CAPITALSOURCE BANK CHANGE IN CONTROL AGREEMENT
Exhibit 10.33
CAPITALSOURCE BANK CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this “Agreement”) is effective the 21st day of
January 2009 (the “Effective Date”), by and between CapitalSource Bank, a California bank (the
“Employer”) and Xxxx X. Xxxxxx (the “Executive”).
NOW THEREFORE, in consideration of the mutual agreements herein contained, and upon the other
terms and conditions hereinafter provided, the parties hereby agree as follows:
1. Definitions. The following words and terms shall have the meanings set forth below
for the
purposes of this Agreement:
(a) Annual Compensation. The Executive’s “Annual Compensation” for purposes of this
Agreement shall be deemed to mean the sum of (1) the base salary as of the Date of
Termination and (2) the average of the annual cash bonuses paid and the value (as reasonably determined by the Employer) of
any equity awards designated by Employer as eligible for purposes of this agreement by the Employer
to the Executive during the prior two calendar years, or if the Executive has been employed by the
Employer for less than two years, the Executive’s target bonus (in lieu of average bonuses).
(b) Bank Change in Control. “Bank Change in Control” shall mean the occurrence of one or more of
the following events: (i) any person (other than a Company Affiliate) is or becomes the record
owner of more than 50% of the Voting Stock of the Employer; (ii) the Employer
adopts any plan of liquidation providing for the distribution of all or substantially all of its
assets; (iii) the Employer transfers all or substantially all of its assets or business
(unless the shareholder of the Employer immediately prior to such transaction beneficially owns,
directly or indirectly, more than 50% of the Voting Stock or other ownership interests
of the entity or entities, if any, that succeed to the business of the Employer); or (iv) any
merger, reorganization or consolidation of the Employer unless, immediately after consummation of
such transaction, the shareholder of the Employer immediately prior to the transaction beneficially
owns, directly or indirectly, more than 50% of the Voting Stock of the Employer. 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.
(c) Cause. Termination of the Executive’s employment for “Cause” shall mean: (i) the
Executive’s knowing violation of law in the course of performance of the duties of Executive’s
employment with the Company or any Company Affiliate, and/or the Executive’s conviction of, or plea
of nolo contendere to, a felony or any crime involving dishonesty, disloyalty, or fraud with
respect to the Employer; (ii) the Executive’s material breach of any obligation in this
Agreement; (iii) the Executive’s engaging in conduct constituting a material breach of any
fiduciary duty to the Employer, willful and material misconduct, or gross negligence; (iv) any act
of dishonesty, fraud, misrepresentation, or embezzlement by the Executive that xxxxx or injures the
Employer or a Company Affiliate; (v) the Executive’s failure to retain regulatory approval from the
Federal Deposit Insurance Corporation (the “FDIC”), the California Department of Financial
Institutions, or any other state or federal regulatory body with oversight or authority over
banking or the Employer (a “Regulator”) for any position Executive maintains with Employer; (vi)
Employer’s termination of Executive’s employment arising out of or in connection with any direct or
indirect order, request, mandate or other instruction of any Regulator or a finding by any such
Regulator that Executive’s performance threatens the safety or soundness of the Employer or any of
its subsidiaries; (vii) the Executive’s failure to furnish all information or take any other steps
necessary to enable Employer to maintain fidelity bond coverage (in an amount and with a surety
company selected by Employer in its sole discretion) of Executive during the term of his
employment; or (viii) the Executive’s continued failure to competently perform the
Executive’s duties after receiving written notice from the Employer identifying the manner in which
the Executive has failed to perform competently and being given 30 days to cure such
failure.
(d) Change in Control. “Change in Control” shall mean both “Bank Change in Control” and
“CSE Change in Control”.
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(e) Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
(f) Company Affiliate. “Company Affiliate” means any entity controlled by, in control
of, or under common control with, the Employer.
(g) CSE Change in Control. “CSE Change in Control” means (i) the dissolution or liquidation of
CapitalSource Inc. or a merger, consolidation, or reorganization of CapitalSource Inc. with one or
more other entities in which CapitalSource Inc. is not the surviving entity, (ii) a sale of
substantially all of the assets of CapitalSource Inc. to another person or entity, or (iii) any
transaction (including without limitation a merger or reorganization in which CapitalSource Inc. is
the surviving entity) which results in any person or entity owning 50% or more of the combined
voting power of all classes of shares of CapitalSource Inc. or its successor; provided however,
that a transaction described in (i) or (ii) shall not be a CSE Change in Control if persons who are
shareholders of CapitalSource Inc. or its affiliates immediately prior to the transaction continue
to own 50% or more of the combined voting power of CapitalSource Inc. or the resulting entity
immediately following the transaction.
(h) Date of Termination. “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 by the Employer or the Executive, the date specified in the Notice of
Termination; or (iii) if the Executive’s employment ends because of Non-Renewal, the date on which
the Initial Term or the Extended Term, as the case may be, expires. Notwithstanding the foregoing,
the Executive’s Date of Termination shall mean the date of the Executive’s separation from service
as defined in Code Section 409A.
(i) Disability. “Disability” shall mean the Executive is substantially unable to
perform the Executive’s material duties by reason of illness, physical or mental disability
or other similar incapacity, which inability shall continue for at least 90 consecutive days or
more than 120 days in any 12 month period. The Executive agrees, in the event of any dispute 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 agreement between 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 the parties as to whether a Disability exists and the date
when such Disability arose. This Agreement shall be interpreted and applied so as to comply with
the provisions of the Americans with Disabilities Act (to the extent that it is applicable) and any
applicable state or local laws.
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(j) Good Reason. Termination by the Executive of the Executive’s employment for “Good
Reason” shall mean termination by the Executive as a result of or within the 12 months following a
Change in Control based on: (i) the Employer’s failure to pay any Annual Compensation due and
payable to the Executive; (ii) a change in the Executive’s title below the Executive’s level
immediately prior to the date of the Change in Control or a material diminution by the Employer in
Executive’s authority, responsibilities or duties (not including, by itself, removal of authority
or responsibility for any aspect of Executive’s position) taken as a whole; (iii) the Employer’s
willful and material breach of any obligation in this Agreement; or (iv) a relocation of the
Executive’s primary place of employment to a location that increases the Executive’s commute prior
to the Change in Control (the distance between the Executive’s primary residence and primary place
of employment prior to the relocation) by more than 25 miles. The Executive understands and agrees
that none of the foregoing events shall constitute Good Reason if the Executive consents in writing
to such event. The Executive further understands and agrees that none of the foregoing events shall
constitute Good Reason unless and until the Executive provides written notice to the Employer
identifying the asserted grounds for Good Reason, such notice is provided to the Employer within 45
days of such event, and the Employer fails to cure such asserted grounds for Good Reason within 60
days of its receipt of such notice from the Executive. A Good Reason termination shall not exist
unless the Executive resigns within 150 days from the date of the initial existence of one of the
foregoing conditions.
(k) IRS. “IRS” shall mean the Internal Revenue Service.
(l) Notice of Termination. Any purported termination of the Executive’s employment by the
Employer for any reason, including without limitation for Cause or Disability, or by the Executive
for any reason, including without limitation for Good Reason, shall be communicated by written
“Notice of Termination” to the other party hereto. For purposes of this Agreement, a
“Notice of Termination” shall mean a written dated notice which indicates the specific termination
provision in this Agreement relied upon.
2. Term of Agreement. The term of this Agreement shall be for two years, commencing on the
Effective Date, and shall automatically extend for an additional consecutive 12 month period on the
first anniversary of the Effective Date unless and until the Employer or the Executive provides
written notice to the other party not less than 60 days before such anniversary date that such
party is electing not to extend the term of this Agreement
(“Non-Renewal”). References herein to
the term of this Agreement shall refer both to the initial term and successive terms.
3. Benefits Upon Termination. During the term of this Agreement, if the Executive’s employment by
the Employer terminates as a result of a Change in Control, or if the Employer terminates the
Executive’s employment other than for Cause or Disability within 12 months following a Change in
Control, or if the Executive terminates the Executive’s employment for Good Reason within 12 months
following a Change in Control, then (in accordance with the other terms of this Agreement,
including but not limited to Section 6):
(a) the Employer shall pay the Executive an amount equal to two times the Executive’s Annual
Compensation;
(b) any unvested shares of CapitalSource Inc.’s common stock granted to the Executive in connection
with the Executive’s employment shall vest subject to any revocation period set forth herein; and
(c) the Employer shall pay for the Executive and the Executive’s covered dependents to participate
or continue to participate, on the same terms and conditions as available or applicable immediately
prior to the Executive’s Date of Termination, in such medical and dental insurance plans through
COBRA (to the extent the Executive and the Executive’s eligible dependents were
eligible to participate or were participating in such plans immediately prior to the Date of
Termination) until the earlier of (i) the Executive obtaining new employment, and (ii) 18
months from the Date of Termination.
4. Limitation of Benefits under Certain Circumstances. Notwithstanding any other provision of this
Agreement or of any other agreement, contract, or understanding heretofore or hereafter entered
into by a Executive with the Employer or any affiliate, except an agreement, contract, or
understanding that expressly addresses Section 280G or Section 4999 of the Code (an “Other
Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or
indirect provision of compensation to the Executive, whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the Executive (a “Benefit Arrangement”), if
the Executive is a “disqualified individual,” as defined in
Section 280G(c) of the Code, any equity
award held by the Executive and any right to receive any payment or other benefit under this
Agreement or otherwise shall not become exercisable, vested or paid (i) to the extent that such
right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or
benefits to or for the Executive under this Agreement, all Other Agreements, and all Benefit
Arrangements, would cause any payment or benefit to the Executive under this Agreement to be
considered a “parachute payment” within the meaning of
Section 280G(bX2) of the Code as then in
effect (a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Executive from the Employer under this
Agreement, all Other Agreements, and all Benefit Arrangements would be less than the maximum
after-tax amount that could be received by the Executive without causing any such payment or
benefit to be considered a Parachute Payment. In the event that the receipt of any such right to
exercise, vesting, payment, or benefit under this Agreement, in conjunction with all other rights,
payments, or benefits to or for the Executive under any Other Agreement or any Benefit Arrangement
would cause the Executive to be considered to have received a Parachute Payment under this
Agreement that would have the
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effect of decreasing the after-tax amount received by the
Executive as described in clause (ii) of the preceding sentence, then the Grantee shall
have the right, in the Executive’s sole discretion, to designate those rights, payments, or
benefits under this Agreement, any Other Agreements, and any Benefit Arrangements that should be
reduced or eliminated so as to avoid having the payment or benefit to the Agreement under this
Agreement be deemed to be a Parachute Payment; provided, however, that in order to comply with Code
Section 409A, the reduction or elimination will be performed in the order in which each dollar of
value subject to a payment, benefit or award reduces the Parachute Payment to the greatest extent.
5. Withholding. All payments required to be made by the Employer hereunder to the Executive shall
be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions
as the Employer may reasonably determine should be withheld pursuant to any applicable law or
regulation.
6. Requirement of General Release. The Executive agrees that, as a condition to receiving any
payments or other benefits hereunder, the Executive will execute a general release of claims in a
form acceptable to the Employer. Within five business days of the Date of Termination, the Employer
shall deliver to the Executive the release, and such release shall be signed within 21 days of the
receipt of the release by Executive. Any payment to be made hereunder shall be made
within ten business days following the later of the Employer’s receipt of the executed general
release of claims or the expiration of the revocation period (to the extent that there is a
revocation period) without the general release of claims being revoked by the Executive.
7. Nature of Employment and Obligations. Nothing contained herein shall be deemed to create any
relationship other than a terminable at will employment relationship between the Employer and the
Executive, and the Employer may terminate the Executive’s employment at any time, subject to
providing any payments specified herein in accordance with the terms hereof.
8. Offset. Any payments to the Executive pursuant to this Agreement shall, at the
Employer’s discretion, be offset and less any amounts owed by the Executive to the Employer as of
the Date of Termination, including without limitation, any denied expense reimbursements, any
personal expenses, any unpaid loan balances, the value of any negative leave balances, any
repayment obligations for the signing bonus, and any other amounts owing to the Employer. The
Executive hereby consents to and authorizes such offsets.
9. Attorney’s Fees. In the event of any dispute relating to or arising from this Agreement, the
Executive shall be entitled to recover from the Employer any and all costs and expenses
(including without limitation attorneys’ fees and other charges of counsel) incurred in connection
with litigating such dispute if such dispute is resolved in favor of
the Executive. Otherwise,
each party is responsible for their own costs.
10. Severability;
Assignability. 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. This Agreement shall be binding upon, and
inure to the benefit of, the Executive, the Employer and their respective successors and assigns.
The rights and obligations of the parties to this Agreement shall not be assignable or delegable,
except that the rights and obligations of the Employer hereunder shall be assignable and delegable
to any Company Affiliate or 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.
Subject to any provisions in this Agreement 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.
11. 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
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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.
12. 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.
13. Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims
or disputes relating thereto, shall be governed by and construed in accordance with the laws of the
State of California (but not including any choice of law rule thereof that would cause the laws of
another jurisdiction to apply). The parties hereby consent to the exclusive jurisdiction
of, and venue in, any federal or state court of competent jurisdiction located in Los Angeles
County, California for the purposes of adjudicating any and all claims, demands, causes of action,
disputes, controversies, and other matters rising out of or relating to this Agreement, any of its provisions, or the relationship between
the parties created by this Agreement.
14. 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. 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.
15. Notice. 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:
| (a) | If to the Employer: | ||
| CapitalSource Bank Attn: Xxxxxx X. Xxxxxxx, Chief Legal Officer c/o CapitalSource 0000 Xxxxxxx Xxxxxx 00xx Xxxxx Xxxxx Xxxxx, XX 00000 Tel: (000) 000-0000 Fax: (000) 000-0000 |
|||
| (b) | If to the Executive: 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, 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.
16. Regulatory Provisions. Notwithstanding any other provision of this Agreement to the
contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act
(12 U.S.C. § 1828(k)) and the regulations promulgated thereunder, including 12 C.F.R.
Part 359, if and to the extent applicable at the time of any payment.
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17. IRS Section 409A.
(a) With respect to payments under this Agreement for purposes of Section 409A of the Code, each
COBRA continuation reimbursement payment will be considered one of a series of separate payments;
(b) If at the time of Executive’s separation from service, (i) Executive is a specified employee
(within the meaning of Section 409A and using the identification methodology selected by the
Company from time to time, and (ii) the Company makes a good faith determination that an amount
payable hereunder constitutes deferred compensation (within the meaning of Section 409A) the
payment of which is required to be delayed pursuant to the six-month delay rule set forth in
Section 409A in order to avoid taxes or penalties under Section 409A, then the Company will not pay
such amount on the otherwise scheduled payment date but will instead pay it in a lump sum on the
first business day after such six-month period together with
interest for the period of delay, compounded annually, equal to the prime rate (as published in the
Wall Street Journal) in effect as of the dates the payments should otherwise have been provided.
(c) Any amount that Executive is entitled to be reimbursed under this Agreement will be reimbursed
to Executive as promptly as practical and in any event not later than the last day of the calendar
year after the calendar year in which the expenses are incurred, and the amount of the expenses
eligible for reimbursement during any calendar year will not affect the amount of expenses eligible
for reimbursement in any other calendar year.
(d) 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 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 17. The Executive and the Employer agree to cooperate to make
such amendments to the terms of this Agreement as may be necessary to avoid the imposition of
penalties and additional taxes under Section 409A of the Code to the extent possible; provided,
however, that the Employer agrees that any such amendment shall provide the Executive with
economically equivalent payments and benefits, and the Executive agrees that any such amendment
will not materially increase the cost to, or liability of, the Employer with respect to any
payments.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.
Attest:
/s/ Xxxxxx X. Xxxxxxx
Attest:
/s/ Xxxxxx X. Xxxxxxx
CAPITALSOURCE BANK
By: /s/ Xxx Xxxxxx
Name: Xxx Xxxxxx
Title: President and Chief Executive Officer
Name: Xxx Xxxxxx
Title: President and Chief Executive Officer
XXXX X. XXXXXX
By: /s/
Xxxx X. Xxxxxx
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