EMPLOYMENT AGREEMENT
Exhibit 10.46
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 X. Xxxxxx, an individual (the “Executive”).
WHEREAS, the Executive is currently employed as the Managing Director of the Healthcare Credit
Group; and
WHEREAS, the Employer and the Executive desire to 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
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.”
3. Position
and Duties. During the Employment Period, the Executive shall
serve as the Managing Director of the Healthcare Credit Group 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 for similarly situated executives. 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.
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 Chevy
Chase, Maryland), except for reasonable travel on the Employer’s business consistent with the
Executive’s position.
5. Compensation
and Benefits; Options; Change in Control.
(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 $250,000 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.
(b)
Annual Bonus. For each calendar year that ends prior to a Change in Control
during the Employment Period, the Executive shall receive an annual cash bonus in an amount
determined reasonably and in good faith by the Employer based upon the Employer’s overall
performance and the performance of the Executive and the Healthcare and Specialty Finance Business.
For each calendar year during the Employment Period that ends after a Change in Control, the
Executive shall be paid in cash an annual bonus in an amount not less than 100% of 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 the 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)
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
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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; provided, however, all of Executive’s equity or
equity-related rewards shall also be governed by the terms of this Agreement (as applicable,
including without limitation, accelerated vesting provisions herein) and provided, further, to the
extent that this Agreement and the CapitalSource Stock Plan conflict, this Agreement shall control
in all instances. 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.
(e)
Change in Control.
(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). In the event of a Change in Control covered by Exhibit A,
which is hereby incorporated in and made a part of this Agreement,
Section 5(e)(1)(b) and Section
5(e)(2) shall not apply to the Executive.
(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
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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 in payment rule for key employees, to the extent permitted by Section 409A the
Executive shall be entitled to payment by the Employer of
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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).
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 the 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 the Company Affiliates:
(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
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(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. 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.
(d)
Non-Competition.
(i) 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
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competitive with the Employer and 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
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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.
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:
(A) Disability. If the Executive shall have been substantially
unable to perform 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 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. If the Executive terminates his 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.
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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.
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 (30) 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; and
(iii) Equity
Awards. All outstanding equity awards, including without limitation
those granted pursuant to Section 5(d), held by the Executive immediately prior to his death shall
immediately vest (with outstanding options remaining exercisable for the length of their remaining
term).
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
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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 as of the Date of
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(c) and 7(d) 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
10
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 one of the two releases
(whichever is appropriate) attached hereto as Exhibit B. Within five (5) business days of the Date
of Termination, the Employer shall deliver to the Executive the appropriate form of release of
claims for the Executive to execute. The Severance Payments shall be made within three (3) business
days of Employer’s receipt of the release of claims if the Executive is under 40 years old on the
date on which such release is signed, or within three (3) business days of the expiration of the
7-day revocation period in the release without the release being revoked if the Executive is 40
years old or older on the date on which such release is signed. In addition, the Employer will
execute a release of claims substantially in the form of the release attached hereto as Exhibit C
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).
10. Certain Additional Payments by the Employer.
(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
11
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
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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.
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 to promptly advance to the Executive or the Executive’s heirs or representatives such
expenses upon written request with appropriate documentation of such expense 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, the Employer also shall provide the Executive with
coverage under its current directors’ and officers’ liability policy to the same extent that it
provides such coverage to other similarly situated executives. 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. 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
13
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.
12. Attorney’s Fees. The Employer shall advance the Executive (and his
beneficiaries) any and all 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, any other agreement or
arrangement between the Executive and the Employer, the Executive’s employment with the Employer,
or the termination thereof; provided that the Executive shall reimburse the Employer any advances
on a net after-tax basis 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 it is judicially
determined that the Employer is the prevailing party, or (b) brought by the Executive that are
judicially determined to be frivolous or advanced in bad faith. 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 Finance LLC
4400 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Xttn: Chief Legal Officer
Facsimile Number: 000-000-0000
4400 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Xttn: Chief Legal Officer
Facsimile Number: 000-000-0000
(ii) If to the Executive:
Xxxxx X. Xxxxxx
Address last shown on the Employer’s Records
Address last shown on the Employer’s Records
14
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. The provisions of this Agreement shall supersede
the terms of any plan, policy, agreement, award or other arrangement of the Employer (whether
entered into before or after the Effective Date) to the extent application of the terms of this
Agreement is more favorable to the Executive.
16. Survival. It is the express intention and agreement of the parties hereto
that the provisions of Sections 7, 9, 10, 11, 12, 13, 14, 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 and (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 corporation.
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.
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,
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.
15
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 Maryland (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 subject matter herein, 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 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 of stock or other property shall be satisfied
through withholding an appropriate number of shares of stock or appropriate amount of such other
property.
25. Definitions.
“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 the Executive 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
16
material breach by the Executive of Sections 3, 4, 7(d)(i)(B) or 7(d)(i)(C) 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 (it being understood that any errors in expense reimbursement may be cured
by repayment).
“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
17
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 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) any other material breach by
the Employer of the terms of this Agreement or any other agreement which 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
18
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.
19
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 FINANCE LLC | ||||||
| By: | /s/ Xxxx X. Xxxxxxx | |||||
| Title: Chairman of the Board and Chief-Executive Officer | ||||||
| EXECUTIVE | ||||||
| /s/ Xxxxx X. Xxxxxx | ||||||
| Xxxxx X. Xxxxxx | ||||||
20
EXHIBIT A
In the
event of any Change in Control and if the Executive reasonably determines that, after such
transaction, the Executive shall be required to directly or indirectly report to Xxxxxx Xxxxx or
Xxxxx Xxxxxxxx, the following provision, at Executive’s option, shall apply to the Executive:
(1) Section 5(e)(1)(b) and Section 5(e)(2) shall not apply to the Executive. Instead,
immediately prior to the Change in Control, (A) 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) 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 other equity or equity-related awards
will, to the extent applicable, be transferred or distributed to the Executive immediately prior to
such Change in Control.
EXHIBIT B
General Release of Claims If Executive Is 40 Years-Old or Older on the Date of
Execution
Consistent with Section 9(e) of the Employment Agreement dated November 22, 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, 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), 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.
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 if the Executive is Under 40 Years-Old on the Date of Execution
Consistent with Section 9(e) of the Employment Agreement dated November 22nd 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 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), 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.
I acknowledge and agree that I have been given a more than sufficient period of time 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. I further
acknowledge and agree that my execution of this General Release is made freely and voluntarily and
not under duress or coercion of any kind.
| AGREED: | ||||||||
EXHIBIT C
General Release of Claims by CapitalSource Finance LLC
Consistent with Section 9(e) of the Employment Agreement dated November 22, 2005 between
CapitalSource Finance LLC (“CapitalSource”) and Xxxxx X. Xxxxxx (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: | ||||||||
| By: | , | |||||||||
| Name | Title |
