         SECTION  7.08  Registration  Statement.   The  Registration  Statement,
including any amendments or supplements  thereto,  shall be effective  under the
Securities  Act  and  no  stop  order   suspending  the   effectiveness  of  the
Registration  Statement  shall be in effect or proceedings  for purpose  pending
before or threatened  by the S.E.C.  All state  securities  permits or approvals
required by applicable  state  securities  laws to consummate  the  transactions
contemplated by this Agreement and the Merger Agreement shall have been received
and remain in effect.

         SECTION 7.09 Federal Tax Opinion. Pacific shall have received a copy of
the opinion of Jenkens & Gilchrist,  P.C., counsel to SBB, to the effect that if
the  Merger  is  consummated  in  accordance  with the  terms  set forth in this
Agreement (i) the Merger will constitute a reorganization  within the meaning of
Section 368(a) of the Code,  (ii) no gain or loss will be recognized for federal
income  tax  purposes  by the  holders of shares of  Pacific  Common  Stock upon
receipt  of the  Merger  Consideration  (except  for  cash  received  in lieu of
fractional  shares),  (iii) the basis of shares of SBB Common Stock  received by
the  shareholders  of Pacific will be the same as the basis of shares of Pacific
Common Stock  exchanged  therefor,  and (iv) the holding period of the shares of
SBB Common Stock received by such  shareholders  will include the holding period
of the shares of Pacific Common Stock exchanged  therefor,  provided such shares
were held as capital assets as of the Effective Date. In rendering such opinion,
such counsel may require and rely upon  representations  and covenants including
those contained in certificates of officers of SBB, Pacific and others.

         SECTION  7.10  Dissenting  Shareholders.  Holders  of not  more  than a
certain  percentage (not to exceed 9.9%) of the issued and outstanding shares of
Pacific Common Stock shall have demanded or be entitled to demand payment of the
fair  value  of  their  shares  as  dissenting   shareholders  under  applicable
provisions  of the GCL such that their  receipt of cash pursuant to the exercise
of their  appraisal  rights,  when  combined  with all other  cash  transactions
required to be considered  under GAAP, would result in the Merger not qualifying
for "pooling of interests" accounting treatment under GAAP.

         SECTION 7.11  Accounting  Treatment.  All accounting and tax treatment,
entries and adjustments in connection with the transactions contemplated by this
Agreement  and the other  agreements  contemplated  hereby  shall be  reasonably
satisfactory to Pacific,  Pacific shall not have received  notification from any
proper regulatory authority that Pacific's accounting and tax treatment, entries
and  adjustments  used in connection  with the Merger are improper,  and 



                                      -65-
<PAGE>

Pacific  shall not have been required by any such  regulatory  authority to make
any  accounting  or tax  adjustments  that would  constitute a Material  Adverse
Change.

         SECTION  7.12  Bylaw  Amendment.  SBB  shall  have  taken  all  actions
necessary to effect the Bylaw Amendment.

         SECTION  7.13 No  Material  Adverse  Change.  There  shall have been no
Material Adverse Change with respect to SBB since December 31, 1997.

                                  ARTICLE VIII.

                 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBB

         All  obligations  of  SBB  under  this  Agreement  are  subject  to the
fulfillment  (or,  if legally  permissible,  waiver by SBB),  prior to or at the
Closing, of each of the following conditions:

         SECTION 8.01 Compliance   with   Representations,   Warranties   and
Agreements.

         (a)  All  representations  and  warranties  made  by  Pacific  in  this
Agreement or in any document or schedule  delivered to SBB pursuant hereto shall
have been true and correct in all material  respects when made and shall be true
and correct in all material  respects as of the Closing Date with the same force
and effect as if such  representations and warranties were made at and as of the
Closing  Date,  except  with  respect to those  representations  and  warranties
specifically made as of an earlier date (in which case such  representations and
warranties shall be true as of such earlier date).

         (b) Pacific shall have  performed or complied in all material  respects
with all agreements,  terms, covenants and conditions required by this Agreement
to be performed or complied with by Pacific prior to or at the Closing.

         SECTION 8.02 Shareholder Approvals. The holders of at least the minimum
required  percentage  of Pacific  Common Stock and SBB Common Stock  entitled to
vote on the Agreement,  the Merger  Agreement and the Merger shall have approved
the Agreement,  the Merger Agreement and the Merger; and the holding of at least
the  minimum  percentage  of SBB  Common  Stock  entitled  to vote on the  Bylaw
Amendment shall have approved the Bylaw Amendment.

         SECTION 8.03 Government and Other Approvals. SBB and Pacific shall have
received  approvals,  acquiescence  or  consents,  all on terms  and  conditions
mutually acceptable to SBB and Pacific, of the transactions contemplated by this
Agreement and the Merger Agreement, from all necessary governmental agencies and
authorities and other third parties, including but not limited to the S.E.C. and
the Federal Reserve,  and all applicable waiting periods shall have expired, and
SBB and Pacific  shall have  received  the  approvals  and consents of all third
parties   required  to  consummate  this  Agreement  and  the  other  agreements
contemplated hereby, including, but not limited to, the Merger Agreement and the
transactions   contemplated   hereby  and  thereby.   Such   approvals  and  the
transactions  contemplated hereby shall not have been contested or threatened to
be  contested  by any Federal or state  governmental  authority  or by any other
third party  (except  shareholders  asserting  statutory  dissenters'  appraisal

                                      -66-
<PAGE>

rights) by formal proceedings. It is understood that, if such contest is brought
by formal proceedings, SBB may, but shall not be obligated to, answer and defend
such contest or otherwise pursue this transaction over such objection.

         SECTION 8.04 No  Litigation.  No action  shall have been taken,  and no
statute,  rule,  regulation  or order  shall  have  been  promulgated,  enacted,
entered,  enforced or deemed  applicable to this Agreement,  the Merger,  or the
transactions  contemplated  hereby or thereby by any  Federal,  state or foreign
government  or  governmental  authority  or by any court,  domestic  or foreign,
including the entry of a  preliminary  or permanent  injunction,  that would (a)
make this Agreement or any other agreement contemplated hereby,  including,  but
not limited to, the Merger Agreement, or the transactions contemplated hereby or
thereby  illegal,  invalid or  unenforceable,  (b) require the  divestiture of a
material  portion of the assets of Pacific,  (c) impose  material  limits in the
ability of any party to this  Agreement to consummate the Agreement or any other
agreement  contemplated  hereby,  including,  but not  limited  to,  the  Merger
Agreement,  or the transactions  contemplated  hereby or thereby,  (d) otherwise
result  in a  Material  Adverse  Change,  or (e) if the  Agreement  or any other
agreement  contemplated  hereby,  including,  but not  limited  to,  the  Merger
Agreement,  or the transactions  contemplated hereby or thereby are consummated,
subject SBB or subject any officer, director,  shareholder or employee of SBB to
criminal  or civil  liability.  No  action  or  proceeding  before  any court or
governmental  authority,  domestic or foreign, by any government or governmental
authority  or by any other  person,  domestic or foreign,  shall be  threatened,
instituted or pending that would  reasonably be expected to result in any of the
consequences referred to in clauses (a) through (e) above.

         SECTION 8.05 Delivery of Closing Documents. SBB shall have received all
documents  required to be received  from Pacific on or prior to the Closing Date
as set  forth in  Section  2.02  hereof,  all in form and  substance  reasonably
satisfactory to SBB.

         SECTION 8.06 Receipt of  Shareholder  Letters.  SBB shall have received
from Pacific, at least 31 days prior to the Closing Date, the signed Shareholder
Letters,  in the form attached hereto as Exhibit "F" hereof,  of each person who
may  reasonably be deemed an  "affiliate"  of Pacific within the meaning of such
term as used in Rule 145 under the Securities Act.

         SECTION 8.07 Receipt of Fairness Opinion. The Board of Directors of SBB
shall have  received,  on or before the date of the  mailing of the Joint  Proxy
Statement/Prospectus,  from its  investment  advisor,  The Bank Advisory  Group,
Inc., an  unqualified  written  opinion to the effect that the Merger is fair to
the shareholders of SBB from a financial point of view.

         SECTION  8.08  Dissenting  Shareholders.  Holders  of not  more  than a
certain  percentage (not to exceed 9.9%) of the issued and outstanding shares of
Pacific Common Stock shall have demanded or be entitled to demand payment of the
fair  value  of  their  shares  as  dissenting   shareholders  under  applicable
provisions  of the GCL such that their  receipt of cash pursuant to the exercise
of their  appraisal  rights,  when  combined  with all other  cash  transactions
required to be considered  under GAAP, would result in the Merger not qualifying
for "pooling of interests" accounting treatment under GAAP.

                                      -67-
<PAGE>

         SECTION 8.09 Receipt of Pooling  Opinions.  SBB shall have  received an
opinion  letter,  dated as of the  Closing  Date,  from KPMG Peat  Marwick  LLP,
independent public accountants for Pacific, to the effect that Pacific qualifies
as an  entity  that may be a party  to a  business  combination  for  which  the
"pooling of interests" method of accounting would be available under APB 16. SBB
shall have also received an opinion  letter,  dated as of the Closing Date, from
Arthur Andersen LLP, its independent public accountants,  to the effect that the
Merger will qualify for "pooling of interests" accounting treatment under APB 16
if closed and consummated in accordance with this Agreement. In addition,  there
shall have been no determination by any court,  tribunal,  regulatory  agency or
other  governmental  entity,  that the Merger  fails or will fail to qualify for
"pooling of interests" accounting treatment.

         SECTION  8.10  Registration  Statement.   The  Registration  Statement,
including any amendments or supplements  thereto,  shall be effective  under the
Securities  Act  and  no  stop  order   suspending  the   effectiveness  of  the
Registration  Statement  shall be in effect or proceedings  for purpose  pending
before or threatened  by the S.E.C.  All state  securities  permits or approvals
required by applicable  state  securities  laws to consummate  the  transactions
contemplated by this Agreement and the Merger Agreement shall have been received
and remain in effect.

         SECTION 8.11 Federal Tax Opinion. SBB shall have received an opinion of
its  counsel,  Jenkens &  Gilchrist,  P.C.,  to the effect that if the Merger is
consummated  in  accordance  with the terms set forth in this  Agreement (i) the
Merger will constitute a reorganization  within the meaning of Section 368(a) of
the  Code,  (ii) no gain or loss  will be  recognized  for  federal  income  tax
purposes by the holders of shares of Pacific  Common  Stock upon  receipt of the
Merger  Consideration  (except for cash received in lieu of fractional  shares),
(iii) the basis of shares of SBB Common Stock  received by the  shareholders  of
Pacific  will be the  same as the  basis  of  shares  of  Pacific  Common  Stock
exchanged  therefor,  and (iv) the  holding  period of the  shares of SBB Common
Stock  received by such  shareholders  will  include  the holding  period of the
shares of Pacific  Common Stock  exchanged  therefor,  provided such shares were
held as capital assets as of the Effective Date. In rendering such opinion, such
counsel may require and rely upon  representations and covenants including those
contained in certificates of officers of SBB, Pacific and others.

         SECTION 8.12  Accounting  Treatment.  All accounting and tax treatment,
entries and adjustments in connection with the transactions contemplated by this
Agreement  and the other  agreements  contemplated  hereby  shall be  reasonably
satisfactory  to SBB, SBB shall not have received  notification  from any proper
regulatory  authority  that SBB's  accounting  and tax  treatment,  entries  and
adjustments  used in connection with the Merger are improper,  and SBB shall not
have been required by any such  regulatory  authority to make any  accounting or
tax adjustments that would constitute a Material Adverse Change.

         SECTION  8.13 No  Material  Adverse  Change.  There  shall have been no
Material Adverse Change with respect to Pacific since December 31, 1997.

                                      -68-
<PAGE>

                                   ARTICLE IX.

                      EXPENSES, TERMINATION AND ABANDONMENT

         SECTION  9.01  Expenses.  Each of the  parties  hereto  shall  bear its
respective  costs and expenses  incurred in connection with the  consummation of
the transactions contemplated by this Agreement; provided, however, in the event
that:

         (a)  this  Agreement  is  terminated  by SBB  because  (i)  the  Merger
Agreement is not approved by the required  vote of  shareholders  at the Pacific
Shareholders'  Meeting,  and (ii) the Board of Directors of Pacific  (subject to
compliance with its fiduciary duties as advised by counsel) shall have failed to
have used its best efforts to obtain shareholder approval,  Pacific shall pay to
SBB within ten (10) business days after such  termination  (y) a termination fee
of $7,650,000,  and (z) all documented  fees and expenses of SBB related to this
Agreement and the transactions  contemplated hereby (which fees and expenses, as
communicated to Pacific by SBB within five (5) business days after  termination,
shall not exceed $250,000); and

         (b) this  Agreement  is  terminated  by Pacific  because (i) the Merger
Agreement  is not  approved  by the  required  vote of  shareholders  at the SBB
Shareholders'  Meeting,  and (ii) the  Board of  Directors  of SBB  (subject  to
compliance with its fiduciary duties as advised by counsel) shall have failed to
have used its best  efforts  to obtain  shareholder  approval,  SBB shall pay to
Pacific within ten (10) business days after such  termination  (y) a termination
fee of $7,650,000,  and (z) all documented  fees and expenses of Pacific related
to this  Agreement  and the  transactions  contemplated  hereby  (which fees and
expenses,  as  communicated  to SBB by Pacific  within five (5)  business  after
termination, shall not exceed $250,000); and

         (c) this  Agreement is terminated  by Pacific  because of a Third Party
Transaction  (as defined in Section  9.02,  Pacific  shall pay to SBB within ten
(10) business days after such  termination  (y) a termination fee of $7,650,000,
and (z) all  documented  fees and expenses of SBB related to this  Agreement and
the transactions  contemplated hereby (which fees and expenses, as communication
to Pacific by SBB within five (5)  business  days after  termination,  shall not
exceed $250,000).

         The parties hereto  acknowledge  that the agreements  contained in this
Section  9.01 are an  integral  part of the  transactions  contemplated  in this
Agreement,  and that, without these agreements,  SBB and Pacific would not enter
into this Agreement.

         SECTION  9.02  Termination.  Subject to any  payments  as  provided  in
Section 9.01, this Agreement may be terminated, and the Merger may be abandoned,
at any time prior to the Effective Date:

         (a) by mutual written agreement  between SBB and Pacific,  if the Board
of Directors of each party so determines by vote of a majority of the members of
its entire Board;

         (b) by either SBB or Pacific, if the Effective Date has not occurred by
January 31,  1999,  or such later date as may be  mutually  agreed to by SBB and
Pacific;

         (c) by SBB, if there has been a Material Adverse Change with respect to
Pacific;

                                      -69-
<PAGE>

         (d) by  Pacific,  if there  has been a  Material  Adverse  Change  with
respect to SBB.

         (e) by either SBB or Pacific,  by written  notice to the other,  if the
other has  breached  any of its  covenants  in  Article V or  Article VI of this
Agreement, as the case may be, in any material respect and has failed to correct
or cure any such breach within twenty (20) business days after notice thereof is
given by the nonbreaching party;

         (f) by either SBB or Pacific,  by written  notice to the other,  if any
representation  or warranty  given or made by such other party in this Agreement
or in any schedule or other document delivered by such other party in accordance
with the terms of this  Agreement,  is or  becomes  untrue or  incorrect  in any
material  respect and is not  corrected  within  twenty (20) business days after
written notice thereof is given by the party  terminating  this Agreement to the
party giving or making such  representation or warranty,  provided that any such
notice shall be delivered promptly upon discovery of the breach;

         (g)  by  either  SBB  or  Pacific,  if  (i)  any  of  the  transactions
contemplated  by this Agreement or the Merger  Agreement are  disapproved by any
regulatory authority whose approval is required to consummate such transactions,
(ii) any court of competent  jurisdiction  in the United  States or other United
States (federal or state)  governmental body shall have issued an order,  decree
or ruling or taken any other  action  restraining,  enjoining,  invalidating  or
otherwise prohibiting the Agreement or the transactions  contemplated hereby and
such  order,  decree,   ruling  or  other  action  shall  have  been  final  and
nonappealable,  or (iii) either  Pacific or SBB reasonably  determines,  in good
faith and after  consulting with counsel,  there is substantial  likelihood that
any necessary  regulatory approval will not be obtained or will be obtained only
upon a condition  or  conditions  that make it  inadvisable  to proceed with the
transactions contemplated by this Agreement;

         (h) by SBB or Pacific,  if the Merger  Agreement is not approved by the
required vote of shareholders of Pacific or SBB;

         (i) by Pacific, by written notice to SBB, if (i) a proposal for a Third
Party Transaction (as defined below) involving Pacific has been made or received
and the Board of  Directors of Pacific  determines,  in the exercise of its good
faith judgment (based on written advice of independent  legal counsel) that such
termination is required in order for Pacific's Board of Directors to comply with
its fiduciary  duties to Pacific's  shareholders,  or (ii) following  receipt by
Pacific of a proposal for a Third Party  Transaction,  the Board of Directors of
Pacific shall have altered its  determination to recommend that the shareholders
of Pacific  approve  this  Agreement or shall have failed to proceed to hold the
special Pacific Shareholders' Meeting to approve this Agreement,  in either case
of which  Pacific  shall  give SBB  prompt  written  notice of its  election  to
terminate this Agreement pursuant to this Section 9.02(i).

         For purposes of this Section 9.02(i), a "Third Party Transaction" shall
include (i) any  successful  tender  offer for more than 50% of the  outstanding
shares of Pacific,  (ii) any merger or consolidation of Pacific with or into any
entity  other  than  SBB or an  affiliate  of  SBB,  (iii)  any  sale  of all or
substantially all of the assets of Pacific,  (iv) any  reorganization of Pacific
or  other  transaction  that  results  or  when  completed  would  result  in  a
disposition of substantially all of the



                                      -70-
<PAGE>

assets of  Pacific,  or (v) the  issuance,  sale or  disposition  of  securities
representing 50% or more of the common stock of Pacific;

         (j)      by SBB pursuant to the terms of Section 5.15(b) hereof;

         (k)      by Pacific pursuant to the terms of Section 6.16(b) hereof;

         (l) by Pacific,  if the  average of the  average  closing bid and asked
price of a share of SBB Common  Stock as  reported on Nasdaq for the twenty (20)
business day period immediately  preceding the fifth (5th) business day prior to
the Closing  Date (the "SBB  Average  Price")  shall be less than $22.95  (which
number shall be  appropriately  adjusted to give effect to any Share  Adjustment
relative  to shares of SBB Common  Stock);  provided,  however,  that if the SBB
Average  Price shall be less than $22.95,  Pacific and SBB shall attempt in good
faith to renegotiate the Exchange Ratio,  subject to existing market conditions.
Should the parties fail to so  renegotiate  the Exchange  Ratio within three (3)
business  days  after  determination  of the  SBB  Average  Price,  Pacific  may
terminate this Agreement pursuant to this Section 9.02(l);

         (m) by  Pacific,  if Pacific  shall not have  received  an  unqualified
written  opinion  from its  investment  advisor,  dated as of the mailing of the
Proxy  Statement/Prospectus,  to the  effect  that  the  Merger  is  fair to the
shareholders of Pacific from a financial point of view; or

         (n) by SBB,  if SBB  shall not have  received  an  unqualified  written
opinion  from its  investment  advisor,  dated as of the  mailing  of the  Proxy
Statement/Prospectus,  to the effect that the Merger is fair to the shareholders
of SBB from a financial point of view.

         SECTION 9.03 Notice of Termination.  The power of termination  provided
for by Section 9.02 hereof may be  exercised  only by a notice given in writing,
as provided in Section 12.05 of this Agreement.

         SECTION 9.04 Effect of Termination.  Without  limiting any other relief
to which either party  hereto may be entitled for breach of this  Agreement,  in
the event of the termination  and abandonment of this Agreement  pursuant to the
provisions  of Section 9.02 hereof,  no party to this  Agreement  shall have any
further  liability or  obligation in respect of this  Agreement,  except for (a)
liability of a party pursuant to Section 9.01 hereof,  and (b) the provisions of
Article XI hereof shall remain applicable.

                                   ARTICLE X.

                  NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES

         SECTION  10.01  Nonsurvival  of  Representations  and  Warranties.  The
parties hereto agree that all of their respective representations and warranties
contained in this Agreement shall not survive Closing.

                                      -71-
<PAGE>

                                   ARTICLE XI.

                            CONFIDENTIAL INFORMATION

         SECTION  11.01   Definition   of   "Recipient,"   "Disclosing   Party,"
"Representative"  and  "Person".  For  purposes  of this  Article  XI,  the term
"Recipient"  shall mean the party receiving the Subject  Information (as defined
in  Section  11.02)  and the  term  "Disclosing  Party"  shall  mean  the  party
furnishing the Subject Information. The terms "Recipient" or "Disclosing Party",
as used herein,  include:  (1) all persons and entities related to or affiliated
in any way with the Recipient or the Disclosing  Party,  as the case may be, and
(2) any person or entity controlling, controlled by or under common control with
the  Recipient  or  the  Disclosing   Party,  as  the  case  may  be.  The  term
"Representative"  as  used  herein,  shall  include  all  directors,   officers,
shareholders, employees,  representatives,  advisors, attorneys, accountants and
agents of any of the  foregoing.  The term  "person" as used in this  Article XI
shall be broadly interpreted to include,  without  limitation,  any corporation,
company, group, partnership, governmental agency or individual.

         SECTION 11.02 Definition of "Subject Information". For purposes of this
Article XI, the term "Subject  Information" shall mean all information furnished
to the  Recipient or its  Representatives  (whether  prepared by the  Disclosing
Party, its  Representatives  or otherwise and whether or not identified as being
nonpublic,  confidential or proprietary) by or on behalf of the Disclosing Party
or its  Representatives  relating to or involving  the  business,  operations or
affairs of the  Disclosing  Party or otherwise in possession  of the  Disclosing
Party. The term "Subject Information" shall not include information that (i) was
already in the  Recipient's  possession  at the time it was first  furnished  to
Recipient by or on behalf of Disclosing Party, provided that such information is
not known by the  Recipient to be subject to another  confidentiality  agreement
with or other obligation of secrecy to the Disclosing Party, its Subsidiaries or
another party, or (ii) becomes generally available to the public other than as a
result of a disclosure by the Recipient or its Representatives, or (iii) becomes
available to the Recipient on a non-confidential  basis from a source other than
the Disclosing Party, its Representative or otherwise, provided that such source
is not known by the Recipient to be bound by a confidentiality agreement with or
other  obligation of secrecy to the  Disclosing  Party,  its  Representative  or
another party.

         SECTION 11.03  Confidentiality.  Each Recipient  hereby agrees that the
Subject  Information  will be used  solely  for the  purpose  of  reviewing  and
evaluating  the  transactions  contemplated  by this  Agreement  and  the  other
agreements  contemplated  hereby,  including the Merger Agreement,  and that the
Subject  Information  will  be  kept  confidential  by  the  Recipient  and  the
Recipient's  Representatives;  provided,  however,  that (i) any of such Subject
Information may be disclosed to the Recipient's  Representatives (including, but
not limited to, the Recipient's accountants and attorneys) who need to know such
information for the purpose of evaluating any such possible  transaction between
the  Disclosing   Party  and  the  Recipient  (it  being  understood  that  such
Representatives shall be informed by the Recipient of the confidential nature of
such  information  and that the Recipient shall direct and cause such persons to
treat such information confidentially);  and (ii) any disclosure of such Subject
Information may be made to which the Disclosing  Party consents in writing prior
to any such disclosure by Recipient.

                                      -72-
<PAGE>

         SECTION  11.04   Securities  Law  Concerns.   Each   Recipient   hereby
acknowledges  that the  Recipient is aware,  and the  Recipient  will advise the
Recipient's  Representatives  who are  informed as to the  matters  that are the
subject of this Agreement,  that the United States  securities laws prohibit any
person  who has  received  material,  non-public  information  from an issuer of
securities  from  purchasing  or  selling  securities  of  such  issuer  or from
communicating such information to any other person under  circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.

         SECTION  11.05  Return  of  Subject   Information.   In  the  event  of
termination  of this  Agreement  or the Merger  Agreement,  for any reason,  the
Recipient shall promptly return to the Disclosing Party all material  containing
or reflecting any of the Subject Information other than information contained in
any application, notice or other document filed with any governmental agency and
not returned to the Recipient by such  governmental  agency.  In making any such
filing,  the  Recipient  will  request  confidential  treatment  of such Subject
Information included in any application, notice or other document filed with any
governmental agency.

         SECTION 11.06 Specific  Performance/Injunctive  Relief.  Each Recipient
acknowledges  that the Subject  Information  constitutes  valuable,  special and
unique  property of the  Disclosing  Party critical to its business and that any
breach of  Article  XI of this  Agreement  by it will  give rise to  irreparable
injury to the Disclosing Party that is not compensable in damages.  Accordingly,
each  Recipient  agrees  that the  Disclosing  Party shall be entitled to obtain
specific  performance  and/or injunctive relief against the breach or threatened
breach of Article XI of this Agreement by the Recipient or its  Representatives.
Each Recipient further agrees to waive, and use its reasonable  efforts to cause
its Representatives to waive, any requirement for the securing or posting of any
bond in connection  with such  remedies.  Such remedies  shall not be deemed the
exclusive remedies for a breach of Article XI of this Agreement, but shall be in
addition to all other  remedies  available at law or in equity to the Disclosing
Party.

                                  ARTICLE XII.

                                  MISCELLANEOUS

         SECTION 12.01 Brokerage Fees and Commissions.

         (a) SBB  hereby  represents  to  Pacific  that,  except as set forth on
Schedule 12.01(a), no agent, representative or broker has represented SBB or any
or all of the shareholders in connection with the transactions described in this
Agreement.  Pacific  shall have no  responsibility  or  liability  for any fees,
expenses or commissions payable to any agent, representative or broker of SBB or
any  shareholder  of SBB, and SBB hereby  agrees to  indemnify  and hold Pacific
harmless for any amounts owed to any agent,  representative  or broker of SBB or
any shareholder of SBB.

         (b)  Pacific  hereby  represents  to SBB  that,  except as set forth on
Schedule 12.01(b), no agent, representative or broker has represented Pacific or
any or all of the shareholders in connection with the transactions  described in
this  Agreement.  SBB shall have no  responsibility  or liability  for any fees,
expenses  or  commissions  payable  to any  agent,  representative  or broker of
Pacific or any  shareholder  of Pacific,  and Pacific hereby agrees to indemnify
and hold SBB  



                                      -73-
<PAGE>

harmless for any amounts owed to any agent,  representative or broker of Pacific
or any shareholder of Pacific.

         SECTION  12.02  Entire   Agreement.   This   Agreement  and  the  other
agreements,   documents,   schedules,  exhibits  and  instruments  executed  and
delivered  by the  parties  to each  other at the  Closing  constitute  the full
understanding of the parties, a complete  allocation of risks between them and a
complete and exclusive  statement of the terms and conditions of their agreement
relating  to  the  subject  matter  hereof  and  supersede  any  and  all  prior
agreements,  whether  written or oral,  that may exist  between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement, no
conditions,  usage of trade, course of dealing or performance,  understanding or
agreement  purporting  to  modify,  vary,  explain  or  supplement  the terms or
conditions   of  this   Agreement   shall  be  binding   unless   hereafter   or
contemporaneously  herewith made in writing and signed by the party to be bound,
and no  modification  shall be effected by the  acknowledgment  or acceptance of
documents  containing  terms or  conditions  at variance  with or in addition to
those set forth in this Agreement.

         SECTION 12.03 Further Cooperation. The parties agree that they will, at
any time and from time to time after the Closing,  upon request by the other and
without further consideration, do, perform, execute, acknowledge and deliver all
such further acts,  deeds,  assignments,  assumptions,  transfers,  conveyances,
powers of attorney, certificates and assurances as may be reasonably required in
order to fully  consummate the  transactions  contemplated  hereby in accordance
with this  Agreement  or to carry out and  perform any  undertaking  made by the
parties hereunder.

         SECTION  12.04  Severability.  In the event that any  provision of this
Agreement  is held to be  illegal,  invalid or  unenforceable  under  present or
future laws, then (a) such provision shall be fully severable and this Agreement
shall be construed  and enforced as if such  illegal,  invalid or  unenforceable
provision were not a part hereof; (b) the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by such illegal,
invalid or unenforceable provision or by its severance from this Agreement;  and
(c) there shall be added  automatically  as a part of this Agreement a provision
as similar in terms to such illegal,  invalid or unenforceable  provision as may
be possible and still be legal, valid and enforceable.

         SECTION 12.05 Notices. Any and all payments (other than payments at the
Closing),  notices, requests,  instructions and other communications required or
permitted  to be given under this  Agreement  after the date hereof by any party
hereto  to  any  other  party  may  be  delivered  personally  or by  nationally
recognized  overnight  courier service or sent by mail or (except in the case of
payments) by telex or facsimile  transmission,  at the  respective  addresses or
transmission  numbers set forth below and shall be effective  (a) in the case of
personal delivery,  telex or facsimile  transmission,  when received; (b) in the
case of mail, upon the earlier of actual receipt or five (5) business days after
deposit in the United States Postal Service, first class certified or registered
mail,  postage  prepaid,  return  receipt  requested;  and  (c) in the  case  of
nationally-recognized  overnight  courier  service,  one (1)  business day after
delivery to such courier service  together with all appropriate  fees or charges
and  instructions  for such  overnight  delivery.  The parties may change  their
respective  addresses and  transmission  numbers by written  notice to all other
parties,  sent as provided in this Section 12.05. All communications  must be in
writing and addressed as follows:

                                      -74-
<PAGE>


                        IF TO PACIFIC:

                        Pacific Capital Bancorp
                        307 Main Street
                        Salinas, California 93901
                        Telecopy:     (408) 646-9748
                        Attention:    Mr. Clayton C. Larson,
                                      President and Chief Administrative Officer

                        WITH A COPY TO:

                        Mr. James E. Topinka
                        Preston Gates & Ellis LLP
                        One Maritime Plaza
                        Suite 2400
                        San Francisco, California 94111
                        Telecopy:     (415) 788-8819

                        IF TO SBB:

                        Santa Barbara Bancorp
                        1021 Anacapa Street
                        Santa Barbara, California 93101-2036
                        Telecopy:     (804) 564-6293
                        Attention:    Mr. David W. Spainhour,
                                      President and Chief Executive Officer

                        WITH A COPY TO:

                        Mr. Charles E. Greef
                        Mr. Peter G. Weinstock
                        Jenkens & Gilchrist,
                        a Professional Corporation
                        1445 Ross Avenue, Suite 3200
                        Dallas, Texas  75202-2799
                        Telecopy:     (214) 855-4300

         SECTION  12.06  GOVERNING  LAW.  THIS  AGREEMENT  SHALL BE CONSTRUED IN
ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA  (INCLUDING
THOSE LAWS RELATING TO CHOICE OF LAW) APPLYING TO CONTRACTS  ENTERED INTO AND TO
BE PERFORMED  WITHIN THE STATE OF CALIFORNIA,  WITHOUT REGARD FOR THE PROVISIONS
THEREOF REGARDING CHOICE OF LAW. VENUE FOR ANY CAUSE OF ACTION ARISING FROM THIS
AGREEMENT SHALL LIE IN SANTA BARBARA, CALIFORNIA.

                                      -75-
<PAGE>

         SECTION 12.07 Multiple Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in multiple  counterparts,  each of which
shall be deemed an  original,  and all  counterparts  hereof so  executed by the
parties hereto, whether or not such counterpart shall bear the execution of each
of the parties hereto, shall be deemed to be, and shall be construed as, one and
the same Agreement. A telecopy or facsimile transmission of a signed counterpart
of this  Agreement  shall be  sufficient  to bind the  party  or  parties  whose
signature(s) appear thereon.

         SECTION 12.08 Certain Definitions.

         A. "Affiliate"  means, with respect to any person or entity, any person
or entity that, directly or indirectly,  controls, is controlled by, or is under
common control with, such person or entity in question. For the purposes of this
definition,   "control"   (including,   with  correlative   meaning,  the  terms
"controlled  by" and "under  common  control  with") as used with respect to any
person or entity,  shall mean the  possession,  directly or  indirectly,  of the
power to direct or cause the  direction of the  management  and policies of such
person or entity,  whether  through the  ownership  of voting  securities  or by
contract or otherwise.

         B.  "Subsidiary"  means,  when used with  reference  to an entity,  any
corporation,  a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity or any partnership, joint venture or other
enterprise in which any entity has, directly or indirectly, any equity interest.

         C.  "Material   Adverse  Change"  means  any  material  adverse  change
(excluding  the  occurrence  of expenses in  connection  with the Merger)  since
December 31, 1997 in the business,  results of operations,  condition (financial
or otherwise), assets, properties, liabilities (absolute, accrued, contingent or
otherwise), reserves of Pacific or SBB, as the case may be, and their respective
Subsidiaries taken as a whole, and specifically  includes,  without  limitation,
with  respect to Pacific,  any change that  reduces the  tangible  shareholders'
equity of Pacific  below  $70,000,000,  or, with respect to SBB, any change that
reduces the tangible shareholders' equity of SBB below $118,000,000.

         D.  "Environmental  Laws"  mean all  federal,  state  and  local  laws,
regulations,  statutes,  ordinances,  codes, rules, decisions, orders or decrees
relating or pertaining to the public  health and safety or the  environment,  or
otherwise  governing  the  generation,  use,  handling,  collection,  treatment,
storage, transportation,  recovery, recycling, removal, discharge or disposal of
Hazardous  Materials,  including,  without limitation,  the Solid Waste Disposal
Act,  42 U.S.C.  6901 et seq.,  as amended  ("SWDA,"  also known as "RCRA" for a
subsequent  amending  act),  (b)  the  Comprehensive   Environmental   Response,
Compensation  and  Liability  Act,  42  U.S.C.   ss.9601  et  seq.,  as  amended
("CERCLA"),  (c) the Clean  Water Act,  33 U.S.C.  ss.1251  et seq.,  as amended
("CWA"),  (d) the Clean Air Act, 42 U.S.C.  ss.7401 et seq., as amended ("CAA"),
(e) the Toxic  Substances  Control  Act, 15 U.S.C.  ss.2601 et seq.,  as amended
("TSCA"),  (f) the Emergency Planning and Community Right to Know Act, 15 U.S.C.
ss.2601 et seq.,  as amended  ("EPCRKA"),  and (g) the  Occupational  Safety and
Health Act, 29 U.S.C. ss. 651 et seq., as amended.

                                      -76-
<PAGE>

         E. "Hazardous Material" means,  without limitation,  (a) any "hazardous
wastes" as defined under RCRA, (b) any  "hazardous  substances" as defined under
CERCLA,  (c) any toxic  pollutants  as defined  under CWA, (d) any hazardous air
pollutants as defined  under CAA, (e) any  hazardous  chemicals as defined under
TSCA, (f) any hazardous  substances or extremely hazardous substances as defined
under EPCRKA,  (g) asbestos,  (h)  polychlorinated  biphenyls,  (i)  underground
storage tanks, whether empty, filled or partially filled with any substance, (j)
any  substance  the presence of which on the property in question is  prohibited
under  any  Environmental  Law,  and (k) any  other  substance  which  under any
Environmental  Law requires  special handling or notification of or reporting to
any  federal,  state  or  local  governmental  entity  in its  generation,  use,
handling, collection, treatment, storage, re-cycling, treatment, transportation,
recovery,  removal,  discharge  or  disposal.   Notwithstanding  the  foregoing,
"Hazardous  Material" shall not include materials employed in normal consumer or
office  uses,  such  as  gasoline,  lubricants,  printing  materials,  cleaners,
disinfectants,  pesticides, building materials, fluorescent lights and ballasts,
batteries and  refrigerants,  as long as such materials are used and stored only
in quantities typical of consumer and office uses.

         SECTION  12.09  Specific  Performance.   Each  of  the  parties  hereto
acknowledges  that the other parties would be irreparably  damaged and would not
have an  adequate  remedy at law for money  damages in the event that any of the
covenants  contained in this Agreement were not performed in accordance with its
terms  or  otherwise  were  materially  breached.  Each  of the  parties  hereto
therefore  agrees  that,  without the  necessity  of proving  actual  damages or
posting bond or other  security,  the other party shall be entitled to temporary
and/or  permanent   injunction  or  injunctions  to  prevent  breaches  of  such
performance  and to specific  enforcement  of such  covenants in addition to any
other remedy to which they may be entitled, at law or in equity.

         SECTION 12.10  Attorneys' Fees and Costs. In the event  attorneys' fees
or other costs are  incurred  to secure  performance  of any of the  obligations
herein  provided  for, or to  establish  damages for the breach  thereof,  or to
obtain any other appropriate  relief,  whether by way of prosecution or defense,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred therein.

         SECTION 12.11 Rules of Construction.  Each use herein of the masculine,
neuter or feminine gender shall be deemed to include the other genders. Each use
herein of the plural shall include the singular and vice versa,  in each case as
the context requires or as it is otherwise appropriate. The word "or" is used in
the inclusive sense.  All articles and sections  referred to herein are articles
and  sections,  respectively,  of this  Agreement and all exhibits and schedules
referred to herein are exhibits and  schedules,  respectively,  attached to this
Agreement.  Descriptive  headings as to the contents of particular  sections are
for convenience  only and shall not control or affect the meaning,  construction
or  interpretation  of any provision of this  Agreement.  Any and all schedules,
exhibits,  annexes,  statements,  reports,  certificates  or other  documents or
instruments  referred to herein or attached hereto are and shall be incorporated
herein by reference hereto as though fully set forth herein verbatim.

         SECTION 12.12 Binding Effect;  Assignment. All of the terms, covenants,
representations,  warranties and  conditions of this Agreement  shall be binding
upon, and inure to the benefit of and be enforceable  by, the parties hereto and
their respective  successors,  representatives  and permitted  assigns.  Nothing
expressed  or referred to herein is intended or



                                      -77-
<PAGE>

shall be construed to give any person other than the parties hereto any legal or
equitable right,  remedy or claim under or in respect of this Agreement,  or any
provision  herein  contained,  it being the intention of the parties hereto that
this Agreement, the assumption of obligations and statements of responsibilities
hereunder,  and all other  conditions  and  provisions  hereof  are for the sole
benefit of the parties to this Agreement and for the benefit of no other person.
Nothing in this  Agreement  shall act to relieve or discharge the  obligation or
liability  of any  third  party to any  party to this  Agreement,  nor shall any
provision  give any  third  party  any right of  subrogation  or action  over or
against any party to this  Agreement.  No party to this  Agreement  shall assign
this Agreement,  by operation of law or otherwise,  in whole or in part, without
the prior written consent of the other parties. Any assignment made or attempted
in violation of this Section 12.12 shall be void and of no effect.

         SECTION  12.13  Public  Disclosure.  Neither SBB nor Pacific will make,
issue or release any announcement,  statement, press release,  acknowledgment or
other public disclosure of the existence of, or reveal the terms,  conditions or
the status of, this Agreement or the  transactions  contemplated  hereby without
the prior  written  consent of the other  parties to this  Agreement;  provided,
however,  that notwithstanding the foregoing,  SBB and Pacific will be permitted
to make any public disclosures or governmental filings as legal counsel may deem
necessary to maintain  compliance  with or to prevent  violations  of applicable
federal  or state  laws or  regulations  or which  may be  necessary  to  obtain
regulatory approval for the transactions contemplated hereby.

         SECTION 12.14 Extension; Waiver. At any time prior to the Closing Date,
the  parties  may  (i)  extend  the  time  for  the  performance  of  any of the
obligations  or  other  acts  of  the  other  parties  hereto,  (ii)  waive  any
inaccuracies in the  representations  and warranties  contained herein or in any
document,  certificate  or writing  delivered  pursuant  hereto,  or (iii) waive
compliance  with any of the  agreements or  conditions  contained  herein.  Such
action  shall  be  evidenced  by a signed  written  notice  given in the  manner
provided in Section 12.05 hereof.  No party to this  Agreement  shall by any act
(except by a written  instrument  given  pursuant  to Section  12.05  hereof) be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
breach of any of the terms and conditions  hereof.  No failure to exercise,  nor
any delay in  exercising  any right,  power or privilege  hereunder by any party
hereto shall operate as a waiver thereof.  No single or partial  exercise of any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  A waiver of any
party of any right or remedy on any one occasion shall not be construed as a bar
to any right or remedy  that  such  party  would  otherwise  have on any  future
occasion or to any right or remedy that any other party may have hereunder.

         SECTION 12.15  Amendments.  To the extent  permitted by applicable law,
this  Agreement  may be amended by action  taken by or on behalf of the Board of
Directors  of SBB and  Pacific  at any time  before  or after  adoption  of this
Agreement by the  shareholders  of SBB and Pacific but,  after any submission of
this Agreement to such  shareholders  for approval,  no amendment  shall be made
that (i) decreases the Merger  Consideration  to be paid for the Pacific  Common
Stock as set forth in Section 1.04 or (ii) materially and adversely  affects the
rights of the  shareholders  of either  SBB or  Pacific  hereunder  without  the
requisite approval of such shareholders. This Agreement may be amended, modified
or supplemented  only by an 


                                      -78-
<PAGE>

instrument in writing  executed by the party against  which  enforcement  of the
amendment, modification or supplement is sought.

         SECTION 12.16     Access; Due Diligence.

         (a) Subject to the  confidentiality  provisions of Article XI,  Pacific
shall,  for a period of forty-five (45) calendar days following the date of this
Agreement, afford the officers, directors,  employees,  attorneys,  accountants,
investment  bankers  and  authorized  representatives  of SBB full access to the
properties,  books,  contracts  and  records of Pacific in order to conduct  due
diligence  of Pacific to assess  the  condition  and  results of  operations  of
Pacific.

         (b) Subject to the confidentiality provisions of Article XI, SBB shall,
for a  period  of  forty-five  (45)  calendar  days  following  the date of this
Agreement, afford the officers, directors,  employees,  attorneys,  accountants,
investment bankers and authorized  representatives of Pacific full access to the
properties,  books,  contracts  and  records  of SBB in  order  to  conduct  due
diligence of SBB to assess the condition and results of operations of SBB.

                               [Signatures Follow]



                                      -79-
<PAGE>


         IN WITNESS  WHEREOF,  SBB and Pacific have caused this  Agreement to be
executed by their duly authorized officers as of the date first above written.

                             SANTA BARBARA BANCORP


                             By: /s/ William S. Thomas, Jr.
                                 -----------------------------------------------
                                      William S. Thomas, Jr., Vice Chairman
                                           and Chief Operating Officer

                             and


                             By: /s/ Kent M. Vining
                                 -----------------------------------------------
                                      Kent M. Vining, Senior Vice President

                             PACIFIC CAPITAL BANCORP


                             By: /s/ D. Vernon Horton
                                 -----------------------------------------------
                                   D. Vernon Horton, Chairman of the Board and
                                             Chief Executive Officer

                             and


                             By: /s/ Clayton C. Larson
                                 -----------------------------------------------
                                         Clayton C. Larson, President and
                                           Chief Administrative Officer