EMPLOYMENT AGREEMENT



         This Employment Agreement  (hereinafter  referred to as "Agreement") is
made effective as of May 22, 1996, by and between FIRST NATIONAL BANK OF CENTRAL
CALIFORNIA  (hereinafter  referred  to as  "Employer")  and  CLAYTON  C.  LARSON
(hereinafter referred to as "Employee").

         Employer  desires to employ,  as President,  a person of high executive
caliber with  significant  prior  experience in banking  services which Employer
provides.

         Employee  being  willing to be employed by Employer as  President,  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 President of Employer.

         2. Employment Term. The term of this Agreement shall commence effective
May 22, 1996, and continue for three (3) years thereafter  through May 21, 1999,
unless earlier  terminated  pursuant to Paragraph 6 below, such period being the
term of this Agreement.

         3.  Employee  Duties.  Employee  shall hold and perform  the  customary
responsibilities  and duties of the position of President,  as designated by the
Bylaws of Employer  and as directed by Employer  through its Board of  Directors
(hereinafter referred to as "Board").

         4. Extent of Services.  Employee shall devote his full time,  attention
and energies to the business of Employer, 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
$165,672 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.
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 such 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

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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.  Employer 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 of  $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  receive  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 and any and all other necessary, customary or usual expenses (including
entertainment)  incurred by employee  for or on behalf of Employer in the normal
course of business as determined to be appropriate by Employer.

                  (e) Other  Benefits.  In the event that Employer in the future
establishes any other benefit plan for its 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 May 21, 1999,
with or without cause in accordance  with this  Paragraph  6(a) through 6(f). 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) the salary and insurance benefits
as  provided  under the terms of this  Agreement  for a period of six (6) months
from the date of such termination provided Employee shall, at his discretion, be
entitled to receive such salary  payment in a lump sum in lieu of receiving such
salary payments over a period of six (6) months following termination;  and (ii)
a bonus for the year in which the  termination  occurs,  prorated based upon the
fraction of the calendar year  Employee was  employed,  if, and only if, a bonus
program  for that  year  has been  established  prior  to such  termination  and
such-plan  provides  for  calculable  bonuses  not  based on the  discretion  of
Employer.  Such  salary and  insurance  benefits

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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.  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 usage of drugs without
prescription,  (5)  misappropriation  of  Employer's  property;  (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
Employer's interests.

                  (c) Early  Termination  By  Employee.  This  Agreement  may be
terminated by Employee upon thirty (30) days' written notice to Employer.

                  (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 disability, but not beyond May 21, 1999, and
to  accrued  but  unused  vacation  leave.  Employee's  salary  in the  event of
disability and termination  therefor shall be offset by any payments received by
Employee as a result of a disability  insurance policy purchased by Employer 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

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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.

                  (f) Change of Control.  In the event of a change in control by
merger of  Employer  and/or  Pacific  Capital  Bancorp,  the  parent  company of
Employer  (hereinafter  referred  to as  "Pacific"),  into  another  bank and/or
holding company or other entity or by purchase of Employer and/or Pacific or the
purchase of all or substantially all of the assets of Employer and/or Pacific by
another bank and/or  holding  company or other person or entity,  not  resulting
from  financial  difficulties  or insolvency of Employer  and/or  Pacific,  then
Employee  shall be paid two and one-half times his annual Base Salary plus Bonus
as defined in Section 5 of this  Agreement  for the  average of the three  years
immediately preceding the effective time of such change of 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.

         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 Pacific 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,  Pacific or any affiliate of Pacific.  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,  Pacific or any affiliate of Pacific.
Employee recognizes and acknowledges that all financial  information  concerning
any of Employer's customers 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

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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 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 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  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.  Any  action  or
proceeding  brought  upon or arising out of this  Agreement  or its  termination
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  Pacific  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

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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 shall indemnify Employee to the
maximum extent permitted under the Bylaws of Employer and the governing laws 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, shall be settled
by  arbitration  in  accordance  with the  Commercial  Arbitration  Rules of the
American  Arbitration  Association,  and  judgment on the award  rendered by the
arbitrators  may be entered in any court  having  jurisdiction.  There  shall be
three (3) arbitrators, one (1) to be chosen directly by each party and the third
(3rd) arbitrator to be selected by the two (2) arbitrators so chosen. 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. Other costs of the arbitration,  including the cost of
any record or transcripts of the  arbitration,  administrative  fees, the fee of
the third (3rd) arbitrator,  and all other fees and costs shall be borne equally
by the parties.

                  (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  or its
termination,  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 he may be entitled.

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         IN WITNESS  WHEREOF,  the parties hereto have set their hands this 22nd
day of  May,  1996,  in the  City of  Salinas,  County  of  Monterey,  State  of
California.

                  EMPLOYER:         FIRST NATIONAL BANK OF CENTRAL CALIFORNIA

                                    By:      /s/ William H. Pope
                                          -----------------------------------

                                    Its:     Executive Committee Chairman
                                          -----------------------------------


                  EMPLOYEE:         /s/ Clayton C. Larson
                                    -----------------------------------------
                                    Clayton C. Larson

                                    2 La Pradera

                                    Carmel, CA  93923



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