exv10w7





EXHIBIT
10.7







CAPITALSOURCE INC.

AMENDED AND RESTATED DEFERRED COMPENSATION PLAN




     This Amended and Restated CapitalSource Inc. Deferred Compensation Plan (the “Plan”) is
adopted by CapitalSource Inc., a Delaware corporation (“CapitalSource”), for the purpose of
providing a deferred compensation arrangement to officers and to directors of the Company who are
not also employees of the Company (“non-employee directors”) and their beneficiaries in
consideration of services rendered to the Company and as an inducement for their continued services
in the future. The Plan was first effective November 26, 2003, and was subsequently amended March
11, 2004. The Plan was amended and restated January 31, 2005, and also amended and restated on
July 31, 2007. This amendment and restatement of the Plan is effective August 8, 2008.



ARTICLE I: DEFINITIONS




     Whenever used herein, the masculine pronoun shall be deemed to include the feminine, and the
singular to include the plural, unless the context clearly indicates otherwise, and the following
definitions shall govern the Plan:




	1.1.	 	“Account” means the book entry account established under the Plan for each Participant (i) to
which shall be credited such amounts as the Company shall determine and the Participant’s
Credited Investment Return (Loss) determined under Article IV and (ii) which shall be reduced
by any distributions made to a Participant.
	 
	1.2.	 	“Beneficiary” those persons, trusts or other entities entitled to receive Benefits which may
be payable hereunder upon a Participant’s death as determined under Article VI.
	 
	1.3.	 	“Benefits” means the amounts credited to a Participant’s Account pursuant to such
Participant’s Deferred Compensation Agreements, plus or minus all Credited Investment Return
(Loss).
	 
	1.4.	 	“Board of Directors” or “Board” means the Board of Directors of CapitalSource Inc.
	 
	1.5.	 	“Change of Control” means (i) the dissolution or liquidation of the Company or a merger,
consolidation, or reorganization of the Company with one or more other entities in which the
Company is not the surviving entity, (ii) a sale of substantially all of the assets of the
Company to another person or entity, or (iii) any transaction (including without limitation a
merger or reorganization in which the Company is the surviving entity) which results in any
person or entity owning 50% or more of the combined voting power of all classes of Shares of
the Company or its successor. Notwithstanding the




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	 	 	foregoing, a transaction described in clause (i) or clause (ii) of the preceding sentence
shall not be a Change of Control if persons who are shareholders of the Company or its
Affiliates immediately prior to the transaction continue to own 50% or more of the combined
voting power of the Company or the resulting entity immediately following the transaction.
Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred if a
“change of control” within the meaning of Section 409A of the Code (“Section 409A”) has not
occurred.
	 
	1.6.	 	“Code” means the Internal Revenue Code of 1986, as amended, and references to particular
sections of the Code are deemed to refer to such sections or any successor sections thereto.
	 
	1.7.	 	“Committee” means the Compensation Committee of the Board.
	 
	1.8.	 	“Company” means CapitalSource and any past, present or future parent corporation or
subsidiary corporation of CapitalSource or other legal entity under common control with
CapitalSource within the meaning of Section 414(c) of the Code. For purposes of the Plan, the
terms parent corporation and subsidiary corporation shall be defined as set forth in Sections
424(e) and 424(f) of the Code.
	 
	1.9.	 	“Credited Investment Return (Loss)” means the hypothetical investment return which shall be
credited to the Participant’s Account pursuant to Article IV.
	 
	1.10.	 	“Deferred Compensation Agreement” means an agreement to participate and to defer
compensation between a Participant and the Company in such form and consistent with terms of
the Plan as the Company may prescribe from time to time.
	 
	1.11.	 	“Distribution Date” means the date on which distribution of a Participant’s Benefits is made
or commenced pursuant to Article V.
	 
	1.12.	 	“Distribution Election” means the election described in Section 5.2(b).
	 
	1.13.	 	“Early Benefit Distribution Date” means the date in a different calendar year than the year
in which the Eligible Compensation to which the Deferred Compensation Agreement relates is
earned that the Participant has elected as a Distribution Date.
	 
	1.14.	 	“Effective Date” means November 26, 2003.
	 
	1.15.	 	“Eligible Compensation” means, with regard to non-employee directors of the Company, annual
board or committee retainers, equity awards and, effective with regard to meeting fees earned
on or after the 2004 Annual Meeting,




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	 	 	board or committee meeting fees, and with regard to employees, annual bonuses and
restricted stock unit grants.
	 
	1.16.	 	“Financial Hardship” means one or more of the following events:






	 	a.	 	A sudden and unexpected illness or accident of the Participant or a dependent
(as defined in Section 152(a) of the Code) of the Participant;
	 
	 	b.	 	A loss of the Participant’s property due to casualty; or
	 
	 	c.	 	Other similar and extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, as determined by the Company.
	 
	 	d.	 	The need to pay for funeral expenses of a spouse, Beneficiary, or a dependent
(as defined in Section 152(a) of the Code)






	1.17.	 	“CapitalSource” means CapitalSource Inc., a Delaware corporation.
	 
	1.18.	 	“Participant” means a non-employee director of the Company or an officer of the Company who
has been designated by the Company as eligible to participate in this Plan.
	 
	1.19.	 	“Plan” shall mean this CapitalSource Inc. Deferred Compensation Plan, as it may be amended
from time to time.
	 
	1.20.	 	“Plan Year” means the calendar year or such other period of time as may be designated by the
Committee.
	 
	1.21.	 	“Separation from Service” means a termination of services provided by a Participant to his
or her employer, whether voluntarily or involuntarily, other than by reason of death or
Disability, as determined by the Committee in accordance with Treas. Reg. §1.409A-1(h). In
determining whether a Participant has experienced a Separation from Service, the following
provisions shall apply:
	 
	 	 	For a Participant who provides services to an employer as an employee, except as otherwise
provided in part (c) of this Section, a Separation from Service shall occur when such
Participant has experienced a termination of employment with such employer. A Participant
shall be considered to have experienced a termination of employment when the facts and
circumstances indicate that the Participant and his or her employer reasonably anticipate
that either (i) no further services will be performed for the employer after a certain date,
or (ii) that the level of bona fide services the Participant will perform for the employer
after such date (whether as an employee or as an independent contractor) will permanently
decrease to no more than 20% of the average level of bona fide services performed by such
Participant




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	         	 	(whether as an employee or an independent contractor) over the immediately preceding
36-month period (or the full period of services to the employer if the Participant has been
providing services to the employer less than 36 months).






If a Participant is on military leave, sick leave, or other bona fide leave of
absence, the employment relationship between the Participant and the employer shall
be treated as continuing intact, provided that the period of such leave does not
exceed 6 months, or if longer, so long as the Participant retains a right to
reemployment with the employer under an applicable statute or by contract. If the
period of a military leave, sick leave, or other bona fide leave of absence exceeds
6 months and the Participant does not retain a right to reemployment under an
applicable statute or by contract, the employment relationship shall be considered
to be terminated for purposes of this Plan as of the first day immediately following
the end of such 6-month period. In applying the provisions of this paragraph, a
leave of absence shall be considered a bona fide leave of absence only if there is a
reasonable expectation that the Participant will return to perform services for the
employer.




For a Participant who provides services to an employer as a non-employee
director, except as otherwise provided in part (c) of this Section, a Separation
from Service shall occur upon the termination of the Participant’s services as a
non-employee director if there is no other contractual relationship between the
Participant and such employer for the Participant to provide services.




For a Participant who provides services to an employer as both an employee and a member of
the Board of Directors, a Separation from Service generally shall not occur until the
Participant has ceased providing services for such employer as both as an employee, as a
member of the Board of Directors and as an independent contractor, as determined in
accordance with the provisions set forth above, respectively. Similarly, if a Participant
either (i) ceases providing services for an employer as a member or the Board of Directors
and begins providing services for such employer as an employee, or (ii) ceases providing
services for an employer as an employee and begins providing services for such employer as
an independent contractor including as a member of the Board of Directors, the Participant
will not be considered to have experienced a Separation from Service until the Participant
has ceased providing services for such employer in all capacities, as determined in
accordance with the applicable provisions set forth above.




Notwithstanding the foregoing provisions in this part (c), if a Participant provides
services for an employer as both an employee and as a member of the Board of
Directors, to the extent permitted by Treas. Reg. §1.409A-1(h)(5) the services
provided by such Participant



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as a member of the Board of Directors shall not be taken into account in determining
whether the Participant has experienced a Separation from Service as an employee,
and the services provided by such Participant as an employee shall not be taken into
account in determining whether the Participant has experienced a Separation from
Service as a member of the Board of Directors.




	1.22.	 	“Shares” means shares of common stock of CapitalSource.
	 
	1.23.	 	“Stock Unit” means an unfunded right to receive one share of Company common stock at a
future date. Stock Units do not have voting rights.
	 
	1.24.	 	“Termination Event” means the Participant’s Separation from Service with the Company (within
the meaning of Section 409A) for any reason.





ARTICLE II: ELIGIBILITY





	2.1.	 	Eligibility. Eligibility for participation in the Plan shall be limited to
non-employee directors of the Company and to officers of the Company who are selected by the
Company, in its sole discretion, to participate in the Plan. No employee may be designated as
eligible unless the employee belongs to “a select group of management or highly compensated
employees” as defined in Title I of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). Non-employee directors and individuals who are in this select group shall
be notified as to their eligibility to participate in the Plan and shall be eligible to defer
Eligible Compensation in accordance with this Plan and rules established by the Committee.






	2.2.	 	Cessation of Participation. Participation in the Plan shall continue until all of
the Benefits to which the Participant is entitled thereunder have been paid in full.






	2.3.	 	Time of Election of Deferral. Except as otherwise provided in Section 2.3, an
election to defer Eligible Compensation must be made before the year in which the Eligible
Compensation is earned. In the case of a bonus, except with regard to bonuses relating to
2005 performance or “performance-based bonuses,” the election to defer must be made prior to
the year in which the bonus is earned. Notwithstanding the foregoing, in his or her first
year of eligibility a Participant may make a deferral election within 30 days of first
becoming eligible. This initial deferral may relate only to Eligible Compensation
attributable to the period following the deferral election.






	 	(i)	 	Special Rule for 2005 Bonuses. For bonuses earned in 2005, but
paid 2006, in accordance with Notice 2005-1 elections to defer such bonuses may
be made no later than March 15, 2005.




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	 	(ii)	 	Special Rule for Performance-bases Bonuses. If a bonus is
“performance-based” within the meaning of Section 409A, an election to defer
such bonus may be made no later than six months before the end of the service
period to which such bonus relates and while achievement of the performance
goals is substantially uncertain.





ARTICLE III: PARTICIPANT’S ACCOUNTS





	3.1.	 	Establishment of Accounts. The Company shall cause an Account to be kept in the name
of each Participant and each Beneficiary of a deceased Participant which shall reflect the
value of such Participant’s Benefits as adjusted from time to time to reflect Credited
Investment Return (Loss). Each such Account initially shall be credited with the number of
Stock Units calculated in accordance with the Deferred Compensation Agreement.






	3.2.	 	Vesting. Accounts shall be 100% vested at all times, except that any vesting
restrictions applicable to an award of Restricted Stock Units deferred under the Plan shall
apply to the portion of the Participant’s Account attributable to such award until such
restrictions lapse in accordance with the original terms of the award.





ARTICLE IV: CREDITED INVESTMENT RETURN (LOSS)





	4.1.	 	Credited Investment Return (Loss). All amounts credited to an Account shall be
deemed to be invested in Stock Units. Accounts shall be credited with dividend equivalents to
the extent dividends are paid on Company common stock.





ARTICLE V: BENEFITS





	5.1.	 	(a) Timing of Distribution. The vested amounts credited
to a Participant’s Account shall be paid (or payment
shall commence) within 60 days after the earlier of
(i) the Early Benefit Distribution Date, if the
Participant has made a valid election for early
distribution of Benefits pursuant to Section 5.1(b),
or (ii) a Termination Event.






Anything in this Plan to the contrary notwithstanding, if (A) on the date of a Termination
Event for a Participant, any of the Company’s stock is publicly traded on an established
securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Code),
(B) Participant is determined to be a “specified employee” within the meaning of Section
409A(a)(2)(B) of the Code,



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(C) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations
section 1.409A-1(b)(9)(iii) and (D) such delay is required to avoid the imposition of the
tax set forth in Section 409A(a)(1) of the Code as a result of such termination, the
Participant would receive any payment that, absent the application of this Section 5.1,
would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the
Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such
payment shall be payable prior to the date that is the earliest of (1) 6 months and one day
after date of the Participant’s Termination Event, (2) the Participant’s death or (3) such
other date as will cause such payment not to be subject to such interest and additional tax
(with a catch-up payment equal to the sum of all amounts that have been delayed to be made
as of the date of the initial payment).




It is the intention of the Company and all Participants that payments or benefits payable
under this Plan not be subject to the additional tax imposed pursuant to Section 409A. To
the extent such potential payments or benefits could otherwise be subject to such additional
taxes, the Company and Participant shall cooperate to structure the payments with the goal
of giving the Participant the economic benefits described herein in a manner that does not
result in such tax being imposed.




(b) Early Benefit Distribution. A Participant may elect an Early Benefit
Distribution Date. Such election shall be made on the Participant’s original Deferred
Compensation Agreement.




In the event a Participant has a Termination Event prior to his or her Early Benefit
Distribution Date, his or her election of an Early Benefit Distribution Date shall not be
given effect and distribution of the Participant’s Accounts, to the extent vested, shall be
made in accordance with Section 5.1(a) without regard to the Early Benefit Distribution
Date.




	5.2.	 	(a) Method of Distribution. A Participant’s Account shall be paid in one of the
following methods specified in his or her most recent valid document or agreement providing
for a distribution method: (i) a single lump sum payment; or (ii) in the case of Participants
who are employees of the Company, substantially equal annual installments over up to a ten
year period. Accounts, adjusted for applicable investment gains and losses, shall be divided
by the number of years remaining under the election to determine the amount of such annual
installment. For purposes of this Plan, the right to receive a benefit payment in annual
installments shall be treated as the entitlement to a single payment. All payments from the
Plan shall be in the form of CapitalSource common stock.




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(b) Distribution Election for Method of Distribution. The Participant shall
designate the method of distribution on the Deferred Compensation Agreement and may amend
any such designation in such form and manner as the Company may prescribe. However, no
amendment completed within twelve (12) full calendar months preceding the Participant’s
Termination Event or Early Benefit Distribution Date, if applicable (whichever event or date
gives rise to a payment of Benefits to the Participant), or that has the effect of
accelerating payments, shall be given effect with respect to Benefits that become payable as
of such Termination Event or Early Benefit Distribution Date, if applicable. In addition,
any such amendment must delay payment (or, in the case of installments, commencement of
payments) at least five years.




(c) Death Benefits. In the event the Participant dies before his or her Benefits
have been fully distributed, the Participant’s Benefits shall be paid to his or her
Beneficiary in accordance with the Participant’s most recent valid Distribution Election.




(d) Non-Election. If no Distribution Election has been properly made prior to the
Distribution Date, the Participant’s Benefits will be distributed in a single lump sum. In
the event that a Participant files an amended Distribution Election as to the form of
distribution but such amendment cannot be given effect by reason of the provisions of
Section 5.2(b), distribution shall be made in accordance with the Participant’s Deferred
Compensation Agreement, any valid amendment thereto, or otherwise in accordance with this
Section 5.2(d).




(e) Valuation of Accounts. Participants Accounts shall be valued as of the
valuation date immediately preceding the Distribution Date.




	5.3.	 	Financial Hardship. Notwithstanding the foregoing, with the consent of the Company,
a Participant who is an employee of the Company may withdraw up to one hundred percent (100%)
of the vested amount credited to his or her Account to the extent such withdrawal is required
to meet an unforeseeable emergency of the Participant constituting a Financial Hardship,
provided that the entire amount requested by the Participant is not reasonably available from
other resources of the Participant, and provided further that:






(a) The withdrawal must be necessary to satisfy the unforeseeable emergency and no more may
be withdrawn from the Participant’s Account than is required to relieve the financial need,
which shall include amounts necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account other resources that are reasonably available to the
Participant for this purpose.



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(b) The Participant must certify such matters as the Company reasonably may require,
including that the financial need cannot be relieved: (i) through reimbursement or
compensation by insurance or otherwise; (ii) by reasonable liquidation of the Participant’s
assets, to the extent such liquidation would not itself cause an immediate and heavy
financial need; (iii) by discontinuing the Participant’s salary deferrals, if any; or (iv)
by borrowing from commercial sources on reasonable commercial terms.




(c) Withdrawals for Financial Hardship will be limited to the amount reasonably necessary to
satisfy the emergency need. The Company shall be entitled to impose such further or
additional restrictions on a withdrawal for Financial Hardship as it deems necessary to
avoid adverse tax consequences to any Participant.




	5.4.	 	Limitation on Distributions to Covered Employees. Notwithstanding any other
provision of this Article V, in the event that the Participant is a “covered employee” as
defined in Section 162(m)(3) of the Code, or would be a covered employee if the Benefits were
distributed in accordance with his or her Distribution Election or withdrawal request, the
maximum amount which may be distributed from the Participant’s Account, in any Plan Year,
shall not exceed one million dollars ($1,000,000) less the amount of compensation paid to the
Participant in such Plan Year which is not “performance-based” (as defined in Code Section
162(m)(4)(C)), which amount shall be reasonably determined by the Company at the time of the
proposed distribution. Any amount which is not distributed to the Participant in a Plan Year
as a result of the limitation set forth in this Section 5.4 shall be distributed to the
Participant in the next Plan Year, subject to compliance with the foregoing limitation set
forth in this Section 5.4. This Section 5.4 shall not be given effect if its application
would result in the imposition of the 20% penalty tax under Section 409A.






	5.5.	 	Tax Withholding. All payments under this Article V shall be subject to all
applicable withholding for state and federal income tax and to any other federal, state or
local tax which may be applicable thereto. In the event any taxes become due prior to payment,
including but not limited to, taxes under Section 3121(v) of the Code, such taxes shall be the
sole responsibility of the Participant.





ARTICLE VI: BENEFICIARIES





	6.1.	 	Designation of Beneficiary. The Participant shall have the right to designate, on
such form as may be prescribed by the Company, a Beneficiary to receive any Benefits due under
Article V which may remain unpaid at the




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	 	 	Participant’s death and shall have the right at any time to revoke such designation and to
substitute another such Beneficiary.






	6.2.	 	No Designated Beneficiary. If, upon the death of the Participant, there is no valid
designation of a Beneficiary, the Beneficiary shall be the Participant’s estate.





ARTICLE VII: ADMINISTRATION OF THE PLAN





	7.1.	 	Administration by the Company. This Plan shall be administered by the Committee.
The Committee has the authority to amend the Plan and the sole discretion to interpret the
Plan and to determine all questions arising in the administration, interpretation, and
application of the Plan. The Committee’s powers include the power, in its sole discretion and
consistent with the terms of the Plan, to determine who is eligible to participate in this
Plan, to determine the eligibility for and the amount of benefits payable under the Plan, to
determine when and how amounts are allocated to a Participant’s Account, to establish rules
for determining when and how elections can be made, to adopt any rules relating to
administering the Plan and to take any other action it deems appropriate to administer the
Plan. The Committee may delegate its authority hereunder to one or more officers of the
Company. Whenever the value of an Account is to be determined under this Plan as of a
particular date, the Committee may determine such value using any method that is reasonable,
in its discretion. Whenever payments are to be made under this Plan, such payments shall be
made or begin within 60 days and no interest shall be paid on such amounts for any reasonable
delay in making the payments.
	 
	7.3	 	Claims Procedures. (a) The Committee shall maintain procedures with respect to the
filing of claims for benefits under the Plan. Pursuant to such procedures, any Participant or
beneficiary (hereinafter called “claimant”) whose claim for benefits under the Plan is denied
shall receive written notice of such denial. The notice shall set forth:






     (i) the specific reasons for the denial of the claim;




     (ii) a reference to the specific provisions of the Plan on which the denial is based;




     (iii) any additional material or information necessary to perfect the claim and an
explanation why such material or information is necessary; and




     (iv) a description of the procedures for review of the denial of the claim and the time
limits applicable to such procedures, including a



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statement of the claimant’s right to bring a civil action under ERISA following a denial on
review.




Such notice shall be furnished to the claimant within a reasonable period of time, but no
later than 90 days after receipt of the claim by the Plan, unless the Committee determines
that special circumstances require an extension of time for processing the claim. In no
event shall such an extension exceed a period of 90 days from the end of the initial 90-day
period. If such an extension is required, written notice thereof shall be furnished to the
claimant before the end of the initial 90-day period, which shall indicate the special
circumstances requiring an extension of time and the date by which the Committee expects to
render a decision.




(b) Right to a Review of the Denial. Every claimant whose claim for benefits under
the Plan is denied in whole or in part by the Committee shall have the right to request a
review of the denial. Review shall be granted if it is requested in writing by the claimant
no later than 60 days after the claimant receives written notice of the denial. The review
shall be conducted by the Committee.




(c) Decision of the Committee on Appeal. At any hearing of the Committee to review
the denial of a claim, the claimant, in person or by duly authorized representative, shall
have reasonable notice, shall have an opportunity to be present and be heard, may submit
written comments, documents, records and other information relating to the claim, and may
review documents, records and other information relevant to the claim under the applicable
standards under ERISA. The Committee shall render its decision as soon as practicable.
Ordinarily decisions shall be rendered within 60 days following receipt of the request for
review. If the need to hold a hearing or other special circumstances require additional
processing time, the decision shall be rendered as soon as possible, but not later than 120
days following receipt of the request for review. If additional processing time is
required, the Committee shall provide the claimant with written notice thereof, which shall
indicate the special circumstances requiring the additional time and the date by which the
Committee expects to render a decision. If the Committee denies the claim on review, it
shall provide the claimant with written notice of its decision, which shall set forth (i)
the specific reasons for the decision, (ii) reference to the specific provisions of the Plan
on which the decision is based, (iii) a statement of the claimant’s right to reasonable
access to, and copies of, all documents, records and other information relevant to the claim
under the applicable standards under ERISA, and (iv) and a statement of the claimant’s right
to bring a civil action under ERISA. The Committee’s decision shall be final and binding on
the claimant, and the claimant’s heirs, assigns, administrator, executor, and any other
person claiming through the claimant.



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ARTICLE VIII: MISCELLANEOUS





	8.1.	 	The right of a Participant or his or her designated Beneficiary to receive a distribution
hereunder shall be an unsecured claim against the general assets of the Company, and neither
the Participant nor a designated Beneficiary shall have any rights in or against any specific
assets of the Company. Notwithstanding the previous sentence, the Company reserves the right
to establish a grantor trust, the assets of which shall remain subject to claims of creditors
of the Company, to which Company assets may be invested to fund some or all of the liabilities
represented by this Plan. This Plan shall not be construed to require the Company to fund,
prior to payment, any of the Benefits payable under this Plan.






	8.2.	 	If, in the Company’s opinion, a Participant or Beneficiary for any reason is unable to handle
properly any property distributable to him or her under the Plan, then the Company may make
such arrangements which it determines to be beneficial to such Participant or Beneficiary, to
the extent such arrangements have not been made by such Participant or Beneficiary, for the
distribution of such property, including (without limitation) the distribution of such
property to the guardian, conservator, spouse or dependent(s) of such Participant or
Beneficiary.






	8.3.	 	The right of any Participant, any Beneficiary, or any other person to the payment of any
Benefits under this Plan shall not be assigned, transferred, pledged or encumbered.






	8.4.	 	This Plan shall be binding upon and inure to the benefit of the Company, its successors and
assigns and the Participant and his or her heirs, executors, administrators and legal
representatives.






	8.5.	 	Nothing contained herein shall be construed as conferring upon any Participant the right to
continue in the employ or service of the Company as an employee or otherwise.






	8.6.	 	If the Company, the Participant, any Beneficiary, or a successor in interest to any of the
foregoing, brings legal action to enforce any of the provisions of this Plan, the prevailing
party in such legal action shall be reimbursed by the other party for the prevailing party’s
costs of such legal action including, without limitation, reasonable fees of attorneys,
accountants and similar advisors and expert witnesses.






	8.7.	 	This Plan shall be construed in accordance with and governed by the laws of the State of
Maryland, without reference to the principles of conflicts of law thereof, to the extent such
construction is not pre-empted by any applicable federal law.




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	8.8.	 	This Plan constitutes the entire understanding and agreement with respect to the subject
matter contained herein, and there are no agreements, understandings, restrictions,
representations or warranties among any Participant and the Company other than those set forth
or provided for herein.






	8.9.	 	(a) This Plan may be amended or terminated by CapitalSource at any time in its sole
discretion by resolution of its Board, the Committee or any other committee to which its Board
has delegated such authority to amend; provided, however, that no amendment
may be made which would alter the irrevocable nature of an election or which would reduce the
amount credited to a Participant’s Account on the date of such amendment. If the Plan is
terminated, Compensation shall prospectively cease to be deferred as of the date of the
termination. Each Participant will be paid the value of his or her Account at the time and in
the manner provided for in Article V; provided, that if such payment would result in the
imposition of the 20% penalty tax under Section 409A, payment will instead be made in
accordance with Section 5.1 and Section 5.2.






(b) Notwithstanding the foregoing paragraph or any other provision in this Plan to the
contrary, upon the consummation of a Change of Control, each Participant’s Account shall be
distributed to him or her in a lump sum distribution within 15 days following the
consummation of such Change in Control, or, in the event there is a trust in effect with
respect to the Plan, in accordance with the terms of the trust.



*          *          *




          To record the adoption of the Plan as amended and restated, the Company has caused its
authorized officer to execute the same this
8th day of August, 2008.



	 	 	 	 	 	 	 
	 	 	CAPITALSOURCE INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By: 	 	 /s/ JOSEPH TURITZ	 	 
	 

	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	As its:	 	 Assistant Secretary	 	 
	 

	 	 	 	 	 	 






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