Exhibit 10.1


 


Amendment No. 1


to the


Employment Agreement


 


This
Amendment No. 1 to the Employment Agreement is entered into as of October 30,
2008 by and between CapitalSource Inc., a Delaware corporation (the “Employer”),
and Thomas A. Fink (the “Executive”).


 


WHEREAS, the
Executive is currently employed as the Chief Financial Officer of the Employer;


 


WHEREAS, the
Executive and the Employer previously entered into an Employment Agreement
dated November 22, 2005 (the “Employment Agreement”);


 


WHEREAS, the Executive
and the Employer desire to amend the Employment Agreement to provide for the
payment of certain severance benefits upon the Executive’s resignation;


 


WHEREAS, the
Executive and the Employer desire to amend the Employment Agreement to prohibit
the disparagement of either party;


 


WHEREAS, the
Executive and the Employer desire to amend the Employment Agreement to comply
with the requirements of Section 409A of the Internal Revenue Code of
1986, as amended; and


 


WHEREAS, the
Executive and the Employer desire to amend the Employment Agreement in such a
manner that the Employment Agreement not hinder the Employer’s ability to
participate in the Troubled Assets Relief Program (TARP), the Capital Purchase
Program (CPP) or any other program authorized by the Emergency Economic
Stabilization Act.


 


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 are
hereby acknowledged, the parties hereto agree to amend the Employment Agreement
as follows:


 


1.             A new Section 9(h) is
added to the end of Section 9 to read as follows:


 


(h)           Termination by the Executive


 


As
of the Effective Date (defined below) and notwithstanding any other provisions
of the Agreement, the Employer shall pay or provide to the Executive all of the
benefits set forth in Section 9(d) if the Executive terminates his
employment for any reason; provided, however, that, in order to be eligible for
the benefits set forth in Section 9(d), the Executive must provide written
notice of such termination, pursuant to the provisions of this Agreement, 90
days or more in advance of such termination, but in no event may Employee
provide such notice prior to December 31, 2008.


 


2.  Section 9(d) is deleted in its
entirety and restated to read as follows:


 

















 


(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 $915,000 (C) a
cash lump sum in an amount equal to $2,558,000 (D) 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 (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) shall immediately vest and, if applicable, become exercisable, (B) all
stock options, stock appreciation rights or other similar rights held by the
Executive shall remain exercisable for the remainder of their originally
scheduled terms, and (C) all deferred compensation or other equity or
equity-related awards will be transferred or distributed to the Executive
within 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 the greater of (A) 24 months or
(B) the balance of the Employment Period 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
grossed up amount that, on an after-tax basis, such payment is equivalent to the
cost of comparable coverage obtained by Executive.


 


3.             Section 9(g) is
deleted in its entirety and restated to read as follows:


 


(g)           Section 409A


 


(i)            With respect to payments under the
Agreement, for purposes of Section 409A of the Code (“Section 409A”),
each severance payment and COBRA continuation reimbursement will be considered
one of a series of separate payments.


 


(ii)           The Executive will be deemed to have
a Date of Termination for purposes of determining the timing of any payments
that are classified as deferred compensation only upon a “separation from
service” within the meaning of Section 409A.


 


(iii)          If at the time of the Executive’s
separation from service, (a) the Executive is a “specified employee”
(within the meaning of Section 409A and using the methodology selected by
the Employer) and (b) the Employer makes a good faith determination that
an amount payable hereunder constitutes deferred compensation (within the
meaning of Section 409A), the payment of which is required to be delayed
pursuant to the six-month delay rule of Section 409A in order to
avoid taxes or penalties under Section 409A, then the Employer will not
pay such amount on the otherwise scheduled payment date but will instead pay
the amount in a lump sum on the first business day after such six month
period.  It is agreed and understood by
the parties hereto that currently only payments made under Section 9(d)(i)(C) and
deferred compensation under Section 9(d)(ii)(A) & (C) of the
Agreement may be subject to the payment delay under Section 409A


 


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(iv)          To the extent the Executive would be
subject to an additional 20% tax imposed on certain deferred compensation
arrangements pursuant to Section 409A 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)(iv).  The Executive and the Employer agree to
cooperate to make such amendment to the terms of this Agreement as may be
necessary to avoid the imposition of penalties and taxes under Section 409A;
provided, however, that the Employer agrees that any such amendment shall
provide the Executive with economically equivalent payments and benefits, and
the Executive agrees that any such amendment will not materially increase the
cost to, or liability of, the Employer with respect to any payments.


 


4.             A new Section 27 is added to
read as follows:


 


27.           Non-Disparagement.  The Executive shall
not, at any time during the Term and thereafter, make statements or
representations, or otherwise communicate, directly or indirectly, in writing,
orally, or otherwise, or take any action which may, directly or indirectly,
disparage or be damaging to the Employer, its subsidiaries or affiliates or
their respective officers, directors, employees, advisors, businesses or
reputations, nor shall members of the Employer’s Board of Directors or
Executive’s successor in office, or other executive officers of the Employer,
make any such statements or representations regarding the Executive.  Notwithstanding the foregoing, nothing in
this Agreement shall preclude the Executive or his successor or members of the
Employer’s Board of Directors or other executive officers of the Employer from
making truthful statements that are required by applicable law, regulation or
legal process.


 


5.             Section 7(d)(i)(B) is
deleted in its entirety and restated to read as follows:


 


(B) provide services to any entity if the entity is in competition
with the Employer or a Company Affiliate; provided, however, that an entity
will not be considered to be in competition with the Employer or a Company
Affiliate for purposes of this paragraph if (i) the entity or operating
unit of the entity in which the Executive is employed or with which the
Executive is associated (collectively, the “Business Unit”) is not engaged in
offering asset-based, commercial mortgage, senior, cash flow and/or mezzanine
financing to small and mid-sized corporate borrowers, or (ii) if the
operations of the Business Unit in offering asset-based, commercial mortgage,
senior, cash flow and/or mezzanine financing to small and mid-sized corporate
borrowers constitute less than 10% of such Business Unit’s revenue, products or
services.


 


6.             A new Section 28 is added to
read as follows:


 


28.           Troubled Assets Relief Program and
Capital Purchase Program


 


(a)           It is intended that this Agreement
and all other agreements entered into between the Employer and the Executive,
including, but not limited to, option agreements and restricted stock unit
agreements (collectively, the “Compensation Agreements”), comply with the terms
of the Troubled Assets Relief Program(TARP), the Capital Purchase Program (CPP)
or any other program authorized by the Emergency Economic Stabilization Act
(collectively, the “EESA Programs”). 
During any time in which the Employer participates in an EESA Program,
to the extent that the Employer determines 


 


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that
the terms of any Compensation Agreement do not comply with the terms of an EESA
Program, such Compensation Agreement shall be deemed amended to the minimum
extent necessary to comply with the terms of the EESA Program.


 


(b)           During any time in
which the Employer participates in an EESA Program, notwithstanding any other
provision of any other agreement, contract, or understanding between the
Employer and the Executive, and notwithstanding any formal or informal plan or
other arrangement for the direct or indirect provision of compensation to the
Executive (including groups or classes of participants or beneficiaries of
which the Executive is a member), whether or not such compensation is deferred,
is in cash, or is in the form of a benefit to or for the Executive (a “Benefit
Arrangement”), any amount payable to the Executive and any right to receive any
payment or other benefit under any Benefit Arrangement shall not become payable
or vested to the extent that such amount, right or benefit, taking into account
all other amounts, rights or benefits to or for the Executive under any Benefit
Arrangement, would constitute a “golden parachute” under the terms of an EESA
Program.


 


7.             Except as expressly provided
herein, the terms and conditions of the Employment Agreement shall remain in
full force and effect and shall be binding on the parties hereto.


 


8.             Effectiveness of this Amendment No. 1
to the Employment Agreement shall be conditioned upon approval by Employer’s
Board of Directors (or the appropriate committee thereof), and this Amendment No. 1
to the Employment Agreement shall become effective on the later of date of such
approval and execution by both parties hereto (the “Effective Date”).


 


IN WITNESS WHEREOF, the parties have duly executed and delivered this Amendment No. 1
to the Employment Agreement, or have caused this Amendment No. 1 to the
Employment Agreement to be duly executed and delivered in their name and on
their behalf, as of the day and year first above written.


 


 


	
  EXECUTIVE

  	
   

  	
  CAPITALSOURCE INC.

  
	
   

  	
   

  	
   

  
	
  /s/ Thomas A. Fink

  	
   

  	
  By:

  	
  /s/ John K. Delaney

  
	
  Thomas
  A. Fink

  	
   

  	
  Its:  Chairman and Chief Executive Officer

  



 


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