CapitalSource Employment Offer Letter Agreement with Thomas A. Fink (Chief Financial Officer)

Summary

This agreement is an employment offer letter from CapitalSource to Thomas A. Fink for the position of Chief Financial Officer, starting May 1, 2003. It outlines his job duties, salary, bonus, stock options, and restricted stock grants. The agreement specifies that employment is at-will but provides for severance pay, bonus, and benefits continuation if terminated without cause or for good reason. If terminated for cause, only accrued salary and unused vacation are paid. The agreement also details vesting schedules for equity awards and conditions for termination and severance.

EX-10.6 9 w87344exv10w6.txt EX-10.6 LETTER AGREEMENT Exhibit 10.6 4445 Willard Avenue, Twelfth Floor Chevy Chase, Maryland 20815 ###-###-#### phone ###-###-#### fax April 21, 2003 Thomas A. Fink 4420 Dexter Street, NW Washington, DC 20007 Dear Tom: I am very pleased to offer you (the "Executive") a position with CapitalSource. I have set forth below a summary description of some of the terms and conditions that shall govern your employment: Position: Chief Financial Officer Job Description: Your current duties shall include (i) developing new, and managing all existing, debt financing and debt capital markets transactions, (ii) supervising all treasury functions, (iii) managing (with Jim Mozingo) the preparation, review and signing of all audited and unaudited financial statements, (iv) all corporate budgeting, forecasting and financial modeling, and (v) equity capital markets and equity investor relations responsibilities as assigned by the CEO or President. You shall report directly to John Delaney and Jason Fish. These duties may change from time to time. Location: Chevy Chase, MD Department: Corporate Starting Date: May 1, 2003 Base Salary: $12,500 semimonthly (equivalent to $300,000 per year). Paychecks are issued on the 15th and the last day of each month; if paydays fall on a weekend or a holiday pay is issued on the workday preceding the weekend or holiday. Paychecks issued on the 15th of each month are for the time period of the first day of the current month through the 15th of the current month. Paychecks issued Thomas A. Fink April 21, 2003 Page 2 on the last day of each month are for the time period of the 16th through the last day of each month. Overtime: Exempt Exempt employees do not receive overtime pay for hours worked in excess of the standard workweek. Non-exempt employees working in excess of 40 hours in any given seven day week (beginning Saturday and ending Friday), are entitled to overtime pay at the rate of 1.5 times the equivalent of an hourly rate for the employee. Bonus: For the year ended December 31, 2003, the discretionary bonus shall not be less than $150,000, which will be applied on a pro-rata basis depending on how long Executive works in 2003. For example if Executive commences on May 1, 2003 then the bonus will be $100,000. The bonus shall be paid at the same time as all year-end bonuses are paid to other CapitalSource employees. Thereafter, bonuses may be awarded at the sole discretion of the senior officers of CapitalSource. Options: Options to purchase 50,000 units with a per unit exercise price equal to the fair market value per unit as of the date your employment commences, subject to appropriate adjustments for changes in capitalization, will be granted contingent upon required corporate approvals. Options will be subject to CapitalSource's Equity Incentive Plan, including a five-year vesting period (20% to vest on your employment start date and an additional 20% on each anniversary of your start date), and you will be required to enter into a non-qualified option agreement with CapitalSource. Restricted Stock: 50,000 units will be granted as of the date your employment commences, contingent upon required corporate approvals. Restricted Stock will be subject to CapitalSource's Equity Incentive Plan, including a five-year vesting period (20% to vest on your start date and an additional 20% on each anniversary of your start date), and you will be required to enter into a Restricted Unit Agreement with CapitalSource. Thomas A. Fink April 21, 2003 Page 3 Employment Termination: The respective rights and responsibilities of the parties to this offer letter notwithstanding, Executive remains an employee-at-will, and his employment may be terminated by either party at any time for any reason by written notice. (A) Termination without Cause or for Good Reason. If Executive's employment is terminated by CapitalSource for any reason other than Cause (as defined below) or if Executive's employment is terminated by Executive for Good Reason (as defined below), then CapitalSource shall pay Executive the Severance Package. (1) For purposes of this Agreement, "Severance Package" means: (a) Base Salary continuation for twelve (12) months at Executive's annual Base Salary rate in effect on the date of termination, subject to all applicable federal, state and local withholding and reporting requirements. These salary continuation payments shall be paid in accordance with usual CapitalSource payroll practices; (b) A bonus equal to $150,000 and a pro-rata bonus for that year, all payable within 10 days of the date of termination; (d) Continuation of benefits under any life, group medical, and dental insurance benefits substantially similar to those which Executive was receiving immediately prior to termination of employment until the earlier of: (i) the end of the twelve (12) month period following Executive's termination of employment, or (ii) the date on which Executive becomes eligible to receive any benefits under any plan or program of any other employer. Thomas A. Fink April 21, 2003 Page 4 The continuing coverage provided under this paragraph (A)(1)(d) is subject the same employee contribution requirement as immediately prior the Executive's termination. In no event shall the Executive's continuation period for purposes of Part 6 of Title I of the Executive Retirement Income Security Act of 1974, as amended ("COBRA"), begin prior to the end of the Executive's coverage under CapitalSource's group health plan as provided in this paragraph (A)(1)(d). (2) For purposes of this Agreement, a termination of employment by Executive for "Good Reason" shall be a termination by Executive following the occurrence of any of the following events unless CapitalSource has cured as provided below: (a) A material and permanent diminution in Executive's duties or responsibilities; (b) A material reduction in the aggregate value of Base Salary; or (c) A permanent reassignment of Executive to another primary office, or a relocation of the office that is Executive's primary office, unless Executive's primary office following such reassignment or relocation is within twenty (20) miles of Executive's primary office before the reassignment or relocation. Executive must notify CapitalSource of any event constituting Good Reason within one hundred twenty (120) days after Executive becomes aware of such event or such event shall not constitute Good Reason for purposes of this agreement provided that CapitalSource shall have fifteen (15) days from the date of such notice to cure the Good Reason event. A failure of Executive to notify CapitalSource after the first occurrence of an event constituting Good Reason shall not Thomas A. Fink April 21, 2003 Page 5 preclude any subsequent occurrences of such event (or similar event) from constituting Good Reason. (B) Termination for Cause. If Executive's employment is terminated for Cause, CapitalSource shall pay Executive his accrued but unpaid Base Salary and accrued but unused vacation days through the date of the termination of employment, and no further payments or benefits shall be owed. The accrued unpaid Base Salary amounts payable under this paragraph (b) shall be payable in a lump sum within ten (10) days of termination of employment. As used herein, the term "Cause" shall be limited to: (1) Executive's conviction of or plea of guilty or nolo contendere to a crime constituting a felony under the laws of the United States or any state thereof or any other jurisdiction in which CapitalSource conducts business; (2) Executive's willful misconduct or gross negligence in the performance of his duties to CapitalSource; (3) Executive's willful and continued failure to follow the instructions of CapitalSource's Board, CEO, or President; or (4) Executive's willful and/or continued neglect of duties (other than any such neglect resulting from incapacity of Executive due to physical or mental illness); provided, however, that Cause shall arise under items (3) or (4) only following ten (10) days written notice thereof from CapitalSource which specifically identifies such failure or neglect and the continuance of such failure or neglect during such notice period. Any failure by CapitalSource to notify Executive after the first occurrence of an event constituting Cause shall not preclude any subsequent occurrences of such event a similar event) from constituting Cause. Thomas A. Fink April 21, 2003 Page 6 Confidentiality: You will keep the terms of your employment confidential with all other CapitalSource employees, except John Delaney, CEO, and Jason Fish, President. In addition, you will agree to keep CapitalSource information confidential. Benefits: THE BENEFITS CURRENTLY OFFERED BY CAPITALSOURCE ARE AS FOLLOWS. FOR THE BENEFIT PROGRAMS LISTED BELOW, CAPITALSOURCE RESERVES THE RIGHT TO AMEND OR TERMINATE ANY OF ITS BENEFITS PROGRAMS AT ANY TIME OR TO REQUIRE OR INCREASE EMPLOYEE PREMIUM CONTRIBUTIONS TOWARD BENEFITS WITH OR WITHOUT ADVANCE NOTICE AT ITS DISCRETION. IF THERE IS ANY CONFLICT BETWEEN THIS SUMMARY AND THE BENEFIT PLANS, THE BENEFIT PLANS GOVERN. Composite leave: Composite leave accrues at the rate of 20 days per year. Such leave may be used for any personal reason, including vacation, illness, or a doctor's or other appointment. Holidays: CapitalSource recognizes eight holidays each calendar year. In addition, you may take up to two floating holidays per year. Health and Dental Insurance: CapitalSource provides health coverage through UniCare Life & Health Insurance and dental insurance coverage through Guardian for the employees, and contributes 50% of the premium toward spouse/family coverage. An employee's contribution toward health insurance premiums for spouse/family coverage will be deducted from pay on a pre-tax basis. If you waive this benefit, you will not receive any compensation in place of coverage. Long-Term Disability Insurance: CapitalSource pays the premiums for long-term disability insurance coverage for all employees through Fortis Benefits Insurance Company. Group Term Life: Thomas A. Fink April 21, 2003 Page 7 Insurance: CapitalSource pays the premiums for voluntary term life insurance coverage through Fortis Benefits Insurance Company in an amount equal to the employee's annual salary (not to exceed $50,000). 401(k) Savings Plan: CapitalSource offers a 401(k) savings plan through Fidelity Management Trust Company. Flexible Spending Accounts: CapitalSource offers Flexible Spending Accounts to all employees, for both medical expenses and dependent day care coverage. The maximum amounts, which may be withheld from your paychecks during any calendar year, are as follows: Medical: $3,600.00 Dependent day care: $5,000.00 Parking: CapitalSource allows employees to withhold on a pre-tax basis up to $175.00 per month from their pay to cover actual parking costs. The employee must submit parking receipts to receive reimbursement. Metrochek/Commuter Checks: CapitalSource allows employees to withhold on a pre-tax basis up to $100.00 per month from their pay to purchase Metrochek passes or Commuter Checks for use on the Washington Metro or the Bay Area Rapid Transit, respectively. Other: CapitalSource will provide Executive with an Indemnification Agreement similar in form to the Indemnification provided to other senior executives of CapitalSource. Federal law requires that all employers verify the identity and employment eligibility of each new employee within three days of hire. Accordingly, should you accept our offer, you will need to supply, on your first day of work, original documents that confirm your identity and your authorization to be employed by our company in the United States. By accepting this offer, you hereby represent and warrant to CapitalSource that you are not subject to any employment agreement or other document or arrangement, in each case, affecting your ability to provide your services exclusively to CapitalSource or restricting you from competing with any person. Your provision of services as contemplated by this offer letter would not breach any contract, agreement, judgment or order binding upon you. Thomas A. Fink April 21, 2003 Page 8 I look forward to working with you. Very truly yours, /s/ John K. Delaney John K. Delaney Chief Executive Officer cc: Jason Fish Accepted by: /s/ Jason Fish Date: April 30, 2003 ----------------------------- -------------------------