Document:

exv10w2

 

Exhibit 10.2

CAPITALSOURCE INC.

SECOND AMENDED AND RESTATED EQUITY INCENTIVE PLAN

FORM OF NON-QUALIFIED OPTION AGREEMENT

FOR DIRECTOR

	 	 	 	 	 
	Non-qualified Option	 	This option is not intended to be an incentive option under Section 422 of the
Internal Revenue Code and will be interpreted accordingly.
	 
	 	 	 	 
	Vesting	 	This option is exercisable only as to the vested portion of the shares of Stock
(the “Shares”) shown in the notice of grant of stock options (the “Grant
Notice”). The option may be exercised, in whole or in part, to purchase a whole
number of vested Shares of not less than 100 Shares, unless the number of
vested Shares purchased is the total number available for purchase under the
option, by following the procedures set forth in the Plan and below in this
Agreement.
	 
	 	 	 	 
	 	 	Notwithstanding the vesting schedule set forth in the Grant Notice, in the
event of a Change of Control (as defined in this Agreement), the option Shares
will become 100% vested.
	 
	 	 	 	 
	 	 	For purposes of this Agreement:
	 
	 	 	 	 
	

	 	•
	 	“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 (other than persons who are shareholders or Affiliates
immediately prior to the transaction) owning 50% or more of the combined voting
power of all classes of Shares of the Company or its successor.
Notwithstanding the 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.

	 
	 	 	 	 
	

	 	No additional Shares will vest after your Service has terminated for any reason.
	 
	 	 	 	 
	Term	 	Your option will expire in any event on the Expiration Date shown on the Grant
Notice. Your option will expire earlier if your Service terminates, as
described below.
	 
	 	 	 	 
	Regular Termination	 	If your Service terminates for any reason, other than Cause, then the unvested
portion of your option shall expire immediately and the vested portion of your
option will expire at the close of business at Company headquarters on the
earlier of the Expiration Date or the third anniversary of your termination
date.
	 
	 	 	 	 
	Termination for
Cause	 	If your Service is terminated for Cause, then you shall immediately forfeit all
rights to your option and the option shall immediately expire.
	 
	 	 	 	 
	Notice of Exercise	 	When you wish to exercise this option, you must notify the Company by filing
the

 

 

	 	 	 	 	 
	 	 	proper “Notice of Exercise” form at the address given on the form. Your
notice must specify how many Shares you wish to purchase (in a parcel of at
least 100 Shares generally). Your notice must also specify how your Shares
should be registered (in your name only or in your and your spouse’s names as
joint tenants with right of survivorship). The notice will be effective when
it is received by the Company.
	 
	 	 	 	 
	 	 	If someone else wants to exercise this option after your death, that person
must prove to the Company’s satisfaction that he or she is entitled to do so.
	 
	 	 	 	 
	Form of Payment	 	When you submit your notice of exercise, you must include payment of the option
price indicated on the Grant Notice for the Shares you are purchasing. Payment
may be made in one (or a combination) of the following forms:
	 
	 	 	 	 
	 	 	-       Cash, your personal check, a cashier’s check, a money order or another
cash equivalent acceptable to the Company.
	 
	 	 	 	 
	 	 	-      Shares which have already been owned by you for more than six months
and which are surrendered to the Company. The value of the Shares, determined
as of the effective date of the option exercise, will be applied to the option
price.
	 
	 	 	 	 
	 	 	-       To the extent a public market for the Shares exists as determined by
the Company, by delivery (on a form prescribed by the Company) of an
irrevocable direction to a licensed securities broker acceptable to the Company
to sell Shares and to deliver all or part of the sale proceeds to the Company
in payment of the aggregate option price and any withholding taxes (if approved
in advance by the Compensation Committee of the Board).
	 
	 	 	 	 
	Transfer of Option	 	During your lifetime:
	 
	 	 	 	 
	

	 	•
	 	only you (or, in the event of your legal incapacity or incompetency,
your guardian or legal representative) may exercise the option; and
	 
	 	 	 	 
	

	 	•
	 	you cannot transfer or assign this option. For instance, you may not
sell this option or use it as security for a loan.
	 
	 	 	 	 
	 	 	If you attempt to do any of these things, this option will immediately become
invalid. You may, however, dispose of this option in your will or it may be
transferred upon your death by the laws of descent and distribution.
Regardless of any marital property settlement agreement, the Company is not
obligated to honor a notice of exercise from your spouse, nor is the Company
obligated to recognize your spouse’s interest in your option in any other way.
	 
	 	 	 	 
	 	 	Notwithstanding the restrictions on transfer in this section of the Agreement,
the Board may authorize, in their sole discretion, the transfer of a vested
option (in whole or in part) to a member of your immediate family or a trust
for the benefit of your immediate family.
	 
	 	 	 	 
	Shareholder Rights	 	You, or your estate or heirs, have no rights as a shareholder of the Company
until the Shares have been issued upon exercise of your option and either a
certificate evidencing your Shares has been issued or an appropriate entry has
been made on the Company’s books. No adjustments are made for distributions or
other rights if the applicable record date occurs before your certificate is
issued (or an appropriate book entry is made), except as described in the Plan.
	 
	 	 	 	 
	Adjustments	 	In the event of a split, a distribution or a similar change in the Shares, the
number of Shares covered by this option and the option price per Share may be
adjusted (and

 

 

	 	 	 	 	 
	 	 	rounded down to the nearest whole number) pursuant to the Plan.
Your option shall be subject to the terms of the agreement of merger,
liquidation or reorganization in the event the Company is subject to such
corporate activity.
	 
	 	 	 	 
	Applicable Law	 	This Agreement will be interpreted and enforced under the laws of the State of
Delaware, other than any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Agreement to the
substantive law of another jurisdiction.
	 
	 	 	 	 
	The Plan	 	The text of the Plan is incorporated in this Agreement by reference. Certain
capitalized terms used in this Agreement are defined in the Plan, and have the
meaning set forth in the Plan.
	 
	 	 	 	 
	 	 	This Agreement, the associated Grant Notice and the Plan constitute the entire
understanding between you and the Company regarding this option. Any prior
agreements, commitments or negotiations concerning this option are superseded.

By signing the Grant Notice, you agree to all of the terms and
conditions described above, in the Grant Notice and in the Plan.exv10w3

 

Exhibit 10.3

CAPITALSOURCE INC.

SECOND AMENDED AND RESTATED EQUITY INCENTIVE PLAN

FORM OF RESTRICTED STOCK AGREEMENT

	 	 	 	 	 	 	 
	Restricted Stock	 	This grant is an award of shares of Stock in the
number set forth on the cover sheet and subject to
the vesting conditions described below (the
“Restricted Stock”). To the extent not yet vested,
your Restricted Stock may not be transferred,
assigned, pledged or hypothecated, whether by
operation of law or otherwise, nor may the
Restricted Stock be made subject to execution,
attachment or similar process.
	 
	 	 	 	 	 	 
	Issuance and Vesting	 	The Company will issue your Restricted Stock in your
name as of the Grant Date. Provided you continue in
Service on the vesting dates specified below, your
right to the Stock under this Restricted Stock grant
vests as to:
	 
	 	 	 	 	 	 
	

	 	•
	 	[  ]
	 	 
	 
	 	 	 	 	 	 
	 	 	The resulting aggregate number of vested shares of
Stock will be rounded to the nearest whole number,
and you cannot vest in more than the number of
shares of Stock covered by this grant. No
additional shares of Stock will vest after your
Service has terminated for any reason, except in the
case of your Retirement (as described below in the
section labeled “Retirement”).
	 
	 	 	 	 	 	 
	 	 	Notwithstanding the vesting schedule set forth above:
	 
	 	 	 	 	 	 
	 	 	•	 	The Restricted Stock will become 100% vested
upon your termination of Service due to your death
or Disability.
	 
	 	 	 	 	 	 
	 	 	•	 	Upon the closing of a Change of Control, the
Restricted Stock will become 100% vested if the
Restricted Stock is not assumed, or equivalent
restricted securities are not substituted for the
Restricted Stock, by the Company or its successor.
	 
	 	 	 	 	 	 
	 	 	•	 	Upon the closing of a Change of Control, 50%
of the Restricted Stock will become vested on a
pro-rata basis (but only to the extent not already
vested) even if the Restricted Stock is assumed, or
equivalent restricted securities are substituted for
the Restricted Stock, by the Company or its
successor. In this case, the remaining unvested
portion of the Restricted Stock will become 100%
vested upon your Involuntary Termination within the
24 month period following the closing of the Change
in Control. For the avoidance of doubt, the
application of the pro-rata 50% vesting acceleration
contemplated by this subsection is illustrated by
the following examples:
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	Example 1: If a Change of Control occurs on December
31, 2004 and the Restricted Stock is assumed, 50% of
the Restricted Stock would become vested on the
closing of the Change of Control (so that a total of
50% of the Restricted Stock is then vested), 12.5%
of the Restricted Stock would then vest on each of
the third and fourth anniversaries of the Grant Date
and 25% of the Restricted Stock would then vest on
the fifth anniversary of the Grant Date (with all
vesting based on your continued Service).

 

 

	 	 	 	 	 	 	 
	

	 	 	 	 	 	Example 2: If a Change of Control occurs on December
31, 2006 and the Restricted Stock is assumed, an
additional 25% of the Restricted Stock would become
vested on the closing of the Change of Control (so
that a total of 50% of the Restricted Stock is then
vested), 12.5% of the Restricted Stock would then
vest on the fourth anniversary of the Grant Date and
37.5% of the Restricted Stock would then vest on the
fifth anniversary of the Grant Date (with all
vesting based on your continued Service).
	 
	 	 	 	 	 	 
	 	 	For purposes of this Agreement:
	 
	 	 	 	 	 	 
	 	 	•	 	“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 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.
	 
	 	 	 	 	 	 
	 	 	•	 	“Involuntary Termination” means termination
of your Service by reason of (i) your involuntary
dismissal by the Company for reasons other than
Cause; or (ii) your voluntary resignation following
(x) a change in your position with the Company which
materially reduces your duties and responsibilities
or the level of management to which you report, (y)
a material reduction in your level of compensation
(including base salary, fringe benefits and target
bonus) or (z) a relocation of your place of
employment by more than fifty (50) miles, provided
and only if such change, reduction or relation is
brought about by the Company without your consent.
	 
	 	 	 	 	 	 
	Forfeiture of
Unvested Stock	 	In the event that your Service terminates for any
reason other than your: (i) death, (ii) Disability,
(iii) Retirement (as defined in the next section) or
(iv) an Involuntary Termination within a 24 month
period following the closing of a Change of Control,
you will automatically forfeit to the Company all of
the shares of Stock subject to this grant that have
not yet vested.
	 
	 	 	 	 	 	 
	Retirement	 	In the event your Service terminates because of your
Retirement, your Restricted Stock will continue to
vest (notwithstanding your termination of Service)
until the third anniversary of the date of your
Retirement. On the third anniversary of the date of
your Retirement, you will automatically forfeit to
the Company all of the shares of Stock subject to
this grant that have not yet vested. “Retirement”
means, for the purpose of this Agreement, your
voluntary termination of Service at or after age 55
with the sum of your age and years of service equal
to 65 or greater. The Company shall have the right
to cause an immediate forfeiture of your unvested
Restricted Stock if the Company determines that
following your Retirement you have violated the
terms of any non-competition, non-solicitation,
non-disclosure, non-disparagement or other similar
agreement between you and the Company or its
Affiliate.
	 
	 	 	 	 	 	 
	Leaves of Absence	 	For purposes of this grant, your Service does not
terminate when you go on a bona fide employee leave
of absence that was approved by the Company in
writing, if the

 

 

	 	 	 	 	 	 	 
	 	 	terms of the leave provide for
continued Service crediting, or when continued
Service crediting is required by applicable law.
Your Service terminates in any event when the
approved leave ends unless you immediately return to
active employee work.
	 
	 	 	 	 	 	 
	 	 	The Company determines, in its sole discretion,
which leaves count for this purpose, and when your
Service terminates for all purposes under the Plan.
	 
	 	 	 	 	 	 
	Section 83(b) Election	 	You should consider whether or not to make a
“Section 83 (b) election.” Under Section 83 of the
Internal Revenue Code (the “Code”), the fair market
value of the shares of Stock on the date any
forfeiture restrictions applicable to the shares of
Stock lapse will be reportable as ordinary income at
that time. For this purpose, “forfeiture
restrictions” include the requirement that you
forfeit unvested shares of Stock on termination of
Service described above. You may elect to be taxed
at the time the unvested shares of Stock are
acquired rather than when such shares of Stock cease
to be subject to such forfeiture restrictions, by
filing an election under Section 83(b) of the Code
with the Internal Revenue Service within thirty (30)
days after the date of purchase. The form for
making this election is attached as Exhibit B (along
with summary information describing the election).
Failure to make this filing within the thirty (30)
day period will result in the recognition of
ordinary income by you as the forfeiture
restrictions lapse. It is recommended that you seek
the advice of your own tax consultant in connection
with the purchase of shares of Stock and the
advisability of filing an election under Section
83(b) of the Code.
	 
	 	 	 	 	 	 
	 	 	YOU ACKNOWLEDGE THAT IT IS YOUR SOLE RESPONSIBILITY,
AND NOT THE COMPANY’S, TO FILE A TIMELY ELECTION
UNDER SECTION 83(b). YOU FURTHER ACKNOWLEDGE THAT
YOU ARE RELYING SOLELY ON YOUR OWN ADVISORS WITH
RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE
AN 83(b) ELECTION.
	 
	 	 	 	 	 	 
	Escrow	 	If certificates are issued for the Restricted Stock,
the certificates for the unvested Stock shall be
deposited in escrow with the Secretary of the
Company (or his delegate) to be held in accordance
with the provisions of this paragraph. Each
deposited certificate shall be accompanied by a duly
executed Assignment Separate from Certificate in the
form attached hereto as Exhibit A. The deposited
certificates shall remain in escrow until such time
or times as the certificates are to be released or
otherwise surrendered for cancellation as discussed
below. Upon delivery of the certificates to the
Company, you shall be issued an instrument of
deposit acknowledging the number of shares of Stock
delivered in escrow to the Secretary of the Company
(or his delegate). All regular cash distributions
on the unvested Stock (or other securities at the
time held in escrow) shall be paid directly to you
and shall not be held in escrow.
	 
	 	 	 	 	 	 
	 	 	However, in the event of any distribution, split,
recapitalization or other change affecting the
Company’s outstanding Stock as a class effected
without receipt of consideration or in the event of
a split, a distribution or a similar change in the
Company Stock, any new, substituted or additional
securities or other property which is by reason of
such transaction distributed with respect to the
unvested shares of Stock shall be immediately
delivered to the Company’s Secretary (or his
delegate) to be held in escrow hereunder, but only
to the extent the unvested shares of Stock are at
the time subject to the escrow requirements hereof.
	 
	 	 	 	 	 	 
	 	 	The unvested shares of Stock held in escrow
hereunder shall be subject to the following terms
and conditions relating to their release from escrow
or their surrender to the Company for repurchase and
cancellation:

 

 

	 	 	 	 	 	 	 
	 	 	As your interest in the unvested shares of Stock
vests as described above, the certificates for the
shares of Stock shall be released from escrow and
delivered to you, at your request.
	 
	 	 	 	 	 	 
	 	 	Should you forfeit any unvested Stock held in escrow
hereunder, then the escrowed certificates for such
unvested Stock shall be surrendered to the Company
for cancellation without payment, and you shall have
no further rights with respect to such shares of
Stock.
	 
	 	 	 	 	 	 
	Withholding Taxes	 	You agree as a condition of this grant that you will
make acceptable arrangements to pay any withholding
or other taxes that may be due as a result of the
vesting or receipt of the Restricted Stock. In the
event that the Company determines that any federal,
state, local or foreign tax or withholding payment
is required relating to the vesting or receipt of
Stock arising from this grant, the Company shall
have the right to require such payments from you, or
withhold such amounts from other payments due to you
from the Company or any Affiliate (including
withholding the delivery of vested shares of Stock
otherwise deliverable under this Agreement).
	 
	 	 	 	 	 	 
	Transfer of Unvested
Stock	 	Unvested Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered,
excepting the sale, assignment and transfer to the
Company in accordance with the Assignment Separate
from Certificate in the form attached hereto as
Exhibit A.
	 
	 	 	 	 	 	 
	Retention Rights	 	This Agreement does not give you the right to be
retained by the Company (or any Affiliate) in any
capacity. Unless otherwise specified in an
employment or other agreement between the Company
(or any Affiliate) and you, the Company (and any
Affiliate) reserve the right to terminate your
Service at any time and for any reason.
	 
	 	 	 	 	 	 
	Stockholder Rights	 	No adjustments are made for dividends or other
rights if the applicable record date occurs before
your certificate is issued (or an appropriate book
entry is made), except as described in the Plan.
	 
	 	 	 	 	 	 
	Adjustments	 	In the event of a split, a distribution or a similar
change in the Stock, the number of shares of Stock
covered by this grant may be adjusted (and rounded
down to the nearest whole number) pursuant to the
Plan. Your grant shall be subject to the terms of
the agreement of merger, liquidation or
reorganization in the event the Company is subject
to such corporate activity.
	 
	 	 	 	 	 	 
	Legends	 	If and to the extent that the shares of Stock are
represented by certificates rather than book entry,
all certificates representing the Stock issued under
this grant shall, where applicable, have endorsed
thereon the following legends:
	 
	 	 	 	 	 	 
	 	 	“THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND
OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST. A
COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY
THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY
THIS CERTIFICATE.”
	 
	 	 	 	 	 	 
	Applicable Law	 	This Agreement will be interpreted and enforced
under the laws of the State of Delaware, other than
any conflicts or choice of law rule or principle
that might otherwise refer construction or
interpretation of this Agreement to the substantive
law of another jurisdiction.

 

 

	 	 	 	 	 	 	 
	The Plan	 	The text of the Plan is incorporated in this
Agreement by reference. Certain capitalized terms
used in this Agreement are defined in the Plan, and
have the meaning set forth in the Plan.

This Agreement and the Plan constitute the entire
understanding between you and the Company regarding
this grant. Any prior agreements, commitments or
negotiations concerning this grant are superseded.

By signing the cover sheet of this Agreement, you agree to all of the terms and

conditions described above and in the Plan.

 

 

EXHIBIT A

ASSIGNMENT SEPARATE FROM CERTIFICATE

               FOR VALUE RECEIVED,                                          hereby sells, assigns and transfers unto
CapitalSource Inc., a Delaware corporation (the “Company”),                      (___) shares of Stock
of the Company represented by Certificate No. ___herewith and does hereby irrevocably constitute
and appoint                                          to transfer the said shares on the books of the Company with
full power of substitution in the premises.

               Dated:                     , ___

	 	 	 
	
	 	

(Please Print Name)
	 	 	 
	
	 	

(Signature)

Spousal Consent (if applicable)

                                                        (Purchaser’s spouse) indicates by the execution of this Assignment
his or her consent to be bound by the terms herein as to his or her interests, whether as community
property or otherwise, if any, in the Stock.

	 	 	 
	
	 	

(Signature)

               INSTRUCTIONS: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE APPROPRIATE SIGNATURE LINE(S).

 

 

EXHIBIT B 

ELECTION UNDER SECTION 83(b) OF

THE INTERNAL REVENUE CODE

               The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue
Code with respect to the property described below and supplies the following information in
accordance with the regulations promulgated thereunder:

               1. The name, address and social security number of the undersigned:

Name:                                                                                                                                                      

Address:                                                                                                                                            

                                                                                                                                                                

Social Security No. :                                                                                                                            

               2. Description of property with respect to which the election is being made:

                                   shares of stock of CapitalSource Inc., a Delaware corporation, (the
“Company”).

               3. The date on which the property was transferred is                      ___, 20___.

               4. The taxable year to which this election relates is calendar year 20___.

               5. Nature of restrictions to which the property is subject:

         The shares of Stock are subject to a Restricted Stock Agreement between the undersigned
and the Company. The shares are subject to forfeiture under the terms of the Agreement.

               6. The fair market value of the property at the time of transfer (determined without regard to
any lapse restriction) was $                     per share, for a total of $                    .

               7. The amount paid by taxpayer for the property was $0.00.

               8. A copy of this statement has been furnished to the Company.

Dated:                     , 20__

	 	 	 
	

	 	

	

	 	Taxpayer’s Signature
	 
	 	 
	

	 	

	

	 	Taxpayer’s Printed Name

 

 

PROCEDURES FOR MAKING ELECTION

UNDER INTERNAL REVENUE CODE SECTION 83(b)

                    The following procedures must be followed with respect to the attached form for making an
election under Internal Revenue Code section 83(b) in order for the election to be effective:

                    1. You must file one copy of the completed election form with the IRS Service Center where you
file your federal income tax returns within 30 days after the Grant Date of your Restricted Stock.

                    2. At the same time you file the election form with the IRS, you must also give a copy of the
election form to the Secretary of the Company.

                    3. You must file another copy of the election form with your federal income tax return
(generally, Form 1040) for the taxable year in which the shares of stock are transferred to you.

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