EMPLOYMENT AGREEMENT
                                
     This Employment Agreement (hereinafter referred to as
"Agreement") is made effective as of August 26, 1997, by and
between PACIFIC CAPITAL BANCORP (hereinafter referred to as
"Employer") and DALE R. DIEDERICK (hereinafter referred to as
"Employee").

     Employer desires to employ, as its President and as an
executive officer of its subsidiary banks, a person of high
executive caliber with significant prior experience in banking
services which Employer and its subsidiary banks provide.

     Employee being willing to be employed by Employer as
indicated herein, and Employer being willing to employ Employee
on the terms, covenants and conditions hereinafter set forth, it
is agreed as follows:

     1.   Position.  Employee is hereby employed as Executive
Vice President and Credit Administrator and in such additional
executive positions with Employer and Employer's subsidiary banks
as Employer may designate from time to time.

     2.   Employment Term.  The term of this Agreement shall
commence effective August 26, 1997, and continue for three (3)
years thereafter through August 25, 2000, unless earlier
terminated pursuant to Paragraph 6 below, either such period
being the term of this Agreement.

     3.   Employee Duties.  Employee shall hold and perform the
customary responsibilities and duties of his positions as
designated by the Bylaws of Employer and the subsidiary banks and
as directed by Employer and the subsidiary banks through their
Boards of Directors (hereinafter collectively referred to as the
"Board").

     4.   Extent of Services.  Employee shall devote his full
time, attention and energies to the business of Employer and the
subsidiary banks, and shall not, during the term of this
Agreement, engage directly or indirectly, in any other business
activity, except personal investments, without the prior written
consent of Employer.

     5.   Compensation and Benefits.  Employee's salary shall be
at the rate of $102,624.00 per year, prorated for any partial
year in which this Agreement is in effect (as such salary may be
adjusted during the term of this Agreement, the "Base Salary").
Said salary shall be payable in equal semi-monthly installments
from which Employer will withhold and deduct all applicable
federal and state income, social security and disability taxes as
required by applicable law.  Any salary increase shall be at the
sole discretion of the Board.  Employer agrees to review and
evaluate Employee's performance at the end of each fiscal year to
determine whether Employee should be paid a cash bonus (the
"Bonus").  The amount of the Bonus, if any, will be determined in
the sole discretion of the Board.  In addition, Employee shall
receive the following benefits:

          (a)  Automobile.  Employer shall provide Employee with
a full-size automobile, the make, model and equipment of which
shall be determined by Employer, solely for his use alone during
the term of this Agreement.  Employer shall pay or reimburse
Employee for all auto expenses incurred in the use of said
automobile by Employee in the performance of his duties under
this Agreement.  Employer shall maintain an automobile liability
insurance policy on said automobile, with coverage to include
Employee's operation of said automobile and in such amounts as
Employer and Employee shall agree upon.

          (b)  Insurance.  Upon meeting all eligibility
requirements, Employee shall be a participant in such group life
insurance, health and long-term disability plans as are
maintained by Employer, at Employer's sole cost and expense.  In
addition, Employer shall, at its sole cost and expense, provide
Employee with a copy of standard term life insurance in the face
amount to be determined by Employer but which in no event shall
be less than $250,000.  Employee shall have the right, in
Employee's sole discretion, to designate the beneficiary or
beneficiaries of any such insurance.

          (c)  Vacation.  Employee shall accrue four (4) weeks
paid vacation per year, prorated for any partial calendar year in
which this Agreement is in effect, which shall be taken at such
time or times as mutually agreed upon by Employee and the Board,
provided that at least two (2) weeks of such vacation shall be
taken consecutively per calendar year.  Employee acknowledges
that the requirement of two (2) consecutive weeks of vacation is
required by sound banking practices.

          (d)  General Expenses.  Employer shall, upon submission
and approval of written statements and bills in accordance with
the then-regular procedures of Employer, pay or reimburse
Employee for any and all necessary, customary and usual expenses
incurred by him while traveling for or on behalf of Employer or
its subsidiary banks and any and all other necessary, customary
or usual expenses (including entertainment) incurred by employee
for or on behalf of Employer or its subsidiary banks in the
normal course of business as determined to be appropriate by
Employer.

          (e)  Other Benefits.  In the event that Employer or its
subsidiary banks in the future establish any other benefit plan
for senior executives generally, Employee shall be eligible to
participate in such plan on the terms and conditions stated in
the legal documents for such plan.

     6.   Termination.  This Agreement may be terminated prior to
August 25, 2000, with or without cause in accordance with this
Paragraph 6(a) through 6(g).  In the event of such termination,
Employee shall be released from all obligations under this
Agreement, except that Employee shall remain subject to
Paragraphs 7, 8, 12 (c), 12 (i) and 12 (j), and Employer shall be
released from all obligations under this Agreement, except as
otherwise provided in this Paragraph and Paragraphs 12(c), 12(e),
12(i) and 12 (j).

          (a)  Early Termination By Employer Without Cause.  This
Agreement may be terminated without cause, for any reason
whatsoever, in the sole, absolute and unreviewable discretion of
Employer, upon thirty (30) days' written notice by Employer to
Employee.  If this Agreement is terminated pursuant to this
Paragraph 6(a) or the term of this Agreement is not extended upon
expiration thereof, Employee shall receive (i) three (3) times
the annual Base Salary and Bonus as defined in Paragraph 5 of
this Agreement for the average of the three years immediately
preceding the date of such termination which amount shall be due
and payable to Employee on the date of such termination together
with any Base Salary and Bonus earned to such date and (ii)
medical and life insurance coverage for one (1) year from the
date of such termination.  The foregoing shall be in full and
complete satisfaction of any and all rights which Employee may
enjoy under this Agreement and shall be the sole compensation
and/or damages payable to Employee as the result of termination
of this Agreement without cause.

          (b)  Early Termination By Employer For Cause.  This
Agreement may be terminated for cause by Employer immediately
upon written notice to Employee, and Employee shall not be
entitled to receive compensation or other benefits for any period
after termination for cause.  Employer's total liability to
Employee in the event of termination of Employee's employment
under this Paragraph 6(b) shall be limited to the payment of
Employee's Base Salary through the effective date of termination.
Employee understands and agrees that satisfactory performance of
this Agreement on his part requires conformance with the highest
standards of integrity, diligence, competence, skill, judgment
and efficiency in the banking industry and that failure to
conform to such standards is cause for termination of the
Agreement by Employer.  Cause for termination pursuant to this
Paragraph 6(b) also includes: (1) failure to qualify for a surety
bond as provided in Paragraph 11 of this Agreement; (2) violation
of any law, rule or regulation (other than a traffic violation or
similar offense); (3) acts causing termination of Employer's
Banker's Blanket Bond with respect to Employee; (4) repeated
insobriety or use of drugs without prescription, (5)
misappropriation of property of Employer or its subsidiary banks;
(6) any act of dishonesty; (7) neglect of duties or negligence in
carrying out duties; (8) repeated unexcused absence; (9) breach
of any material provision of this Agreement; and (10) any act or
omission that is seriously detrimental to the interests of
Employer or its subsidiary banks.

          (c)  Early Termination By Employee.  This Agreement may
be terminated by Employee upon thirty (30) days' written notice
to Employer.  Employer's total liability in such event shall be
limited to payment of Employee's Base Salary and benefits through
the date of termination.

          (d)  Early Termination Upon Disability.  If Employee
becomes disabled due to a physical or mental disability so that
he is unable to perform the essential functions of his position
and the disability cannot be reasonably accommodated without
undue hardship, Employer may at its option terminate this
Agreement.  Employee shall be entitled to the salary provided for
in Paragraph 5 of this Agreement for a period of not to exceed
six (6) months from the date of Employee's first absence due to
the condition or illness causing or related to the disability,
but not beyond August 25, 2000, and to accrued but unused
vacation leave.  Employee's Base Salary in the event of
disability and termination under this Paragraph 6(b) shall be
offset by any payments received by Employee as a result of a
disability insurance policy purchased by Employer or its
subsidiary banks for Employee.  All other benefits provided for
under this Agreement shall cease as of the date of termination.
For purposes of this Agreement, physical or mental disability
shall mean the inability of Employee to fully perform under this
Agreement for a continuous period of ninety (90) days, as
determined by a physician in the case of physical disability, or
a psychiatrist in the case of mental disability, licensed to
practice medicine in California and selected jointly by Employer
and Employee.  Upon demand by Employer, Employee shall act
promptly to select such physician or psychiatrist jointly with
Employer, shall consent to undergo any reasonable examination or
test and shall authorize release of all pertinent medical records
to Employer.  Recurrent disabilities will be treated as separate
disabilities if they result from unrelated causes or if they
result from the same or related cause or causes and are separated
by a continuous period of at least six (6) full months during
which Employee was able to perform his duties hereunder equal to
at least eighty percent (80%) of his capacity prior to
disability.  Otherwise, recurrent disabilities will be treated as
a continuation of previous disabilities for the purpose of
determining the limitations established in this paragraph.

          (e)  Death During Employment.  This Agreement shall
terminate immediately upon the death of Employee.  Employer's
total liability in such events shall be limited to payment of
Employee's Base Salary and benefits through the date of
Employee's death.

          (f)  Change in Control.  In the event of a Change in
Control (as defined in Paragraph 13 below), Employee shall
receive (i) one and a half (1.5) times the annual Base Salary and
Bonus as defined in Paragraph 5 of this Agreement for the average
of the three years immediately preceding the effective time of
such Change in Control, which amount shall be due and payable to
Employee at the effective time of such Change in Control together
with any Base Salary and Bonus earned to such date, (ii) medical
and life insurance coverage for two (2) years from the date of
such termination and (iii) up to Fifteen Thousand Dollars
($15,000) in outplacement services for Employee to be paid by
Employer directly to any such outplacement service.

          (g)  Limitation of Termination Payments.
Notwithstanding any other provisions of this Agreement, in the
event that any payments or benefits received or to be received by
Employee in connection with a termination pursuant to Paragraph 6
hereof, (all such payments and benefits being hereinafter called
"Total Payments") would not be deductible (in whole or part), by
Employer, as a result of Section 280G of the Code (as defined in
Paragraph 14 below), then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking into
account any other reduction in the Total Payments provided by
reason of Section 280G of the Code), (i) the cash payments shall
first be reduced (if necessary, to zero), and (ii) all other non-
cash payments shall next be reduced (if necessary, to zero).  For
purposes of this limitation (i) no portion of the Total Payments,
the receipt or enjoyment of which Employee shall have effectively
waived in writing prior to the date of termination, shall be
taken into account, (ii) no portion of the Total Payments shall
be taken into account which in the opinion of tax counsel
selected by Employer's independent auditors and reasonably
acceptable to Employee, does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, including
by reason of Section 280G(b)(4)(A) of the Code, (iii) the
payments shall be reduced only to the extent necessary so that
the Total Payments (other than those referred to in clauses (i)
or (ii) of this sentence) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4)(B) of the Code and proposed Reg. Section 1-
280G-1, Q&A-42(b)(5), or are otherwise not subject to
disallowance as deductions, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined by Employer's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.

     7.   Printed Material.  All written or printed materials
used by Employee in performing duties for Employer are and shall
remain the property of Employer.  Upon termination of employment,
Employee shall promptly return such written or printed materials
to Employer.

     8.   Disclosure of Information.  Employee recognizes and
acknowledges that Employer and its subsidiary banks possess
information concerning their business affairs and methods of
operation which constitute valuable, special and unique assets of
their businesses.  Employee shall not, at any time before or
after termination of this Agreement, disclose to anyone any
confidential information relating to Employer, its subsidiary
banks or any affiliate thereof.  For purpose of this paragraph,
confidential information includes all information regarding
products, services, processes, know-how, customers, suppliers,
product and/or service development, business plans, research,
finances, marketing, pricing, costs and any other proprietary
matters relating to Employer, its subsidiary banks or any
affiliate thereof.  Employee recognizes and acknowledges that all
financial information concerning any of the  customers of
Employer's subsidiary banks is strictly confidential, and
Employee shall not at any time before or after termination of
this Agreement disclose to anyone any such financial information
or any part thereof, for any reason or purpose whatsoever.

     9.   Noncompetition by Employee.  During the term of this
Agreement, Employee shall not, directly or indirectly, either as
an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in
any competing banking business; provided, however, Employee shall
not be restricted by this paragraph from owning securities of
corporations listed on a national securities exchange or
regularly traded by national securities dealers, so long as such
investment does not exceed one percent (1%) of the market value
of the outstanding securities of such corporation.

     10.  Moral Conduct.  Employee agrees to conduct himself at
all times with due regard to public conventions and morals.
Employee further agrees not to do or commit any act that will
reasonably tend to degrade him or to bring him into public
hatred, contempt or ridicule or that will reasonably tend to
shock or offend the community or to prejudice Employer, its
subsidiary banks or the banking industry in general.

     11.  Surety Bond.  Employee agrees that he will furnish all
information and take any steps necessary to enable Employer or
its subsidiary banks to obtain or maintain a fidelity bond,
satisfactory to Employer, conditional on the rendering of a true
account by Employee of all monies, goods or other property which
may come into the custody, charge or possession of Employee
during the term of this employment.  Employer or its subsidiary
banks shall pay all premiums on the bond.  If Employee cannot
qualify for a surety bond at any time during the term of this
Agreement, Employer shall have the option to terminate this
Agreement immediately.

     12.  General Provisions.  This Agreement is further governed
by the following provisions:

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

          (b)  Waiver.  Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such provision or
of any breach of any other provision of this Agreement.  The
failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this
Agreement.

          (c)  Choice of Law and Forum.  This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, except to the extent preempted by the laws
of the United States, including, but not limited to, the National
Bank Act.  Any action or proceeding brought upon or arising out
of this Agreement or its termination or the termination of
Employee's employment shall be brought in a forum located within
the State of California.

          (d)  Binding Effect of Agreement.  This Agreement shall
inure to the benefit of and be binding upon Employer, its
successors and assigns, including without limitation, any person,
partnership or corporation which may acquire all or substantially
all of Employer's assets and business or with or into which
Employer or its subsidiary banks may be consolidated, merged or
otherwise reorganized, and this provision shall apply in the
event of any subsequent merger, consolidation reorganization or
transfer.  The provisions of this Agreement shall be binding upon
and inure to the benefit of Employee and his heirs and personal
representatives.  The rights and obligations of Employee under
this Agreement shall not be transferable by Employee by
assignment or otherwise and such rights shall not be subject to
commutation, encumbrance or the claims of Employee's creditors,
and any attempt to do any of the foregoing shall be void.

          (e)  Indemnification.  Employer and its subsidiary
banks shall indemnify Employee to the maximum extent permitted
under their articles of association, bylaws and applicable law
for any liability or loss arising out of Employee's actual or
asserted misfeasance or nonfeasance in the good faith performance
of his duties or out of any actual or asserted wrongful act
against or by Employer, including, but not limited to, judgments,
fines, settlements and expenses incurred in the defense of
actions, proceedings and appeals therefrom.  If available at
reasonable rates, which shall be determined by the Employer in
its sole discretion, Employer shall endeavor to apply for and
obtain directors' and officers' liability insurance to indemnify
and insure Employer and Employee from such liability or loss.

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

          (g)  Headings.  The headings in this Agreement are
solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.

          (h)  Notices.  Any notices to be given hereunder by any
party to another party may be effected either by personal
delivery, in writing or by mail, registered or certified, postage
prepaid with return receipt requested.  Mailed notices shall be
addressed to the parties at the addresses indicated at the end of
this Agreement, but each party may change his or her address by
written notice in accordance with this paragraph.  Notices
delivered personally shall be deemed communicated as of actual
receipt; mailed notices shall be deemed communicated as of five
(5) days after mailing.

          (i)  Arbitration.  Any controversy or claim arising out
of or relating to this Agreement or alleged breach of this
Agreement or in any way arising out of the termination of
Employee's employment shall be settled by arbitration in
accordance with the then current Employment Dispute Resolution
Rules of the American Arbitration Association, and judgment on
the award rendered by the arbitrators may be entered in any court
having jurisdiction. Each party shall pay the fees of the
arbitrator he/it selects and of his/its own attorneys, and the
expenses of his/its witnesses and all other expenses connected
with presenting his/its case.  Except as otherwise required by
law, other costs of the arbitration, including the cost of any
record or transcripts of the arbitration, administrative fees and
all other fees and costs shall be borne equally by the parties.
Full discovery shall be permitted to the parties to any such
arbitration, including depositions of all relevant witnesses.

          (j)  Attorneys' Fees and Costs.  If any action at law
or in equity is brought by a party upon or arising out of this
Agreement, its termination or the termination of Employee's
employment, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements incurred in
the action, in addition to any other relief to which it may be
entitled.

     13.  Change in Control.  A "Change in Control" shall be
deemed to have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied:

          (a)  after the date of this Agreement, any Person (as
defined below) becomes the Beneficial Owner (as defined below),
directly or indirectly, of securities of Employer representing
25% or more of the combined voting power of Employer's then
outstanding securities; or
          (b)  during any period of two consecutive years (not
including any period prior to the date of this Agreement),
individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a
Person who has entered into an agreement with Employer to effect
a transaction described in this Paragraph 13) whose election by
the Board or nomination for election by Employer's shareholders
was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or
          
          (c)  the shareholders of Employer approve a merger or
consolidation of Employer with any other corporation, other than
(i) a merger or consolidation which would result in the voting
securities of Employer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity),
in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of
Employer, at least 51% of the combined voting power of the voting
securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of
Employer (or similar transaction) in which no Person acquires
more than 49% of the combined voting power of Employer's then
outstanding securities; or
          
          (d)  the shareholders of Employer approve a plan of
complete liquidation of Employer or an agreement for the sale or
disposition by Employer of all or substantially all of Employer's
assets.

     For the purposes of this Paragraph 13, "Person" shall have
the meaning given in Section 3(a)(9) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act"), as modified and used
in Sections 13(d) and 14(d) thereof; however, a Person shall not
include (i) Employer or any of its subsidiaries, (ii) a trustee
or other fiduciary holding securities under an employee benefit
plan of the company or any of its subsidiaries, or (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities.  "Beneficial Owner" shall have the
meaning defined in Rule 13d-3 under the Exchange Act.
     
     14.  Code.  "Code" means the Internal Revenue Code of 1986,
as amended from time to time, and any regulations relating
thereto.

     
     
     
     
     
     
     
     
     
     
     The parties hereto have executed this Agreement as of the
date first written above, in the City of Salinas, County of
Monterey, State of California.

          EMPLOYER:      PACIFIC CAPITAL BANCORP
          
                         By: /s/ Robert B. Sheppard
                    
                         Its: Chairman, Human Resources Committee
                    
          
          
          EMPLOYEE:      /s/ Dale R. Diederick
                         Dale R. Diederick