Exhibit 10.45
EMPLOYMENT AGREEMENT
     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 James
Pieczynski, an individual (the “Executive”).
     WHEREAS, the Executive is currently employed as a Managing Director; 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. Duties and Investing.
          (a) Duties and Responsibilities. During the Employment Period, the
Executive shall serve as a Managing Director and shall be a member of the
Executive Committee (to the extent the Employer maintains such committee and
desires the Executive serve on such committee). In such capacities, prior to any
Change in Control the Executive shall report to the President, Healthcare and
Specialty Finance or some other position of equal or greater authority within
the Employer. The Executive’s responsibilities shall include those currently
performed by him, and may include such other duties as designated by the
Employer. The Executive shall

 

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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.
          (b) Investing in Company Loans. During the Employment Period and
subject to any necessary or required Company approvals, the Executive may invest
up to $500,000.00 per calendar year in the Company’s loans that originate under
his supervision. If the Executive chooses to make such an investment, then he
must invest in all of the loans that are under his supervision (i.e., across his
entire portfolio of loans on a pro rata basis); he may not invest in any
particular loan or in any particular group or groups of loans.
     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 Westlake Village, California), except for reasonable travel on the
Employer’s business consistent with the Executive’s position. If the Employer
designates Santa Monica, California as the Executive’s place of employment, then
the Executive shall be permitted to work from a home office for two (2) days per
week, or as the parties otherwise agree.
     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
$272,651 per calendar year, less applicable deductions, and prorated for any
partial year. The Base Salary shall be reviewed for increase by the Employer no
less frequently than annually and shall be increased in the discretion of the
Employer and any such adjusted Base Salary shall constitute the “Base Salary”
for purposes of this Agreement. The Base Salary shall be paid in substantially
equal installments in accordance with the Employer’s regular payroll procedures.
The Executive’s Base Salary may not be decreased during the Employment Period.
          (b) Annual Bonus. For each calendar year that ends prior to a Change
in Control during the Employment Period, the Executive shall be eligible for an
annual cash bonus in an amount determined reasonably and in good faith by the
Employer based upon such factors as 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

 

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Executive employee benefits and perquisites on a basis that is comparable in all
material respects to that provided to other similarly situated executives of the
Employer. Subject to the terms of this Agreement, all benefits are provided at
the Employer’s sole discretion. Subject to the terms of this Agreement, the
Employer shall have the right to change insurance carriers and to adopt, amend,
terminate or modify employee benefit plans and arrangements at any time and
without the consent of the Executive.
          (d) Additional Consideration. In consideration of entering into this
Agreement, on the Effective Date, the Employer shall grant to the Executive
100,000 shares of the Employer’s common stock, par value $0.01 (“Stock”), which
shall vest and become freely transferable as follows: (i) 16,667 shares on each
of the Effective Date, June 30, 2006, June 30, 2007, June 30, 2008, and June 30,
2009; and (ii) 16,665 shares on June 30, 2010. Unvested shares of Stock granted
under this Section 5(d) shall be forfeited by the Executive if and only if the
Executive’s employment with the Employer and all the Company Affiliates is
voluntarily terminated by the Executive without Good Reason or is terminated by
the Employer for Cause, in each case, before the date on which such shares of
Stock would otherwise vest hereunder. Except as expressly set forth in this
Agreement, this grant of Stock shall be governed by and subject to the terms and
conditions set forth in the CapitalSource Stock Plan. Nothing in this Section
5(d) shall prohibit the Executive from receiving or require the Employer to
provide grants of Stock after the Effective Date, such future grants remaining
within the sole discretion of the Employer.
          (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).
          (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

 

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shall deposit into the Trust cash in an amount equal to the sum of (i) the Value
(as defined below) of restricted shares of Stock previously granted to the
Executive, including without limitation those granted pursuant to Section 5(d),
that are not vested on the date of the Change in Control, (ii) the value of the
spread with respect to any options to acquire Stock held by the Executive as of
the Change in Control (based on the difference between the Value of a share of
Stock and the applicable option exercise price) that are not vested and
exercisable on the date of the Change in Control and (iii) the value of any
other equity-related award (based on the Value of a share of Stock) held by the
Executive that are not vested as of the Change in Control (such awards
collectively being referred to herein as the “Applicable Awards”). Upon
contribution of the cash to the Trust, the related Applicable Awards described
in clauses (i), (ii) and (iii) above shall be canceled and no longer
outstanding. For purposes hereof, the Value of a share of Stock shall be the per
share price of Stock immediately before the Change in Control as listed on the
principal exchange on which such Stock trades. Upon the earlier of the first
anniversary of the Change in Control if the Executive is employed by the
Employer or any Company Affiliate on such date and the termination of the
Executive’s employment in a manner that entitles him to benefits under Section
9(a), (b), (d) or (e) (as applicable, the “Distribution Date”), the Executive
(or his estate) shall be paid, based on an election made by the Executive or his
estate to the Employer at the time of such payment, (X) the amount required to
be held in Trust on his behalf hereunder (including any earnings on such amount)
(the “Cash Based Value”) or (Y) the value the Applicable Awards would have had
on the Distribution Date if such Applicable Awards were outstanding on such date
based on the value of Stock on such date (or the value on such date of the stock
of any publicly traded parent company of the Employer assuming the aggregate
cash contributed to the Trust had been invested in such stock on the date of the
Change in Control) (the “Stock Based Value”). Notwithstanding the foregoing, in
any Change in Control transaction pursuant to which 100% of the Stock holdings
of shareholders of the Employer immediately prior to the transaction are
exchanged solely for cash, the Stock Based Value shall be $0. If the Executive
fails to make such an election by the Distribution Date, the Executive shall be
paid the greater of the Cash Based Value or the Stock Based Value. If the
Executive is paid the Stock Based Value, the Executive shall be paid shares of
stock of the Employer (or the stock of any publicly-traded parent company of the
Employer) that are freely and immediately transferable by the Executive and the
Trust shall be dissolved and all amounts required to be kept in the Trust shall
be returned to the Employer. If the Executive is paid the Cash Based Value, the
Executive shall be paid in cash. Notwithstanding the foregoing, if any
Applicable Award would have vested before the applicable Distribution Date, the
Executive shall be entitled to a payment of the value of such Applicable Award
in the form (cash or stock) and amount as determined in accordance with the
principles of the four preceding sentences (but using the vesting date rather
than the Distribution Date for purposes of determining such value) and such
payment shall reduce the amount otherwise payable under this Section 5(e)(1).
The Employer shall be responsible for making any payments required under this
Section 5(e). The Executive shall forfeit his right to any future payment under
this Section 5(e) and his interest in the Trust (the assets of which shall
revert to the Employer) only if his employment is terminated after the
occurrence of a Change in Control and before the Distribution Date in a manner
described in Section 9(c); provided that he shall not forfeit his right to any
payment due him under this Section 5(e) with respect to Applicable Awards that
would have vested prior to his date of termination. Payments under this
Section 5(e)(1)(b) shall be delayed for six months following the Executive’s
separation from service if so required by Section 409A. To the extent permitted

 

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under Section 409A of the Code, if the Executive shall be entitled to a payment
pursuant to this Section 5(e)(1)(b) prior to the date at which a payment can be
made to the Executive solely because of the Code Section 409A six month delay
inpayment rule for key employees, to the extent permitted by Section 409A the
Executive shall be entitled to payment by the Employer of the applicable
employee portion of the withholding taxes due on such payment. Such a payment by
the Employer of withholding taxes shall reduce the amount otherwise payable to
the Executive under this Section 5(e)(1).
          (2) Notwithstanding Section 5(e)(1) above, instead of funding a trust
with the cash amounts required to be deposited under Section 5(e)(1) pursuant to
the cancellation of the Applicable Awards, the Employer, may with the
Executive’s consent (which shall not be unreasonably withheld), obtain an
irrevocable letter of credit for, or other irrevocable insurance or a guarantee
of, the amounts required to be so deposited from a insurance company or other
financial institution with the highest credit rating from a nationally
recognized rating agency on terms that provide the Executive with no less
protection or security than that provided under Section 5(e)(1) above. Even if
the Employer elects to not fund the Trust in accordance with this
Section 5(e)(2), the Cash Based Value for purposes of Section 5(e)(1) shall be
calculated as if the Employer had funded the Trust in accordance with
Section 5(e)(1).
     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

 

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known to the public or within the relevant trade or industry other than due to
the Executive’s violation of this Section 7(a); (iv) as to information that is
or becomes available to the Executive on a non-confidential basis from a source
which is entitled to disclose it to the Executive; or (v) as to information that
the Executive possessed prior to the commencement of employment with the
Employer.
          (b) Materials. The Executive will not remove any Company Confidential
Information or any other property of the Employer or any Company Affiliate from
the Employer’s premises or make copies of such materials except for normal and
customary use in the Employer’s business as determined reasonably and in good
faith by the Executive. The Employer acknowledges that the Executive, in the
ordinary course of his duties, routinely uses and stores Company Confidential
Information at home and other locations. The Executive will return to the
Employer all Company Confidential Information and copies thereof and all other
property of the Employer or any Company Affiliate at any time upon the request
of the Employer and in any event promptly after termination of Executive’s
employment. The Executive agrees to attempt in good faith to identify and return
to the Employer any copies of any Company Confidential Information after the
Executive ceases to be employed by the Employer. Anything to the contrary
notwithstanding, nothing in this Section 7 shall prevent the Executive from
retaining a home computer, papers and other materials of a personal nature,
including diaries, calendars and Rolodexes, information relating to his
compensation or relating to reimbursement of expenses, information that he
reasonably believes may be needed for tax purposes, and copies of plans,
programs and agreements relating to his employment.
          (c) No Solicitation or Hiring of Employees. Except to the extent that
such obligations are prohibited by applicable law, during the Non-Compete
Period, the Executive shall not solicit, entice, persuade or induce any
individual who is employed by the Employer or the Company Affiliates (or who was
so employed within 180 days prior to the Executive’s action) to terminate or
refrain from continuing such employment or to become employed by or enter into
contractual relations with any other individual or entity other than the
Employer or the Company Affiliates, and the Executive shall not hire, directly
or indirectly, as an employee, consultant or otherwise, any such person.
Anything to the contrary notwithstanding, the Employer agrees that (i) the
Executive’s responding to an unsolicited request from any former employee of the
Employer for advice on employment matters; and (ii) the Executive’s responding
to an unsolicited request for an employment reference regarding any former
employee of the Employer from such former employee, or from a third party, by
providing a reference setting forth his personal views about such former
employee, shall not be deemed a violation of this Section 7(c). Notwithstanding
the foregoing, this Section 7(c) shall not preclude the Executive from
soliciting for employment or hiring any person who has been discharged by the
Employer or any Company Affiliate without cause.
          (d) Non-Competition.
               (i) Except to the extent that such obligations are prohibited by
applicable law, during the Non-Compete Period, the Executive shall not, directly
or indirectly, (A) solicit or encourage any client or customer of the Employer
or a Company Affiliate, or any person or entity who was a client or customer
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terminate, reduce or alter in a manner adverse to the Employer, any existing
business arrangements with the Employer or a Company Affiliate or to transfer
existing business from the Employer or a Company Affiliate to any other person
or entity, (B) provide services to any entity if (i) the entity competes with
the Employer by engaging in any business engaged in by the Employer, or (ii) the
services to be provided by the Executive to the entity are competitive with the
Employer or substantially similar to those previously provided by the Executive
to the Employer; provided, however, that following a Change in Control,
Section 7(d)(i)(B)(i) shall not apply to the Executive, or (C) own an interest
in any entity described in subsection (B)(i) immediately above; provided,
however, that Executive may own, as a passive investor, securities of any such
entity that has outstanding publicly traded securities so long as his direct
holdings in any such entity shall not in the aggregate constitute more than 5%
of the voting power of such entity. For purposes of this Section 7(d), a “client
or customer” shall be limited to any actual borrower of the Employer (as set
forth in the Employer’s CAM or substantially similar successor or related
system) and any other entity in the “term sheet issued,” “term sheet executed”
or “credit committee approved” categories listed in the Employer’s DealTracker
or substantially similar successor or related system. The Executive agrees that,
before providing services, whether as an employee or consultant, to any entity
during the Non-Compete Period, he will provide a copy of this Agreement to such
entity, and such entity shall acknowledge to the Employer in writing that it has
read this Agreement. The Executive acknowledges that this covenant has a unique,
very substantial and immeasurable value to the Employer, that the Executive has
sufficient assets and skills to provide a livelihood for the Executive while
such covenant remains in force and that, as a result of the foregoing, in the
event that the Executive breaches such covenant, monetary damages would be an
insufficient remedy for the Employer and equitable enforcement of the covenant
would be proper.
               (ii) If the restrictions contained in Section 7(d)(i) shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of their extending for too great a period of time or over too great a
geographical area or by reason of their being too extensive in any other
respect, Section 7(d)(i) shall be modified to be effective for the maximum
period of time for which it may be enforceable and over the maximum geographical
area as to which it may be enforceable and to the maximum extent in all other
respects as to which it may be enforceable.
          (e) Publicity. During the Employment Period, the Executive hereby
grants to the Employer the right to use, in a reasonable and appropriate manner,
the Executive’s name and likeness, without additional consideration, on, in and
in connection with technical, marketing or disclosure materials, or any
combination thereof, published by or for the Employer or any Company Affiliate.
          (f) Conflicting Obligations and Rights. The Executive agrees to inform
the Employer of any apparent conflicts between the Executive’s work for the
Employer and any obligations the Executive may have to preserve the
confidentiality of another’s proprietary information or related materials before
using the same on the Employer’s behalf. The Employer shall receive such
disclosures in confidence and consistent with the objectives of avoiding any
conflict of obligations and rights or the appearance of any conflict of
interest.

 

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          (g) Enforcement. The Executive acknowledges that in the event of any
breach of this Section 7, the business interests of the Employer and the Company
Affiliates will be irreparably injured, the full extent of the damages to the
Employer and the Company Affiliates will be impossible to ascertain, monetary
damages will not be an adequate remedy for the Employer and the Company
Affiliates, and the Employer will be entitled to enforce this Agreement by a
temporary, preliminary and/or permanent injunction or other equitable relief,
without the necessity of posting bond or security, which the Executive expressly
waives. The Executive understands that the Employer may waive some of the
requirements expressed in this Agreement, but that such a waiver to be effective
must be made in writing and should not in any way be deemed a waiver of the
Employer’s right to enforce any other requirements or provisions of this
Agreement. The Executive agrees that each of the Executive’s obligations
specified in this Agreement is a separate and independent covenant and that the
unenforceability of any of them shall not preclude the enforcement of any other
covenants in this Agreement. The Executive further agrees that any breach of
this Agreement by the Employer prior to the Date of Termination shall not
release the Executive from compliance with his obligations under this Section 7,
so along as the Employer fully complies with Sections 9,10,11, and 12 (to the
extent that the obligations therein apply). The Employer further agrees that any
breach of this Agreement by the Executive that does not result in the
Executive’s being terminated for Cause, other than a willful (as defined in the
definition of “Cause”) and material breach of Section 7 after his employment has
terminated, shall not release the Employer from compliance with its obligations
under this Agreement. Notwithstanding the foregoing two sentences, neither party
shall be precluded from pursuing judicial remedies as a result of any such
breaches.
     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

 

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employment without Good Reason, then he shall provide written notice to the
Employer at least ten (10) days prior to the Date of Termination.
          (b) Termination. Any termination of the Executive’s employment by the
Employer or the Executive (other than because of the Executive’s death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 13 hereof. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon, if any, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated.
Termination of the Executive’s employment shall take effect on the Date of
Termination. The Executive agrees, in the event of any dispute under Section
8(a)(ii)(A) as to whether a Disability exists, and if requested by the Employer,
to submit to a physical examination by a licensed physician selected by mutual
consent of the Employer and the Executive, the cost of such examination to be
paid by the Employer. The written medical opinion of such physician shall be
conclusive and binding upon each of the parties hereto as to whether a
Disability exists and the date when such Disability arose. This Section shall be
interpreted and applied so as to comply with the provisions of the Americans
with Disabilities Act and any applicable state or local laws.
     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

 

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benefit of the Executive. Except as set forth herein, the Employer shall have no
further obligation to the Executive under this Agreement.
          (b) Disability. If the Employer terminates the Executive’s employment
during the Employment Period because of the Executive’s Disability pursuant to
Section 8(a)(ii)(A),(i) the Employer shall pay to the Executive the Executive’s
Base Salary due through the Date of Termination and all Accrued Benefits, if
any, to which the Executive is entitled as of the Date of Termination at the
time such payments are due, and (ii) all outstanding equity awards held by the
Executive immediately prior to his termination, including without limitation
those granted pursuant to Section 5(d), shall immediately vest (with outstanding
options remaining exercisable for the length of their remaining term). Except as
set forth herein, the Employer shall have no further obligations to the
Executive under this Agreement.
          (c) Termination by the Employer for Cause, by the Executive without
Good Reason, or because of Non-Renewal. If, during the Employment Period, the
Employer terminates the Executive’s employment for Cause pursuant to
Section 8(a)(ii)(B) or the Executive terminates his employment without Good
Reason, or if his employment ends because of Non-Renewal, then the Employer
shall pay to the Executive the Executive’s Base Salary due through the Date of
Termination and all Accrued Benefits, if any, to which the Executive is entitled
as of the Date of Termination, at the time such payments are due. All
outstanding equity awards held by the Executive immediately prior to his
termination, including without limitation those granted pursuant to
Section 5(d), that had not vested as of the Date of Termination shall be
forfeited by the Executive. Otherwise, the Executive’s rights with respect to
equity or equity-related awards shall be governed by the applicable terms of the
related plan or award agreement. If the Executive’s employment terminates
because of Non-Renewal by the Employer, then Sections 7(d)(i)(B) and 7(d)(i)(C)
shall not apply to the Executive. Except as set forth herein, the Employer shall
have no further obligations to the Executive under this Agreement.
          (d) Termination by the Employer without Cause or by the Executive with
Good Reason. If the Employer terminates the Executive’s employment during the
Employment Period other than for Cause or Disability pursuant to Section 8(a) or
if the Executive terminates his employment hereunder with Good Reason, (i) the
Employer shall pay the Executive (A) the Executive’s Base Salary due through the
Date of Termination, (B) a cash lump sum in an amount equal to a pro rata
portion (based upon the number of days the Executive was employed during the
calendar year in which the Date of Termination occurs) of the average amount of
the annual bonuses, if any, that were earned by the Executive for the two
calendar years immediately preceding the year of the Date of Termination,
(C) all Accrued Benefits, if any, to which the Executive is entitled as of the
Date of Termination, in each case at the time such payments are due, and (D) a
cash lump sum in an amount equal to the sum of the Executive’s Base Salary and
the average of the annual bonuses earned by the Executive for the two calendar
years immediately preceding the year of the Date of Termination, if any; (ii)
(A) all deferred compensation credited on the Executive’s behalf and all equity
or equity-related awards held by, or credited to, the Executive (including,
without limitation, stock options, stock appreciation rights, restricted stock
awards, dividend equivalent rights, restricted stock units or deferred stock
awards, including without limitation those granted pursuant to Section 5(d))
shall immediately vest and, if applicable, become exercisable, (B) all stock
options, stock appreciation rights or

 

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other similar rights held by the Executive shall remain exercisable for the
remainder of their originally scheduled terms, and (C) all deferred compensation
or other equity or equity-related awards will, to the extent applicable, be
transferred or distributed to the Executive within ten (10) days of the
Executive’s Date of Termination; and (iii) the Executive and his covered
dependents shall be entitled to continued participation on the same terms and
conditions as applicable immediately prior to the Executive’s Date of
Termination for twelve (12) months in such medical, dental, hospitalization and
life insurance coverages in which the Executive and his eligible dependents were
participating immediately prior to the Date of Termination; provided that if
such continued coverage is not permitted under the terms of such benefit plans,
the Employer shall pay Executive an additional amount that, on an after-tax
basis, is equal to the cost of comparable coverage obtained by Executive.
          (e) Liquidated Damages. The parties acknowledge and agree that damages
which will result to the Executive for termination by the Employer of the
Executive’s employment without Cause or by the Executive for Good Reason shall
be extremely difficult or impossible to establish or prove, and agree that the
amounts payable to the Executive under Section 9(d) (the “Severance Payments”)
shall constitute liquidated damages for any such termination. The Executive
agrees that, except for such other payments and benefits to which the Executive
may be entitled as expressly provided by the terms of this Agreement or any
other applicable benefit plan, such liquidated damages shall be in lieu of all
other claims that the Executive may make by reason of any such termination of
his employment and that, as a condition to receiving the Severance Payments, the
Executive will execute a release of claims substantially in the form of the
release attached hereto as Exhibit A. Within five (5) business days of the Date
of Termination, the Employer shall deliver to the Executive the release of
claims for the Executive to execute. The Severance Payments shall be made within
three (3) business days of the expiration of the 7-day revocation period in the
release without the release being revoked. In addition, the Employer will
execute a release of claims substantially in the form of the release attached
hereto as Exhibit B and will deliver such release to the Executive along with
the Severance Payments.
          (f) No Offset. In the event of termination of his employment, the
Executive shall be under no obligation to seek other employment and there shall
be no offset against amounts due to him on account of any remuneration or
benefits provided by any subsequent employment he may obtain. The Employer’s
obligation to make any payment pursuant to, and otherwise to perform its
obligations under, this Agreement shall not be affected by any offset,
counterclaim or other right that the Employer or its affiliates may have against
him for any reason.
          (g) Section 409A. To the extent the Executive would be subject to the
additional 20% tax imposed on certain deferred compensation arrangements
pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), as a result of any provision of this Agreement, such provision shall be
deemed amended to the minimum extent necessary to avoid application of such tax
and the parties shall promptly execute any amendment reasonably necessary to
implement this Section 9(g).

 

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     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 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

 

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Gross-Up Payment. Such notification shall be given as soon as practicable but no
later than 10 business days after the Executive is informed in writing of such
claim and shall apprise the Employer of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Employer (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Employer
notifies the Executive in writing prior to the expiration of such period that
they desire to contest such claim, the Executive shall:
                    (i) give the Employer any information reasonably requested
by the Employer relating to such claim;
                    (ii) take such action in connection with contesting such
claim as the Employer shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Employer;
                    (iii) cooperate with the Employer in good faith effectively
to contest such claim; and
                    (iv) permit the Employer to participate in any proceedings
relating to such claim; provided, however, that the Employer shall bear and pay
directly all costs and expenses (including additional interest and penalties
incurred in connection with such contest) and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
     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;

 

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provided that the failure to give such notice shall not affect the Executive’s
right to indemnification. The Employer shall be entitled to assume the defense
of any such proceeding and the Executive will use reasonable efforts to
cooperate with such defense. To the extent that the Executive in good faith
determines that there is an actual or potential conflict of interest between the
Employer and the Executive in connection with the defense of a proceeding, the
Executive shall so notify the Employer and shall be entitled to separate
representation at the Employer’s expense by counsel selected by the Executive
(provided that the Employer may reasonably object to the selection of counsel
within ten (10) business days after notification thereof) which counsel shall
cooperate, and coordinate the defense, with the Employer’s counsel and minimize
the expense of such separate representation to the extent consistent with the
Executive’s separate defense. This Section 11 shall continue in effect after the
termination of the Executive’s employment or the termination of this Agreement.
     12. Attorney’s Fees. In the event of any litigation between the parties,
the prevailing party shall be entitled to recover its or his costs and
attorney’s fees. Notwithstanding the foregoing, in the event of any litigation
between the parties that commenced after a Change in Control, 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 litigating 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
4445 Willard Avenue
12th Floor
Chevy Chase, Maryland 20815
Attn: Chief Legal Officer
Facsimile Number: 301-841-2380

 

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          (ii) If to the Executive:
James Pieczynski
Address last shown on the Employer’s Records
          Each party may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so given, served
or sent. Each notice, demand, request, or communication that shall be given or
made in the manner described above shall be deemed sufficiently given or made
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, confirmation of facsimile transmission or
the affidavit of messenger being deemed conclusive but not exclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
     14. Severabilitv. 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

 

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sought. Neither the waiver by either of the parties hereto of a breach of or a
default under any of the provisions of this Agreement, nor the failure of either
of the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder, shall thereafter
be construed as a waiver of any subsequent breach or default of a similar
nature, or as a waiver of any such provisions, rights or privileges hereunder.
     20. Headings. Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
     21. Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of 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

 

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specifically identifying the manner in which the Executive has substantially
failed to perform his essential job functions, specifying the manner in which
the Executive may substantially perform his essential job functions in the
future, and providing him with thirty (30) days to cure his failure to
substantially perform; (iii) a material act of fraud or willful and material
misconduct with respect, in each case, to the Employer, by the Executive; (iv) a
willful and material breach by the Executive of Sections 3, 4 or 7 of this
Agreement; or (v) the hiring of any person who was an employee of the Employer
within 180 days prior to such hiring, other than to perform services for the
benefit of the Employer. For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered “willful” unless it is
done, or omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive’s action or omission was in the best interests of the
Employer. Anything herein to the contrary notwithstanding, the Executive shall
not be terminated for “Cause” hereunder unless (A) written notice stating the
basis for the termination is provided to the Executive, and (B) as to clause
(iv) of this paragraph, he is given thirty (30) days to cure the breach that is
the basis of such claim.
          “Change in Control” means the occurrence of one or more of the
following events: (i) any “person” (as such terms is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934 as amended (the “Act”)) or
“group” (as such term is used in Section 14(d)(d) of the Act) is or becomes a
“beneficial owner” (as such term is used in Rule 13d-3 promulgated under the
Act) of more than 30% of the voting Stock of the Employer; (ii) the majority of
the Board of Directors of the Employer (the “Board”) consists of individuals
other than Incumbent Directors, which term means the members of the Board on the
Effective Date; provided that any person becoming a director subsequent to such
date whose election or nomination for election was supported by two-thirds of
the directors who then comprised the Incumbent Directors shall be considered to
be an Incumbent Director; (iii) the Employer adopts any plan of liquidation
providing for the distribution of all or substantially all of its assets;
(iv) the Employer transfers all or substantially all of its assets or business
(unless the shareholders of the Employer immediately prior to such transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the Voting Stock of the Employer, all of the Voting Stock or other
ownership interests of the entity or entities, if any, that succeed to the
business of the Employer); or (v) any merger, reorganization, consolidation or
similar transaction unless, immediately after consummation of such transaction,
the shareholders of the Employer immediately prior to the transaction hold,
directly or indirectly, more than 50% of the Voting Stock of the Employer or the
Employer’s ultimate parent company if the Employer is a subsidiary of another
corporation (there being excluded from the number of shares held by such
shareholders, but not from the Voting Stock of the combined company, any shares
received by Affiliates of such other company in exchange for stock of such other
company). For purposes of this Change in Control definition, the “Employer”
shall include any entity that succeeds to all or substantially all of the
business of the Employer and “Voting Stock” shall mean securities of any class
or classes having general voting power under ordinary circumstances, in the
absence of contingencies, to elect the directors of a corporation.
          “Company Affiliate” means any entity controlled by, in control of, or
under common control with, the Employer.

 

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          “Company Confidential Information” means information known to the
Executive to constitute trade secrets or proprietary information belonging to
the Employer or other confidential financial information, operating budgets,
strategic plans or research methods, personnel data, projects or plans, or
non-public information regarding the terms of any existing or pending lending
transaction between Employer and an existing or pending client or customer (as
the phrase “client or customer” is defined in Section 7(d)(i) hereof), in each
case, received by the Executive in the course of his employment by the Employer
or in connection with his duties with the Employer. Notwithstanding anything to
the contrary contained herein, the general skills, knowledge and experience
gained during the Executive’s employment with the Employer, information publicly
available or generally known within the industry or trade in which the Employer
competes and information or knowledge possessed by the Executive prior to his
employment by the Employer, shall not be considered Company Confidential
Information.
          “Date of Termination” means (i) if the Executive’s employment is
terminated by the Executive’s death, the date of the Executive’s death; (ii) if
the Executive’s employment is terminated because of the Executive’s Disability
pursuant to Section 8(a)(ii)(A), thirty (30) days after Notice of Termination,
provided that the Executive shall not have returned to the performance of the
Executive’s duties on a full-time basis during such 30-day period; (iii) if the
Executive’s employment is terminated by the Employer pursuant to
Section 8(a)(ii)(B) or by the Executive pursuant to Section 8(a)(iii), the date
specified in the Notice of Termination; (iv) if the Employment Period ends
because of Non-Renewal, the last day of the Initial Term or the Extended Term,
as the case may be; or (v) if the Executive’s employment is terminated during
the Employment Period other than pursuant to Section 8(a), the date on which
Notice of Termination is given.
          “Good Reason” means, unless otherwise agreed to in writing by the
Executive, (i) any diminution or adverse change prior to a Change in Control in
the Executive’s title; (ii) reduction in the Executive’s Base Salary or, after a
Change in Control, the annual bonus payable to the Executive under Section 5(b);
(iii) prior to a Change in Control a requirement that the Executive report to
someone other than the Employer’s President, Healthcare and Specialty Finance or
another position of equal or greater authority within the Employer; (iv) a
material diminution in the Executive’s authority, responsibilities or duties or
material interference with the Executive’s carrying out his duties; (v) the
assignment of duties inconsistent with the Executive’s position or status with
the Employer as of the date hereof; (vi) a relocation of the Executive’s primary
place of employment other than to Santa Monica, California (provided that such
relocation is in connection with the Employer’s moving its healthcare real
estate operations there) and to a location more than twenty-five (25) miles
further from the Executive’s primary residence than the current location of the
Employer’s offices; (vii) a willful (as defined above in the definition of
“Cause”) and material breach by the Employer of the terms of this Agreement or
any other agreement that breach is not cured within thirty (30) days after the
Executive’s delivery of a written notice of such breach to the Employer;
(viii) any purported termination of the Executive’s employment by the Employer
that is not effected in accordance with the applicable provisions of this
Agreement; or (ix) the failure of the Employer to obtain the assumption in
writing of its obligations under this Agreement by any successor to all or
substantially all of the assets of the Employer within fifteen (15) days after a
merger, consolidation, sale or similar transaction. In order to invoke a
termination for Good Reason, the

 

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Executive must terminate his employment, if at all, within thirty (30) days of
the occurrence of any event of “Good Reason”. Notwithstanding anything to the
contrary herein, (A) Good Reason shall not, by itself, include removal of the
Executive’s authority and/or responsibility for any aspect of loan management or
removal of the Executive from the Executive Committee, and (B) after a Change in
Control, Good Reason shall not, by itself, include (i) the assignment to the
Executive of a different title that is, within the organization of the successor
entity, equivalent to the Executive’s title with the Employer immediately prior
to the Change in Control; or (ii) requiring the Executive to report to the
person within a successor entity with management authority for the Executive’s
business unit.
          “Non-Compete Period” means the period commencing on the Effective Date
and ending twelve months after the earlier of the expiration of the Employment
Period or the Executive’s Date of Termination, provided that if a Change in
Control occurs after 2005, the Non-Compete Period shall end six months after the
earlier of the expiration of the Employment Period or the Executive’s Date of
Termination.
          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/ John K. Delaney             Name: John K. Delaney     Title:
Chairman of the Board and Chief Executive Officer     EXECUTIVE
      /s/ James Pieczynski      James Pieczynski                      

 

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EXHIBIT A
General Release of Claims
          Consistent with Section 9(e) of the Employment Agreement dated
November ___, 2005 between me and CapitalSource Finance LLC (the “Employment
Agreement”) and in consideration for and contingent upon my receipt of the
Severance Payments set forth in Section 9 of the Employment Agreement, I, for
myself, my attorneys, heirs, executors, administrators, successors, and assigns,
do hereby fully and forever release and discharge CapitalSource Finance LLC
(“CapitalSource”) and its affiliated entities, as well as their predecessors,
successors, assigns, and their current or former directors, officers, partners,
agents, employees, attorneys, and administrators from all suits, causes of
action, and/or claims, demands or entitlements of any nature whatsoever, whether
known, unknown, or unforeseen, which I have or may have against any of them
arising out of or in connection with my employment by CapitalSource, the
Employment Agreement, the termination of my employment with CapitalSource, or
any event, transaction, or matter occurring or existing on or before the date of
my signing of this General Release, except that I am not releasing any claims
arising under Sections 5(e), 10, 11, or 12 of the Employment Agreement, any
other right to indemnification that I may otherwise have, or any claims arising
after the date of my signing this General Release. I agree not to file or
otherwise institute any claim, demand or lawsuit seeking damages or other relief
and not to otherwise assert any claims, demands or entitlements that are
lawfully released herein. I further hereby irrevocably and unconditionally waive
any and all rights to recover any relief or damages concerning the claims,
demands or entitlements that are lawfully released herein. I represent and
warrant that I have not previously filed or joined in any such claims, demands
or entitlements against CapitalSource or the other persons released herein and
that I will indemnify and hold them harmless from all liabilities, claims,
demands, costs, expenses and/or attorney’s fees incurred as a result of any such
claims, demands or lawsuits.
          This General Release specifically includes, but is not limited to, all
claims of breach of contract, employment discrimination (including any claims
coming within the scope of Title VII of the Civil Rights Act, the Age
Discrimination in Employment Act, the Older Workers Benefit Protection Act, the
Equal Pay Act, the Americans with Disabilities Act, the Family and Medical Leave
Act, Article 49B of the Maryland Code, the California Fair Employment and
Housing Act, and the California Family Rights Act, all as amended, or any other
applicable federal, state, or local law), claims under the Employee Retirement
Income Security Act, as amended, claims under the Fair Labor Standards Act, as
amended (or any other applicable federal, state or local statute relating to
payment of wages), claims under the California Labor Code or the California
Industrial Welfare Commission wage orders, claims concerning recruitment,
hiring, termination, salary rate, severance pay, stock options, wages or
benefits due, sick leave, holiday pay, vacation pay, life insurance, group
medical insurance, any other fringe benefits, worker’s compensation,
termination, employment status, libel, slander, defamation, intentional or
negligent misrepresentation and/or infliction of emotional distress, together
with any and all tort, contract, or other claims which might have been asserted
by me or on my behalf in any suit, charge of discrimination, or claim against
CapitalSource or the persons released herein.

 

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          In the event that California law and the following provision of the
California Civil Code arc applicable to this General Release, as a further
consideration and inducement for us to enter into this General Release and the
promises related thereto, CapitalSource and I expressly waive the provision of
Section 1542 of the California Civil Code, which reads as follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
CapitalSource and I acknowledge that different or additional facts may be
discovered in addition to what we now know or believe to be true with respect to
the matters released in this General Release, and we agree that this General
Release shall be and remain in effect in all respects as a complete and final
release of the matters released, notwithstanding any different or additional
facts.
          I acknowledge that I have been given an opportunity of twenty-one
(21) days to consider this General Release and that I have been encouraged by
CapitalSource to discuss fully the terms of this General Release with legal
counsel of my own choosing. Moreover, for a period of seven (7) days following
my execution of this General Release, I shall have the right to revoke the
waiver of claims arising under the Age Discrimination in Employment Act, a
federal statute that prohibits employers from discriminating against employees
who are age 40 or over. If I elect to revoke this General Release within this
seven-day period, I must inform CapitalSource by delivering a written notice of
revocation to CapitalSource’s Director of Human Resources, 4445 Willard Avenue,
12th Floor, Chevy Chase, Maryland 20815, 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:          
 
           
 
 
 
James Pieczynski  
 
Date    

 

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EXHIBIT B
General Release of Claims by CapitalSource Finance LLC
          Consistent with Section 9(e) of the Employment Agreement dated
November      , 2005 between CapitalSource Finance LLC (“CapitalSource”) and
James Pieczynski (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

 

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choosing. CapitalSource further acknowledges and agrees that its execution of
this General Release is made freely and voluntarily and not under duress or
coercion of any kind.

                     
 
  AGREED:                  
 
                                          CapitalSource Finance LLC       Date  
 
 
                   
 
  By:       ,             
 
 
 
   
 
 
Name
 
Title