DOUGLAS HAYES LOWREY AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.11
This
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is
entered into as of this 29th
day of July, 2010 (the “Effective Date”), by and between CapitalSource Bank, a California
industrial bank (the “Employer” or the “Company”), and Xxxxxxx Xxxxx Xxxxxx, an individual (the
“Executive”).
WHEREAS, the Executive and the Employer entered into that certain Employment Agreement dated
as of July 25, 2008 (the “Original Employment Agreement”);
WHEREAS, the Executive is currently employed as Chief Executive Officer and President of the
Employer; and
WHEREAS, the Employer and the Executive desire to amend and restate the Original Employment
Agreement and enter into this Agreement to set out the terms and conditions for the continued
employment relationship of the Executive with the Employer.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Employment Agreement. On the terms and conditions set forth in this Agreement, the
Employer agrees to continue to employ the Executive and the Executive agrees to continue to be
employed by the Employer for the Employment Period set forth in Section 2 and in the positions and
with the duties set forth in Section 3. Terms used herein with initial capitalization not
otherwise defined are defined in Section 25.
2. Term. The initial term of employment under this Agreement shall be for a period
ending on July 29, 2013 (the “Initial Term”). The term of employment shall be automatically
extended for an additional 12 month period (the “Extended
Term”) on July 29, 2013 and each
subsequent July 29, unless and until the Employer or Executive provides written notice to the other
party in accordance with Section 13 hereof not less than 60 days before such date that such party
is electing not to extend the term of employment under this Agreement (“Non-Renewal”). In each
case, the term of the Executive’s employment shall end as of the end of such Initial Term or
Extended Term, as the case may be, unless sooner terminated as hereinafter set forth. Such Initial
Term and all such Extended Terms are collectively referred to herein as the “Employment Period.”
Anything herein to the contrary notwithstanding, if on the date of a Change in Control, the
remaining term of the Employment Period is less than 24 months, the Employment Period shall be
automatically extended to the end of the 24 month period following such Change in Control.
3. Position and Duties.
(a) Executive Positions. The Executive shall continue to serve as Chief Executive
Officer and President of the Company. The Executive shall, at the Company’s request, also serve in
such other officer position(s) of any of the Company’s subsidiaries or affiliates, in each case
without further compensation beyond that set forth in this Agreement. During the Employment
Period, the Executive shall have the powers and authority customarily exercised by individuals
serving in the position of chief executive officer for a company the size and nature of the
Employer. The Executive shall devote the Executive’s reasonable best efforts and full business
time to the performance of the Executive’s duties hereunder and the advancement of the business and
affairs of the Employer; provided that the Executive shall be entitled to (i) serve as a member of
the board of directors of a reasonable number of other companies, (ii) to serve on civic,
charitable, educational, religious, public interest or public service boards, (iii) to serve on the
board of directors of the Federal Home Loan Bank of San Francisco and (iv) to manage the
Executive’s personal and family investments, in each case, to the extent such activities do not
materially interfere with the performance of the Executive’s duties and responsibilities hereunder.
The Executive’s service as a member of the board of directors for a publicly traded company shall
be subject to the prior approval of the Board, which approval shall not be unreasonably withheld.
(b) Executive is a member of the Board as of the Effective Date and the Employer shall use its
commercially reasonable best efforts to cause Executive to be nominated to serve for an additional
term at the expiration of his initial Board term (and each subsequent expiration of the Board term
thereafter) for the remainder of the Employment Period; provided, however, Executive agrees that if
his employment as Chief Executive Officer and President terminates, he will resign from his
position on the Board co-terminous with his termination unless otherwise mutually agreed with the
Board.
4. Place of Performance. During the Employment Period, the Executive shall be based
primarily at a principal office of the Employer designated by the Employer (currently in Los
Angeles, California) except for reasonable travel on the Employer’s business consistent with the
Executive’s position.
5. Compensation and Benefits.
(a) Base Salary. Beginning on the Effective Date and for the remainder of the
Employment Period, the Employer shall pay to the Executive a base salary at the rate of no less
than $500,000 per calendar year, less applicable deductions (the “Base Salary”), prorated for any
partial year. The Base Salary shall be reviewed for increase by the Employer no less frequently
than annually and may be increased in the discretion of the Employer. Any such adjusted Base
Salary shall constitute the “Base Salary” for purposes of this Agreement. The Base Salary shall be
paid in substantially equal installments in accordance with the Employer’s regular payroll
procedures. The Executive’s Base Salary may not be decreased during the Employment Period.
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(b) Annual Bonus. For each calendar year that ends during the Employment Period and
prior to a Change in Control, the Executive shall be eligible to receive an annual target cash
bonus equal to 100% of the Base Salary in effect at the end of such calendar year, in each case as
determined by the Company’s Board or the compensation committee thereof, subject to the Employer’s
and/or one or more Company Affiliates’ overall performance and business prospects, the performance
of the Executive and such other factors as determined by the Board or compensation committee
thereof. The bonus paid to the Executive may be greater or lesser than 100% of Base Salary based
upon whether the target performance factors have been achieved or exceeded or other reasons or
factors. For each calendar year that ends during the Employment Period and after a Change in
Control, the Executive shall be paid in cash an annual bonus in an amount not less than two times
the Executive’s Base Salary as in effect on the last day of such calendar year. Any annual bonus
payable to the Executive hereunder shall be paid at the time bonuses are otherwise paid to other
executive officers of the Employer, but in any event, by March 15 of the calendar year following
the year with respect to which such annual bonus is earned.
(c) Options and Restricted Stock. In consideration for entering into this Agreement,
upon the Effective Date, the Company has requested that CapitalSource Inc. grant to the Executive,
and CapitalSource Inc. has agreed to grant to the Executive, options to purchase 300,000 shares of
CapitalSource Inc’s common stock and 300,000 shares of restricted common stock of CapitalSource
Inc., vesting in equal amounts on each of the first three anniversaries of the Effective Date, and
subject to other conditions set forth in the applicable award agreements substantially in the form
previously provided to the Executive. Unless otherwise provided in this Agreement or in the
applicable award agreements, any such unvested options or restricted stock shall be forfeited by
the Executive upon the termination of the Executive’s employment with the Employer. Except as
expressly set forth in this Agreement, the grant of options and restricted stock contemplated by
this Section 5(c) shall be governed by and be subject to the terms and conditions set forth in the
CapitalSource Inc. Third Amended and Restated Equity Incentive Plan, as amended from time to time
(the “Plan”), and shall be documented and evidenced by award agreements under the Plan to be
executed by the Employer and the Executive. These grants are intended to reflect the equity grants
to the Executive for the four years 2010, 2011, 2012 and 2013; provided, however, that nothing
herein shall be construed to preclude the making of additional grants to the Executive if the Board
of CapitalSource Inc. (or compensation committee of the Board of CapitalSource Inc., as applicable)
so determines.
(d) Vacation; Benefits. During the Employment Period, the Executive shall be entitled
to at least four weeks of vacation annually. Executive agrees that any vacation taken during his
employment shall be subject to and take into account applicable banking laws and regulations, with
no more than two (2) weeks scheduled consecutively, and shall otherwise be subject to the
Employer’s policies governing vacation. In addition, the Employer shall provide to the Executive
all employee and executive benefit plans, practices, perquisites and programs maintained by the
Employer and made generally available to employees or executives including, without limitation, the
pension, retirement, profit sharing, incentive compensation, savings, medical, hospitalization,
disability, dental, life or travel accident insurance, benefit plans, and sick
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leave on a basis that (i) prior to a Change in Control is comparable in all material respects
to that provided to any other member of CapitalSource Inc.’s Management Committee (or successor
committee performing substantially similar functions), and (ii) following a Change in Control is at
least as favorable in all material respects to that provided to the most senior executives of
CapitalSource Inc. Subject to the terms of this Agreement, all benefits are provided at the
Employer’s and Company Affiliates’, as applicable, sole discretion. Subject to the terms of this
Agreement, the Employer and Company Affiliates, as applicable, shall have the right to change
insurance carriers and to adopt, amend, terminate or modify employee benefit, equity incentive,
deferred compensation and other plans, practices, perquisites, programs and arrangements at any
time and without the consent of the Executive.
6. Expenses. The Executive is expected and is authorized to incur reasonable expenses
in the performance of his duties hereunder. The Employer shall reimburse the Executive for all
such expenses reasonably and actually incurred in accordance with policies which may be adopted
from time to time by the Employer promptly upon periodic presentation by the Executive of an
itemized account, including reasonable substantiation, of such expenses.
7. Confidentiality, Non-Disclosure and Non-Competition Agreement. The Employer and
the Executive acknowledge and agree that during the Executive’s employment with the Employer, the
Executive will have access to and may assist in developing Company Confidential Information and
will occupy a position of trust and confidence with respect to the Employer’s affairs and business
and the affairs and business of the Company Affiliates. The Executive agrees that the following
obligations are necessary to preserve the confidential and proprietary nature of Company
Confidential Information and to protect the Employer and Company Affiliates against harmful
solicitation of employees and customers, harmful competition and other actions by the Executive
that would result in serious adverse consequences for the Employer and Company Affiliates:
(a) Non-Disclosure. During and after the Executive’s employment with the Employer or
Company Affiliates, the Executive will not knowingly, directly or indirectly through an
intermediary, use, disclose or transfer any Company Confidential Information other than as
authorized in writing by the Employer or Company Affiliates, or otherwise, during such employment,
is within the scope of the Executive’s duties with the Employer or Company Affiliates as determined
reasonably and in good faith by the Executive. Anything herein to the contrary notwithstanding,
the provisions of this Section 7(a) shall not apply (i) when disclosure is required by law or by
any court, arbitrator, mediator or administrative or legislative body (including any committee
thereof) with actual or apparent jurisdiction to order the Executive to disclose or make accessible
any information; (ii) with respect to any other litigation, arbitration or mediation involving this
Agreement, including, but not limited to, the enforcement of this Agreement; (iii) as to
information that becomes generally known to the public or within the relevant trade or industry
other than due to the Executive’s violation of this Section 7(a); (iv) as to information that is or
becomes available to the Executive on a non-confidential basis from a source
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which is entitled to disclose it to the Executive; or (v) as to information that the Executive
possessed prior to the commencement of employment with the Employer.
(b) Materials. The Executive will not remove, directly or indirectly through an
intermediary, any Company Confidential Information or any other property of the Employer or any
Company Affiliate from the Employer’s or Company Affiliate’s premises or make copies of such
materials except for normal and customary use in the Employer’s or Company Affiliate’s business as
determined reasonably and in good faith by the Executive. The Employer acknowledges that the
Executive, in the ordinary course of his duties, routinely uses and stores Company Confidential
Information at home and other locations. The Executive will return to the Employer all Company
Confidential Information and copies thereof and all other property of the Employer or any Company
Affiliate at any time upon the request of the Employer and in any event promptly after termination
of Executive’s employment. The Executive agrees to attempt in good faith to identify and return to
the Employer any copies of any Company Confidential Information after the Executive ceases to be
employed by the Employer. Anything to the contrary notwithstanding, nothing in this Section 7(b)
shall prevent the Executive from retaining a home computer, papers and other materials of a
personal nature, including diaries, calendars and Rolodexes, information relating to his
compensation or relating to reimbursement of expenses, information that he reasonably believes may
be needed for tax purposes, and copies of plans, programs and agreements relating to his
employment.
(c) No Solicitation or Hiring of Employees. During the Non-Compete Period, the
Executive shall not, directly or indirectly through an intermediary, solicit, entice, persuade or
induce any individual who is employed by the Employer or any Company Affiliate (or who was so
employed within 180 days prior to the Executive’s action) to terminate or refrain from continuing
such employment or to become employed by or enter into contractual relations with any other
individual or entity other than the Employer or Company Affiliates, and the Executive shall not
hire, directly or indirectly, as an employee, consultant or otherwise, any such person. Anything
to the contrary notwithstanding, the Employer agrees that (i) the Executive’s responding to an
unsolicited request from any former employee of the Employer for advice on employment matters; and
(ii) the Executive’s responding to an unsolicited request for an employment reference regarding any
former employee of the Employer from such former employee, or from a third party, by providing a
reference setting forth his personal views about such former employee, shall not be deemed a
violation of this Section 7(c). Notwithstanding the foregoing, this Section 7(c) shall not
preclude the Executive from soliciting for employment or hiring any person who has been discharged
by the Employer or any Company Affiliate.
In the event that any restrictive covenant contained in any Company or Company Affiliate
policy, program, agreement or other arrangement to which the Executive is subject (including any
such Company policy, program, agreement or other arrangement to which the Executive becomes subject
after the date hereof) is more restrictive than the provisions of this Section 7, the relevant
provision or provisions of this Section 7 shall supersede such more restrictive provision or
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provisions unless the Company and the Executive expressly agree, in writing, to have such more
restrictive provision or provisions be controlling.
(d) Non-Competition.
(i) During the Non-Compete Period, the Executive shall not, directly or indirectly through an
intermediary, (A) solicit or encourage any client or customer of the Employer or any Company
Affiliate, or any person or entity who was a client or customer within 180 days prior to
Executive’s action, to terminate, reduce or alter in a manner adverse to the Employer or any
Company Affiliate any existing business arrangements with the Employer or any Company Affiliate or
to transfer existing business from the Employer or any Company Affiliate to any other person or
entity, or (B) provide services to any entity if (i) during the preceding 12 months more than 10%
of the revenues of such entity and its affiliates is derived from any business from which the
Employer or any Company Affiliate derived more than 10% of its revenues during such period (such
percentage determined on a pro forma basis for any business acquired during such 12 month period as
if the acquisition had occurred at the beginning of such 12 month period) (a “Material Business”)
or (ii) the services to be provided by the Executive are competitive with a Material Business and
substantially similar to those previously provided by the Executive to the Employer or any Company
Affiliate; provided, however, that following a Change in Control, this Section 7(d)(i)(B)(i) shall
not apply to the Executive, or (C) own an interest in any entity described in subsection (B)(i)
immediately above; provided, however, that Executive may own, as a passive investor, securities of
any such entity that has outstanding publicly traded securities so long as his direct holdings in
any such entity shall not in the aggregate constitute more than 5% of the voting power of such
entity and does not otherwise violate any Company or Company Affiliate policy applicable to
Executive. For purposes of this Section 7(d), a “client or customer” shall be limited to any
actual borrower, customer or client of the Employer (as set forth in the Employer’s CAM or
substantially similar successor or other system) and any other entity in the “term sheet issued,”
“term sheet executed” or “credit committee approved” categories listed in the Employer’s
DealTracker or substantially similar successor or other system. The Executive agrees that, before
providing services, whether as an employee or consultant, to any entity during the Non-Compete
Period, he will provide a copy of this Agreement to such entity, and such entity shall acknowledge
to the Employer in writing that it has read this Agreement. The Executive acknowledges that this
covenant has a unique, very substantial and immeasurable value to the Employer and Company
Affiliates, that the Executive has sufficient assets and skills to provide a livelihood for the
Executive while such covenant remains in force and that, as a result of the foregoing, in the event
that the Executive breaches such covenant, monetary damages would be an insufficient remedy for the
Employer and equitable enforcement of the covenant would be proper.
(ii) If the restrictions contained in Section 7(d)(i) shall be determined by any court of
competent jurisdiction to be unenforceable by reason of their extending for too great a period of
time or over too great a geographical area or by reason of their being too extensive in any other
respect, Section 7(d)(i) shall be modified to be effective for the maximum period of time for
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which it may be enforceable and over the maximum geographical area as to which it may be
enforceable and to the maximum extent in all other respects as to which it may be enforceable.
(e) Non-Disparagement. Neither the Company nor the Executive shall initiate,
participate or engage in any communication whatsoever with any current or former customer,
supplier, vendor or competitor of the Company or any Company Affiliate or any of their respective
shareholders, partners, members, directors, managers, officers, employees or agents, or with any
current or former shareholder, director, manager, officer, employee or agent of the Company or any
Company Affiliate, which communication could reasonably be interpreted as derogatory or disparaging
to the Executive or the Company or any Company Affiliate, as applicable, including but not limited
to the business, practices, policies, shareholders, partners, members, directors, managers,
officers, employees, agents, advisors and attorneys of the Company or any Company Affiliate. The
Company agrees to use its commercially reasonable best efforts to cause its directors and executive
officers not to engage in any public statement or communication that could reasonably be
interpreted as derogatory or disparaging to the Executive. The foregoing shall not be violated by
truthful statements in response to legal process, required governmental testimony or filings, or
administrative or arbitral proceedings (including, without limitation, depositions in connection
with such proceedings).
(f) Publicity. During the Employment Period, the Executive hereby grants to the
Employer the right to use, in a reasonable and appropriate manner, the Executive’s name and
likeness, without additional consideration, on, in and in connection with technical, marketing or
disclosure materials, or any combination thereof, published by or for the Employer or any Company
Affiliate, and any documents or other matters to the extent legally required.
(g) Enforcement. The Executive acknowledges that in the event of any breach of this
Section 7, the business interests of the Employer and the Company Affiliates will be irreparably
injured, the full extent of the damages to the Employer and the Company Affiliates will be
impossible to ascertain, monetary damages will not be an adequate remedy for the Employer
and the Company Affiliates, and the Employer will be entitled to enforce this Agreement by a
temporary, preliminary and/or permanent injunction or other equitable relief, without the necessity
of posting bond or security, which the Executive expressly waives. The Executive understands that
the Employer may waive some of the requirements expressed in this Agreement, but that such a waiver
to be effective must be made in writing and should not in any way be deemed a waiver of the
Employer’s right to enforce any other requirements or provisions of this Agreement. The Executive
agrees that each of the Executive’s obligations specified in this Agreement is a separate and
independent covenant and that the unenforceability of any of them shall not preclude the
enforcement of any other covenants in this Agreement. The Executive further agrees that any breach
of this Agreement by the Employer prior to the Date of Termination shall not release the Executive
from compliance with his obligations under this Section 7, so long as the Employer fully complies
with Sections 9, 11, and 12. The Employer further agrees that any breach during the Employment
Period of this Agreement by the Executive that does not result in the Executive’s being terminated
for Cause shall not release the Employer from compliance with its obligations
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under this Agreement. Notwithstanding the foregoing two sentences, neither party shall be
precluded from pursuing judicial remedies as a result of any such breaches.
8. Termination of Employment.
(a) Permitted Terminations. The Executive’s employment hereunder may be terminated
during the Employment Period under the following circumstances:
(i) Death. The Executive’s employment hereunder shall terminate upon the Executive’s
death;
(ii) By the Employer. The Employer may terminate the Executive’s employment for:
(A) Disability. If the Executive shall have been substantially unable to perform,
despite reasonable accommodation, the Executive’s material duties hereunder by reason of illness,
physical or mental disability or other similar incapacity, which inability shall continue for 180
consecutive days or 270 days in any 24-month period (a “Disability”) (provided, that until such
termination, the Executive shall continue to receive his compensation and benefits hereunder,
reduced by any benefits payable to him under any Employer-provided disability insurance policy or
plan applicable to him or her); or
(B) Cause. For Cause or without Cause;
(iii) By the Executive. The Executive may terminate his employment for any reason
(including Good Reason) or for no reason.
(b) Termination. Any termination of the Executive’s employment by the Employer or the
Executive (other than because of the Executive’s death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 13 hereof. For purposes of this
Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon, if any, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated. Termination of the Executive’s employment shall take
effect on the Date of Termination. The Executive agrees, in the event of any dispute under Section
8(a)(ii)(A) as to whether a Disability exists, and if requested by the Employer, to submit to a
physical examination by a licensed physician selected by mutual consent of the Employer and the
Executive, the cost of such examination to be paid by the Employer. The written medical opinion of
such physician shall be conclusive and binding upon each of the parties hereto as to whether a
Disability exists and the date when such Disability arose. This Section shall be interpreted and
applied so as to comply with the provisions of the Americans with Disabilities Act and any
applicable state or local laws.
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9. Compensation Upon Termination.
(a) Death. If the Executive’s employment is terminated during the Employment Period
as a result of the Executive’s death, this Agreement and the Employment Period shall terminate
without further notice or any action required by the Employer or the Executive’s legal
representatives. Upon the Executive’s death, the Employer shall pay or provide the following:
(i) Base Salary. The Employer shall pay to the Executive’s legal representative or
estate, as applicable, a cash lump sum amount equal to one year’s Base Salary within thirty days
following the Executive’s death;
(ii) Accrued Benefits. The Employer shall pay to the Executive’s legal representative
or estate, as applicable, the Accrued Benefits and the rights of the Executive’s legal
representative or estate with respect to equity or equity-related awards shall be governed by the
applicable terms of the related plan or award agreement (except as provided in the next paragraph);
and
(iii) Equity Awards. Notwithstanding any provision of the related plan or award
agreements, all outstanding equity awards held by the Executive immediately prior to his death
shall immediately vest, except that the total amount of the equity awards provided for in Section
5(c) shall, if not otherwise vested to a greater extent, be vested at the level of 50% upon his
death during the first year after the date of grant and during the Employment Period, 75% upon his
death during the second year after the date of grant and during the Employment Period and 100% upon
his death after the second anniversary of the date of grant and during the Employment Period. All
options shall remain exercisable for the length of their remaining term.
The Employer shall pay to the Executive’s legal representatives or estate, or as may be
directed by the legal representatives of such estate, the Executive’s Accrued Benefits due pursuant
to Section 9(a)(ii), at the time such payments are due. Any payments by the Employer pursuant to
Section 9(a)(i) shall be reduced by the amount of any payments to the Executive’s beneficiaries or
estate paid on account of any life insurance plan or policy provided by the Employer for the
benefit of the Executive. Except as set forth herein, the Employer and Company Affiliates shall
have no further obligation to the Executive or his legal representatives, estate or heirs upon his
death under this Agreement.
(b) Disability. If the Employer terminates the Executive’s employment during the
Employment Period because of the Executive’s Disability pursuant to Section 8(a)(ii)(A), (A) the
Employer shall pay to the Executive (i) the Executive’s Base Salary due through the Date of
Termination, and (ii) all Accrued Benefits, if any, to which the Executive is entitled as of the
Date of Termination at the time such payments are due, and (B) all outstanding equity awards held
by the Executive immediately prior to his termination shall immediately vest, except that the total
amount of the equity awards provided for in Section 5(c) shall, if not otherwise vested to a
greater extent, be vested at the level of 50% upon his termination for Disability during the first
year after
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the date of grant and during the Employment Period, 75% upon his termination for Disability during
the second year after the date of grant and during the Employment Period and 100% upon his
termination for Disability after the second anniversary of the date of grant and during the
Employment Period. All options shall remain exercisable for the length of their remaining term.
Except as set forth herein, the Employer and Company Affiliates shall have no further obligations
to the Executive under this Agreement upon Executive’s termination due to Disability pursuant to
Section 8(a)(ii)(A).
(c) Termination by the Employer for Cause or by the Executive without Good Reason.
If, during the Employment Period, the Employer terminates the Executive’s employment for Cause
pursuant to Section 8(a)(ii)(B) or the Executive terminates his employment without Good Reason, the
Employer shall pay to the Executive the Executive’s Base Salary due through the Date of Termination
and all Accrued Benefits, if any, to which the Executive is entitled as of the Date of Termination,
at the time such payments are due, and the Executive’s rights with respect to then vested or
exercisable equity or equity-related awards shall be governed by the applicable terms of the
related plan or award agreements except that all of his then unvested or unexercisable equity or
equity-related awards shall be terminated. Except as set forth herein, the Employer shall have no
further obligations to the Executive under this Agreement upon such termination.
(d) Termination by the Employer without Cause or by the Executive with Good Reason.
(i) If, other than as set forth in Section 9(d)(ii), the Employer terminates the Executive’s
employment during the Employment Period pursuant to Section 8(a)(ii)(B) other than for Cause or the
Executive terminates his employment hereunder with Good Reason, the Employer shall pay the
Executive all Accrued Benefits, if any, to which the Executive is entitled as of the Date of
Termination, in each case at the time such payments are due, and the Executive’s Base Salary due
through the Date of Termination. The Executive shall also be entitled to the Severance Payments.
(ii) Notwithstanding Section 9(d)(i), if, within 24 months following consummation of a Change
in Control or at any time within the period commencing three months prior to (i) the execution of a
binding agreement for a transaction, or (ii) the making of a tender or exchange offer, in either
case that, if consummated, would result in a Change in Control and ending on the date of the Change
in Control or, if earlier, the date that such transaction is completely abandoned by the parties
thereto (regardless of whether a Change in Control actually occurs), the Employer terminates the
Executive’s employment during the Employment Period pursuant to Section 8(a)(ii)(B) other than for
Cause or the Executive terminates his employment hereunder with Good Reason, the Employer shall pay
the Executive all Accrued Benefits, if any, to which the Executive is entitled as of the Date of
Termination, in each case at the time such payments are due and the Executive’s Base Salary due
through the Date of Termination. The Executive shall also be entitled to the Severance Payments.
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(e) Liquidated Damages. The parties acknowledge and agree that damages which will
result to the Executive for termination by the Employer of the Executive’s employment without Cause
under Section 8(a)(ii)(B) or by the Executive for Good Reason shall be extremely difficult or
impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated
damages for any such termination. The Executive agrees that, except for such other payments and
benefits to which the Executive may be entitled as expressly provided by the terms of this
Agreement or any other applicable benefit plan, such liquidated damages shall be in lieu of all
other claims that the Executive may make by reason of any such termination of his employment and
that, as a condition to receiving the Severance Payments, the Executive will execute a release of
claims substantially in the form of the release attached hereto as Exhibit A. Within two business
days of the Date of Termination, the Employer shall deliver to the Executive the release for the
Executive to execute. The Executive will forfeit all rights to the Severance Payments unless the
Executive executes and delivers to the Company the release within 30 days of delivery of the
release by the Company to the Executive and such release has become irrevocable by virtue of the
expiration of the revocation period without the release having been revoked (the first such date,
the “Release Effective Date”). The Employer and Company Affiliates shall have no obligation to
provide the Severance Payments prior to the Release Effective Date. Subject to Section 9(g) below,
the Severance Payments shall be made within three business days of the Release Effective Date. If
the Executive fails to comply with his obligations under Section 7, the Executive shall, to the
extent such amounts are paid, vested or distributed pursuant to Section 9 hereof, (i) forfeit
outstanding equity awards, (ii) transfer the shares underlying equity awards that were accelerated
pursuant to Section 9 and settled in shares to CapitalSource Inc. for no consideration and (iii)
repay the after-tax amount of the Severance Payments and any equity awards that were accelerated
pursuant to Section 9 and settled in cash or sold.
(f) No Offset. In the event of termination of his employment, the Executive shall be
under no obligation to seek other employment and there shall be no offset against amounts due to
him on account of any remuneration or benefits provided by any subsequent employment he may obtain.
The Employer’s and Company Affiliates’ obligation to make any payment pursuant to, and otherwise
to perform its obligations under, this Agreement shall not be affected by any offset, counterclaim
or other right that the Employer or its affiliates may have against him for any reason.
(g) Section 409A. To the extent the Executive would be subject to the additional 20%
tax imposed on certain deferred compensation arrangements pursuant to Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”)(“Section 409A”), as a result of any provision of this
Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid
application of such tax and preserve to the maximum extent possible the original intent and
economic benefit to the Executive and the Company, and the parties shall promptly execute any
amendment reasonably necessary to implement this Section 9(g).
(i) For purposes of Section 409A, the Executive’s right to receive installment payments
pursuant to this Agreement including, without limitation, each
11
severance payment and COBRA continuation reimbursement shall be treated as a right to receive a
series of separate and distinct payments.
(ii) The Executive will be deemed to have a Date of Termination for purposes of determining
the timing of any payments or benefits hereunder that are classified as deferred compensation only
upon a “separation from service” within the meaning of Section 409A.
(iii) Notwithstanding any other provision of this Agreement to the contrary, if at the time of
the Executive’s separation from service, (i) the Executive is a specified employee (within the
meaning of Section 409A and using the identification methodology selected by the Company from time
to time), and (ii) the Company makes a good faith determination that an amount payable on account
of such separation from service to the Executive constitutes deferred compensation (within the
meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month
delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A (the
“Delay Period”), then the Company will not pay such amount on the otherwise scheduled payment date
but will instead pay it in a lump sum on the first business day after such six-month period (or
upon the Executive’s death, if earlier), together with interest for the period of delay, compounded
annually, equal to the prime rate (as published in the Wall Street Journal) in effect as of the
dates the payments should otherwise have been provided. To the extent that any benefits to be
provided during the Delay Period are considered deferred compensation under Section 409A provided
on account of a “separation from service,” and such benefits are not otherwise exempt from Section
409A, the Executive shall pay the cost of such benefit during the Delay Period, and the Company
shall reimburse the Executive, to the extent that such costs would otherwise have been paid by the
Company or to the extent that such benefits would otherwise have been provided by the Company at no
cost to the Executive, the Company’s share of the cost of such benefits upon expiration of the
Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in
accordance with the procedures specified herein.
(iv) (A) Any amount that the Executive is entitled to be reimbursed under this Agreement will
be reimbursed to the Executive as promptly as practical and in any event not later than the last
day of the calendar year after the calendar year in which the expenses are incurred, (B) any right
to reimbursement or in kind benefits will not be subject to liquidation or exchange for another
benefit, and (C) the amount of the expenses eligible for reimbursement during any taxable year will
not affect the amount of expenses eligible for reimbursement in any other taxable year.
(v) Whenever a payment under this Agreement specifies a payment period with reference to a
number of days (e.g., “payment shall be made within thirty (30) days following the date of
termination”), the actual date of payment within the specified period shall be within the sole
discretion of the Company.
12
(h) Cell phone/Email Address. If not precluded or limited by applicable law at the
time, the Company shall use its commercially reasonable best efforts upon termination of the
Executive’s employment for any reason, to cause the Executive’s cell phone number assigned to his
Company-provided cell phone to be retained by the Executive if he so elects (and the Company shall
assist in transferring such cell phone number to an account with the cell phone service provider in
the Executive’s name) and, the Company shall forward to the Executive, as soon as reasonably
practicable, relevant e-mail sent to his “capitalsourcebank” email account and received during the
60 days following such termination.
(i) FDIC Regulation. Notwithstanding anything herein contained to the contrary, any
payments to the Executive by the Company, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit
Insurance Act (“FDI Act”), 12 U.S.C. §1828(k), and any regulations promulgated thereunder.
10. Parachute Limitations.
Notwithstanding any other provision of this Agreement or of any other agreement, contract, or
understanding heretofore or hereafter entered into by the Executive and the Company or Company
Affiliates, except an agreement, contract, or understanding hereafter entered into that expressly
modifies or excludes application of this Section 10 (the “Other Agreements”), and notwithstanding
any formal or informal plan or other arrangement heretofore or hereafter adopted by the Company or
Company Affiliates for the direct or indirect compensation of the Executive (including groups or
classes of participants or beneficiaries of which the Executive is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for the Executive (a
“Benefit Arrangement”), if the Executive is a “disqualified individual,” as defined in Section
280G(c) of the Code, any right to receive any payment or other benefit under this Agreement shall
not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment,
or benefit, taking into account all other rights, payments, or benefits to or for Executive under
the Agreement, all Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the Executive under this Agreement to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”) and
(ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by
the Executive from the Company or Company Affiliate under this Agreement, all Other Agreements, and
all Benefit Arrangements would be less than the maximum after-tax amount that could be received by
Executive without causing any such payment or benefit to be considered a Parachute Payment. In the
event that the receipt of any such right to exercise, vesting, payment, or benefit under this
Agreement, in conjunction with all other rights, payments, or benefits to or for the Executive
under the Agreement, any Other Agreement or any Benefit Arrangement would cause the Executive to be
considered to have received a Parachute Payment under this Agreement that would have the effect of
decreasing the after-tax amount received by the Executive as described in clause (ii) of the
preceding sentence, then the Executive shall have the right, in the Executive’s sole discretion, to
designate those rights, payments, or benefits under this
13
Agreement, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated
so as to avoid having the payment or benefit to the Executive under this Agreement be deemed to be
a Parachute Payment; provided, however, that in order to comply with Section 409A, the reduction or
elimination will be performed in the order in which each dollar of value subject to a right,
payment or benefit reduces the Parachute Payment to the greatest extent.
11. Indemnification. During the Employment Period and thereafter, the Employer agrees
to indemnify and hold the Executive and the Executive’s heirs and representatives harmless, to the
maximum extent permitted by law, against any and all damages, costs, liabilities, losses and
expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether
civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether
civil, criminal, administrative or investigative), against the Executive that arises out of or
relates to the Executive’s service as an officer, director or employee, as the case may be, of the
Employer, or the Executive’s service in any such capacity or similar capacity with an affiliate of
the Employer or other entity at the request of the Employer, both prior to and after the Effective
Date, and promptly to advance to the Executive or the Executive’s heirs or representatives any and
all such expenses upon written request with appropriate documentation of such expense and upon
receipt of an undertaking by the Executive or on the Executive’s behalf to repay such amount if it
shall ultimately be determined that the Executive is not entitled to be indemnified by the
Employer. During the Employment Period and thereafter covering the Employment Period, the Employer
also shall provide the Executive with coverage under its or a Company Affiliate’s (at its election)
then current directors’ and officers’ liability policy to the same extent that it provides such
coverage to its other executive officers. If the Executive has any knowledge of any actual or
threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as
to which the Executive may request indemnity under this provision, the Executive will give the
Employer prompt written notice thereof; provided that the failure to give such notice shall not
affect the Executive’s right to indemnification unless the Employer or a Company Affiliate is
materially prejudiced by such failure. The Employer or a Company Affiliate shall be entitled to
assume the defense of any such proceeding and the Executive will use reasonable efforts to
cooperate with such defense. To the extent that the Executive in good faith determines that there
is an actual or potential conflict of interest between the Employer or a Company Affiliate and the
Executive in connection with the defense of a proceeding, the Executive shall so notify the
Employer and shall be entitled to separate representation at the Employer’s expense by counsel
selected by the Executive (provided that the Employer may reasonably object to the selection of
counsel within ten (10) business days after notification thereof) which counsel shall cooperate,
and coordinate the defense, with the Employer’s counsel and minimize the expense of such separate
representation to the extent consistent with the Executive’s separate defense and to the extent
possible and consistent with all applicable rules of legal ethics. This Section 11 shall continue
in effect after the termination of the Executive’s employment or the termination of this Agreement.
12. Attorney’s Fees. If a Change in Control has not occurred, the Employer shall
reimburse the Executive (and his beneficiaries) for any and all reasonable costs and expenses
(including without limitation attorneys’ fees and other charges of counsel) incurred by the
14
Executive (or any of his beneficiaries) in resolving any controversy, dispute or claim arising out
of or relating to this Agreement, the Executive’s employment with the Employer, or the termination
thereof; provided that this is not a claim (a) brought by the Employer on account of the
Executive’s alleged breach of Section 7 of this Agreement, breach of the Executive’s fiduciary duty
of loyalty, or fraud or material misconduct, if the Employer is the prevailing party, or (b)
brought by the Executive unless the Executive prevails on at least one material claim.
Following a Change in Control, the Employer shall advance the Executive (and his
beneficiaries) any and all reasonable costs and expenses (including without limitation attorneys’
fees and other charges of counsel) incurred by the Executive (or any of his beneficiaries) in
resolving any controversy, dispute or claim arising out of or relating to this Agreement, the
Executive’s employment with the Employer, or the termination thereof; provided that the Executive
shall reimburse the Employer any advances to cover expenses incurred by the Executive for claims
(a) brought by the Employer on account of the Executive’s alleged breach of Section 7 of this
Agreement, breach of the Executive’s fiduciary duty of loyalty, or fraud or material misconduct, if
the Employer is the prevailing party, or (b) brought by the Executive if the Executive prevails on
at least one material claim. Pending the resolution of any such claim, the Executive (and his
beneficiaries) shall continue to receive all payments and benefits described in Section 5 of this
Agreement.
This Section 12 shall continue in effect after the termination of the Executive’s employment
or the termination of this Agreement.
13. Notices. All notices, demands, requests, or other communications which may be or
are required to be given or made by any party to any other party pursuant to this Agreement shall
be in writing and shall be hand delivered, mailed by first-class registered or certified mail,
return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by
facsimile transmission addressed as follows:
(i) If to the Employer:
CapitalSource Bank
[Address]
Attn: Chairman of the Board of Directors
Fax: [ ]
[Address]
Attn: Chairman of the Board of Directors
Fax: [ ]
With a copy to:
CapitalSource Inc.
0000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attn: Chairman of the Board of Directors and General Counsel
Facsimile Number: 000-000-0000
CapitalSource Inc.
0000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attn: Chairman of the Board of Directors and General Counsel
Facsimile Number: 000-000-0000
15
(ii) If to the Executive:
Xxxxxxx Xxxxx Xxxxxx
Address last shown on the Employer’s Records
Address last shown on the Employer’s Records
Each party may designate by notice in writing a new address to which any notice, demand,
request or communication may thereafter be so given, served or sent. Each notice, demand, request,
or communication that shall be given or made in the manner described above shall be deemed
sufficiently given or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, confirmation of facsimile transmission or the affidavit
of messenger being deemed conclusive but not exclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
14. Severability. The invalidity or unenforceability of any one or more provisions of
this Agreement shall not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect.
15. Effect on Other Agreements. This Agreement constitutes the entire agreement
between the parties respecting the employment of the Executive and supersedes the terms of any
plan, policy, agreement, award or other arrangement of the Employer or Company Affiliates (whether
entered into before or after the Effective Date), including the Original Employment Agreement by
and between the parties, to the extent inconsistent with the terms of this Agreement.
16. Survival. It is the express intention and agreement of the parties hereto that
the provisions of Sections 7, 9, 10, 11, 12, 13, 15, 17, 18, 19, 21, 22 and 24 hereof and this
Section 16 shall survive the termination of employment of the Executive. In addition, all
obligations of the Employer to make payments hereunder shall survive any termination of this
Agreement on the terms and conditions set forth herein.
17. Assignment. The rights and obligations of the parties to this Agreement shall not
be assignable or delegable, except that (i) in the event of the Executive’s death, the personal
representative or legatees or distributees of the Executive’s estate, as the case may be, shall
have the right to receive any amount owing and unpaid to the Executive hereunder, (ii) the rights
and obligations of the Employer hereunder shall be assignable and delegable in connection with any
subsequent merger, consolidation, sale of all or substantially all of the assets or equity
interests of the Employer or similar transaction involving the Employer or a successor entity, and
(iii) the rights and obligations of the Employer hereunder shall be assignable and delegable to
CapitalSource Inc. and/or CapitalSource Finance LLC. The Employer shall require any successor to
the Employer to expressly assume and agree to perform this Agreement in the same manner and to the
same extent that the Employer would be required to perform it if no such succession had taken
place.
16
18. Binding Effect. Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon the parties hereto and shall inure to the benefit of the parties
and their respective heirs, devisees, executors, administrators, legal representatives and
permitted successors and assigns.
19. Amendment; Waiver. This Agreement shall not be amended, altered or modified
except by an instrument in writing duly executed by the party against whom enforcement is sought.
Neither the waiver by either of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure of either of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder,
shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature,
or as a waiver of any such provisions, rights or privileges hereunder.
20. Headings. Section and subsection headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for
any purpose, and shall not in any way define or affect the meaning, construction or scope of any of
the provisions hereof.
21. Governing Law. This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed in accordance with
the laws of the State of California (but not including any choice of law rule thereof that would
cause the laws of another jurisdiction to apply).
22. Entire Agreement. This Agreement constitutes the entire agreement between the
parties respecting the employment of the Executive, there being no representations, warranties or
commitments except as set forth herein.
23. Counterparts. This Agreement may be executed in two counterparts, each of which
shall be an original and all of which shall be deemed to constitute one and the same instrument.
24. Withholding. The Employer may withhold from any benefit payment or any other
payment or amount under this Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or governmental regulation or ruling provided that any withholding obligation
arising in connection with the exercise of a stock option or the transfer, vesting or conversion of
stock, restricted stock units or other property shall be satisfied through surrendering, forfeiture
and withholding an appropriate number of shares of stock, restricted stock units or appropriate
amount of such other property. The Executive hereby agrees that the tax withholding obligations
with respect to the foregoing shall be satisfied by such surrender, forfeiture and withholding on
the applicable dates and hereby authorizes the Company to use such portions to satisfy such
obligations.
25. Definitions.
17
“Accrued Benefits” means (i) any compensation deferred by the Executive prior to the Date of
Termination and not paid by the Employer or otherwise specifically addressed by this Agreement;
(ii) any amounts or benefits owing to the Executive or to the Executive’s beneficiaries under the
then applicable benefit plans of the Employer; (iii) any amounts owing to the Executive for
reimbursement of expenses properly incurred by the Executive prior to the Date of Termination and
which are reimbursable in accordance with Section 6; and (iv) any other benefits or amounts due and
owing to the Executive under the terms of any plan, program or arrangement of the Employer.
“Board” means the Company’s Board of Directors.
“Cause” shall be limited to the following events (i) the Executive’s conviction of, or plea of
nolo contendere to, a felony (other than in connection with a traffic violation) under any state
or federal law; (ii) the Executive’s willful and continued failure to substantially perform his
essential job functions hereunder after receipt of written notice from the Employer that
specifically identifies the manner in which the Executive has substantially failed to perform his
essential job functions and specifying the manner in which the Executive may substantially perform
his essential job functions in the future; (iii) a material act of fraud or willful and material
misconduct with respect, in each case, to the Employer or Company Affiliates, by the Executive;
(iv) Employer’s termination of Executive’s employment arising out of or in connection with any
direct or indirect order, request, mandate or other instruction of the Federal Deposit Insurance
Corporation, the California Department of Financial Institutions, or any other state or federal
regulatory body with oversight or authority over banking or the Employer or Company Affiliates (a
“Regulator”); or a finding by any such Regulator that Executive’s performance threatens the safety
or soundness of the Employer or any Company Affiliate; (v) the Executive’s failure to furnish all
information or take any other steps necessary to enable Employer to maintain fidelity bond coverage
(in an amount and with a surety company selected by Employer in its sole discretion) of Executive
during the term of his employment; or (vi) a willful and material breach of Section 7(c) or (d) of
this Agreement. For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive
in bad faith or without reasonable belief that the Executive’s action or omission was in the best
interests of the Employer or Company Affiliate, as appropriate. Anything herein to the contrary
notwithstanding, the Executive shall not be terminated for “Cause” hereunder unless (A) written
notice stating the basis for the termination, including, without limitation, whether such basis is
an indirect order, request, mandate or other instruction of any Regulator, is provided to the
Executive, (B) as to clause (ii) of this paragraph, he is given 30 days to cure the neglect or
conduct that is the basis of such claim (it being understood that any errors in expense
reimbursement may be cured by repayment), (C) if he fails to cure such neglect or conduct, the
Executive has an opportunity to be heard with counsel of his choosing before the full Board prior
to any vote regarding the existence of Cause and (D) there is a vote of a majority of the members
of the Board, excluding the Executive, to terminate him for Cause.
18
“Change in Control” means the occurrence of one or more of the following events, for either
the Company or CapitalSource Inc.: (i) any “person” (as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934 as amended (the “Act”)) or “group” (as such term is
used in Section 13(d)(3) of the Act) is or becomes a “beneficial owner” (as such term is used in
Rule 13d-3 promulgated under the Act) of more than 30% of the Voting Stock of the Company or
CapitalSource Inc.; (ii) within any 24 month period the majority of the Board of Directors of the
Company or CapitalSource Inc. consists of individuals other than Incumbent Directors, which term
means the members of the Board of Directors of the Company or CapitalSource Inc. on the Effective
Date; provided that any person becoming a director subsequent to such date whose election or
nomination for election was supported by two-thirds of the directors who then comprised the
Incumbent Directors of the applicable company shall be considered to be an Incumbent Director;
(iii) the Company or CapitalSource Inc. adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets; (iv) the Company or CapitalSource Inc.
transfers all or substantially all of its assets or business (unless the shareholders of the
applicable company immediately prior to such transaction beneficially own, directly or indirectly,
in substantially the same proportion as they owned the Voting Stock of the applicable company, all
of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to
the business of, as applicable, the Company or CapitalSource Inc. or the Company’s or CapitalSource
Inc.’s ultimate parent company if the Company or CapitalSource Inc. is a subsidiary of another
corporation); or (v) any merger, reorganization, consolidation or similar transaction unless,
immediately after consummation of such transaction, the shareholders of the Company or
CapitalSource Inc., as applicable, immediately prior to the transaction hold, directly or
indirectly, more than 50% of the Voting Stock of, as applicable, the Company or CapitalSource Inc.
or the Company’s or CapitalSource Inc.’s ultimate parent company if the Company or CapitalSource
Inc. is a subsidiary of another corporation (there being excluded from the number of shares held by
such shareholders, but not from the Voting Stock of the combined company, any shares received by
affiliates of such other company in exchange for stock of such other company). For purposes of
this Change in Control definition, the Company and CapitalSource Inc. shall include any entity that
succeeds to all or substantially all of the business of the Company or CapitalSource Inc. and
“Voting Stock” shall mean securities or ownership interests of any class or classes having general
voting power under ordinary circumstances, in the absence of contingencies, to elect the directors
of a corporation.
“Company Affiliate” means any entity controlled by, in control of, or under common control
with, the Employer, including without limitation, CapitalSource Inc. and its subsidiaries.
“Company Confidential Information” means information known to the Executive to constitute
trade secrets or proprietary information belonging to the Employer or Company Affiliates or other
non-public information, confidential financial information, operating budgets, strategic plans or
research methods, personnel data, projects or plans, or non-public information regarding the terms
of any existing or pending transaction between Employer or any Company Affiliate and an existing or
pending client or customer (as the phrase “client or customer” is defined in Section 7(d)(i)
hereof) or other person or entity, in each case, received by the Executive
19
in the course of his employment by the Employer or in connection with his duties with the Employer.
Notwithstanding anything to the contrary contained herein, the general skills, knowledge and
experience gained during the Executive’s employment with the Employer, information publicly
available or generally known within the industry or trade in which the Employer competes and
information or knowledge possessed by the Executive prior to his employment by the Employer, shall
not be considered Company Confidential Information.
“Date of Termination” means (i) if the Executive’s employment is terminated by the Executive’s
death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated because
of the Executive’s Disability pursuant to Section 8(a)(ii)(A), 30 days after Notice of Termination,
provided that the Executive shall not have returned to the performance of the Executive’s duties on
a full-time basis during such 30-day period; or (iii) if the Executive’s employment is terminated
by the Employer pursuant to Section 8(a)(ii)(B) or by the Executive pursuant to Section 8(a)(iii),
the date specified in the Notice of Termination. Notwithstanding any provision of this Agreement
to the contrary, for purposes of any provision of this Agreement providing for the payment of any
amounts or benefits upon or following a termination of employment that are considered deferred
compensation under Code Section 409A, references to Executive’s termination of employment (and
corollary terms) with the Company shall be construed to refer to Executive’s “separation from
service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the Company.
“Extended Term” shall have the meaning set forth in Section 2.
“Good Reason” means, unless otherwise agreed to in writing by the Executive, (i) a reduction
in the Executive’s Base Salary, or after a Change in Control, the annual bonus payable to the
Executive under Section 5(b), (ii) the requirement that the Executive report to someone other than
the Board of Directors of the Company, (iii) a material diminution in the Executive’s title,
authority, responsibilities or duties; (iv) the assignment of duties inconsistent with the
Executive’s position or status with the Employer as of the Effective Date; (v) a relocation of the
Executive’s primary place of employment to a location more than 25 miles further from the
Executive’s primary residence than the current location of the Employer’s offices; (vi) any other
material breach of the terms of this Agreement or any other agreement which is not cured within ten
days after the Executive’s delivery of a written notice of such breach to the Employer; (vii) any
purported termination of the Executive’s employment by the Employer that is not effected in
accordance with the applicable provisions of this Agreement; (viii) the failure to be nominated for
an additional term as a member of the Board upon each expiration of such Board term during the
Employment Period, (ix) the failure of the Employer to obtain the assumption in writing of its
obligations under this Agreement by any successor to all or substantially all of the assets of the
Employer within 15 days after a merger, consolidation, sale or similar transaction or (x) the
delivery of a notice of Non-Renewal by the Employer. In order to invoke a termination for Good
Reason, the Executive must deliver a written notice of such breach to the Employer within 60 days
of the occurrence of the breach and Employer shall have 30 days to cure the breach. In order to
20
terminate his employment, if at all, for Good Reason, Executive must terminate employment within 30
days of the end of the cure period if the breach has not been cured.
“Non-Compete Period” means the period commencing on the Effective Date and ending twelve
months after the earlier of the expiration of the Employment Period or the Executive’s Date of
Termination.
“Severance Payments” means (1) a lump sum cash payment equal to two times the Executive’s Base
Salary as of the Date of Termination (except for purposes of Section 9(d)(ii), in lieu of the
foregoing, the Executive shall receive a lump sum cash payment equal to two and one half times the
Executive’s Base Salary as of the Date of Termination plus two and one half times the average
bonuses earned for the two years prior to the year in which the Date of Termination occurs), (2) a
pro-rata bonus for the year of termination payable when bonuses for such year are normally paid,
and, if based on objective performance or other criteria, such bonus shall be based on actual
achievement of such criteria for such year of termination, (3) all of Executive’s unvested and
unexercisable equity awards that are outstanding as of the Date of Termination shall be vested in
all circumstances (except as noted below) and remain exercisable for two years following the Date
of Termination, or in a termination subject to Section 9(d)(ii), five years following the Date of
Termination (or, in any case, if earlier, the original expiration date of the award) except that,
in a termination subject to Section 9(d)(i) only, the total amount of the equity awards provided
for in Section 5(c) shall, if not otherwise vested to a greater extent, be vested at the level of
50% if the Date of Termination is during the first year after the date of grant and during the
Employment Period, 75% if the Date of Termination is during the second year after the date of grant
and during the Employment Period and 100% if the Date of Termination is after the second
anniversary of the date of grant and during the Employment Period, and (4) the Executive and his
covered dependents shall be entitled to continued participation on the same terms and conditions as
applicable immediately prior to the Executive’s Date of Termination for 24 months in such medical,
dental, hospitalization and life insurance coverages in which the Executive and his eligible
dependents were participating immediately prior to the Date of Termination or such earlier time
that Executive becomes eligible for comparable benefits elsewhere; provided, however, if such
insurance coverage cannot be provided by the Company for any period after 18 months, the Company
will pay the Executive the amount on an after-tax basis equal to the COBRA premiums for the
subsequent period. Notwithstanding the foregoing, for purposes of termination with Good Reason due
to the non-renewal of this Agreement, for purposes of clause 1 above, the Executive shall only be
entitled to a lump sum cash payment equal to one times the Executive’s Base Salary as of the Date
of Termination.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement, or have
caused this Agreement to be duly executed and delivered on their behalf.
| CAPITALSOURCE BANK. | ||||
| /s/ Xxxx X. Xxxxxxx | ||||
| Name: Xxxx X. Xxxxxxx | ||||
| Title: Chairman of the Board | ||||
| EXECUTIVE | ||||
| /s/ Xxxxxxx Xxxxx Xxxxxx | ||||
| Xxxxxxx Xxxxx Xxxxxx |
22
EXHIBIT A
General Release of Claims
Consistent
with Section 9 of the Amended and Restated Employment Agreement
dated July 29,
2010 between me and CapitalSource Bank (the “Employment Agreement”) and in consideration for and
contingent upon my receipt of the Accrued Benefits and the Severance Payments set forth in Section
9 of the Employment Agreement, I, for myself, my attorneys, heirs, executors, administrators,
successors, and assigns, do hereby fully and forever release and discharge CapitalSource Bank and
CapitalSource Inc. (together, “CapitalSource”) and their past, current and future affiliated
entities, as well as their predecessors, successors, assigns, and their past, current and former
directors, officers, partners, agents, employees, attorneys, and administrators from all suits,
causes of action, and/or claims, demands or entitlements of any nature whatsoever, whether known,
unknown, or unforeseen, which I have or may have against any of them arising out of or in
connection with my employment by CapitalSource, the Employment Agreement, the termination of my
employment with CapitalSource, or any event, transaction, or matter occurring or existing on or
before the date of my signing of this General Release, except that I am not releasing any claims
arising under Sections 10, 11, or 12 of the Employment Agreement, any other right to
indemnification that I may otherwise have, or any claims arising after the date of my signing this
General Release. I agree not to file or otherwise institute any claim, demand or lawsuit seeking
damages or other relief and not to otherwise assert any claims, demands or entitlements that are
released herein. I further hereby irrevocably and unconditionally waive any and all rights to
recover any relief or damages concerning the claims, demands or entitlements that are released
herein. I represent and warrant that I have not previously filed or joined in any such claims,
demands or entitlements against CapitalSource or the other persons or entities released herein and
that I will indemnify and hold them harmless from all liabilities, claims, demands, costs, expenses
and/or attorney’s fees incurred as a result of any such claims, demands or lawsuits.
This General Release specifically includes, but is not limited to, all claims of breach of
contract, employment discrimination (including any claims coming within the scope of Title VII of
the Civil Rights Act, the Age Discrimination in Employment Act, the Older Workers Benefit
Protection Act, the Equal Pay Act, the Americans with Disabilities Act, the Family and Medical
Leave Act, and Article 49B of the Maryland Code, all as amended, or any other applicable federal,
state, or local law), claims under the Employee Retirement Income Security Act, as amended, claims
under the Fair Labor Standards Act, as amended (or any other applicable federal, state or local
statute relating to payment of wages), wage orders, claims concerning recruitment, hiring,
termination, salary rate, severance pay, stock options, wages or benefits due, sick leave, holiday
pay, vacation pay, life insurance, group medical insurance, any other fringe benefits, worker’s
compensation, termination, employment status, libel, slander, defamation, intentional or negligent
misrepresentation and/or infliction of emotional distress, together with any and all tort,
contract, or other claims which might have been asserted by me or on my behalf in any suit, charge
of discrimination, or claim against CapitalSource or the persons or entities released herein.
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CapitalSource and I acknowledge that different or additional facts may be discovered in
addition to what we now know or believe to be true with respect to the matters released in this
General Release, and we agree that this General Release shall be and remain in effect in all
respects as a complete and final release of the matters released, notwithstanding any different or
additional facts.
Claims Excluded from this Release: However, notwithstanding the foregoing, nothing in
this General Release shall be construed to waive any right that is not subject to waiver by private
agreement, including, without limitation, any claims arising under state unemployment insurance or
workers compensation laws. I understand that rights or claims under the Age Discrimination in
Employment Act that may arise after I execute this General Release are not waived. Likewise,
nothing in this General Release shall be construed to prohibit me from filing a charge with or
participating in any investigation or proceeding conducted by the EEOC, NLRB, or any comparable
state or local agency. Notwithstanding the foregoing, I agree to waive my right to recover
individual relief in any charge, complaint, or lawsuit filed by me or anyone on my behalf.
I acknowledge that I have been given an opportunity of twenty-one (21) days to consider this
General Release and that I have been encouraged by CapitalSource to discuss fully the terms of this
General Release with legal counsel of my own choosing. Moreover, for a period of seven (7) days
following my execution of this General Release, I shall have the right to revoke the waiver of
claims arising under the Age Discrimination in Employment Act, a federal statute that prohibits
employers from discriminating against employees who are age 40 or over. If I elect to revoke this
General Release in whole or in part within this seven-day period, I must inform CapitalSource by
delivering a written notice of revocation to CapitalSource’s General Counsel, 0000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxxxx Xxxxx, Xxxxxxxx 00000, no later than 11:59 p.m. on the seventh
calendar day after I sign this General Release. I understand that, if I elect to exercise this
revocation right, this General Release shall be voided in its entirety at the election of
CapitalSource and CapitalSource shall be relieved of all obligations to make the Severance Payments
described in Section 9 of the Employment Agreement. I may, if I wish, elect to sign this General
Release prior to the expiration of the 21-day consideration period, and I agree that if I elect to
do so, my election is made freely and voluntarily and after having an opportunity to consult
counsel.
| AGREED: | ||||
| Xxxxxxx Xxxxx Xxxxxx | Date |
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