Exhibit 10.1.16

 

[GRAPHIC APPEARS HERE]

 

2005

HIGH PERFORMANCE INCENTIVE PROGRAM

 

The High Performance Incentive Program (HPIP) is designed to recognize and
reward those employees of Pacific Capital Bancorp (the Company) who have
contributed meaningfully to the increase in shareholder value, profitability and
customer centricity of the Company. Additionally, the plan’s objectives include
the following:

 

  •   Create greater alignment with the Core Bank Performance*

  •   Encourage teamwork within departments and across business units

  •   Ensure that our total compensation is competitive

 

The High Performance Incentive Program is linked directly to achieving the
company’s annual Core Bank Net Income goal. Every employee is important in
achieving our goal.

 

*Does not include revenue and expenses from Refund Anticipation Loan and Refund
Transfer business.

 

KEY ELEMENTS

 

Success Factors

 

Three Success Factors determine an annual Incentive award:

  •   Bank Performance

  •   Department Performance

  •   Individual Performance

 

Ø Bank Performance

The Company’s annual business planning and budgeting process outlines the
objectives to be achieved for the year. Our goal for 2005 is Core Bank Net
Income at or above plan.

 

Ø Department Performance

The performance of each department is dependent upon the combined efforts and
focus of all its employees. To ensure that there is a common framework, the
following metrics will apply to all departments:

  •   Revenue Generation

  •   Expense Management

  •   Customer Value Added

  •   Risk Management (e.g. Regulatory and Governance Compliance)

 

Departments may have different components for these metrics depending upon their
function. It is important that all employees understand their role in achieving
the department goals.

 

Ø Individual Performance

In addition to the responsibilities each individual has in performing his or her
job, individual goals will be established that contribute directly to the
Company’s annual business goals. The individual’s goals will support the
Department’s metrics, must be significant, and directly support the
profitability or contribution of the business unit’s achievement of the annual
business plan, compliance and risk mitigation, and the leadership and
development of employees if the individual is in a leadership role.

 

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Goals and Weightings

To ensure that all employees are aligned toward the Bank Performance, every
employee will have a minimum of 15% weighting in this goal category. Positions
in higher grade levels generally have the responsibility to guide a business
unit and to more directly impact the overall Bank performance. The goals in the
higher grade levels, therefore, will be weighted more heavily to the overall
Bank performance. The goal setting process and weighting should correlate
directly to the individual’s responsibility level and ability to measure his or
her impact on company performance. It is recommended that not more than three to
four goals are established to ensure that the employee has the right focus.

 

Plan Funding

Our ability to fund incentive payouts is dependent upon our overall success in
achieving the Core Bank’s net income goal. Funding levels will reflect the
degree of success in attaining the Core Bank’s net income goal and in turn, will
establish the dollar level of the incentive pool. If the Bank does not achieve
the Threshold level, there will be no payout of incentives even if a Department
and/or Individual has met or exceeded his or her goals.

 

Levels   Bank Goal Achievement   Funding Level of Pool

Below Threshold

 

< 95% of Goal

 

No funding

Threshold

 

95% - 99% of Goal

 

75% funded

Target

 

100% -110% of Goal

 

100% funded

Stretch

 

110% - 120% of goal

 

120%

Super Stretch

Bank level only

 

> 120% of goal

 

Funded up to

a cap of 150%

 

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Guidelines for Determining Individual Award

The department leader is responsible for recommending the appropriate incentive
awards based upon the individual contributions of each eligible employee. Award
percentages will differ based upon the level of goal achievement and performance
of the employee. An individual must have achieved an “Expectations Achieved”
overall PACE rating for the past 12 months to be considered for any award. Base
compensation rewards the employee for performing his or her responsibilities;
the HPIP incentive recognizes the “above and beyond” contributions of the
employee.

 

Grade    Below Threshold   Threshold   Target   Stretch

18-19, T6

   0%   Up to 18.75%   Up to 25%   Up to 31.25%

17, T5

   0%   Up to 15%   Up to 20%   Up to 25%

15-16,

T3-T4

   0%   Up to 11.25%   Up to 15%   Up to 18.75%

13-14, T2

   0%   Up to 9%   Up to 12%   Up to 15%

7-12, T1,

D1-3

   0%   Up to 3.75%   Up to 5%   Up to 6.25%

 

An Adjustment Factor can be used that takes into consideration the employee’s
contribution to Individual, Department and Bank goals relative to other
employees in the department. It also should take into account other factors such
as overall PACE rating, pro-ration for new employees, risk management and
leadership.

 

TERMS AND CONDITIONS

 

Eligible Participants

All regular status employees of Pacific Capital Bancorp who are paid on a 100%
salaried basis through the program year and who are actively employed at the
time of distribution are eligible for consideration. Eligibility, however, does
not guarantee payment. Employees who participate in variable or commission pay
programs or the RAL department incentive program are not eligible for the HPIP
Program.

 

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Employees who are hired during the year but prior to October 1, 2005, will be
eligible on a prorated basis. Employees who change from a 100% salaried position
to a variable or commission pay plan during the business year may be eligible
for HPIP on a prorated basis. Employees who retire from the Company (in
accordance with the Company’s retirement criteria) after the first quarter of
the year will also be eligible on a prorated basis.

 

When an employee transfers to a new business unit during the year, it is
important that the new leader collaborates with the former leader to document
accomplishment level for the previously set individual goals and business unit
goals. The new leader and employee will then determine and document new
individual and department goals for the balance of the year.

 

Program Year

The HPIP is effective January 1, 2005 and will be in effect during the plan year
defined as January 1 through December 31, 2005. The Program will be reviewed and
updated annually to ensure alignment with the Bank’s strategic plan and business
goals.

 

Program Administrator

The Program Administrator is the Director of Human Resources of Pacific Capital
Bancorp. The Program Administrator reviews all recommendations prior to
submission to the Compensation Committee of the Board of Directors and has
responsibility to ensure fair and consistent consideration of participants. The
Program Administrator may recommend modifications in the program design and
review the effectiveness of the plan on an annual basis.

 

Payment

Funding of the program and payments are subject to approval by the Compensation
Committee of the Board of Directors, and if approved, payment will be made in
February 2006.

 

Termination of Employment

To encourage employees to remain in the employment of the Company, a participant
must be employed on the date of the actual incentive payout. Any termination
(except by reason of death or official company retirement), prior to the
incentive payment date will serve as a forfeiture of any award.

 

Disability or Death

If a participant is disabled by an accident or illness, and is disabled long
enough to be placed on long-term disability as defined by the Company’s LTD
plan, his or her incentive award for the Program period shall be pro-rated so
that no award will be earned during the period of long-term disability.

 

In the event of death, the Company will pay to the participant’s estate the
pro-rata portion of the award that the participant would have received if he or
she had lived to the end of the Program year.

 

Miscellaneous

The Program will not be deemed to give any participant the right to be retained
in the employ of the Company, nor will the Program interfere with the right of
the Company to discharge any participant at any time.

 

Pacific Capital Bancorp reserves the right to modify this program at any time.

 

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