Performance-Based Annual Incentive Compensation Plan



 Exhibit 10.23 
 

 
 August 2007 
 PERFORMANCE-BASED 
 ANNUAL INCENTIVE
COMPENSATION PLAN 
 Amendment #1 March 2008 
 Amendment #2 July 2008 
 Amendment #3 February 2009 







 PERFORMANCE-BASED 
 ANNUAL INCENTIVE COMPENSATION PLAN 
 INTRODUCTION 
 Pacific Capital Bancorp (the “Company”) is
willing to provide annual cash incentive award opportunities for eligible employees, through the use of a Performance-Based Annual Incentive Compensation Plan (the “Plan”). The annual incentive awards will provide a payment based upon
attainment of specified goals and objectives. The objective is to align the interests of these employees with the interests of the Company in obtaining superior financial results. 
  

	1.	OBJECTIVE & PURPOSE 

 The Company believes
in pay for performance, and desires to implement a performance-based culture. The Company is committed to rewarding employees for the achievement of annual performance goals. This Plan is designed to reward and retain high performers, and to drive
the long-term financial success of the Company. The Plan should encourage teamwork and create an environment where executives are rewarded if the Company and his/her department achieve or exceed pre-determined annual performance criteria. The Plan
is also designed to reward employees for achieving and exceeding individual performance criteria. It is prospective in design with the utilization of a defined payout formula that is based upon the achievement of a combination of pre-determined
Company and department/individual performance criteria. 
  

	2.	PARTICIPATION/ELIGIBLITY 

 Each Plan Year the CEO
shall submit to the Compensation Committee of the Board of Directors (“Committee”) a list of eligible employees (or employee groups) for participation in the Plan for the upcoming Plan Year. In addition to a listing of the eligible
employees, the CEO shall also provide the Committee with a summary of the annual incentive award tiers, the incentive award opportunities for each tier, the weighting of Company versus department/individual performance goals, and a summary of
possible payouts. Each Plan participant shall be notified of eligibility for participation in the Plan. 
 The Plan has been limited to
a select group of officers of the Company as defined under the Plan Design Chart set forth in Section 4. In addition, at the sole and absolute discretion of the CEO, annual incentive payments may be made under the Plan to other exempt employees
who have demonstrated exemplary performance but have not been designated eligible employees under the Plan. Such incentive payment amounts will be determined in accordance with the Plan Design Chart set forth in Section 4. In the case of an
employee that has been granted eligibility to participate in the Plan but does not maintain a job title that qualifies for an incentive payment under Plan Design Chart, the CEO may award a discretionary incentive payment to such individual under the
Plan, subject to the approval of the Compensation Committee. 
  

 Page 1, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009 








 Eligibility requirements include: 
  

	 	 •
	 	 Eligibility shall be based on the employee’s position on January 1st. 


  

	 	 •
	 	 If an eligible employee is promoted after January 1st, any incentive award will be pro-rated based on the employee’s achievement of performance goals for the old and new position. 


  

	 	 •
	 	 New employees must be employed by October 1st in a given Plan Year to be eligible for an award related to performance in that Plan Year. 


  

	 	 •
	 	 Employees hired after October 1st must wait until the next fiscal year to be eligible for an award. 


  

	 	 •
	 	 Employees hired before October 1st who work a partial year will receive pro-rated awards. 


  

	 	•	 	 Plan participants must receive a threshold performance rating of “expectations achieved” or better for the Plan Year to be eligible for any payout.



  

	 	•	 	 A Plan participant must be an active employee as of the award payout date to receive an award. 


  

	 	•	 	 Eligible employees who terminate employment due to disability, death or retirement (as defined by the Company’s official retirement policies) can receive a
partial award based on the percentage of days the eligible employee was actively employed in the calendar year, even if they are not employed as of the award payout date. 


  

	 	•	 	 Employees who participate in variable or commission pay programs or the Refund Anticipation Loan department incentive program are not eligible to participate in
this Plan. 


  

	3.	PLAN YEAR/PERFORMANCE PERIOD 

 The Plan and performance period operates on a calendar year basis (January 1st to December 31st). 
  

	4.	PLAN DESIGN 

 The Plan design incorporates a tiered
approach with annual incentive awards that are linked to the achievement of pre-defined performance goals. The incentive ranges (as a percent of salary) are designed to provide market competitive payouts for the achievement of threshold, target and
maximum performance goals. The table below provides the basic Plan design to be used until the Plan is amended, and the Plan will be reviewed annually to ensure alignment with corporate objectives. The basic Plan design must be approved by both the
Compensation Committee and the Board of Directors on an annual basis. 
  

 Page 2, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009 









																
	 	  	 	  	Incentive Award Opportunities
(Percent of Salary)	 	 	Performance Objectives
(Weighting)
	 Tier
	  	 Officers Included
	  	Threshold	 	 	Target	 	 	Maximum	 	 	Company	  	 Dept/Individual

	 I
	  	CEO	  	0	%	 	75	%	 	150	%	 	100%	  	0%
	 II
	  	CEO Direct Reports	  	0	%	 	50	%	 	100	%	 	50% - 75%	  	25% - 50%
	 III A
	  	SVPs – Production Direct Reports	  	0	%	 	25	%	 	50	%	 	40%	  	60%
	 III B
	  	SVPs – Operations Direct Reports	  	0	%	 	25	%	 	50	%	 	50%	  	50%
	 IV A
	  	VPs – Production (+ Branch Mgrs.)	  	0	%	 	15	%	 	30	%	 	25%	  	75%
	 IV B
	  	VPs – Operations	  	0	%	 	15	%	 	30	%	 	30%	  	70%

  

	5.	AWARD OPPORTUNITIES 

 Threshold, target, and maximum
award opportunity levels, expressed as a percent of salary, have been set for each eligible employee. The actual payouts will be calculated using a ratable approach, where payouts are calculated as a proportion of threshold, target and maximum
performance levels. An example calculation is provided in Section 7. 
  

	 	A.	Threshold Performance: The threshold level of performance needed to be eligible to receive an incentive award.  

  

	 	B.	Target Performance: The budgeted, or expected, level of performance based upon both historical data and management's best judgment of expected performance
during the performance period.  

  

	 	C.	Maximum Performance: The level of performance which based upon historical performance and management’s judgment would be exceptional or significantly
beyond the expected.  

  

	6.	PERFORMANCE OBJECTIVES 

 The Plan will provide
annual incentive awards to Plan participants based on overall Company and Department and/or Individual performance objectives. The performance objectives are determined by using the Company’s performance history, peer data, market data, and
management's judgment of what reasonable levels can be reached, based on previous experience. At the beginning of each plan year, based on recommendations from the CEO and other Company management, the Compensation Committee shall determine and
approve the performance objectives for the CEO, CFO and the three other most highly compensated executives (the “Senior Executive Officers”). The performance objectives for the Senior Executive Officers may consist of one or more of the
following: Revenue, Revenue Growth, Net Income, Net Income Growth, Total Assets, Growth in Total Assets, Deposits, Growth of Deposits, Loans, Loan Growth, EPS, EPS Growth, Efficiency Ratio 

  

 Page 3, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009 








 
Improvement, Charge Offs, Non-Performing Loans to Total Loans [and others that may apply to the Senior Executive Officers]. 
 The foregoing performance objectives may be applied to the Company, a division of the corporation or subsidiary of the corporation. The Compensation
Committee will submit the approved plan design to the Board of Directors for approval. The specific performance criteria for participants that are not Senior Executive Officers will be determined by management and communicated via a goal setting
worksheet. These worksheets will clearly define the performance objectives at threshold, target, and maximum levels and will define the potential award opportunity for the Plan participants. 
  

	 	A.	Company Performance - The overall Company performance will be based on measurement criteria approved by the Compensation Committee and Board of Directors. The
percentage of payout for overall Company performance will be allocated based on the specific weighting of the Company goal(s), as well as on the participant’s tier level and the actual performance compared to the pre-determined threshold,
target, and maximum performance levels. 

  

	 	B.	Department or Individual Performance - Plan participants below Tier I of the Plan will also have a portion of their annual incentive award based on a combination of
department and/or individual performance criteria. The number of performance criteria included, the specific type of performance criteria to use, and the weighting of each criteria for the overall incentive award, will vary based on tier and Plan
participant. 

  

	7.	AWARD CALCULATION (Example) 

 The actual award
payouts will be calculated using a ratable approach, where award payouts are calculated as a proportion of threshold, target and maximum award opportunities. If actual performance falls between a performance level, the payout will also fall between
the pre-defined performance level on a pro-rated basis. 
 An example of how a payout amount is determined is provided in the example below.

  

	 	•	 	 Plan participant = Tier II Executive with a salary of $200,000 


  

	 	•	 	 Award Opportunity = 50% of salary at target and 100% of salary at maximum 


  

	 	•	 	 Performance Objectives = 60% based on Company performance and 40% based on Department or Individual performance 


  

 Page 4, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009 









																	
	 Company Goal/s
	 	 Goal Weight
(Total 100%)
	 	 Criteria
(example)
	 	 Threshold
	 	 Target
	 	 Maximum
	 	 Actual
Performance
	 	 Bonus Calculation
	 	 Actual Payment

									
	60%	 	100%	 	Net Income	 	X Value	 	Y Value	 	Z Value	 	Y Value (Target)	 	Salary x Target Performance % x Company Goal % x Goal Weight %	 	$200,000 x 50% x
60% x 100% =
$60,000
									
	 Dept. / Indiv.
Goal/s
	 	 Dept./ Indiv.
Goal Weight
(Total 100%)
	 	 Criteria
	 	 Threshold
	 	 Target
	 	 Maximum
	 	 Actual
Performance
	 	 Bonus Calculation
	 	 Actual Payment

									
	40%	 	50%	 	Fee Income	 	X	 	Y	 	Z	 	Y (Target)	 	Salary x Target Performance % x Dept./Ind. Goal % x Goal Weight %	 	$200,000 x 50% x
40% x 50% =
$20,000
	 	20%	 	Deposit Growth	 	A	 	B	 	C	 	C (Maximum)	 	Salary x Max Performance % x Dept./Ind. Goal % x Goal Weight %	 	$200,000 x 100% x
40% x 20% =
$16,000
	 	5%	 	Loan Growth	 	Q	 	R	 	S	 	Q (Threshold)	 	Salary x Threshold Performance % x Dept./Ind. Goal % x Goal Weight %	 	$200,000 x 0% x
40% x 5% = $0
	 	25%	 	Other	 	L	 	M	 	N	 	M/N (Between Target & Max)	 	Salary x Between Targ. & Max Performance & x Dept./Ind. Goal % x Goal Weight %	 	$200,000 x 75% x
40% x 25% =
$15,000
								
	 TOTAL PAYOUT
	 		 		 		 		 		 		 	$111,000 (55.5%)

 Notwithstanding the foregoing, no incentive payment shall be made to a Covered Employee unless
prior to such payment, the Compensation Committee certifies that the performance goals that provide for the payment have been satisfied. 
  

	8.	EARNING OF ANNUAL INCENTIVE AWARDS 

 Incentive
awards will be earned during each Plan Year/Performance Period. If the Company does not meet threshold performance levels, there will be no payouts for the Company’s performance objective portion to Plan participants. However, the Plan
participants will still be eligible to receive payouts related to their department or individual performance objectives. 
  

	9.	PAYMENT OF AWARDS 

 After all performance results
are available at year-end, the award calculation for each Plan participant will be submitted to the CEO and the Compensation Committee for approval. In approving an award, the CEO and the Compensation Committee shall have the discretionary authority
to consider all performance results including Company, department, and individual performance. Payouts will be based on the eligible salary of the Plan Participant. Eligible salary is defined as the actual amount of salary earned in the calendar
year in which the award is based. Awards are then paid out as a special payment, less any applicable tax withholdings, within two and one half months following the fiscal year-end. The awards granted and payments made to Senior Executive Officers
under this Plan are intended to qualify as performance-based compensation under Section 162(m). 
  

 Page 5, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009 









	10.	RECOVERY OF AWARDS MADE TO SENIOR EXECUTIVE OFFICERS 

 Any employee that is prohibited from receiving bonus or incentive compensation under the Emergency Economic Stabilization Act of 2008, as amended (“EESA”), shall be required to forfeit such compensation paid to such employee if
the bonus or incentive compensation is paid during the period that the Department of the Treasury holds a debt or equity position in the Company. In addition, certain other highly compensated employees of the Company (as determined under EESA), that
are not prohibited from receiving bonus or incentive compensation under EESA, shall be required to forfeit any bonus or incentive compensation paid to such employee during the period that the Department of Treasury holds a debt or equity position in
the Company, if the award or incentive compensation is based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate. 
  

	11.	PLAN ADMINISTRATION 

 The Program Administrator is
the Chief People Officer of the Company.The Program Administrator reviews all recommendations with the CEO for approval prior to submission to the Compensation Committee and has responsibility to ensure fair and consistent consideration of eligible
Plan participants. The Program Administrator or the CEO may recommend modifications to the program design and review the effectiveness of the plan on an annual basis with the Compensation Committee. 
 The Board also has the sole ability to decide if an extraordinary occurrence totally outside of management's influence, be it a windfall or a shortfall,
has occurred during the current Plan Year, and whether the awards should be adjusted to reflect the effects of such events. Such payments shall be determined solely from the plan design approved by the Compensation Committee. The Plan Administrator
shall have the authority to enforce the forfeiture provisions set forth in Section 10. 
  

	12.	TERMINATION OF EMPLOYMENT 

 If a Plan participant is
terminated by the Company, or voluntarily terminates his/her employment with the Company prior to payout, no incentive award will be paid. To encourage employees to remain employed by the Company, a participant must be an active employee of the Bank
on the date the incentive is paid to receive an award. However, there are exceptions for terminations as a result of death, disability, or official retirement. 
 If a participant is disabled and placed on long-term disability, his/her bonus award for the Plan period shall be prorated 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 had been earned by the participant. Employees who qualify for official retirement will receive payment for a pro-rata portion of the award that they
would be eligible for prior to retirement. 
  

 Page 6, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009 









	13.	AMENDMENTS AND PLAN TERMINATION 

 The Company has
developed the Plan on the basis of existing business, market and economic conditions, current services, and staff assignments. If substantial changes occur that affect these conditions, services, assignments, or forecasts, the Company may add to,
amend, modify or discontinue any of the terms or conditions of the Plan at any time with approval from the Board of Directors. The Board of Directors may, at its sole discretion, terminate, change or amend any of the Plan as it deems appropriate to
comply with applicable laws and regulations. 
  

	14.	CLAIMS AND REVIEW PROCEDURES 

 The Administrator
shall have the authority to interpret, administer and decide participant claims with the approval of the CEO and the Compensation Committee. 
  

	15.	MISCELLANEOUS 

  

	 	A.	Binding Effect. This Plan shall bind the Plan participant, the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees.


  

	 	B.	No Guarantee of Employment. This Plan is not an employment policy or contract. It does not give the Plan participant the right to remain an employee of the Company,
nor does it interfere with the Company’s right to discharge the Plan participant. 

  

	 	C.	Non-Transferability. Benefits under this Plan cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner. 

  

	 	D.	Reorganization. If the Company shall merge into or consolidate with another company, or reorganize, or sell substantially all of its assets to another company, firm,
or person such succeeding or continuing company, firm, or person shall succeed to, assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such event, the term “Company” as used in this Plan shall be
deemed to refer to the successor or survivor company. 

  

	 	E.	Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Plan. 

  

	 	F.	Applicable Law. The Plan and all rights hereunder shall be governed by the laws of the State of California, except to the extent preempted by the laws of the United
States of America. 

  

	 	G.	Entire Plan. This Plan constitutes the entire Plan between the Company and the Plan participant as to the subject matter hereof. No rights are granted to the Plan
participant by virtue of this Plan other than those specifically set forth herein. 

  

	 	H.	Designated Fiduciary. The Company shall be the named fiduciary and Plan Administrator under the Plan. The named fiduciary may delegate to others certain aspects of the
management and operation responsibilities of the Plan including the employment of advisors and the delegation of ministerial duties to qualified individuals. 

  


 Page 7, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009 








 IN WITNESS WHEREOF, the Company has signed this Plan document as of
                    , 20        . 
  

			
	Company Name:
		
	By:	 	 
		
	Title:	 	 


  

 Page 8, August 2007 
 Amended and Restated March 2008 
 Amended July 2008 
 Amended February 2009