EMPLOYMENT AGREEMENT

         This Employment Agreement  (hereinafter  referred to as "Agreement") is
made  effective as of November 20, 1996,  by and between  SOUTH VALLEY  NATIONAL
BANK  (hereinafter  referred to as  "Employer")  and BRAD L. SMITH  (hereinafter
referred to as "Employee").

         Employee  being  willing to be employed by  Employer as  President  and
Chief  Executive  Officer,  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  and Chief
Executive Officer of Employer.

         2. Employment Term. The term of this Agreement shall commence effective
November 20, 1996, and continue for two (2) years  thereafter  through  November
20, 1998, 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
responsibilities  and duties of the  position of President  and Chief  Executive
Officer as specified on Exhibit A attached hereto.

         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
One Hundred Fifty Three Thousand, One Hundred Fifty Dollars ($153,150) 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, and any salary increase will be determined in the sole discretion
of Employers Board of Directors (the "Board"), subject to review and approval by
the Board of Directors of Pacific Capital Bancorp  ("Pacific") or its designated
representatives. In addition, Employee shall receive the following benefits:

         (a) Automobile.  For one (1) year after the date hereof, 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 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

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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.  Upon the  expiration  of one (1) year after the
date hereof, Employer may, in its sole discretion, renew the benefits under this
Paragraph 5(a).

         (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,  for one (1) year after the
date hereof Employer shall, at its sole cost and expense,  provide Employee with
a copy of standard  term life  insurance in the face amount of Six Hundred Fifty
Thousand Dollars  ($650,000).  Employee shall have the right, in Employee's sole
discretion, to designate the beneficiary or beneficiaries of any such insurance.
Upon the expiration of one (1) year after the date hereof,  Employer may, in its
sole discretion,  continue  providing such life insurance to Employer under this
Paragraph 5(b).

         (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.

         6. Termination.  This Agreement may be terminated prior to November 20,
1998, with or without cause in accordance with this Paragraph 6(a) through 6(c).
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 13, and Employer shall be released from all
obligations under this Agreement, except as otherwise provided in this Paragraph
and Paragraphs 12(c), 12(e), and 12(i).

         (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).  Employee  shall be entitled to receive two (2) times  Employee's  average
annual  compensation  for the five (5) years  immediately  preceding the date of
this  Agreement,  payable in bi-monthly  installments on the first and fifteenth
days of each month.  Such payment 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.  All other benefits and rights due
to Employee  under this  Agreement  shall  immediately

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cease upon such payment.  Employee  acknowledges and agrees that such payment is
in lieu of all damages,  payments and liabilities under this Agreement and shall
constitute Employee's sole and exclusive remedy hereunder.

         (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 and shall  terminate
immediately upon the death of Employee. If this Agreement is terminated pursuant
to this  Paragraph  6(c),  Employee  shall be  entitled to receive two (2) times
Employee's  average  annual  compensation  for the  five (5)  years  immediately
preceding the date of this Agreement,  payable in bi-monthly installments on the
first and  fifteenth  days of each month.  All other  benefits and rights due to
Employee  under  this  Agreement  shall  immediately  cease  upon such  payment.
Employee  acknowledges  and agrees that such  payment is in lieu of all damages,
payments and liabilities  under this Agreement and shall  constitute  Employee's
sole and exclusive remedy hereunder.

         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,  Pacific and their  affiliates  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

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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  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.

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         (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 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

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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.  The  substantially  prevailing
party in any such arbitration  shall be entitled to reasonable  attorneys' fees,
costs and necessary  disbursements  incurred  therein,  in addition to any other
relief to which he may be entitled.

         13.  Indemnification  for  Negligence  or  Misconduct.  Employee  shall
indemnify  and hold Employer  harmless  from all  liability for loss,  damage or
injury to persons or property resulting from the gross negligence or intentional
conduct of the Employee.

         IN WITNESS  WHEREOF,  the parties hereto have set their hands this 20th
day of November, 1996, in the City of , County of , State of California.

         EMPLOYER:                          SOUTH VALLEY NATIONAL BANK



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

                                            Its:Vice Chairman
                                                -------------
         EMPLOYEE:

                                            /s/ Brad L. Smith
                                            -----------------

                                            Brad L. Smith

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