EMPLOYMENT AGREEMENT
Exhibit 10.48
This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of this 25th day of July, 2008 (the
“Effective Date”), by and between CapitalSource Bank (the “Employer”) and Xxxxxxx Xxxxx Xxxxxx (the
“Executive”).
WHEREAS, the Employer desires to employ Executive as Chief Executive Officer for the Employer; and
WHEREAS, on or prior to the Effective Date, CapitalSource TRS Inc. purchased certain bank assets
and deposit liabilities from Fremont Investment and Loan to be used in the operation of the
Employer as an industrial bank in California;
WHEREAS, the Employer and the Executive desire to enter into this Agreement to set out the terms
and conditions for the 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 employ the Executive and the Executive agrees to be employed by the Employer. Terms used
herein with initial capitalization not otherwise defined are defined in Section 23.
2. Term. The term of employment under this Agreement shall be for a three-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 the third anniversary of the
Effective Date and each subsequent anniversary of the Effective Date unless and until the Employer
or the Executive provides written notice to the other party 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”). Notwithstanding anything to the contrary in this Section 2, either the
Employer or the Executive may terminate the Executive’s employment at any time in accordance with
Section 9. The period of such Initial Term and any Extended Terms through the Date of Termination
is referred to as the “Employment Period.”
3. Position and Responsibilities.
(a) Position. The Executive shall serve as Chief Executive Officer, reporting to the Employer’s
Board of Directors. The Executive’s responsibilities shall include those set forth below and may
include such other duties as designated by the Employer. Employee’s principal responsibilities and
duties as CEO shall include the following:
(i) Pursuing superior financial performance of the Employer;
(ii) Establishing a strong culture for ethical business practice and compliance with appropriate
laws and regulations;
(iii) Developing and directing strategies, goals and objectives
consistent with meeting the needs of customers, shareholders, communities, regulators and
employees;
(iv) Directing the development and operation of the Employer to ensure sound future growth, and
communicating the Employer’s strategic goals to key constituencies, including the Board of
Directors, shareholders, employees and regulators;
(v) Overseeing the development and implementation of the Employer’s strategic and business plans;
(vi) Advising and reporting to the Board of Directors on the
Employer’s progress against strategic and business goals;
(vii) Ensuring that the Employer has an appropriate body of policies and standards;
(viii) Reviewing and approving key credit exceptions consistent with the Employer’s credit policy;
(ix) Selecting senior executives for the Employer and establishing an organizational structure and
management processes capable of meeting the Employer’s objectives;
(x) Setting goals and objectives and evaluating performance of senior executives; and
(xi) Fostering and maintaining effective regulatory relationships.
(b) Best Efforts. The Executive shall devote the Executive’s reasonable best efforts and full
business time to the performance of the Executive’s duties hereunder and the advancement of the
business and affairs of the Employer and the Company Affiliates; provided that the Executive shall
be entitled to serve as a member of the board of directors (or board of managers or trustee, as
appropriate) of (i) a reasonable number of civic, charitable, educational, religious, public
interest or public service non-profit boards, (ii) the Federal Home Loan Bank of San Francisco, the
University of XxXxxxx, Three Sixty Advisory Group, LLC, and Pasadena Playhouse State Theatre of
California, and (iii) such other for-profit boards for which Executive obtains consent from the
Chairman of the Board of Directors of Employer, in each case to the extent such activities do not
materially interfere with the performance of the Executive’s duties and responsibilities hereunder.
2
4. Place of Performance. During the Employment Period, the Executive shall be based primarily at an
office of the Employer designated by the Employer (currently Brea, California but expected to move
to another location in the downtown Los Angeles region), except for reasonable travel on the
Employer’s business consistent with the Executive’s position.
5. Compliance with Employer’s Policies. The Executive agrees to enter into or acknowledge the
Employer’s handbook and standard agreements on confidentiality, xxxxxxx xxxxxxx, corporate
governance and other similar agreements of the Employer within ten (10) days of the Effective Date,
and to observe and comply with all policies and rules of the Employer unless such compliance is
inconsistent with the terms of this Agreement.
6. Compensation; Benefits; Restricted Stock Grant.
(a) Base Salary. During the Employment Period, the Employer shall pay to the Executive a base
salary (the “Base Salary”), and the annualized rate shall be at least $450,000. The Base Salary
shall be reviewed by the Employer no less frequently than annually and shall be increased in the
discretion of the Employer, and any such increased 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.
(b) Annual Bonus. For each calendar year that ends during the Employment Period (including calendar
year 2008), the Executive shall be eligible for an annual cash bonus in an amount determined by and
in the sole discretion of the Employer based upon such factors as the Employer’s overall
performance and the performance of the Executive. The target bonus amount shall be 100% of the
Executive’s Base Salary each year. The Executive must be employed by the Employer on December 31 of
the calendar year to be eligible for an annual bonus for that particular calendar year. The annual
bonus, if any, shall be paid no later than March 15 in the calendar year following the calendar
year in which the annual bonus is earned.
(c) Benefits. During the Employment Period, the Executive shall be eligible for perquisites on the
terms as such perquisites are made available to the Employer’s executives. In addition, during the
Employment Period and subject to the terms and conditions of such plans, the Executive shall be
eligible to participate in the medical insurance and other welfare benefits plans that the
Employer, in its sole discretion, may make available to its executives. Nothing in this Agreement
shall affect the Employer’s right to change insurance carriers and to adopt, amend, terminate or
modify such plans and arrangements at any time. Executive agrees that any paid time off taken
during his employment shall be subject to and take into account applicable banking laws and
regulations, with no more than two (2) weeks scheduled consecutively.
(d) Restricted Stock Grant. In consideration for entering into this Agreement. and granted in
accordance with the corporate approvals obtained from the Compensation Committee of CapitalSource
Inc., the Executive shall be granted 65,000 shares of CapitalSource Inc.’s common stock, par value
$0.01 (“Stock”), 20% of which shall vest and become freely transferable on the first anniversary of
the Effective Date and on each of the second, third, fourth, and fifth anniversaries of the
Effective Date. Unvested shares of Stock granted under this Section 6(d) or otherwise granted to the Executive shall be forfeited by
the Executive if the
3
Executive’s employment with the Employer is 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. Upon (i) the termination of Executive’s employment with the
Employer for any other reason (including death or Disability), or (ii) the Change in Control of the
Employer, any unvested shares of Stock granted under Section 6(d) or otherwise granted to the
Executive shall immediately vest. Except as expressly set forth in this Agreement, including,
without limitation, provisions of Section 9(b), the grant of Stock contemplated by this Section
6(d) shall be governed by and be subject to the terms and conditions set forth in the CapitalSource
Inc. Third Amended and Restated Equity Incentive Plan, as amended from time to time (the “Plan”),
and shall be documented and evidenced by an award agreement under the Plan to be executed by
CapitalSource Inc. and the Executive.
(e) Withholding: Employer Compensation Plans. All compensation provided to the Executive pursuant
to Section 6 shall be (1) in accordance with the Employer’s compensation plans and policies, and
(2) less applicable deductions and withholding as determined by the Employer.
7. Expenses. The Executive is authorized to incur reasonable and necessary expenses in the
performance of the Executive’s 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 upon periodic presentation by the Executive of an itemized
account, including reasonable substantiation, of such expenses.
8. Confidentiality, Non-Disclosure and Non-Solicitation Agreement. The Employer and the Executive
acknowledge and agree that during the Executive’s employment with the Employer, the Executive has
had access to, will have access to, and may assist in developing Company Confidential Information.
The Employer and the Executive further acknowledge and agree that the Executive 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 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 disclose or transfer to any person or entity or use for the Executive’s or any other
person’s or entity’s benefit 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. Anything
herein to the contrary notwithstanding, the provisions of this Section 8(a) shall not apply (1)
when disclosure is required by law or
by any court, arbitrator, 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; or (2) when disclosure is necessary to enforce this Agreement. In the event the
Executive is required or compelled by legal process to disclose any Company Confidential
Information, he will first give fifteen (15) days advance written notice (or, in the event that it
is not possible to provide fifteen
4
(15) days written notice, as much written notice as is possible under the circumstances) to the
Employer so that the Employer may present and preserve any objections that it may have to such
disclosure and/or seek an appropriate protective order.
(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. The Employer
acknowledges that the Executive, in the ordinary course of the Executive’s duties, may use and
store Company Confidential Information at home and other locations. The Executive will return to
the Employer or destroy (at Employer’s election) 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 immediately upon termination of the Executive’s employment
for any reason. Anything to the contrary notwithstanding, nothing in Section 8(b) shall prevent the
Executive from retaining papers and other materials of a personal nature, including information
relating to compensation or reimbursement of expenses, information that is necessary for tax
purposes, and copies of plans, programs and agreements relating to the Executive’s employment.
(c) No Solicitation of Employees. During the Non-Solicit Period, the Executive shall not anywhere,
directly or indirectly, other than as an employee of and for the benefit of the Employer, solicit,
entice, persuade or induce any individual who is employed by the Employer or a Company Affiliate
(or who was so employed within six (6) months prior to the Executive’s action) (collectively,
“Company’s Employees”) to: (1) terminate or refrain from continuing such employment, or (2) become
employed by or enter into contractual relations with any individual or entity other than the
Employer or a Company Affiliate.
(d) Non-Solicitation. During the Non-Solicit Period, the Executive shall not anywhere in the United
States, directly or indirectly, other than as an employee of and for the benefit of the Employer:
(i) 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 of the Employer or a Company Affiliate within six (6)
months prior to the Executive’s action, to: (A) terminate, reduce or alter in a manner adverse to
the Employer or the Company Affiliate any existing business arrangements with it or them, or (B)
transfer existing business from the Employer or the Company Affiliate to any other person or
entity;
(ii) own an interest in any entity that competes with the Employer by engaging in any business
engaged in by the Employer; provided, however, that the Executive may own, as a passive investor,
securities of any such entity that has outstanding publicly traded securities so long as the
Executive’s 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 8(d), a “client or customer” shall include any actual borrower of the
Employer (as set forth in the Employer’s asset management or substantially similar successor or
related technology system such as CAM) and any other entity in the “term sheet issued,” “term
5
sheet executed” or “credit committee approved” categories listed in the Employer’s deal
tracking or substantially similar successor or related system such as DealTracker. The Executive
agrees that, before providing services, whether as an employee or consultant, to any entity during
the Non-Solicit Period, the Executive 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.
(e) Ownership on Intellectual Property or Intangibles. All Company Confidential
Information, all work performed, and all other ideas, discoveries, inventions, designs, processes,
methods and improvements, conceived, developed, or otherwise made by Executive, during his
employment with the Employer, alone or with others, and in any way relating to the Employer’s
and/or any of its affiliates’ present or planned businesses or products, whether or not patentable
or subject to copyright protection and whether or not reduced to tangible form or reduced to
practice during the period of Executive’s employment with the Employer (“Developments”) shall be
the sole property of the Employer, provided, however, that such Developments do not include any
invention or development that qualifies fully under the provisions of California Labor Code Section
2870 (the text of which is attached hereto as Exhibit
A). Executive further agrees to disclose all Developments promptly, fully and in writing to the
Employer promptly after development of the same, and at any time upon request. Executive agrees to,
and hereby does assign to the Employer all of Executive’s right, title and interest throughout the
world in and to all Developments. Executive agrees that each of the Developments shall constitute a
“work made for hire,” as defined in 17 U.S .C. § 101, and hereby irrevocably assigns to the
Employer all copyrights, patents and any other proprietary rights Executive may have in any
Developments without any obligation on the part of the Employer to pay royalties or any other
consideration to Executive in respect of such Developments. Executive hereby grants to the Employer
an irrevocable power of attorney to perform any and all acts and execute any and all documents and
instruments on behalf of Executive as the Employer may deem appropriate in order to perfect or
enforce the rights defined in this Section 8(e). Executive agrees to assist the Employer (without
charge, but at no cost to Executive) to obtain and maintain for itself such rights, and agrees that
such obligation to assist the Employer shall continue after the termination of this Agreement. The
provisions of this Section 8(e) are in addition to any other written agreements on this subject
that Executive may have with the Employer and/or any of its affiliates, and are not meant to and do
not excuse any additional obligations that Executive may have under such agreements.
(f) Publicity. During the Employment Period, the Executive hereby grants to the Employer
the right to use, in a reasonable and appropriate manner, the Executive’s name and likeness,
without additional consideration, on, in and in connection with technical, marketing or disclosure
materials, or any combination thereof, published by or for the Employer or any Company Affiliate.
(g) Non-Disparagement. After the Executive’s employment with the Employer, the Executive
will not make to any person or entity, including without limitation the media, any false,
disparaging, or derogatory statements or comments about the Employer, any
Company Affiliate, its or their business affairs, or any of its or their current or former
employees.
6
(h) Acknowledgment. The Executive acknowledges that the covenants in Section 8 have 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 and the Executive’s family for the full
duration of these covenants, and that, as a result of the foregoing, if the Executive breaches any
such covenant, monetary damages would be an insufficient remedy for the Employer and equitable
enforcement of such covenant would be proper.
(i) Enforcement. The Executive acknowledges that in the event of any breach or threatened
breach by the Executive of any of the covenants in Section 8, the business interests of the
Employer will be irreparably injured, the full extent of the damages to the Employer will be
impossible to ascertain, monetary damages may not be an adequate remedy for the Employer, and the
Employer will be entitled to enforce such covenants by temporary, preliminary, or permanent
injunctive relief or other equitable relief, without the necessity of posting bond or security,
which the Executive expressly waives.
(j) Modification; Severability. If any of the restrictions contained in Section 8 are
determined by any court of competent jurisdiction or other adjudicator 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, then the Executive and the Employer
agree that the court or adjudicator shall interpret and modify such restriction(s) to be effective
for the maximum period of time for which it/they may be enforceable and over the maximum
geographical area as to which it/they may be enforceable and to the maximum extent in all other
respects as to which it/they may be enforceable. The Executive and the Employer further agree that
such modified restriction(s) shall be enforced by the court or adjudicator. In the event that
modification is not possible, then the Executive and the Employer agree that, because each of the
Executive’s obligations in Section 8 is a separate and independent covenant, any unenforceable
obligation shall be severed and all remaining obligations shall be enforced.
(k) 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.
9. Termination of Employment.
(a) Permitted Terminations. The Executive’s employment hereunder may be terminated for any
reason, including the following.
(i) Death. The Executive’s employment shall terminate upon death without any further notice
or action required by the Employer or the Executive’s legal representatives.
(ii) By the Employer. The Employer may terminate the Executive’s employment in the
following circumstances:
7
(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 at least ninety (90) consecutive days or
more than one hundred and twenty (120) days in any 12-month period (a “Disability”); provided, that
until such termination, the Executive shall continue to receive the Executive’s compensation and
benefits hereunder, reduced by benefits payable, if any, under any disability insurance policy or
plan; or
(B) Cause. For Cause or without Cause.
(iii) By the Executive. The Executive may terminate the Executive’s employment for any
reason (including Good Reason) or for no reason. If the Executive terminates employment without
Good Reason, then the Executive shall provide written notice to the Employer at least sixty (60)
days prior to the Date of Termination.
(b) Termination. Any termination of the Executive’s employment by the Employer or the
Executive pursuant to Sections 9(a)(ii) or (iii) shall be communicated by a Notice of Termination
to the other party. “Notice of Termination” shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon. The Executive agrees, in the event of
any dispute under Section 9(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 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. Section 9 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.
10. Compensation
Upon Termination.
(a) Death. If the Executive’s employment ends as a result of death, the Employer shall pay
to the Executive’s legal representative or estate, as applicable: (1) the Accrued Benefits, if any;
and (2) a lump sum amount equal to twelve (12) months of the Executive’s Base Salary as of the Date
of Termination, less any amounts or payments to the Executive’s beneficiaries or estate paid or to
be paid on account of any life insurance plan or policy provided by the Employer, by March 15 of
the year after the year in which Executive’s death occurs.
(b) Termination by the Employer for Cause or Disability or by the Executive without Good
Reason; Expiration of Term. If the Employer terminates the Executive’s employment for Cause or
Disability, if the Executive terminates the Executive’s employment without Good Reason, or the term
of employment set forth in Section 2 expires because of Non-Renewal, the Employer shall pay to the
Executive the Accrued Benefits, if any.
8
(c) Termination by the Employer without Cause or by the Executive for Good Reason. If the
Employer terminates the Executive’s employment other than for Cause or Disability or if the
Executive terminates the Executive’s employment for Good Reason, then the Employer shall: (1) pay
the Executive the Accrued Benefits, if any; (2) pay the Executive an amount equal to (A) two times
the Executive’s Base Salary as of the Date of Termination, and (B) two times the average of the
annual cash bonuses paid 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, two times the
Executive’s Base Salary (in lieu of average bonuses); and (3) pay for the Executive and the
Executive’s covered dependents to continue to participate, on the same terms and conditions as
applicable immediately prior to the Executive’s Date of Termination, in such medical and dental
insurance plans through COBRA (to the extent to the extent the Executive and the Executive’s
eligible dependents were participating in such plans immediately prior to the Date of Termination)
until the earlier of (x) the Executive obtaining new employment, and (y) 12 months from the Date of
Termination.
(d) Termination of the Executive in Connection with a Change in Control of the Employer. If
the Executive’s employment terminates as a result of a Change in Control of the Employer, or if the
Employer terminates the Executive’s employment other than for Cause or Disability within 12 months
of a Change in Control of the Employer, or if the Executive terminates the Executive’s employment
for Good Reason within 12 months of a Change in Control of the Employer, then the Employer shall
(in lieu of making payments pursuant to Section 10(c) above): (1) pay the Executive the Accrued
Benefits, if any; (2) pay the Executive an amount equal to (A) three (3) times the Executive’s Base
Salary as of the Date of Termination, and (B) three (3) times the average of the annual cash
bonuses paid 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, three (3) times the
Executive’s Base Salary (in lieu of average bonuses); and (3) pay for the Executive and the
Executive’s covered dependents to continue to participate, on the same terms and conditions as
applicable immediately prior to the Executive’s Date of Termination, in such medical and dental
insurance plans through COBRA (to the extent to the extent the Executive and the Executive’s
eligible dependents were participating in such plans immediately prior to the Date of Termination)
until the earlier of (x) the Executive obtaining new employment, and (y) twelve (12) months from
the Date of Termination.
(e) Deductions/Withholding. Any payments to the Executive pursuant to Section 10 shall be
less applicable deductions and withholding as determined by the Employer.
(f) Timing of Payment of Accrued Benefits. The Employer shall pay to the Executive (or to
the Executive’s legal representative or estate if termination is because of death) the Executive’s
Accrued Benefits at the time such payments would otherwise be due under the Employer’s normal
payroll practices, applicable Employer policies or plans, or as provided by applicable law.
(g) Liquidated Damages. The Employer and the Executive 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
9
difficult or impossible to establish or prove, and agree that the payments and benefits set forth
in Sections 9(c)(2) and (3) and 10(c)(2) and (3) (collectively, the “Severance Payment”) 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 arising from this Agreement that the Executive may make by
reason of any such termination of employment.
(h) Requirement of General Release. The Executive agrees that, as a
condition to receiving the Severance Payment, the Executive will execute a general release of
claims substantially in the form attached hereto as Exhibit B. Within five (5) business days of the
Date of Termination, the Employer shall deliver to the Executive the release, and such
release shall be signed within twenty-one (21) days of the receipt of the release by Executive. The
Severance Payment shall be made within ten (10) 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.
(i) Section 409A.
(i) With respect to payments under this Agreement for purposes of Section 409A of the Internal
Revenue Code of 1986, as amended (“Section 409A”), each severance payment and COBRA continuation
reimbursement payment will be considered one of a series of separate payments;
(ii) The Executive will be deemed to have a Date of Termination for purposes of determining the
timing of any payments that are classified as deferred compensation only upon a “separation from
service” within the meaning of Section 409A.
(iii) 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.
(iv) 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.
10
(v) 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 1 0(i)(v). 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.
(j)
Offset. Any payments to the Executive pursuant to Section 6 or 10 (not including the
Accrued Benefits) 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.
(k) Regulatory Limitations. Each obligation to make a payment under this Agreement that is
subject to the limits of 12 C.F.R. 359 shall be subject to the prior approval of the FDIC, together
with each payment under any such obligation.
(1) No Further Obligations. Except as set forth in this Agreement, the Employer shall have
no further obligation to the Executive under this Agreement upon the termination of the Executive’s
employment.
11. Indemnification. During the Employment Period and thereafter, the Employer 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.
12. Attorney’s Fees. In the event of any dispute relating to or arising from this
Agreement, the prevailing party in such dispute shall be entitled to recover from the non-
prevailing party any and all costs and expenses (including without limitation attorneys’ fees and
other charges of counsel) incurred in connection with litigating such dispute.
13. 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.
14. Survival. It is the express intention and agreement of the parties hereto that certain
provisions in this Agreement shall survive according to their terms the termination of the
Executive’s employment.
11
15. Assignment.
The rights and obligations of the parties to this agreement shall not be
assignable or delegable, except that (1) 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 (2) 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.
16. Binding Effect. 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.
17. 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.
18. 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.
19. 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
arising out of or relating to this Agreement, any of its provisions, or the relationship between
the parties created by this Agreement.
20. 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.
21. 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.
12
22. 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
4445 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, XX 00000
Xxx: (000) 000-0000
Fax: (000)000-0000
Attn: Xxxxxx X. Xxxxxxx, Chief Legal Officer
c/o CapitalSource
4445 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxx Xxxxx, XX 00000
Xxx: (000) 000-0000
Fax: (000)000-0000
(b) If to the Executive:
D. Xxx Xxxxxx
569 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxx: (000) 000-0000
Fax:
569 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxx: (000) 000-0000
Fax:
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.
23. Definitions.
“Accrued Benefits” mean (i) any Base Salary through the Date of Termination not yet paid; (ii) 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; (iii) any amounts or benefits owing
to the Executive or to the Executive’s beneficiaries under the then applicable benefit plans of the
Employer; and (iv) 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 7.
“Cause” means any one of the following events: (i) the Executive’s knowing violation of law in the
course of performance of the duties of Executive’s employment with the
13
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 California Department of Financial Institutions, or any other state or
federal regulatory body with oversight or authority over banking or
the Employer (a “Regulator”) as
CEO or for any other position he 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 thirty (30) days to cure such failure.
“Change in Control” means 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.
“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, CapitalSource Inc. or any Company
Affiliate or other confidential financial information, operating budgets, strategic plans or
research methods, personnel data, projects or plans, or non-public information regarding the terms
of any existing or pending lending transaction between the Employer or Company Affiliate and an
existing or pending client or customer (as the phrase “client or
14
customer” is defined in Section 8(d), in each case, received by the Executive in the course of the
Executive’s employment by the Employer or in connection with the Executive’s 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 the Executive’s 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 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 Section
409A.
“Good Reason” means any one of the following events: (i) the Employer’s failure to pay compensation
to the Executive due and payable pursuant to Section 6; (ii) a change in Executive’s title below
the level of Chief Executive Officer or a material diminution by the Employer in the Executive’s
authority, responsibilities or duties (not including, by itself, removal of authority or
responsibility for any aspect of Executive’s position); (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 then current commute (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.
“Non-Solicit Period” means the period commencing on the Effective Date and ending 12 months after
the Executive’s Date of Termination.
15
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.
| Xxxxxxx Xxxxx Xxxxxx |
||||
| /s/ Xxxxxxx Xxxxx Xxxxxx | ||||
| Date: 9/8/08 | ||||
| CapitalSource Bank |
||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||
| Name: | Xxxxxx X Xxxxxxx | |||
| Title: | Executive Vice President | |||
| Date 9/8/08 | ||||
16
