THIS EMPLOYMENT
AGREEMENT (the “ Agreement ”) is entered into as
of the 29th day of September, 2009 by and between Flagstar Bancorp,
Inc., a Michigan corporation maintaining offices at 5151 Corporate
Drive, Troy, Michigan 48098 (the “ Company ”),
and Joseph P. Campanelli, residing at 55 Livermore Road, Wellesley,
MA 02481 (“ Executive ”) (the Company and
Executive referred to collectively as the “ Parties
” and individually as a “ Party
”).
WHEREAS the
Company is a holding company, primarily engaged, through its
subsidiaries, in the business of obtaining funds in the form of
deposits and wholesale borrowings and investing those funds in
single-family mortgages and other types of loans (the “
Business of the Company ”) and desires to employ
Executive as its President and Chief Executive Officer (“
CEO ”), and Executive desires to become so employed by
the Company,
NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth
herein, the Parties agree as follows:
1.01 Agreement
as to Employment.
This
Agreement will be deemed to be effective as of September 29th,
2009 (the “ Effective Date ”). As of the
Effective Date, the Company hereby employs Executive as its
President and CEO, and Executive hereby accepts such employment by
the Company, subject to the terms of this Agreement.
Notwithstanding anything herein to the contrary, Executive’s
employment and the Company’s and Executive’s
obligations hereunder are contingent upon receipt by Flagstar Bank,
FSB (“ Flagstar Bank ”) of prior written
non-objection of the Regional Director of the Office of Thrift
Supervision in accordance with condition 7 of Order number 2009-06,
issued January 29, 2009 by the Office of Thrift Supervision.
In the event such prior written non-objection is not received, this
Agreement shall terminate effective immediately prior to the
Effective Date and neither the Company nor Executive shall have any
obligations hereunder.
The
initial stub term of Executive’s employment by the Company
under this Agreement shall commence on the Effective Date and end
on December 31, 2009 (the “ Stub Period ”).
Following the Stub Period, the initial term of Executive’s
employment by the Company under this Agreement shall commence on
January 1, 2010 and end on December 31, 2012 (the “
Initial Term ”), and Executive’s employment
hereunder shall continue thereafter for successive terms of one
(1) year following the Initial Term (the Stub Period, the
Initial Term and each one (1)-year term thereafter being
collectively referred to as the “ Term ”),
unless either Party delivers written notice to the other Party at
least two (2) months prior to end of the Initial Term or of
any subsequent year (the “ Notice Period ”) that
it or he wishes to terminate this
Agreement, in
which event this Agreement shall terminate as of the end of the
Term, unless earlier terminated as hereinafter provided. The
Company reserves the right to relieve Executive of his duties at
any time after his or its notice of termination without affecting
his right to compensation and other benefits under the Agreement
during the Notice Period and without such relief’s
constituting a separate termination or a breach of this Agreement.
No termination of this Agreement shall be effective as to those
portions of this Agreement which, by their express terms as set
forth herein, require performance by either Party following
termination of this Agreement.
1.03 Freedom to
Contract.
Executive
represents and warrants that he has the right to enter into this
Agreement, that he is eligible for employment by the Company and
that no other written or verbal agreements exist that would be in
conflict with or prevent performance of any portion of this
Agreement. Executive further agrees to hold the Company harmless
from any and all liability arising out of any prior contractual
obligations entered into by Executive. Executive represents and
warrants that he has not made and will not make any contractual or
other commitments that do or would conflict with or prevent his
performance of his obligations hereunder.
(a) During
the Term, Executive shall be employed by the Company to serve as
its President and CEO, subject to the authority and direction of
the Company’s Board of Directors (the “ Board
”), and shall report directly to the Board. Executive shall
perform such duties relating to the Company and its affiliates,
including any subsequently-acquired affiliates (collectively the
“ Affiliates ”), consistent with his position as
President and CEO, as are assigned to him from time to time by the
Board and any other duties undertaken or accepted by Executive
consistent with such position. In that connection, throughout the
Term Executive shall serve as president and chief executive officer
and as a director of each of the Company’s subsidiaries which
are material to the Business of the Company as determined by the
Board in its discretion (collectively, the “ Material
Subsidiaries ”). Executive shall have such authority,
responsibility and duties as are normally associated with the
positions of President and CEO with respect to the Company and with
the positions of president and chief executive officer with respect
to the Material Subsidiaries. Executive shall be appointed to such
positions with the Company and the Material Subsidiaries effective
as of the Effective Date.
(b) Subject to the provisions of this
subsection 1.04(b), Executive agrees to devote substantially all of
his business time and efforts to the Company as long as he is
employed under this Agreement. Notwithstanding the foregoing,
Executive may continue, throughout the Term, to engage in
charitable, community and personal activities and in the management
of personal investments and his personal and family affairs, and he
may serve on the board of directors of up to two for-profit
corporations, provided that such activities in the aggregate do not
conflict with the interests of the Company or interfere with his
obligations under this Agreement.
(c) The
Executive shall be appointed to the Board effective as of the
Effective Date and the Company shall use its reasonable best
efforts to cause Executive to be nominated for reelection to the
Board at each annual meeting of the stockholders of the Company
held during the Term.
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(a) Base
Salary . During the Stub Period, the Company shall pay to
Executive a gross monthly base salary of $158,333.00, payable
monthly or more frequently in accordance with the Company’s
payroll policy for its other executives and pro-rated for any
partial month during the Stub Period. During the Initial Term, the
Company shall pay to Executive a gross annual salary of
$1,900,000.00 (the “ Base Salary ”), payable
monthly or more frequently in accordance with the Company’s
payroll policy for its other executives. Following the Initial
Term, the Base Salary shall be reviewed for adjustment at the
discretion of the Board annually during the Term, and, if adjusted
(but not below $1,100,000), such adjusted amount shall become the
“Base Salary” for purposes of this
Agreement.
(b) Share
Salary . During the Stub Period, the Company shall pay to
Executive a gross monthly share salary of $62,500.00, payable at
the time that base salary is payable to the Executive and pro-rated
for any partial month during the Stub Period, in grants of
unrestricted shares of the Company’s common stock, par value
$0.01 per share (the “ Common Stock ”), having a
Fair Market Value (as defined below) on the date of grant equal to
the pro rata portion of the share salary payable on each
such pay date. During the Initial Term, the Company shall pay to
Executive a gross annual share salary of $750,000.00 payable, at
the time that base salary is payable to the Executive, in grants of
unrestricted shares of the Common Stock, having a Fair Market Value
on the date of grant equal to the pro rata portion of the
share salary payable on each such pay date (the “ Share
Salary ”). For purposes of this Agreement, “
Fair Market Value ” shall mean, as of any specified
date, the closing price of the Common Stock as reported in The Wall
Street Journal’s New York Stock Exchange (“ NYSE
”) — Composite Transactions listing for such day
(corrected for obvious typographical errors), or if the shares are
listed for trading on the NYSE but no closing price is reported in
such listing for such day, then the last reported closing price for
such shares on the NYSE, or if such shares are not listed or traded
on the NYSE, the closing sales price on any national securities
exchange on which the Common Stock is traded, or if the Common
Stock is not traded on any national securities exchange, then the
mean of the reported high and low sales prices for such shares in
the over-the-counter market, as reported on the National
Association of Securities Dealers Automated Quotations System, or
if such prices shall not be reported thereon, the mean between the
closing bid and asked prices reported by the National Quotation
Bureau Incorporated, or in all other cases, the fair market value
of a share of Common Stock as determined in good faith by the
Board. The Board may, but shall have no obligation to, engage one
or more appraisers in making its determination of Fair Market
Value, and the Fair Market Value as determined by the Board may be
higher or lower than any such appraisal. In making its
determination of Fair Market Value, the Board shall comply with
Section 409A (as defined below), to the extent applicable, and
the applicable Internal Revenue Service and Treasury Department
regulations thereunder. Following the Initial Term, the Share
Salary shall be reviewed for increase (but not decrease) at the
discretion of the Board annually during the Term, and, if adjusted,
such adjusted amount shall become the “Share Salary”
for purposes of this Agreement.
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(c)
Discretionary Shares . The Company may (as determined by the
Board, or a committee thereof designated to make such
determination, in its sole discretion) grant to Executive, at the
end of each calendar year, including the Stub Period, an additional
amount the Fair Market Value of which is equal to up to one-third
(1/3) of Executive’s annual compensation for such year, in
restricted shares of Common Stock, with the Fair Market Value of
such shares determined on the date of grant; provided ,
however , that no such shares shall be granted unless
Executive remains employed by the Company, without notice of
termination of his employment or this Agreement by either Party for
any reason, through the date on which any such grant is due to be
made. For purposes of this Section 1.05(c), “annual
compensation” shall have the meaning as set forth in the
Interim Final Rule, as may be amended from time to time, including
pursuant to any final rule. The “ Interim Final Rule
” shall mean the interim final rule promulgated pursuant to
section 101(a)(1), 101(c)(5) and 111 of the Emergency Economic
Stabilization Act of 2008, as amended by the American Recovery and
Reinvestment Act of 2009, which was published by the Department of
the Treasury on June 15, 2009 (the “Interim Final
Rule”). Any such granted restricted shares shall vest (as
determined by the Board, or a committee thereof designated to make
such determination, in its sole discretion) in accordance with
performance goals (which performance goals shall be determined by
the Board or such committee after consultation with the Executive
and shall be reasonably achievable without excessive risk taking in
the context of the Company’s business plan approved by the
Board or such committee after consultation with the Executive) and
continued substantial service by Executive as set forth in the
grant agreement evidencing each such award and, until the Company
is no longer subject to the Troubled Asset Relief Program under the
Emergency Economic Stabilization Act of 2008, including the Interim
Final Rule and any other rules and regulations thereunder, as
amended (the “ TARP Requirements ”), shall be
subject to all applicable TARP restrictions, including, without
limitation, a minimum two (2) year vesting requirement from
the date of grant as set forth in the Interim Final Rule, as may be
amended from time to time, including pursuant to any final
rule.
(d) Business
Expenses . The Company shall promptly pay directly, or shall
reimburse Executive for, all business expenses, including but not
limited to expenses for travel and entertainment, paid or incurred
by Executive during the Term that are reasonable and appropriate to
the conduct by Executive of the Company’s business, subject
to Executive’s providing reasonable substantiation of such
expenses to the Company in accordance with Company policies. In
addition, the Company shall promptly pay all reasonable expenses
incurred by Executive in connection with the drafting and
negotiation of this Agreement, the Exhibit hereto and related
matters.
1.06
Supplemental Retirement Pension .
(a) On the
last day of each of the first 60 months (pro-rated for any
partial month) of the Term, the Company shall accrue for the
benefit of the Executive, a supplemental retirement accrual (the
“ Monthly Supplemental Retirement Accrual ”)
equal to 1.022% of the sum of Base Salary (at the annual rate
scheduled to take effect on January 1, 2010) and Share Salary
(at the annual rate scheduled to take effect on January 1,
2010), provided the Executive is still employed by the Company on
the date of each such monthly accrual. Subject to the terms of this
Agreement, each Monthly Supplemental
4
Retirement
Accrual shall be vested on the date of such accrual. Upon the later
of the Executive’s “separation from service”
(within the meaning of Section 409A)( “Separation
from Service” ) and attainment of age 62, the Company
shall commence payment to Executive of an annual supplemental
retirement benefit (the “ Supplemental Retirement
Benefit ”) which is equal to the difference between
(i) Executive’s aggregate Monthly Supplemental
Retirement Accruals and (ii) the Offset Amount (as defined
below) determined at age 62 and assuming such Supplemental
Retirement Benefit is paid in the form of equal annual installments
for a twenty-three (23) year period certain commencing upon
Executive’s Separation from Service (the “ Period
Certain Payments ”). Notwithstanding the foregoing, the
Company and the Executive hereby agree that the Supplemental
Retirement Benefit shall be paid in a lump sum which shall be the
actuarial equivalent of the Period Certain Payments using the
applicable interest rate under Section 417(e)(3) (
“Code Section 417(e)(3)” ) of the Internal
Revenue Code of 1986, as amended, in October of the year preceding
the year of payment. If the Executive dies or becomes
“disabled” (within the meaning of Section 409A (as
defined below)) prior to attaining age 62, his beneficiary or
Executive, as applicable, shall, within 90 days after the date of
death or disability, as applicable, receive the present value at
the date of his death or disability, as applicable, of the
Supplemental Retirement Benefit (to the extent accrued through the
date of his death or disability, as applicable) that would
otherwise have been payable to Executive upon attaining age 62.
Notwithstanding the foregoing, in the event the Executive’s
employment is terminated by the Company for Cause (as defined
below), the Supplemental Retirement Benefit shall be
forfeited.
(b) For
purposes of this Section 1.06, “ Cause ”
shall mean that the Executive:
(i) willfully
fails or refuses to substantially perform the Executive’s
responsibilities under this Agreement, after demand for substantial
performance has been given by the Board that specifically
identifies how the Executive has failed to perform such
responsibilities;
(ii) engages in
gross misconduct which is materially and demonstrably injurious to
the Company;
(iii) is convicted
of a felony or pleads guilty or nolo contendere to a
felony;
(iv) materially
breaches Article Two of this Agreement;
(v) engages in any
act of fraud (including misappropriation of the Company’s
funds or property) in connection with the Business of the Company
which is materially and demonstrably injurious to the Company;
or
(vi) is
disqualified or barred by any governmental or self-regulatory
authority from serving in the capacity contemplated by this
Agreement
The termination
of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not
less than 66% of the
5
entire
membership of the Board (excluding the Executive) at a meeting of
the Board called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described above, and specifying the
particulars thereof in detail. For purposes of this Agreement, no
act or omission on the part of the Executive shall be considered
“willful” unless it is done or omitted in bad faith or
without reasonable belief that the act or omission was in the best
interests of the Company. Any act or omission based upon a
resolution duly adopted by the Board or upon advice of counsel for
the Company shall be conclusively presumed to have been done or
omitted in good faith and in the best interests of the
Company.
(c) For
purposes of this Section 1.06, the “ Offset
Amount ” shall mean the sum of:
(i) one hundred
percent (100%) of Executive’s retirement benefit balance at
the time of his Separation from Service under the Company’s
401(k) plan and any other tax-qualified defined contribution or
defined benefit pension plan maintained by the Company or any
Affiliate, to the extent but only to the extent that such
retirement benefit is attributable to contributions to such plans
made by the Company (and not to contributions made by Executive),
converted to an actuarially equivalent single life annuity
commencing on the date the Supplemental Retirement Benefit is paid,
using the applicable interest rate and applicable mortality table
under Code Section 417(e)(3), regardless of whether such benefit
payment is in that form or begins at that time;
(ii) one hundred
percent (100%) of Executive’s retirement benefit under any
other supplemental retirement benefit, excess contribution or
excess benefit plan or arrangement maintained by the Company or any
Affiliate, to the extent but only to the extent that such
retirement benefit is attributable to contributions to such plans
made by the Company (and not to contributions made by Executive),
converted to an actuarially equivalent single life annuity
commencing on the date the Supplemental Retirement Benefit is paid,
using the applicable interest rate and applicable mortality table
under Code Section 417(e)(3), regardless of whether such
benefit payment is in that form or begins at that time;
and
(iii) fifty
percent (50%) of the primary Social Security benefit to which
Executive would be entitled at Separation from Service, assuming
zero compensation after Separation from Service, regardless of
whether he receives any portion of such primary Social Security
benefit on such date.
1.07 Fringe and
Other Benefits.
During
the Term, the Company shall make available to Executive such fringe
and other benefits and perquisites as are regularly and generally
provided to the other senior executives of the Company, subject to
the terms and conditions of any employee benefit plans and
arrangements maintained by the Company and all applicable TARP
Requirements, including, without limitation, the restriction on tax
gross-up payments.
6
Executive
shall purchase from the Company 1,987,500 shares of Common Stock in
accordance with and subject to the conditions contained in a
Purchase Agreement entered into between Executive and the Company
as of the date hereof.
1.09
Termination of Employment.
(a) Payments
Upon Termination . If Executive terminates his employment under
this Agreement for any reason or if the Company terminates
Executive’s employment under this Agreement for any reason,
then, upon any such termination of Executive’s employment,
Executive shall receive from the Company: any unpaid Base Salary
and Share Salary for any period ending on or before the date of
termination of employment, any unreimbursed business expenses
subject to reimbursement under Section 1.05, vacation pay for
accrued but unused vacation days through the date of termination
and any benefits to which Executive may be entitled pursuant to the
terms and conditions of any applicable employee benefit plan of the
Company, which shall be paid on the Company’s first payroll
date following Executive’s termination of employment (or, for
purposes of benefits under an employee benefit plan of the Company,
provided pursuant to the terms of the applicable employee benefit
plan). Notwithstanding anything to the contrary, no payment or
benefit will be provided to Executive if any such payment or
benefit would violate the TARP Requirements.
(b) Return
of Company Property. Upon termination of Executive’s
employment, or upon the request of the Company at any time,
Executive shall terminate his use of and return to the Company all
Company property, including without limitation, any Confidential
Information, vehicles, credit cards, equipment, computers, phones,
cell phones, pagers, equipment, supplies, tools, keys or
locks.
(c) No
Further Obligations . Upon termination of Executive’s
employment under this Agreement, the Parties shall have no further
obligations under this Agreement to each other except as expressly
stated herein and in any written employee benefit plans and
arrangements applicable to Executive which are maintained by the
Company at the time of such termination of Executive’s
employment, and no further payments of Base Salary or Share Salary
or other compensation or benefits shall be payable by the Company
to Executive, except such obligations and payments (i) as are
set forth in this Section 1.09; (ii) as are required by
the express terms of any written employee benefit plans and
arrangements applicable to Executive which are maintained by the
Company at the time of such termination of Executive’s
employment; (iii) as may be required by law or (iv) as
may be mutually agreed upon between the Parties in a signed written
negotiated agreement entered into in connection with a termination
of Executive’s employment under this Agreement, which
agreement shall contain a release in favor of the Company which is
comparable in scope to the release referred to in the next
sentence. Notwithstanding any other provision of this Agreement, as
a precondition to the payment of any compensation or benefits in
excess of those otherwise required by law to be paid upon
termination of employment, the Executive agrees to execute a
release of any claims against the Company, its employees, officers,
directors, shareholders, Affiliates and subsidiaries arising out
of, in connection with or relating to Executive’s employment
with or termination of employment from the Company including any
claims under the terms of
7
this Agreement,
and specifically including but not limited to a release of claims
under the Age Discrimination in Employment Act and any similar
rights under any state or local law, in a form reasonably
acceptable to the Company. Anything to the contrary herein
notwithstanding, nothing in the releases described in this
Section 1.09(c) shall release any releasee from any claims or
damages based on (i) any right or claim that arises
exclusively from events occurring after the date Executive executes
such release, (ii) any right Executive may have to payments,
benefits or entitlements under this Agreement or any applicable
plan, policy, program or arrangement of, or other agreement with,
the Company or any Affiliate, (iii) Executive’s
eligibility for indemnification in accordance with this Agreement,
the organizational documents of the Company and the Material
Subsidiaries (said documents collectively referred to as the
“ Corporate Documents ”), or applicable laws, or
under any applicable insurance policy, with respect to any
liability Executive incurs as a director, officer or employee of
the Company or any Affiliate or (iv) any right Executive may
have to obtain contribution as permitted by law in the event of
entry of judgment against Executive as a result of any act or
failure to act for which Executive and any releasee are jointly
liable. For so long as the Company is subject to the TARP
Requirements, any such agreement or release shall be subject to the
TARP Requirements.
Notwithstanding
any other provision of this Agreement, if, as a result of force
majeure, including and without limitation (i) acts of God;
(ii) acts of public enemy; (iii) civil disturbances;
(iv) war or (v) any and all other events and
circumstances not within or subject to a Party’s reasonable
control, the Company is unable to carry out, wholly or in part, its
duties and obligations under this Agreement, then the duties and
obligations shall be suspended during the continuance of the force
majeure event. The Company shall use all reasonable diligence to
remove the force majeure event as quickly as reasonably possible.
The requirement that any force majeure shall be remedied with all
reasonable diligence shall not require the settlement of strikes,
lockouts or other labor difficulty suffered, but resolution of all
such difficulties shall be entirely within the discretion of the
Party concerned.
In
the course of performing his duties for the Company, the Company
agrees to provide the Executive with certain proprietary,
confidential and trade secret information of the Company and its
affiliates, including but not limited to: the database of customer
accounts; customer, supplier and distributor list; customer
profiles; information regarding sales and marketing activities and
strategies; trade secrets; data regarding technology, products and
services; information regarding pricing, pricing techniques and
procurement; financial data and forecasts regarding the Company and
customers, suppliers and distributors of the Company; software
programs and intellectual property (collectively, “
Confidential Information ”). All Confidential
Information shall be and remain the sole property of the Company
and its assigns, and the Company shall be and remain the sole owner
of all patents, copyrights, trademarks, names and other rights in
connection therewith and without regard to whether the Company is
at
8
any particular
time developing or marketing the same. The Executive acknowledges
that the Confidential Information is a valuable, special and unique
asset of the Company and that his access to and knowledge of the
Confidential Information is essential to the performance of his
duties as an employee of the Company. In light of the competitive
nature of the business in which the Company is engaged, Executive
agrees that he will, both during the Term and thereafter, maintain
the strict confidentiality of all Confidential Information known or
obtained by him or to which he has access in connection with his
employment by the Company and that he will not, without prior
written
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