THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is entered into as of January 9, 2002, by Mid-State Bank & Trust, a banking company organized under the laws of California ("Company"), located in Arroyo Grande, California, and Harry H. Sackrider ("Executive" or "you").

        WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and the shareholders of Mid-State Bancshares;

        WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and the shareholders of Mid-State Bancshares;

        WHEREAS, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in circumstances arising from the possibility of a change in control of the Company. In particular, the Board believes it important, should the Company, Mid-State Bancshares or the shareholders of Mid-State Bancshares receive a proposal for transfer of control of the Company, that Executive be able to assess and advise the Board and/or the Board of Directors of Mid-State Bancshares whether such proposal would be in the best interests of the Company and Mid-State Bancshares' shareholders and to take such other action regarding such proposal as such Boards might determine to be appropriate, without being influenced by the uncertainties of your own situation; and

        WHEREAS, the Board of Directors of the Company has approved this Agreement;

        NOW, THEREFORE, in consideration of the premises and mutual promises of the parties, the Company and Executive agree as follows:

        1.    Right to Terminate.    The Company or you may terminate your employment at any time, subject to the Company's providing the benefits hereinafter specified in accordance with the terms hereof.

        2.    Term of Agreement.    This Agreement shall commence on the date hereof and shall continue in effect until December 31, 2002; provided, however, that commencing on January 1, 2003, and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 90 days prior to such January 1st date, the Company or you shall have given notice that this Agreement shall not be extended; and provided, further, that this Agreement shall continue in effect for a period of Thirty-Six (36) months beyond the term provided herein if a Change in Control of the Company, as defined in Section 3 hereof, shall have occurred during such term. Notwithstanding anything in this Section 2 to the contrary, this Agreement shall terminate if you or the Company terminate your employment prior to a Change in Control of the Company.

        3.    Change in Control.    "Change in Control" means a change, after January 1, 2002, in control of the Company of a nature that would be required to be the subject of prior approval by (A) the Federal Reserve Board pursuant to the Bank Holding Company Act of 1956, as amended, (B) the Federal Deposit Insurance Corporation under the Change In Bank Control Act, (C) the appropriate federal bank regulatory agency under the Bank Merger Act or (D) the California Department of Financial Institutions pursuant to provisions of the California Financial Code; provided, that without limitation, and without consideration of regulatory exemptions from prior approval, such a Change in Control will be deemed to have occurred if and when any of the following occur: (i) there is a transfer, voluntarily or by hostile takeover or proxy contest, operation of law or otherwise, of control of the Company, (ii) individuals, who were members of the Board of Directors of the Company immediately prior to a meeting of the shareholders of the Company which meeting involved a contest for the election of

directors, do not constitute a majority of the Board of Directors of the Company following such election or meeting, (iii) an acquisition, directly or indirectly, of more than 25% of the outstanding shares of any class of voting securities of the Company by any Person, (iv) a merger (in which the Company is not the surviving entity), consolidation or sale of all, or substantially all, of the assets of the Company, or (v) there is a change, during any period of two consecutive years, of a majority of the Board of Directors of the Company as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of such period. If any of the approvals referred to in (A)-(D), above, shall relate to a Change in Control of Bancshares or any of the events or circumstances described in (i)-(v), above, shall occur to or be applicable to Bancshares, then such Change in Control shall be deemed for all purposes of this Agreement to also be a "Change in Control" of the Company. For purposes of this Agreement, the term "Person" shall mean and include any individual, corporation, partnership, group, association or other "person", as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company, Mid-State Bancshares, a wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored by the Company, Mid-State Bancshares or a subsidiary of the Company.

        4.    Termination Following Change in Control.    If any of the events described in Section 3 hereof constituting a Change in Control of the Company shall have occurred, you shall be entitled to the benefits provided in Section 5 hereof upon the termination of your employment with the Company within Thirty-Six (36) months after such event, unless such termination is (a) because of your death or Retirement, (b) by the Company for Cause or Disability or (c) by you other than for Good Reason (as all such capitalized terms are hereinafter defined).

        (i)    Disability.    Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full time basis for one hundred eighty (180) consecutive days as a result of your incapacity due to physical or mental illness (as confirmed by a physician acceptable to you), unless within thirty (30) days after Notice of Termination (as hereinafter defined) is given to you following such absence you shall have returned to the full time performance of your duties.

        (ii)    Retirement.    Termination by you of your employment based on "Retirement" shall mean the voluntary termination of active employment with the Company or a subsidiary on or about 65 years of age or at such later age as such employee desires to discontinue his active employment with the Company or a subsidiary.

        (iii)    Cause.    Termination by the Company of your employment for "Cause" shall mean termination upon (a) the willful and continued failure by you to perform substantially your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness) after a demand for substantial performance is delivered to you by the Chairman of the Board or the Vice Chairman of the Board or the President of the Company which specifically identifies the manner in which such executive believes that you have not substantially performed your duties, or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company. For purposes of this paragraph (iii), no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. It is also expressly understood that your attention to matters not directly related to the business of the Company shall not provide a basis for termination for Cause so long as the Board has approved your engagement in such activities. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been


 

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