EMPLOYMENT AGREEMENT
Exhibit 10.45
This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of this 22nd day of November,
2005 (the “Effective Date”), by and between CapitalSource Finance LLC, a Delaware corporation (the
“Employer” or the “Company”), and Xxxxx Xxxxxxxxxx, an individual (the “Executive”).
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
position 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
five-year period commencing on the Effective Date (the “Initial Term”). The term of employment
shall be automatically extended for an additional consecutive 12-month period (the “Extended Term”)
on November 22< 2010 and each subsequent November 22, unless and until the Employer or the
Executive provides written notice to the other party in accordance with Section 13 hereof not less
than sixty (60) days before such anniversary date that such party is electing not to extend the
term of employment under this Agreement (“Non-Renewal”), in which case the term of employment
hereunder shall end as of the end of such Initial Term or Extended Term, as the case may be.
Notwithstanding anything to the contrary in this Section 2, either the Company or the Executive may
terminate the term of employment at any time in accordance with Section 8. The period of such
Initial Term and any such Extended Terms through the Date of Termination is referred to herein as
the “Employment Period.”
(a) Duties and Responsibilities. During the Employment Period, the Executive
shall serve as a Managing Director and shall be a member of the Executive Committee (to the extent
the Employer maintains such committee and desires the Executive serve on such committee). In such
capacities, prior to any Change in Control the Executive shall report to the President, Healthcare
and Specialty Finance or some other position of equal or greater authority within the Employer. The
Executive’s responsibilities shall include those currently performed by him, and may include such
other duties as designated by 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 to the advancement of the business and affairs of the Employer;
provided that the Executive shall be entitled to serve as a member of the board of directors of a
reasonable number of other companies, to serve on civic, charitable, educational, religious, public
interest or public service boards, and 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.
(a) Base Salary. During the Employment Period, the Employer shall pay to the
Executive a base salary (the “Base Salary”) at the rate of no less than $272,651 per calendar year,
less applicable deductions, and prorated for any partial year. The Base Salary shall be reviewed
for increase by the Employer no less frequently than annually and shall be increased in the
discretion of the Employer and 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.
(c)
Vacation; Benefits. During the Employment Period, the Executive shall be
entitled to four weeks vacation annually. In addition, the Employer shall provide to the
Executive employee benefits and perquisites on a basis that is comparable in all material respects
to that provided to other similarly situated executives of the Employer. Subject to the terms of
this Agreement, all benefits are provided at the Employer’s sole discretion. Subject to the terms
of this Agreement, the Employer shall have the right to change insurance carriers and to adopt,
amend, terminate or modify employee benefit plans and arrangements at any time and without the
consent of the Executive.
(d) Additional Consideration. In consideration of entering into this Agreement,
on the Effective Date, the Employer shall grant to the Executive 100,000 shares of the Employer’s
common stock, par value $0.01 (“Stock”), which shall vest and become freely transferable as
follows: (i) 16,667 shares on each of the Effective Date, June 30, 2006, June 30, 2007, June 30,
2008, and June 30, 2009; and (ii) 16,665 shares on June 30, 2010. Unvested shares of Stock granted
under this Section 5(d) shall be forfeited by the Executive if and only if the Executive’s
employment with the Employer and all the Company Affiliates is voluntarily terminated by the
Executive without Good Reason or is terminated by the Employer for Cause, in each case, before the
date on which such shares of Stock would otherwise vest hereunder. Except as expressly set forth in
this Agreement, this grant of Stock shall be governed by and subject to the terms and conditions
set forth in the CapitalSource Stock Plan. Nothing in this Section 5(d) shall prohibit the
Executive from receiving or require the Employer to provide grants of Stock after the Effective
Date, such future grants remaining within the sole discretion of the Employer.
(1)(a) Immediately prior to the occurrence of a Change in Control and contingent upon the
occurrence of a Change in Control, (i) all deferred compensation credited on the Executive’s behalf
shall immediately vest; (ii) all vested stock options, stock appreciation rights or other similar
rights held by the Executive that are outstanding after such Change in Control shall remain
exercisable for the remainder of their originally scheduled terms (but only if such awards are
assumed by the acquirer); and (iii) all deferred compensation credited on the Executive’s behalf
will, to the extent applicable, be transferred or distributed to the Executive on the first date
such amounts may be distributed without incurring the 20% penalty tax imposed under Section 409A of
the Code (other than such amounts required to be credited pursuant to
this Section 5(e)(1)(b) in
cancellation of the Applicable Awards).
(b) Immediately prior to the occurrence of a Change in Control and contingent upon the
occurrence of a Change in Control, the Employer shall establish a trust with an independent
institutional third party trustee selected by the Executive (the “Trust”). The agreement governing
the Trust shall be in a form mutually agreed upon by the parties and in any event shall be
consistent with the intent of this Section 5(e). The assets of the Trust shall not be used for any
purpose other than to satisfy certain liabilities to the Executive described herein, except that if
the Trust is dissolved in accordance with this Section 5(e)(1)(b) the Employer shall retain the
Trust assets. For the avoidance of doubt, the Trust shall be a “secular” trust, the assets of which
shall not be subject to
the claims of the Employer’s creditors. Trust assets shall be invested in short-term money
market securities until distribution hereunder. Immediately prior to the occurrence of a Change in
Control and contingent upon a Change in Control, the Employer
shall deposit into the Trust cash in an amount equal to the sum of (i) the Value (as defined below)
of restricted shares of Stock previously granted to the Executive, including without limitation
those granted pursuant to Section 5(d), that are not vested on the date of the Change in Control,
(ii) the value of the spread with respect to any options to acquire Stock held by the Executive as
of the Change in Control (based on the difference between the Value of a share of Stock and the
applicable option exercise price) that are not vested and exercisable on the date of the Change in
Control and (iii) the value of any other equity-related award (based on the Value of a share of
Stock) held by the Executive that are not vested as of the Change in Control (such awards
collectively being referred to herein as the “Applicable Awards”). Upon contribution of the cash to
the Trust, the related Applicable Awards described in clauses (i), (ii) and (iii) above shall be
canceled and no longer outstanding. For purposes hereof, the Value of a share of Stock shall be the
per share price of Stock immediately before the Change in Control as listed on the principal
exchange on which such Stock trades. Upon the earlier of the first anniversary of the Change in
Control if the Executive is employed by the Employer or any Company Affiliate on such date and the
termination of the Executive’s employment in a manner that entitles him to benefits under Section
9(a), (b), (d) or (e) (as applicable, the “Distribution Date”), the Executive (or his estate) shall
be paid, based on an election made by the Executive or his estate to the Employer at the time of
such payment, (X) the amount required to be held in Trust on his behalf hereunder (including any
earnings on such amount) (the “Cash Based Value”) or (Y) the value the Applicable Awards would have
had on the Distribution Date if such Applicable Awards were outstanding on such date based on the
value of Stock on such date (or the value on such date of the stock of any publicly traded parent
company of the Employer assuming the aggregate cash contributed to the Trust had been invested in
such stock on the date of the Change in Control) (the “Stock Based Value”). Notwithstanding the
foregoing, in any Change in Control transaction pursuant to which 100% of the Stock holdings of
shareholders of the Employer immediately prior to the transaction are exchanged solely for cash,
the Stock Based Value shall be $0. If the Executive fails to make such an election by the
Distribution Date, the Executive shall be paid the greater of the Cash Based Value or the Stock
Based Value. If the Executive is paid the Stock Based Value, the Executive shall be paid shares of
stock of the Employer (or the stock of any publicly-traded parent company of the Employer) that are
freely and immediately transferable by the Executive and the Trust shall be dissolved and all
amounts required to be kept in the Trust shall be returned to the Employer. If the Executive is
paid the Cash Based Value, the Executive shall be paid in cash. Notwithstanding the foregoing, if
any Applicable Award would have vested before the applicable Distribution Date, the Executive shall
be entitled to a payment of the value of such Applicable Award in the form (cash or stock) and
amount as determined in accordance with the principles of the four preceding sentences (but using
the vesting date rather than the Distribution Date for purposes of determining such value) and such
payment shall reduce the amount otherwise payable under this
Section 5(e)(1). The Employer shall be
responsible for making any payments required under this Section 5(e). The Executive shall forfeit
his right to any future payment under this Section 5(e) and his interest in the Trust (the assets
of which shall revert to the Employer) only if his employment is terminated after the occurrence of
a Change in Control and before the Distribution Date in a manner described in Section 9(c);
provided that he shall not forfeit his right to any payment due him under this Section 5(e) with
respect to Applicable Awards that would have vested prior to his date of termination. Payments
under this Section 5(e)(1)(b) shall be delayed for six months following the Executive’s separation
from service if so required by Section 409A. To the extent permitted
under Section 409A of the Code, if the Executive shall be entitled to a payment pursuant to
this Section 5(e)(1)(b) prior to the date at which a payment can be made to the Executive solely
because of the Code Section 409A six month delay inpayment rule for key employees, to the extent
permitted by Section 409A the Executive shall be entitled to payment by the Employer of the
applicable employee portion of the withholding taxes due on such payment. Such a payment by the
Employer of withholding taxes shall reduce the amount otherwise payable to the Executive under this
Section 5(e)(1).
(2) Notwithstanding
Section 5(e)(1) above, instead of funding a trust with the cash
amounts required to be deposited under Section 5(e)(1) pursuant to the cancellation of the
Applicable Awards, the Employer, may with the Executive’s consent (which shall not be unreasonably
withheld), obtain an irrevocable letter of credit for, or other irrevocable insurance or a
guarantee of, the amounts required to be so deposited from a insurance company or other financial
institution with the highest credit rating from a nationally recognized rating agency on terms that
provide the Executive with no less protection or security than that
provided under Section 5(e)(1)
above. Even if the Employer elects to not fund the Trust in accordance with this Section 5(e)(2),
the Cash Based Value for purposes of Section 5(e)(1) shall be calculated as if the Employer had
funded the Trust in accordance with Section 5(e)(1).
(a) Non-Disclosure. During and after the Executive’s employment with the
Employer, the Executive will not knowingly use, disclose or transfer any Company Confidential
Information other than as authorized in writing by the Employer or within the scope of the
Executive’s duties with the Employer 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 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 any Company Confidential
Information or any other property of the Employer or any Company Affiliate from the
Employer’s premises or make copies of such materials except for normal and customary use in
the Employer’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 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. Except to the extent that such
obligations are prohibited by applicable law, during the Non-Compete Period, the Executive
shall not solicit, entice, persuade or induce any individual who is employed by the Employer
or the Company Affiliates (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 the 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 without cause.
(i) Except to the extent that such obligations are prohibited by
applicable law, during the Non-Compete Period, the Executive shall not, directly or indirectly, (A)
solicit or encourage any client or customer of the Employer or a 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, any existing business arrangements
with the Employer or a Company Affiliate or to transfer existing business from the Employer or a
Company Affiliate to any other person or entity, (B) provide services to any entity if (i) the
entity competes with the Employer by engaging in any business engaged in by the Employer, or (ii)
the services to be provided by the Executive to the entity are competitive with the Employer or
substantially similar to those previously provided by the Executive to the Employer; provided,
however, that following a Change in Control, 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. For purposes
of this Section 7(d), a “client or customer” shall be limited to any actual borrower of the
Employer (as set forth in the Employer’s CAM or substantially similar successor or related 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
related 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, 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 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) 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.
(f) Conflicting Obligations and Rights. The Executive agrees to inform the
Employer of any apparent conflicts between the Executive’s work for the Employer and any
obligations the Executive may have to preserve the confidentiality of another’s proprietary
information or related materials before using the same on the Employer’s behalf. The Employer
shall receive such disclosures in confidence and consistent with the objectives of avoiding
any conflict of obligations and rights or the appearance of any conflict of interest.
(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 along as the
Employer fully complies with Sections
9,10,11, and 12 (to the extent that the obligations therein apply). The Employer further agrees
that any breach of this Agreement by the Executive that does not result in the Executive’s being
terminated for Cause, other than a willful (as defined in the definition of “Cause”) and material
breach of Section 7 after his employment has terminated, shall not release the Employer from
compliance with its obligations under this Agreement. Notwithstanding the foregoing two sentences,
neither party shall be precluded from pursuing judicial remedies as a result of any such breaches.
employment without Good Reason, then he shall provide written notice to the Employer at least ten
(10) days prior to the Date of Termination.
(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.
(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:
The Employer shall pay to the Executive’s 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 this Section 9(a) 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 shall have no further
obligation to the Executive 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),(i) 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 (ii) all outstanding equity awards held by the
Executive immediately prior to his termination, including without limitation those granted
pursuant to Section 5(d), shall immediately vest (with outstanding options remaining exercisable
for the length of their remaining term). Except as set forth herein, the Employer shall have no
further obligations to the Executive under this Agreement.
(c)
Termination by the Employer for Cause, by the Executive without Good Reason, or because of Non-Renewal. 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, or if his employment ends because
of Non-Renewal, then 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. All outstanding
equity awards held by the Executive immediately prior to his termination, including without
limitation those granted pursuant to Section 5(d), that had not vested as of the Date of Termination
shall be forfeited by the Executive. Otherwise, the Executive’s rights with respect to equity or
equity-related awards shall be governed by the applicable terms of the related plan or award
agreement. If the Executive’s employment terminates because of Non-Renewal by the Employer, then
Sections 7(d)(i)(B) and 7(d)(i)(C) shall not apply to the Executive. Except as set forth
herein, the Employer shall have no further obligations to the Executive under this Agreement.
(d)
Termination by the Employer without Cause or by the Executive
with Good Reason. If the Employer terminates the Executive’s employment during the
Employment Period other than for Cause or Disability pursuant to Section 8(a) or if the Executive
terminates his employment hereunder with Good Reason, (i) the Employer shall pay the Executive (A) the
Executive’s Base Salary due through the Date of Termination, (B) a cash lump sum in an amount
equal to a pro rata portion (based upon the number of days the Executive was employed during
the calendar year in which the Date of Termination occurs) of the average amount of the annual
bonuses, if any, that were earned by the Executive for the two calendar years immediately
preceding the year of the Date of Termination, (C) 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 (D) a cash lump sum in an amount equal to the sum of the Executive’s Base Salary and
the average of the annual bonuses earned by the Executive for the two calendar years
immediately preceding the year of the Date of Termination, if any; (ii) (A) all deferred
compensation credited on the Executive’s behalf and all equity or equity-related awards held
by, or credited to, the Executive (including, without limitation, stock options, stock
appreciation rights, restricted stock awards, dividend equivalent rights, restricted stock units or
deferred stock awards, including without limitation those granted pursuant to Section 5(d)) shall immediately
vest and, if applicable, become exercisable, (B) all stock options, stock appreciation rights
or
other similar rights held by the Executive shall remain exercisable for the remainder of their
originally scheduled terms, and (C) all deferred compensation or other equity or equity-related
awards will, to the extent applicable, be transferred or distributed to the Executive within ten
(10) days of the Executive’s Date of Termination; and (iii) 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 twelve (12) 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; provided that
if such continued coverage is not permitted under the terms of such benefit plans, the Employer
shall pay Executive an additional amount that, on an after-tax basis, is equal to the cost of
comparable coverage obtained by Executive.
(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 or by the Executive for Good Reason shall be extremely difficult or
impossible to establish or prove, and agree that the amounts payable to the Executive under
Section 9(d) (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 five (5)
business days of the Date of Termination, the Employer shall deliver to the Executive the release of
claims for the Executive to execute. The Severance Payments shall be made within three (3)
business days of the expiration of the 7-day revocation period in the release without the
release being revoked. In addition, the Employer will execute a release of claims substantially in the
form of the release attached hereto as Exhibit B and will deliver such release to the
Executive along with the Severance Payments.
(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 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”), 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 the parties shall promptly execute any
amendment reasonably necessary to implement this Section 9(g).
(a) If it shall be determined that any benefit provided to the Executive or
payment or distribution by or for the account of the Employer to or for the benefit of the
Executive, whether provided, paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise (a “Payment”) would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are incurred by the Executive with
respect to such excise tax resulting from any action or inaction by the Employer (such excise tax,
together with any such interest and penalties, collectively, the “Excise Tax”), then the
Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such
that after payment by the Executive of the Excise Tax and all other income, employment, excise
and other taxes that are imposed on the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the sum of (A) the Excise Tax
imposed upon the Payments and (B) the product of any deductions disallowed because of the inclusion of the Gross-up Payment
in the Executive’s adjusted gross income and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-Up Payment is to be made.
(b) Subject to the provisions of Section 10(d), all determinations required to
be made under this Section 10, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Employer’s independent, certified public accounting firm
or such other certified public accounting firm as may be designated by the Executive and shall be
reasonably acceptable to the Employer (the “Accounting Firm”) which shall provide detailed
supporting calculations both to the Employer and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a Payment, or such earlier time as is
requested by the Employer. If the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting a change in the ownership or effective control (as
defined for purposes of Section 280G of the Code) of the Employer, the Executive shall appoint another
nationally recognized accounting firm which is reasonably acceptable to the Employer to make
the determinations required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Employer. Any Gross-Up Payment, as determined pursuant to this Section 10,
shall be paid by the Employer to the Executive within five days of the receipt of the
Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the
Employer and the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm hereunder, it is
possible that additional Gross-Up Payments shall be required to be made to compensate the Executive for
amounts of Excise Tax later determined to be due, consistent with the calculations required to
be made hereunder (an “Underpayment”). If the Employer exhausts its remedies pursuant to
Section 10(c) and the Executive is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Employer to or for the benefit of the
Executive.
(c) The Executive shall notify the Employer in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the Employer of the
Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10
business days after the Executive is informed in writing of such claim and shall apprise the
Employer of the nature of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Employer (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Employer notifies the Executive in
writing prior to the expiration of such period that they desire to contest such claim, the
Executive shall:
(i) give the Employer any information reasonably requested by the Employer relating to
such claim;
(ii) take
such action in connection with contesting such claim as the Employer shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an attorney reasonably
selected by the Employer;
(iii) cooperate with the Employer in good faith effectively to contest such claim; and
(iv) permit the Employer to participate in any proceedings relating to such claim;
provided, however, that the Employer shall bear and pay directly all costs and expenses (including
additional interest and penalties incurred in connection with such contest) and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such representation and payment
of costs and expenses.
provided that the failure to give such notice shall not affect the Executive’s right to
indemnification. The Employer 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 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. This Section 11 shall continue in effect after the termination of the Executive’s
employment or the termination of this Agreement.
(i) If to the Employer:
CapitalSource Finance LLC
0000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attn: Chief Legal Officer
Facsimile Number: 000-000-0000
0000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attn: Chief Legal Officer
Facsimile Number: 000-000-0000
(ii) If to the Executive:
Xxxxx Xxxxxxxxxx
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.
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.
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 Maryland (but not including any choice of law rule thereof that
would cause the laws of another jurisdiction to apply).
“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.
“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
specifically identifying the manner in which the Executive has substantially failed to perform his
essential job functions, specifying the manner in which the Executive may substantially perform his
essential job functions in the future, and providing him with thirty (30) days to cure his failure
to substantially perform; (iii) a material act of fraud or willful and material misconduct with
respect, in each case, to the Employer, by the Executive; (iv) a willful and material breach by the
Executive of Sections 3, 4 or 7 of this Agreement; or (v) the hiring of any person who was an
employee of the Employer within 180 days prior to such hiring, other than to perform services for
the benefit of the Employer. 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. 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 is provided to the Executive, and (B) as to clause (iv) of this paragraph, he is given
thirty (30) days to cure the breach that is the basis of such claim.
“Change in Control” means the occurrence of one or more of the following events: (i) any
“person” (as such terms 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 14(d)(d) 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 Employer; (ii) the majority of the Board of Directors of the
Employer (the “Board”) consists of individuals other than Incumbent Directors, which term means the
members of the Board 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 shall be considered to be an Incumbent Director; (iii)
the Employer adopts any plan of liquidation providing for the distribution of all or substantially
all of its assets; (iv) the Employer transfers all or substantially all of its assets or business
(unless the shareholders of the Employer immediately prior to such transaction beneficially own,
directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the
Employer, all of the Voting Stock or other ownership interests of the entity or entities, if any,
that succeed to the business of the Employer); or (v) any merger, reorganization, consolidation or
similar transaction unless, immediately after consummation of such transaction, the shareholders of
the Employer immediately prior to the transaction hold, directly or indirectly, more than 50% of
the Voting Stock of the Employer or the Employer’s ultimate parent company if the Employer 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 “Employer” shall include any entity that succeeds to all or
substantially all of the business of the Employer and “Voting Stock” shall mean securities 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.
“Company Confidential Information” means information known to the Executive to constitute
trade secrets or proprietary information belonging to the Employer or other 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 lending transaction
between Employer and an existing or pending client or customer (as the phrase “client or customer”
is defined in Section 7(d)(i) hereof), in each case, received by the Executive 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), thirty (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; (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; (iv) if the
Employment Period ends because of Non-Renewal, the last day of the Initial Term or the Extended
Term, as the case may be; or (v) if the Executive’s employment is terminated during the Employment
Period other than pursuant to Section 8(a), the date on which Notice of Termination is given.
“Good Reason” means, unless otherwise agreed to in writing by the Executive, (i) any
diminution or adverse change prior to a Change in Control in the Executive’s title; (ii) reduction
in the Executive’s Base Salary or, after a Change in Control, the annual bonus payable to the
Executive under Section 5(b); (iii) prior to a Change in Control a requirement that the Executive
report to someone other than the Employer’s President, Healthcare and Specialty Finance or another
position of equal or greater authority within the Employer; (iv) a material diminution in the
Executive’s authority, responsibilities or duties or material interference with the Executive’s
carrying out his duties; (v) the assignment of duties inconsistent with the Executive’s position or
status with the Employer as of the date hereof; (vi) a relocation of the Executive’s primary place
of employment other than to Santa Monica, California (provided that such relocation is in
connection with the Employer’s moving its healthcare real estate operations there) and to a
location more than twenty-five (25) miles further from the Executive’s primary residence than the
current location of the Employer’s offices; (vii) a willful (as defined above in the definition of
“Cause”) and material breach by the Employer of the terms of this Agreement or any other agreement
that breach is not cured within thirty (30) days after the Executive’s delivery of a written notice
of such breach to the Employer; (viii) any purported termination of the Executive’s employment by
the Employer that is not effected in accordance with the applicable provisions of this Agreement;
or (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
fifteen (15) days after a merger, consolidation, sale or similar transaction. In order to invoke a
termination for Good Reason, the
Executive must terminate his employment, if at all, within thirty (30) days of the occurrence of
any event of “Good Reason”. Notwithstanding anything to the contrary herein, (A) Good Reason shall
not, by itself, include removal of the Executive’s authority and/or responsibility for any aspect
of loan management or removal of the Executive from the Executive Committee, and (B) after a Change
in Control, Good Reason shall not, by itself, include (i) the assignment to the Executive of a
different title that is, within the organization of the successor entity, equivalent to the
Executive’s title with the Employer immediately prior to the Change in Control; or (ii) requiring
the Executive to report to the person within a successor entity with management authority for the
Executive’s business unit.
“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, provided that if a Change in Control occurs after 2005, the Non-Compete Period shall
end six months after the earlier of the expiration of the Employment Period or the Executive’s Date
of Termination.
CAPITALSOURCE FINANCE LLC |
||||
By: | /s/ Xxxx X. Xxxxxxx | |||
Name: Xxxx X. Xxxxxxx | ||||
Title: Chairman of the Board and Chief Executive Officer | ||||
EXECUTIVE |
||||
/s/ Xxxxx Xxxxxxxxxx | ||||
Xxxxx Xxxxxxxxxx | ||||
EXHIBIT A
Consistent with Section 9(e) of the Employment Agreement dated November ___, 2005 between me
and CapitalSource Finance LLC (the “Employment Agreement”) and in consideration for and contingent
upon my receipt of 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 Finance LLC (“CapitalSource”) and its
affiliated entities, as well as their predecessors, successors, assigns, and their current or
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 5(e), 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
lawfully 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 lawfully
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 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, Article 49B of the Maryland Code, the California Fair Employment and Housing Act, and
the California Family Rights Act, 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), claims under the California Labor Code or the California Industrial Welfare
Commission 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 released herein.
In the event that California law and the following provision of the California Civil Code arc
applicable to this General Release, as a further consideration and inducement for us to enter into
this General Release and the promises related thereto, CapitalSource and I expressly waive the
provision of Section 1542 of the California Civil Code, which reads as follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
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.
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 within this seven-day period, I must inform CapitalSource by delivering a written
notice of revocation to CapitalSource’s Director of Human Resources, 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: | ||||||
EXHIBIT B
General Release of Claims by CapitalSource Finance LLC
Consistent
with Section 9(e) of the Employment Agreement dated November
,
2005 between CapitalSource Finance LLC (“CapitalSource”) and Xxxxx Xxxxxxxxxx (the “Employment
Agreement”) and in consideration for and contingent upon Executive’s execution of a general release
of claims in favor of CapitalSource in the form required by the Employment Agreement (and provided
that he does not revoke it in the event that it is revocable), CapitalSource, for itself and its
affiliated entities, as well as their predecessors, successors, assigns, and their current or
former directors, officers, partners, agents, employees, attorneys, and administrators do hereby
fully and forever release and discharge Executive and his attorneys, heirs, executors,
administrators, successors, and assigns, from all suits, causes of action, and/or claims, demands
or entitlements of any nature whatsoever which CapitalSource has or may have against any of them
which are known to it as of the date of its executing this General Release and arising out of or in
connection with Executive’s employment by CapitalSource, the Employment Agreement, the termination
of Executive’s employment with CapitalSource, or any event, transaction, or matter occurring or
existing on or before the date of CapitalSource’s signing of
this General Release. CapitalSource
agrees 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 lawfully released
herein. CapitalSource further hereby irrevocably and unconditionally waives any and all rights to
recover any relief or damages concerning the claims, demands or entitlements that are lawfully
released herein. CapitalSource represents and warrants that it has not previously filed or joined
in any such claims, demands or entitlements against Executive or the other persons released herein
and that it will indemnify and hold them harmless from all liabilities, claims, demands, costs,
expenses and/or attorneys’ fees incurred as a result of any such claims, demands or lawsuits.
This General Release specifically includes, but is not limited to, all known claims of breach
of contract, tortious conduct, or breach of fiduciary duty, together with any and all known tort,
contract, or other known claims which might have been asserted by CapitalSource or on its behalf in
any suit or claim against Executive or the persons released herein.
CapitalSource acknowledges and agrees that it has been given a more than sufficient period of
time to consider this General Release and that it have been encouraged by Executive to discuss
fully the terms of this General Release with legal counsel of its own
choosing. CapitalSource further acknowledges and agrees that its execution of this General Release
is made freely and voluntarily and not under duress or coercion of any kind.
AGREED: | ||||||||||
CapitalSource Finance LLC | Date | |||||||||
By: | , | |||||||||
Name
|
Title |