Exhibit 10.1
Execution Version
 
INVESTMENT AGREEMENT
dated as of December 17, 2008
between
FLAGSTAR BANCORP, INC.
and
MP THRIFT INVESTMENTS L.P.
 

 

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          TABLE OF CONTENTS

 
        ARTICLE I

 
        PURCHASE; CLOSING

 
       
1.1 Purchase
    2  
1.2 Closing
    3  
 
        ARTICLE II

 
        REPRESENTATIONS AND WARRANTIES

 
       
2.1 Disclosure
    6  
2.2 Representations and Warranties of the Company
    7  
2.3 Representations and Warranties of Purchaser
    24  
 
        ARTICLE III

 
        COVENANTS

 
       
3.1 Filings; Other Actions
    27  
3.2 Access, Information and Confidentiality
    29  
3.3 Conduct of the Business
    30  
3.4 Acquisition Proposals
    34  
 
        ARTICLE IV

 
        ADDITIONAL AGREEMENTS

 
       
4.1 Governance Matters
    37  
4.2 Legend
    39  
4.3 Reservation for Issuance
    40  
4.4 Certain Transactions
    40  
4.5 Indemnity
    40  
4.6 Exchange Listing
    43  
4.7 Registration Rights
    43  
4.8 Certificate of Designations
    55  
 
        ARTICLE V

 
        TERMINATION

 
       
5.1 Termination
    55  
5.2 Effects of Termination
    57  
5.3 Fees
    57  

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          ARTICLE VI

 
        MISCELLANEOUS

 
       
6.1 Survival
    58  
6.2 Expenses
    58  
6.3 Amendment; Waiver
    58  
6.4 Counterparts and Facsimile
    59  
6.5 Governing Law
    59  
6.6 Waiver of Jury Trial
    59  
6.7 Notices
    59  
6.8 Entire Agreement, Etc
    60  
6.9 Interpretation; Other Definitions
    60  
6.10 Captions
    61  
6.11 Severability
    61  
6.12 No Third Party Beneficiaries
    61  
6.13 Time of Essence
    62  
6.14 Certain Adjustments
    62  
6.15 Public Announcements
    62  
6.16 Specific Performance
    62  

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INDEX OF DEFINED TERMS

      Term   Location of Definition
Acquisition Proposal
  3.4(b)
Affiliate
  6.9(a)
Agency
  2.2(w)(2)(A)
Agreement
  Preamble
Alternative Acquisition Agreement
  3.4(c)(2)
Applicant
  2.2(f)
Authorizations
  2.2(a)(1)
Bank
  1.2(c)(2)(D)
Bank Charter
  2.2(a)(2)
beneficial owner
  6.9(g)
beneficially own
  6.9(g)
Benefit Plan
  2.2(s)
Board Observers
  4.1(a)
Board of Directors
  1.2(G)
Board Representative
  4.1(a)
Burdensome Condition
  1.2(c)(2)(F)
business day
  6.9(e)
Capitalization Date
  2.2(b)
CERCLA
  2.2(q)
Certificate of Incorporation
  Recitals
Change of Recommendation
  3.4(c)(2)
Closing
  1.2(a)
Closing Date
  1.2(a)
Code
  2.2(j)
Common Stock
  Recitals
Company
  Preamble
Company Financial Statements
  2.2(g)
Company Preferred Stock
  2.2(b)
Company Recommendation
  3.1(b)
Company Reports
  2.2(h)(1)
Company Significant Agreement
  2.2(m)
Company 10-K
  2.1(c)(2)(A)
control/controlled by/under common control with
  6.9(a)
Converted Common Shares
  Recitals
Convertible Preferred Stock
  Recitals
Covered Persons
  4.9
DIF
  2.2(a)(2)
Disclosure Schedule
  2.1(a)
ERISA
  2.2(s)(1)
Exchange Act
  2.2(h)(1)
Expense Reimbursement
  6.2
FDIC
  2.2(a)(2)

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      Term   Location of Definition
GAAP
  2.1(b)
Governance Committee
  4.1(a)
Governmental Entity
  1.2(c)(1)(A)
herein/hereof/hereunder
  6.9(d)
HOLA
  2.2(a)(1)
Holder
  4.7(l)(1)
Holders’ Counsel
  4.7(l)(2)
including/includes/included/include
  6.9(c)
Indemnified Party
  4.5(c)
Indemnifying Party
  4.5(c)
Indemnitee
  4.7(g)(1)
Information
  3.2(b)
Insurer
  2.2(w)(2)(C)
Interim Financials
  2.2(g)
Investment Company Act
  2.2(ee)
Investor Warrants
  Recitals
Investor Amendments
  Recitals
knowledge of the Company
  6.9(h)
Liens
  2.2(d)(2)
Loan Investor
  2.2(w)(2)(B)
Losses
  4.5(a)
Management Equity
  3.1(b)
Management Purchased Shares
  Recitals
Management Purchasers
  Recitals
material
  2.1(b)
Material Adverse Effect
  2.1(b)
MatlinPatterson
  Recitals
May Purchase Agreement
  Recitals
Michigan Secretary
  Recitals
NYSE
  1.2(c)(1)(D)
NYSE Approval
  1.2(c)(1)(C)
Operating Plan
  3.3(c)
Option Shares
  Recitals
or
  6.9(b)
OTS
  2.2(f)
Outside Date
  5.1(b)
Pending Underwritten Offering
  4.7(m)
person
  6.9(f)
Piggyback Registration
  4.7(a)(4)
Pre-Closing Period
  3.3(a)
Preferred Stock Certificate of Designations
  Recitals
Previously Disclosed
  2.1(c)
Proprietary Rights
  2.2(z)
Purchase Price
  1.2(b)(2)
Purchased Shares
  Recitals

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      Term   Location of Definition
Purchaser
  Preamble
Qualifying Ownership Interest
  3.2(a)
Register, registered and shelf registration
  4.7(l)(3)
Registrable Securities
  4.7(l)(4)
Registration Demand
  4.7(a)(2)
Registration Expenses
  4.7(l)(5)
Regulatory Agreement
  2.2(u)
Representatives
  3.4
Required Approvals
  2.2(f)
Rule 144
  4.7(l)(6)
Rule 144A
  4.7(l)(6)
Rule 159A
  4.7(l)(6)
Rule 405
  4.7(l)(6)
Rule 415
  4.7(l)(6)
Scheduled Black-out Period
  4.7(l)(7)
SEC
  2.1(c)(2)(A)
Securities
  Recitals
Securities Act
  Recitals
Selling Expenses
  4.7(l)(8)
Shelf Registration Statement
  4.7(a)(2)
SLHC Parties
  2.2(f)
Special Registration
  4.7(j)
Stockholder Proposals
  3.1(b)
Subsidiary
  2.2(a)(1)
Superior Proposal
  3.4(b)
TARP Approval
  Recitals
TARP Documents
  Recitals
TARP Preferred Stock
  Recitals
TARP Securities
  Recitals
TARP Transaction
  Recitals
TARP Warrant
  Recitals
TARP Warrant Shares
  Recitals
Tax/Taxes
  2.2(j)
Tax Return
  2.2(j)
Termination Fee
  5.3(c)
Threshold Amount
  4.5(e)
Treasury
  Recitals
Voting Debt
  2.2(b)

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LIST OF SCHEDULES AND EXHIBITS

     
Schedule A
  List of Management Members for Recital D
Schedule B
  List of Subsidiaries
Schedule C
  [Reserved]
Schedule D
  List of Management Purchasers
Schedule E
  Terms of Management Equity
Schedule F
  List of Applicants
 
   
Exhibit A
  Preferred Stock Certificate of Designations

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     INVESTMENT AGREEMENT, dated as of December 17, 2008 (this “Agreement”),
between Flagstar Bancorp, Inc., a corporation organized under the laws of the
State of Michigan (the “Company”) and MP Thrift Investments L.P. a Delaware
limited partnership (“Purchaser”).
RECITALS:
A. Purchaser. Purchaser is formed as an “alternative investment vehicle” for the
purpose of making the investment described herein with capital intended to be
contributed (subject to the terms and conditions of this Agreement) by investors
in MatlinPatterson Global Opportunities Partners III L.P. and MatlinPatterson
Global Opportunities Partners Cayman III L.P. The parties acknowledge and agree
that the investment is being made by Purchaser in accordance with the “silo”
structure set forth in Schedule 2.2(f) of the Purchaser Disclosure Schedule and
neither MatlinPatterson Global Advisers LLC or its Affiliates
(“MatlinPatterson”), MatlinPatterson Global Opportunities Partners III L.P.,
MatlinPatterson Global Opportunities Partners Cayman III L.P., nor any other
fund or entity sponsored or advised by MatlinPatterson shall have any
obligations hereunder;
B. The Investment. The Company intends to issue and sell to Purchaser, and
Purchaser intends to purchase from the Company, as an investment in the Company
250,000 shares of a series of mandatory convertible participating voting
preferred stock, $0.01 par value per share, of the Company, having the terms set
forth in Exhibit A (the “Convertible Preferred Stock”), in each case on the
terms and conditions described herein. Each share of Convertible Preferred Stock
will be sold to Purchaser at a purchase price of $1,000 per share and shall be
convertible into common stock, par value $0.01 per share, of the Company (the
“Common Stock”) at the liquidation preference divided by $0.80;
C. TARP Transaction. The Company submitted an application for participation in
the TARP Capital Purchase Program. If such application is approved by the United
States Department of the Treasury (“Treasury”), the Company intends to issue and
sell to Treasury in transactions exempt from registration under the Securities
Act of 1933, as amended (the “Securities Act”), (i) shares of fixed rate
cumulative perpetual preferred stock (the “TARP Preferred Stock”) and (ii) a
warrant (the “TARP Warrant”) to purchase a specified number of shares of Common
Stock (the “TARP Warrant Shares” and together with the TARP Preferred Stock and
the TARP Warrant, collectively, the “TARP Securities”; the issuance and sale of
the TARP Securities are the “TARP Transaction”; the approval of the TARP
Transaction granted by Treasury is the “TARP Approval” and the definitive
documents entered into in connection therewith are the “TARP Documents”);
D. Management Agreement. In connection with the TARP Transaction, members of
management of the Company listed on Schedule A hereto have agreed, if and to the
extent required, to amend their respective employment agreements and executive
compensation arrangements to comply with the requirements of participation in
the TARP Capital Purchase Program;
E. Certificate of Incorporation Amendment. The Company intends to amend its
Amended and Restated Articles of Incorporation (the “Certificate of
Incorporation”) and its bylaws, in form and substance reasonably satisfactory to
Purchaser, to give effect to the transactions,

 

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including the Stockholder Proposals and the governance matters described in
Article IV hereof, contemplated by this Agreement;
F. Investor Amendments. Certain of the several investors who purchased
securities pursuant to the Purchase Agreement, dated May 14, 2008, between the
Company and the purchasers named therein (the “May Purchase Agreement”) have, in
connection with the TARP Transaction, agreed to accept in full satisfaction of
any and all obligations under Section 8 of the May Purchase Agreement, warrants
(the “Investor Warrants”) to purchase Common Stock (the “Investor Amendments”);
G. Management Purchase. In connection with the investment by Purchaser, the
Company shall issue and sell to the persons listed in Schedule D hereto (the
“Management Purchasers”) shares of Common Stock (the “Management Purchased
Shares”) for an aggregate purchase price of not less than $4 million and not
more than $5 million at a price per Management Purchased Share of $0.80 per
share, provided, however, that if the Company does not have sufficient shares of
Common Stock available for issuance prior to the Certificate of Incorporation
amendment, then the Management Purchasers shall instead purchase an equivalent
number shares of Convertible Preferred Stock on an as converted basis as would
have been purchased if sufficient shares of Common stock were available for
issuance; and
H. The Securities. The term “Purchased Shares” refers to the Convertible
Preferred Stock to be purchased pursuant to the terms of Section 1.2(b)(1) of
this Agreement. The term “Securities” refers collectively to (1)  the
Convertible Preferred Stock and the shares of Common Stock into which the
Convertible Preferred Stock is convertible in accordance with the terms thereof
and of this Agreement (the “Converted Common Shares”), (2) the Management Equity
(including the shares of Common Stock to be issued upon exercise of options, the
“Option Shares”), (3) the Investor Warrants (including shares of Common Stock to
be issued upon exercise thereof), (4) the TARP Securities and the shares of
Common Stock issuable upon the exercise of the TARP Warrant and (5) the
Management Purchased Shares. When issued and purchased in accordance with the
terms of this Agreement, the Convertible Preferred Stock will be evidenced by a
share certificate incorporating the terms set forth in a certificate of
designations for the Convertible Preferred Stock substantially in the form
attached as Exhibit A (the “Preferred Stock Certificate of Designations”) made a
part of the Certificate of Incorporation by the filing of the Preferred Stock
Certificate of Designations with the Michigan Department of Labor and Economic
Growth (the “Michigan Secretary”).
     NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE I
PURCHASE; CLOSING
     1.1 Purchase. On the terms and subject to the conditions set forth herein,
Purchaser will purchase from the Company, and the Company will sell to Purchaser
a number of Purchased Shares determined in accordance with Section 1.2(b)(1).

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     1.2 Closing.
     (a) Subject to the satisfaction or waiver of the conditions to the Closing
set forth in this Agreement, the closing of the purchase of the Purchased Shares
referred to in Section 1.1 by Purchaser pursuant hereto (the “Closing”) shall
occur at 9:30 a.m., New York time, on December 31, 2008, provided that if such
conditions have not been so satisfied or waived on such date, the Closing shall
occur on the third business day after the satisfaction or waiver (by the party
entitled to grant such waiver) of the conditions to the Closing set forth in
this Agreement (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to fulfillment or waiver of those
conditions), at the offices of Sullivan & Cromwell LLP located at 125 Broad
Street, New York, New York 10004 or such other date or location as agreed by the
parties. The date of the Closing is referred to as the “Closing Date.”
     (b) Subject to the satisfaction or waiver on the Closing Date of the
applicable conditions to the Closing in Section 1.2(c), at the Closing:
     (1) the Company will deliver to Purchaser (A) the Expense Reimbursement in
accordance with Section 6.2 hereof and (B) 250,000 shares of Convertible
Preferred Stock; and
     (2) Purchaser will deliver $250,000,000 (the “Purchase Price”) to the
Company.
     (c) Closing Conditions. (1)  The obligation of Purchaser, on the one hand,
and the Company, on the other hand, to effect the Closing is subject to the
fulfillment or written waiver by Purchaser and the Company prior to the Closing
of the following conditions:
     (A) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the Closing or shall prohibit or
restrict Purchaser or its Affiliates from owning or voting, or, subject to the
receipt of approval of the Stockholder Proposals, converting any Purchased
Shares in accordance with the terms thereof and no lawsuit shall have been
commenced by any court, administrative agency or commission or other
governmental authority or instrumentality, whether federal, state, local or
foreign, or any applicable industry self-regulatory organization (each, a
“Governmental Entity”) seeking to effect any of the foregoing;
     (B) the Company shall have received proceeds of the sale of the TARP
Securities of not less than $250,000,000 prior to the Closing Date;
     (C) the Company shall have received the approval of the NYSE to issue the
Convertible Preferred Stock and to convert the Convertible Preferred Stock into
Common Stock without the approval of the Company’s stockholders in reliance on
Section 312.05 of the NYSE

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Listed Company Manual (the “NYSE Approval”), and such NYSE Approval shall be in
full force and effect; and
     (D) the Converted Common Shares shall have been authorized for listing on
the New York Stock Exchange (“NYSE”) or such other market on which the Common
Stock is then listed or quoted, subject to stockholder approval, if necessary,
and official notice of issuance.
     (2) The obligation of Purchaser to purchase the Purchased Shares at Closing
is also subject to the fulfillment or written waiver by Purchaser prior to the
Closing of each of the following conditions:
     (A) The Company shall have performed in all material respects all
obligations required to be performed by it at or prior to Closing;
     (B) All representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent any such representations and warranties expressly
relate to a specified date, in which case such representation and warranty need
only be true and correct as of such specified earlier date);
     (C) Purchaser shall have received a certificate signed on behalf of the
Company by a senior executive officer certifying to the effect that the
conditions set forth in Sections 1.2(c)(2)(A) and (B) have been satisfied;
     (D) Since the date of this Agreement, (i) no fact, event, change,
condition, development or circumstance shall have occurred that, individually or
in the aggregate, would reasonably be expected to have a Material Adverse Effect
(as defined herein) with respect to the Company, (ii) there shall have been no
decrease greater than or equal to 7.5% in core deposits (i.e., money market,
demand, checking, savings and transactional accounts for retail customers) of
the Company as of September 30, 2008 and (iii) there shall have been no material
legislative change or change in regulatory interpretation affecting the tax
consequences of the Purchase to Flagstar Bank, FSB (the “Bank”) under existing
Notice 2008-83, or any other material change to any rules under Section 382 that
affect the application of Section 382 to unrealized built-in losses of Flagstar
Bank, FSB (the “Bank”) and any Affiliate (if relevant) that exist on or after
the Closing Date;
     (E) As of the Closing Date, the Bank’s authorized line of credit under the
Advances, Pledge and Security Agreement, dated as of August 6, 1996, among the
Bank, Flagstar Capital Markets Corporation and the Federal Home Loan Bank of
Indianapolis shall not have decreased by

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more than 5% from the date of this Agreement, such that such line of credit is
less than $6.65 billion;
     (F) Any Required Approvals (as defined herein) required to consummate the
transactions contemplated by this Agreement shall have been made or been
obtained and shall be in full force and effect as of the Closing Date; provided,
however, that (1) no such Required Approval shall impose any restraint or
condition that would reasonably be expected to impair in any material respect
the benefits to Purchaser of the transactions contemplated by this Agreement and
(2) no such Required Approval shall contemplate the registration of
MatlinPatterson or any fund sponsored or advised by it, or any of its Affiliates
(other than Purchaser or those companies identified as possible Applicants in
Schedule F) as a savings and loan company or subsidiary thereof, or impose any
activities or other restrictions, require a modification of governance, fee
arrangements and carried interests with respect to, or impose any capital or
other requirements on MatlinPatterson or any person (other than Purchaser or
those companies identified as possible Applicants in Schedule F), including with
respect to any person any agreement or requirement to maintain or contribute to
capital of the Company or the Bank) (each, a “Burdensome Condition”) and,
provided, further that, notwithstanding any other provision of this Agreement,
the imposition of a Burdensome Condition in connection with any Required
Approval shall constitute a denial of such Required Approval and such Required
Approval shall be deemed not received for all purposes in this Agreement,
including Section 5.1(d);
     (G) The board of directors of the Company (the “Board of Directors”) shall
have adopted a board resolution nominating the Board Representatives and
appointing the Board Representatives effective as of Closing, as contemplated in
Section 4.1;
     (H) The Company shall have received proceeds of the sale of the Management
Purchased Shares of not less than $4 million on or prior to the Closing Date;
and
     (I) At the Closing, taking into account payment for the Purchased Shares,
Management Purchased Shares and the TARP Securities, the Bank’s Tier I leverage
ratio shall be no lower than a minimum of 7% and the Bank’s total risk-based
capital ratio shall be a minimum of 12%.
     (3) The obligation of the Company to effect the Closing is subject to the
fulfillment or written waiver by the Company prior to the Closing of the
following additional conditions:

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     (A) Purchaser shall have performed in all material respects all obligations
required to be performed by it at or prior to the Closing;
     (B) All representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent any such representations and warranties expressly
relate to a specified date, in which case such representation and warranty need
only be true and correct as of such specified earlier date); and
     (C) the Company shall have received a certificate signed on behalf of
Purchaser by a senior executive officer certifying to the effect that the
conditions set forth in Sections 1.2(c)(3)(A) and (B) have been satisfied.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
     2.1 Disclosure. (a) On or prior to the date hereof, the Company delivered
to Purchaser and Purchaser delivered to the Company a schedule (a “Disclosure
Schedule”) setting forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to one or more
representations or warranties contained in Section 2.2 with respect to the
Company, or in Section 2.3 with respect to Purchaser, or to one or more
covenants contained in Article III.
     (b) As used in this Agreement, any reference to any fact, change,
circumstance or effect being “material” with respect to the Company means such
fact, change, circumstance or effect is material in relation to the business,
assets, properties, prospects or results of operations or condition (financial
or otherwise) of the Company and the Subsidiaries taken as a whole. As used in
this Agreement, the term “Material Adverse Effect” means any circumstance,
event, change, development or effect (including changes in applicable laws,
rules and regulations or interpretations thereof by Governmental Entities,
changes in U.S. generally accepted accounting principals (“GAAP”) or changes in
general economic, monetary or financial conditions) that, individually or in the
aggregate, (1) is material and adverse to the business, assets, properties,
prospects, results of operations or condition (financial or otherwise) of the
Company and Subsidiaries taken as a whole, or (2) would materially impair the
ability of the Company to perform its obligations under this Agreement or to
consummate the Closing.
     (c) “Previously Disclosed” with regard to (1) a party means information set
forth on its Disclosure Schedule, provided, however, that disclosure in any
section of such Disclosure Schedule shall apply only to the indicated section of
this Agreement except to the extent that it is reasonably apparent from the face
of such disclosure that

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such disclosure is relevant to another section of this Agreement, and (2) the
Company means information publicly disclosed by the Company in (A) its Annual
Report on Form 10-K for the fiscal year ended December 31, 2007, as filed by it
with the Securities and Exchange Commission (“SEC”) on March 13, 2008 (the
“Company 10-K”), (B) its Definitive Proxy Statement on Schedule 14A, as filed by
it with the SEC on April 29, 2008, (C) its Quarterly Reports filed on Form 10-Q
for the periods ended March 31, 2008, June 30, 2008 and September 30, 2008 or
(D) any Current Report on Form 8-K filed or furnished by it with the SEC since
January 1, 2008 and publicly available prior to the date of this Agreement
(excluding any risk factor disclosures contained in such documents under the
heading “Risk Factors” and any disclosure of risks included in any
“forward-looking statements” disclaimer or other statements that are similarly
non-specific and are predictive or forward-looking in nature).
     2.2 Representations and Warranties of the Company. The Company represents
and warrants to Purchaser, as of the date of this Agreement and as of the
Closing Date (except to the extent made only as of a specified date in which
case as of such date), that:
     (a) Organization and Authority. (1) The Company is, and at the Closing Date
will be, a corporation duly organized, validly existing and in good standing
under the laws of the State of Michigan. The Company is a savings and loan
holding company under the Home Owners’ Loan Act of 1933, as amended (“HOLA”).
The Company has, and at the Closing Date will have, the power and authority
(corporate, governmental, regulatory and otherwise) and has or will have all
necessary approvals, orders, licenses, certificates, permits and other
governmental authorizations (collectively, the “Authorizations”) to own or lease
all of the assets owned or leased by it and to conduct its business in the
manner Previously Disclosed, and has the corporate power and authority to own
its properties and assets and to carry on its business as it is now being
conducted. The Company is, and at the Closing Date will be, duly licensed or
qualified to do business and in good standing as a foreign corporation in all
jurisdictions (i) in which the nature of the activities conducted by the Company
requires such qualification and (ii) in which the Company owns or leases real
property other than such failures that would not have any material impact on the
Company. The Amended and Restated Articles of Incorporation of the Company
comply in all material respects with applicable law. A complete and correct copy
of the Amended and Restated Articles of Incorporation and bylaws of the Company,
as amended and as currently in effect, has been delivered or made available to
Purchaser. The Company’s subsidiaries (each a “Subsidiary” and collectively the
“Subsidiaries”) are listed on Schedule B to this Agreement.
     (2) The Bank is a Subsidiary of the Company and is a federally chartered
stock savings bank duly organized, validly existing and in good standing under
HOLA. The deposit accounts of the Bank are insured up to applicable limits by
the Deposit Insurance Fund (“DIF”), which is administered by the Federal Deposit
Insurance Corporation (the “FDIC”), and no proceedings for the termination or
revocation of such insurance are pending or, to the knowledge of the Company,
threatened. The Bank has the power and authority (corporate, governmental,
regulatory and otherwise) and has or will have all necessary Authorizations to
own or lease all of the assets owned or leased by it

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and to conduct its business in the manner Previously Disclosed. The Bank is duly
licensed or qualified to do business and in good standing in all jurisdictions
(i) in which the nature of the activities conducted by the Bank requires such
qualification and (ii) in which the Bank owns or leases real property other than
such failures that would not have any material impact on the Company. The
Federal Stock Savings Bank Charter (“Bank Charter”) of the Bank complies in all
material respects with applicable law. A complete and correct copy of the Bank
Charter, as amended and as currently in effect, has been delivered or made
available to Purchaser.
     (3) Each of the Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Each such Subsidiary has the power and authority
(corporate, governmental, regulatory and otherwise) and has or will have all
necessary Authorizations to own or lease all of the assets owned or leased by it
and to conduct its business as Previously Disclosed. Each such Subsidiary is
duly licensed or qualified to do business and in good standing as a foreign
corporation in all jurisdictions (i) in which the nature of the activities
conducted by such Subsidiary requires such qualification and (ii) in which such
Subsidiary owns or leases real property other than such failures that would not
have any material impact on the Company. The articles or certificate of
incorporation or certificate of trust of each Subsidiary comply in all material
respects with applicable law. A complete and correct copy of the articles or
certificate of incorporation or certificate of trust of each Subsidiary, as
amended and as currently in effect, has been delivered or made available to
Purchaser.
     (b) Capitalization. The authorized capital stock of the Company consists of
150,000,000 shares of Common Stock and 25,000,000 shares of preferred stock,
$0.01 par value per share, of the Company (the “Company Preferred Stock”). As of
the close of business on December 15, 2008 (the “Capitalization Date”), there
were 83,626,726 shares of Common Stock outstanding and zero shares of Company
Preferred Stock outstanding. Since the Capitalization Date and through the date
of this Agreement, except in connection with (A) this Agreement and the
transactions contemplated hereby, (B) the TARP Securities, (C) the Management
Equity, (D) the Investor Warrants, (E) the Management Purchased Shares and
(F) as set forth in Company Disclosure Schedule 2.2(b), the Company has not
(i) issued or authorized the issuance of any shares of Common Stock or Company
Preferred Stock, or any securities convertible into or exchangeable or
exercisable for shares of Common Stock or Company Preferred Stock, (ii) reserved
for issuance any shares of Common Stock or Company Preferred Stock or
(iii) repurchased or redeemed, or authorized the repurchase or redemption of,
any shares of Common Stock or Company Preferred Stock. As of the close of
business on the Capitalization Date, other than in respect of the Convertible
Preferred Stock, the TARP Securities, the Management Equity, the Investor
Warrants, the Management Purchased Shares, the Flagstar Bancorp, Inc. 1997
Employees and Directors Stock Option Plan, as amended, the Flagstar Bancorp,
Inc. 2000 Stock Incentive Plan, as amended, and the 2006 Equity Incentive Plan
in respect of which an aggregate of 521,537 shares of Common Stock have been
reserved for issuance, no shares of Common Stock or

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Company Preferred Stock were reserved for issuance. All of the issued and
outstanding shares of Common Stock and Company Preferred Stock have been duly
authorized and validly issued and are fully paid and nonassessable, and have
been issued in compliance with all federal and state securities laws, and were
not issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities. No bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which the stockholders
of the Company may vote (“Voting Debt”) are issued and outstanding. As of the
date of this Agreement, except (i) pursuant to any cashless exercise provisions
of any Company stock options or pursuant to the surrender of shares to the
Company or the withholding of shares by the Company to cover tax withholding
obligations under the Benefit Plans, and (ii) as set forth elsewhere in this
Section 2.2(b), the Company does not have and is not bound by any outstanding
subscriptions, options, calls, commitments or agreements of any character
calling for the purchase or issuance of, or securities or rights convertible
into or exchangeable for, any shares of Common Stock or Company Preferred Stock
or any other equity securities of the Company or Voting Debt or any securities
representing the right to purchase or otherwise receive any shares of capital
stock of the Company (including any rights plan or agreement).
     (c) Subsidiaries. With respect to each of the Subsidiaries, (i) all the
issued and outstanding shares of such Subsidiary’s capital stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and (ii) there are no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of such Subsidiary’s capital stock, any
other equity security or any Voting Debt, or any such options, rights,
convertible securities or obligations.
     (d) Authorization. (1) The Company has the full legal right, corporate
power and authority to enter into this Agreement and the Preferred Stock
Certificate of Designations and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors. This Agreement has been duly and validly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by Purchaser, is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms (except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors’ rights or by general equity principles). No other corporate
proceedings are necessary for the execution and delivery by the Company of this
Agreement, the performance by it of its obligations hereunder or the
consummation by it of the transactions contemplated hereby, subject, in the case
of the authorization of the Converted Common Shares, to receipt of the approval
by the Company’s stockholders of the Stockholder Proposals. Assuming the receipt
of the NYSE Approval, no vote of stockholders will be needed for the issuance of
the Convertible Preferred Stock or the ability of Purchaser to exercise the
voting rights contained therein, except for the

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approval described in Section 3.1(b)(A) to issue the Converted Common Shares.
The only vote of the stockholders of the Company required in connection with
(i) the conversion of the Convertible Preferred Stock into Common Stock and the
amendments to the Company’s equity compensation plan to effect the Management
Equity issuance for purposes of Section 312.03 of the NYSE Listed Company Manual
is a majority of the votes cast on such proposal, provided that the total vote
cast on the proposal represents over 50% in interest of all securities entitled
to vote on the proposal (after taking into account any securities not entitled
to vote pursuant to the rules of the NYSE), (ii) the amendment of the
Certificate of Incorporation to increase the number of authorized shares of
Common Stock to at least such number as shall be sufficient to permit the full
issuance of the Securities and the amendment of the Certificate of Incorporation
and bylaws to implement the governance matters contemplated in Section 4.1
hereof, is the affirmative vote of the holders of not less than a majority of
the outstanding Common Stock. To the Company’s knowledge, all shares of Common
Stock outstanding on the record date for a meeting at which a vote is taken with
respect to the Stockholder Proposals shall be eligible to vote on such
proposals.
     (2) Neither the execution and delivery by the Company of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance by
the Company with any of the provisions hereof (including, without limitation,
the conversion provisions of the Convertible Preferred Stock), will (A) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or result in the
loss of any benefit or creation of any right on the part of any third party
under, or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of any liens, charges,
adverse rights or claims, pledges, covenants, title defects, security interests
and other encumbrances of any kind (“Liens”) upon any of the material properties
or assets of the Company or any Subsidiary under any of the terms, conditions or
provisions of (i) subject in the case of the authorization and issuance of the
Converted Common Shares to receipt of the approval by the Company’s stockholders
of the Stockholder Proposals, its Certificate of Incorporation or bylaws (or
similar governing documents) or the certificate of incorporation, charter,
bylaws or other governing instrument of any Subsidiary or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or any Subsidiary is a party or by
which it may be bound, or to which the Company or any Subsidiary or any of the
properties or assets of the Company or any Subsidiary may be subject, or
(B) subject to compliance with the statutes and regulations referred to in
Section 2.2(f), violate any law, statute, ordinance, rule, regulation, permit,
concession, grant, franchise or any judgment, ruling, order, writ, injunction or
decree applicable to the Company or any Subsidiary or any of their respective
properties or assets.
     (e) Accountants. Virchow, Krause & Company, LLP, who has expressed its
opinion with respect to the consolidated financial statements contained in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2007, are
registered

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independent public accountants, within the meaning of the Code of Professional
Conduct of the American Institute of Certified Public Accountants, as required
by the Securities Act and the rules and regulations promulgated thereunder and
by the rules of the Public Accounting Oversight Board.
     (f) Consents. Schedule 2.2(f) of the Company Disclosure Schedule lists all
governmental and any other material consents, approvals, authorizations,
applications, registrations and qualifications that are required to be obtained
in connection with or for the consummation of the transactions contemplated by
this Agreement (the “Required Approvals”), including the approval of the persons
listed on Schedule 2.2(f) of the Purchaser Disclosure Schedule (the “SLHC
Parties”) as savings and loan holding companies and an application to the Office
of Thrift Supervision (“OTS”) by the persons listed in Schedule F hereto (such
listed persons, including the SLHC Parties, the “Applicants”) and the written
determination by each of the FDIC and the OTS that neither MatlinPatterson nor
any fund sponsored or advised by it or their Affiliates (other than the
Applicants) will control the Company or the Bank or be an “institution
affiliated party” (as defined in 12 USC Section 1813(u)) with respect thereto in
connection with the structure outlined in Schedule 2.2(f) of the Purchaser
Disclosure Schedule. Other than the securities or blue sky laws of the various
states and the Required Approvals, no material notice to, registration,
declaration or filing with, exemption or review by, or authorization, order,
consent or approval of, any Governmental Entity, or expiration or termination of
any statutory waiting period, is necessary for the consummation by the Company
of the transactions contemplated by this Agreement; no person other than each of
the Applicants is required to obtain any Required Approval or other consent or
approval from any Governmental Entity in connection with the transactions
contemplated by this Agreement and no person other than each of the SLHC Parties
is required to be registered as a savings and loan holding company in order to
consummate the transactions contemplated by this Agreement.
     (g) Financial Statements. Each of the consolidated balance sheets of the
Company and the Subsidiaries and the related consolidated statements of income,
stockholders’ equity and cash flows, together with the notes thereto
(collectively, the “Company Financial Statements”), included in any Company
Report filed with the SEC prior to the date of this Agreement, and the unaudited
consolidated balance sheets of the Company and the Subsidiaries as of
November 30, 2008 and the related consolidated statements of income,
stockholders’ equity and cash flows for the period ending November 30, 2008,
together with the notes thereto and in the form Previously Disclosed to
Purchaser (the “Interim Financials”) (1) have been prepared from, and are in
accordance with, the books and records of the Company and the Subsidiaries in
all material respects, (2) other than the Interim Financials, complied as to
form, as of their respective date of filing with the SEC, in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (3) have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
and (4) present fairly in all material respects the consolidated financial
position of the Company and the Subsidiaries as of the dates set forth therein
and the consolidated results of operations, changes in stockholders’ equity and
cash flows

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of the Company and the Subsidiaries for the periods stated therein subject, in
the case of any unaudited financial statements, to period end adjustments.
     (h) Reports. (1) Since December 31, 2005, the Company and each Subsidiary
has timely filed all material reports, registrations, documents, filings,
statements and submissions, together with any amendments thereto, that it was
required to file with any Governmental Entity (the foregoing, collectively, the
“Company Reports”) and has paid all material fees and assessments due and
payable in connection therewith. As of their respective dates of filing, the
Company Reports complied in all material respects with all statutes and
applicable rules and regulations of the applicable Governmental Entities. To the
knowledge of the Company, as of the date of this Agreement, there are no
outstanding comments from the SEC or any other Governmental Entity with respect
to any Company Report. In the case of each such Company Report filed with or
furnished to the SEC, such Company Report did not, as of its date or if amended
prior to the date of this Agreement, as of the date of such amendment, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements made in it, in
light of the circumstances under which they were made, not misleading and
complied as to form in all material respects with the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). With respect to all other Company Reports, the Company Reports
were complete and accurate in all material respects as of their respective
dates, or the dates of their respective amendments. No executive officer of the
Company or any Subsidiary has failed in any respect to make the certifications
required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of
2002.
     (2) The records, systems, controls, data and information of the Company and
the Subsidiaries are recorded, stored, maintained and operated under means
(including any electronic, mechanical or photographic process, whether
computerized or not) that are under the exclusive ownership and direct control
of the Company or the Subsidiaries or their accountants (including all means of
access thereto and therefrom). The Company (i) keeps books, records and accounts
that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company and the Bank, and (ii) maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with management’s
general or specific authorization, (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (C) access to
assets is permitted only in accordance with management’s general or specific
authorization and (D) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company (A) has implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange
Act) to ensure that material information relating to the Company, including the
consolidated Subsidiaries, is made known to the chief executive officer and the
chief financial officer of the Company by others within those entities, and
(B) has

12

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disclosed, based on its most recent evaluation prior to the date hereof, to the
Company’s outside auditors and the audit committee of the Board of Directors
(x) any significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely
affect the Company’s ability to record, process, summarize and report financial
information and (y) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company’s internal
controls over financial reporting. Since December 31, 2007 and until the date of
this Agreement, (A) neither the Company nor any Subsidiary nor, to the knowledge
of the Company, any director, officer, employee, auditor, accountant or
representative of the Company or any Subsidiary has received or otherwise had or
obtained knowledge of any material complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any Subsidiary or their
respective internal accounting controls, including any material complaint,
allegation, assertion or claim that the Company or any Subsidiary has engaged in
questionable accounting or auditing practices, and (B) no attorney representing
the Company or any Subsidiary, whether or not employed by the Company or any
Subsidiary, has reported evidence of a material violation of securities laws,
breach of fiduciary duty or similar violation by the Company or any of its
officers, directors, employees or agents to the Board of Directors or any
committee thereof or to any director or officer of the Company. The Company is
otherwise in compliance in all material respects with all applicable provisions
of the Sarbanes-Oxley Act of 2002, as amended and the rules and regulations
promulgated thereunder.
     (i) Properties and Leases. The Company and the Subsidiaries have good and
marketable title to all real properties and all other properties and assets
owned by them (other than any assets the Company has repossessed), in each case
free from Liens that would affect the value thereof or interfere with the use
made or to be made thereof by them in any material respect. The Company and its
Subsidiaries own or lease all properties as are necessary to their operations as
now conducted. The Company and the Subsidiaries hold all leased real or personal
property under valid and enforceable leases with no exceptions that would
interfere with the use made or to be made thereof by them in any material
respect.
     (j) Taxes. Except as set forth in Schedule 2.2(j) of the Company Disclosure
Schedule, (1) each of the Company and the Subsidiaries has duly and timely filed
(including, pursuant to applicable extensions granted without penalty) all
material Tax Returns required to be filed by it and all such Tax Returns are
correct and complete in all material respects. Each of the Company and the
Subsidiaries have paid in full all Taxes due or made adequate provision in the
financial statements of the Company (in accordance with GAAP) for any such
Taxes, whether or not shown as due on such Tax Returns; (2) no material
deficiencies for any Taxes have been proposed, asserted or assessed in writing
against or with respect to any Taxes due by, or Tax Returns of, the Company or
any of the Subsidiaries which deficiencies have not since been resolved; and
(3) there are no Liens for Taxes upon the assets of either the Company or the
Subsidiaries

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except for statutory Liens for current Taxes not yet due. None of the Company or
any of the Subsidiaries has been a “distributing corporation” or a “controlled
corporation” in any distribution occurring during the last two years in which
the parties to such distribution treated the distribution as one to which
Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”) is
applicable. None of the Company or any Subsidiary has engaged in any transaction
that is the same as or substantially similar to a “reportable transaction” for
federal income tax purposes within the meaning of Treasury Regulations section
1.6011-4. Neither the Company nor any of the Subsidiaries has engaged in a
transaction of which it made disclosure to any taxing authority to avoid
penalties under Section 6662(d) or any comparable provision of state, foreign or
local law. Neither the Company nor any of the Subsidiaries has participated in
any “tax amnesty” or similar program offered by any taxing authority to avoid
the assessment of penalties or other additions to Tax. The Company and each of
the Subsidiaries have complied in all material respects with all requirements to
report information for Tax purposes to any individual or Taxing Authority, and
have collected and maintained all requisite certifications and documentation in
valid and complete form with respect to any such reporting obligation,
including, without limitation, valid Internal Revenue Service Forms W-8 and W-9.
No claim has been made by a Tax Authority in a jurisdiction where the Company or
any of the Subsidiaries, as the case may be, does not file Tax Returns that the
Company or any of such Subsidiaries, as the case may be, is or may be subject to
Tax by that jurisdiction. For purposes of this Agreement, “Taxes” shall mean all
taxes, charges, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including any income,
excise, property, sales, transfer, franchise, payroll, withholding, social
security, abandoned or unclaimed property or other taxes, together with any
interest or penalties attributable thereto, and any payments made or owing to
any other person measured by such taxes, charges, levies, penalties or other
assessment, whether pursuant to a tax indemnity agreement, tax sharing payment
or otherwise (other than pursuant to commercial agreements or Benefit Plans).
For purposes of this Agreement, “Tax Return” shall mean any return, report,
information return or other document (including any related or supporting
information) required to be filed with any taxing authority with respect to
Taxes, including, without limitation, all information returns relating to Taxes
of third parties, any claims for refunds of Taxes and any amendments or
supplements to any of the foregoing.
     (k) Absence of Certain Changes. Since December 31, 2007 until the date
hereof and except as Previously Disclosed, (1) the Company and the Subsidiaries
have conducted their respective businesses in all material respects in the
ordinary and usual course of business and consistent with prior practice,
(2) neither the Company nor the Bank has issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, except
borrowings in the ordinary course of business, (3) except for publicly disclosed
ordinary dividends on the Common Stock and outstanding Company Preferred Stock,
the Company has not made or declared any distribution in cash or in kind to its
stockholders or issued or repurchased any shares of its capital stock or other
equity interests, (4) the Company has not had and no fact, event, change,
condition, development or circumstance has occurred that would reasonably be
expected to have a Material Adverse Effect with respect to the Company, and
(5) no material default (or event which, with notice or lapse of time, or both,
would constitute a material default)

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exists on the part of either the Company or the Bank or, to their knowledge, on
the part of any other party, in the due performance and observance of any term,
covenant or condition of any agreement to which the Company or the Bank is a
party and which is, individually or in the aggregate, material to the condition
(financial or otherwise) of the Company and the Bank, taken as a whole. Such
agreements are in full force and effect, and no other party to any such
agreement has instituted or, to the knowledge of the Company or the Bank,
threatened any action or proceeding wherein the Company or the Bank is or would
be alleged to be in default thereunder, under circumstances where such action or
proceeding, if determined adversely to the Company or the Bank, would have or be
reasonably likely to have a Material Adverse Effect.
     (l) No Undisclosed Liabilities. Neither the Company nor any of the
Subsidiaries has any material liabilities or obligations of any nature and is
not an obligor under any guarantee, keepwell or other similar agreement
(absolute, accrued, contingent or otherwise) except for (i) liabilities or
obligations reflected in or reserved against in the Company’s consolidated
balance sheet as of December 31, 2007 and September 30, 2008 and
current liabilities that have arisen since the respective dates thereof in the
ordinary and usual course of business and consistent with past practice and
(ii) contractual liabilities under (other than liabilities arising from any
breach or violation of) agreements made in the ordinary and usual course of
business and consistent with past practice and that have either been Previously
Disclosed or would not have a material impact on the Company.
     (m) Commitments and Contracts. (i) The Company has Previously Disclosed or
provided (by hard copy, electronic data room or otherwise) to Purchaser or its
representatives true, correct and complete copies of, each of the following to
which the Company or any Subsidiary is a party or subject (whether written or
oral, express or implied) (each, a “Company Significant Agreement”):
     (1) any contract or agreement which is a “material contract” within the
meaning of Item 601(b)(10) of Regulation S-K to be performed in whole or in part
after the date of this Agreement;
     (2) any contract or agreement which limits the freedom of the Company or
any of the Subsidiaries to compete in any material line of business;
     (3) any material contract or agreement with a labor union or guild
(including any collective bargaining agreement);
     (4) any contract or agreement which grants any person a right of first
refusal, right of first offer or similar right with respect to any material
properties, assets or businesses of the Company or the Subsidiaries;
     (5) any indenture, deed of trust, loan agreement or other financing
agreement or instrument; and

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     (6) any contract relating to the acquisition or disposition of any material
business or material assets (whether by merger, sale of stock or assets or
otherwise), which acquisition or disposition is not yet complete or where such
contract contains continuing material obligations, including continuing material
indemnity obligations, of the Company or any of the Subsidiaries.
(ii) Each of the Company Significant Agreements has been duly and validly
authorized, executed and delivered by the Company or any Subsidiary and is
binding on the Company and the Subsidiaries, as applicable, and in full force
and effect; (iii) the Company and each of the Subsidiaries, as applicable, are
in all material respects in compliance with and have in all material respects
performed all obligations required to be performed by them to date under each
Company Significant Agreement; and (iv) as of the date hereof, to the Company’s
knowledge, neither the Company nor any of the Subsidiaries has received notice
of any material violation or default (or any condition which with the passage of
time or the giving of notice would cause such a violation of or a default) by
any party under any Company Significant Agreement.
     (n) Offering of Purchased Shares. Neither the Company nor any person acting
on its behalf has taken any action (including any offering of any securities of
the Company) under circumstances which would require the integration of such
offering with the offering of any of the Purchased Shares to be issued pursuant
to this Agreement under the Securities Act, and the rules and regulations of the
SEC promulgated thereunder, which might subject the offering, issuance or sale
of any of the Purchased Shares to Purchaser pursuant to this Agreement to the
registration requirements of the Securities Act.
     (o) Status of Purchased Shares. The Purchased Shares (upon filing of the
Preferred Stock Certificate of Designations with the Michigan Secretary) to be
issued pursuant to this Agreement have been duly authorized by all necessary
corporate action, subject to the approval of the Stockholder Proposals. When
issued, delivered and sold against receipt of the consideration therefore as
provided in this Agreement, the Purchased Shares will be validly issued, fully
paid and nonassessable, will not be issued in violation of or subject to
preemptive rights of any other stockholder of the Company and, provided that the
TARP Transaction is consummated, will not result in the violation or triggering
of any price-based antidilution adjustments under any agreement to which the
Company is a party. The voting rights of the Holders of the Purchased Shares
will be enforceable in accordance with the terms of this Agreement and with the
terms of the Certificate of Designations. No stockholder of the Company has any
right (which will not have been waived or will not have expired by reason of
lapse of time following notification of the Company’s intention to file the
Shelf Registration Statement (as defined herein)) to require the Company to
register the sale of any capital stock owned by such stockholder under the Shelf
Registration Statement.
     (p) Litigation and Other Proceedings. There is no pending or, to the
knowledge of the Company, threatened material claim, action, suit, investigation
or proceeding, against the Company or any Subsidiary or to which any of their
assets are subject, nor is the Company or any Subsidiary subject to any order,
judgment or decree.

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There is no material unresolved violation, criticism or exception by any
Governmental Entity with respect to any report or relating to any examinations
or inspections of the Company or any Subsidiaries.
     (q) Compliance with Laws. The Company and each Subsidiary have all material
permits, licenses, franchises, authorizations, orders and approvals of, and have
made all filings, applications and registrations with, Governmental Entities
that are required in order to permit them to own or lease their properties and
assets and to carry on their business as presently conducted and that are
material to the business of the Company or such Subsidiary. The Company and each
Subsidiary has complied in all material respects and is not in default or
violation in any respect of, and none of them is, to the knowledge of the
Company, under investigation with respect to or, to the knowledge of the
Company, has been threatened to be charged with or given notice of any material
violation of, any applicable material domestic (federal, state or local) or
foreign law, statute, ordinance, license, rule, regulation, policy or guideline,
order, demand, writ, injunction, decree or judgment of any Governmental Entity.
Except for statutory or regulatory restrictions of general application, no
Governmental Entity has placed any material restriction on the business or
properties of the Company or any Subsidiary. The Company and its Subsidiaries
have, and at the Closing Date will have complied in all material respects with
all laws, regulations, ordinances and orders relating to public health, safety
or the environment (including without limitation all laws, regulations,
ordinances and orders relating to releases, discharges, emissions or disposals
to air, water, land or groundwater, to the withdrawal or use of groundwater, to
the use, handling or disposal of polychlorinated biphenyls, asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of hazardous
substances, pollutants or contaminants, or to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances), the violation of which
would or might have a material impact on the Company on the consummation of the
transactions contemplated by this Agreement. In addition, and irrespective of
such compliance, neither the Company nor any of its Subsidiaries is subject to
any liability for environmental remediation or clean-up, including any liability
or class of liability of the lessee under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), or the
Resource Conservation and Recovery Act of 1976, as amended, which liability
would or might have a material impact on the consummation of the transactions
contemplated by this Agreement.
     (r) Labor. Employees of the Company and the Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees. No labor organization or
group of employees of the Company or any Subsidiary has made a pending demand
for recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority. There are no
organizing activities, strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances, or other material labor disputes pending or
to the Company’s knowledge threatened against or involving the Company or any
Subsidiary. The Company and each Subsidiary believe that their relations with
their employees are

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good. No executive officer of the Company (as defined in Rule 501(f) promulgated
under the Securities Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer’s employment with the
Company. No executive officer of the Company is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other agreement or any restrictive covenant, and the continued employment of
each such executive officer does not subject the Company or any Subsidiary to
any liability with respect to any of the foregoing matters.
     (s) Company Benefit Plans.
     (1) (A) With respect to each Benefit Plan, the Company and the Subsidiaries
have complied, and are now in compliance, in all material respects, with all
provisions of Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), the Code and all laws and regulations applicable to such Benefit
Plan; and (B) each Benefit Plan has been administered in all material respects
in accordance with its terms. “Benefit Plan” means any employee welfare benefit
plan within the meaning of Section 3(1) of ERISA, any employee pension benefit
plan within the meaning of Section 3(2) of ERISA, and any bonus, incentive,
deferred compensation, vacation, stock purchase, stock option, severance,
employment, change of control or fringe benefit plan, program, agreement or
policy sponsored or maintained by the Company and the Subsidiaries.
     (2) Except for liabilities fully reserved for or identified in the
Financial Statements, no claim has been made, or to the knowledge of the Company
threatened, against the Company or any of the Subsidiaries related to the
employment and compensation of employees or any Benefit Plan, including, without
limitation, any claim related to the purchase of employer securities or to
expenses paid under any defined contribution pension plan.
     (3) No Benefit Plans are subject to Title IV or described in Section 3(37)
of ERISA, and neither the Company nor its Subsidiaries has at any time within
the past six (6) years sponsored or contributed to, or has or had within the
past six (6) years any liability or obligation in respect of, any plan subject
to Title IV or described in Section 3(37) of ERISA. The Company has not incurred
any current or projected liability in respect of post-retirement health, medical
or life insurance benefits for Company Employees, except as required to avoid an
excise tax under Section 4980B of the Code or comparable State benefit
continuation laws.
     (4) (A) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, “excess parachute
payment” (within the meaning of Section 280G of the Code), forgiveness of
indebtedness or otherwise) becoming due to any current or former employee,

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officer or director of the Company or any Subsidiary from the Company or any
Subsidiary under any Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any Benefit Plan, (iii) result in any acceleration of
the time of payment or vesting of any such benefits, (iv) require the funding or
increase in the funding of any such benefits or (v) result in any limitation on
the right of the Company or any Subsidiary to amend, merge, terminate or receive
a reversion of assets from any Benefit Plan or related trust and (B) neither the
Company nor any Subsidiary has taken, or permitted to be taken, any action that
required, and no circumstances exist that will require the funding, or increase
in the funding, of any benefits, or will result, in any limitation on the right
of the Company or any Subsidiary to amend, merge, terminate any Benefit Plan or
receive a reversion of assets from any Benefit Plan or related trust.
     (5) The Company and the Subsidiaries will be in compliance as of the
Closing Date, with Sections 111 and 302 of the Emergency Economic Stabilization
Act of 2008, including all guidance issued thereunder by a Governmental Entity.
     (t) Risk Management Instruments. All material derivative instruments,
including, swaps, caps, floors and option agreements, whether entered into for
the Company’s own account, or for the account of one or more of the
Subsidiaries, were entered into (1) only in the ordinary and usual course of
business and consistent with past practice, (2) in accordance with prudent
practices and in all material respects with all applicable laws, rules,
regulations and regulatory policies and (3) with counterparties believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of the Company or one of the Subsidiaries,
enforceable in accordance with its terms. Neither the Company or the
Subsidiaries, nor, to the knowledge of the Company, any other party thereto, is
in breach of any of its material obligations under any such agreement or
arrangement.
     (u) Agreements with Regulatory Agencies. Except as set forth in Schedule
2.2(u) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is subject to any cease-and-desist or other similar order or
enforcement action issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any capital directive by, or
has adopted any board resolutions at the request of, any Governmental Entity
that currently restricts in any material respect the conduct of its business or
that in any material manner relates to its capital adequacy, its liquidity and
funding policies and practices, its ability to pay dividends, its credit, risk
management or compliance policies, its internal controls, its management or its
operations or business (each item in this sentence, a “Regulatory Agreement”),
nor has the Company or any Subsidiary been advised since December 31, 2006 and
until the date hereof by any Governmental Entity that it is considering issuing,
initiating, ordering, or requesting any such Regulatory Agreement. Neither the
Company nor any Subsidiary is a party or subject to any Regulatory Agreement.

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     (v) Environmental Liability. There is no legal, administrative, arbitral or
other proceeding, claim, action or notice of any nature seeking to impose, or
that could result in the imposition of, on the Company or any Subsidiary, any
liability or obligation of the Company or any Subsidiary with respect to any
environmental health or safety matter or any private or governmental,
environmental health or safety investigation or remediation activity of any
nature arising under common law or under any local, state or federal
environmental, health or safety statute, regulation or ordinance, including
CERCLA, pending or, to the Company’s knowledge, threatened against the Company
or any Subsidiary or any property in which the Company or any Subsidiary has
taken a security interest the result of which has had or would reasonably be
expected to have a material impact on the Company; to the Company’s knowledge,
there is no reasonable basis for, or circumstances that could reasonably be
expected to give rise to, any such proceeding, claim, action, investigation or
remediation; and to the Company’s knowledge, neither the Company nor any
Subsidiary is subject to any agreement, order, judgment, decree, letter or
memorandum by or with any Governmental Entity or third party that could impose
any such environmental obligation or liability.
     (w) Mortgage Banking Business.
     (1) Other than as set forth in Schedule 2.2(w)(i) of the Company Disclosure
Schedule, the Company and each Subsidiary has in all material respects complied
with, and all documentation in connection with the origination, processing,
underwriting and credit approval of any mortgage loan originated, purchased or
serviced by the Company or any Subsidiary satisfied in all material respects,
(A) all applicable federal, state and local laws, rules and regulations with
respect to the origination, insuring, purchase, sale, pooling, servicing,
subservicing, or filing of claims in connection with mortgage loans, including
all laws relating to real estate settlement procedures, consumer credit
protection, truth in lending laws, usury limitations, fair housing, transfers of
servicing, collection practices, equal credit opportunity and adjustable rate
mortgages, (B) the responsibilities and obligations relating to mortgage loans
set forth in any agreement between the Company or any Subsidiary and any Agency,
Loan Investor or Insurer, (C) the applicable rules, regulations, guidelines,
handbooks and other requirements of any Agency, Loan Investor or Insurer and
(D) the terms and provisions of any mortgage or other collateral documents and
other loan documents with respect to each mortgage loan; and
     (2) Other than as set forth in Schedule 2.2(w)(2) of the Company Disclosure
Schedule, no Agency, Loan Investor or Insurer has (A) claimed in writing that
the Company or any Subsidiary has violated or has not complied in all material
respects with the applicable underwriting standards with respect to mortgage
loans sold by the Company or any Subsidiary to a Loan Investor or Agency, or
with respect to any sale of mortgage servicing rights to a Loan Investor,
(B) imposed in writing restrictions on the activities (including commitment
authority) of the Company or any Subsidiary or (C) indicated in writing to the
Company or any Subsidiary that it has terminated or intends to terminate its
relationship with the Company or any Subsidiary for poor

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performance, poor loan quality or concern with respect to the Company’s or any
Subsidiary’s compliance with laws.
For purposes of this Section 2.2(w):
     (A) “Agency” shall mean the Federal Housing Administration, the Federal
Home Loan Mortgage Corporation, the Federal National Mortgage Association, the
Government National Mortgage Association, or any other federal or state agency
with authority to (i) authority to determine any investment, origination,
lending or servicing requirements with regard to mortgage loans originated,
purchased or serviced by the Company or any Subsidiary or (ii) originate,
purchase, or service mortgage loans, or otherwise promote mortgage lending,
including, without limitation, state and local housing finance authorities;
     (B) “Loan Investor” shall mean any person (including an Agency) having a
beneficial interest in any mortgage loan originated, purchased or serviced by
the Company or any Subsidiary or a security backed by or representing an
interest in any such mortgage loan; and
     (C) “Insurer” means a person who insures or guarantees for the benefit of
the mortgagee all or any portion of the risk of loss upon borrower default on
any of the mortgage loans originated, purchased or serviced by the Company or
any Subsidiary, including, the Federal Housing Administration, the United States
Department of Veterans’ Affairs, the Rural Housing Service of the U.S.
Department of Agriculture and any private mortgage insurer, and providers of
hazard, title or other insurance with respect to such mortgage loans or the
related collateral.
     (x) Insurance. The Company maintains insurance underwritten by insurers of
recognized financial responsibility, of the types and in the amounts that the
Company reasonably believes is adequate for its business, including, but not
limited to, insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, with such deductibles as are customary for
companies in the same or similar business, all of which insurance is in full
force and effect.
     (y) Reinsurance. There are no provisions in any first lien residential
mortgage insurance policy or any other insurance policy, certificate of
insurance or other contingent obligation, or any derivative or hedging
instrument, or any commitment to issue any of the foregoing, under which
Flagstar Bank, FSB or any of its affiliates is a beneficiary or owed
obligations, that require as a condition to payment or other performance of the
obligor hereunder that (i) Flagstar Reinsurance Company not be insolvent or
subject to any rehabilitation, liquidation, conservatorship or similar
proceeding, (ii) Flagstar Reinsurance Company be in compliance with, or not in
default under, any or all of its obligations under any reinsurance or other
agreement, or (iii) any

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reinsurance or other agreement to which Flagstar Reinsurance Company is a party
to be in full force and effect.
     (z) Intellectual Property. The Company and its Subsidiaries own or possess
all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets, applications and other unpatented or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names (collectively, “Proprietary Rights”) used in or
necessary for the conduct of the business of the Company as now conducted and as
proposed to be conducted as Previously Disclosed, except where the failure to
own such Proprietary Rights would not have any material impact on the Company.
The Company and its Subsidiaries have the right to use all Proprietary Rights
used in or necessary for the conduct of their respective businesses without
infringing the rights of any person or violating the terms of any licensing or
other agreement to which the Company or any Subsidiary is a party and, to the
Company’s knowledge, no person is infringing upon any of the Proprietary Rights,
except where the infringement of or lack of a right to use such Proprietary
Rights would not have any material impact on the Company. Except as Previously
Disclosed, no charges, claims or litigation have been asserted or, to the
Company’s knowledge, threatened against the Company or any Subsidiary contesting
the right of the Company or any Subsidiary to use, or the validity of, any of
the Proprietary Rights or challenging or questioning the validity or
effectiveness of any license or agreement pertaining thereto or asserting the
misuse thereof, and, to the Company’s knowledge, no valid basis exists for the
assertion of any such charge, claim or litigation. All licenses and other
agreements to which the Company or any Subsidiary is a party relating to
Proprietary Rights are in full force and effect and constitute valid, binding
and enforceable obligations of the Company or such Subsidiary, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights
and to general equity principles, as the case may be, and there have not been
and there currently are not any defaults (or any event which, with notice or
lapse of time, or both, would constitute a default) by the Company or any
Subsidiary under any license or other agreement affecting Proprietary Rights
used in or necessary for the conduct of the business of the Company or any
Subsidiary, except for defaults, if any, which would not have any material
impact on the Company. The validity, continuation and effectiveness of all
licenses and other agreements relating to the Proprietary Rights and the current
terms thereof will not be affected by the transactions contemplated by this
Agreement.
     (aa) Anti-takeover Provisions Not Applicable. The Board of Directors has
taken all necessary action to ensure that the transactions contemplated by this
Agreement and any of the transactions contemplated hereby will be deemed to be
exceptions to the provisions of the Michigan Business Corporation Act, and that
any other similar “moratorium,” “control share,” “fair price,” “takeover” or
“interested stockholder” law does not and will not apply to this Agreement or to
any of the transactions contemplated hereby.
     (bb) Knowledge as to Conditions. As of the date of this Agreement, the
Company knows of no reason why any regulatory approvals and, to the extent
necessary, any other approvals, authorizations, filings, registrations, and
notices required or

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otherwise a condition to the consummation of the transactions contemplated by
this Agreement will not be obtained or that any Required Approval will not be
granted without imposition of a Burdensome Condition.
     (cc) Brokers and Finders. Except as set forth in Schedule 2.2(cc) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary nor any of
their respective officers, directors, employees or agents has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder’s fees, and no broker or finder has acted
directly or indirectly for the Company or any Subsidiary, in connection with
this Agreement or the transactions contemplated hereby.
     (dd) Price of Common Stock. The Company has not taken, and will not take,
directly or indirectly, any action designed to cause or result in, or that has
constituted or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities.
     (ee) Investment Company. The Company is not and, after giving effect to the
offering and sale of the Purchased Shares and the application of the proceeds
thereof, will not be an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, as such term is
defined in the Investment Company Act of 1940 (the “Investment Company Act”), as
amended, and the rules and regulations of the SEC promulgated thereunder.
     (ff) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income taxes) that are required to be paid in connection with the
sale and transfer of the Purchased Shares to be sold to the Purchaser hereunder
will have been, fully paid or provided for by the Company and all laws imposing
such taxes will have been fully complied with.
     (gg) Related Party Transactions. No transaction has occurred between or
among the Company, on the one hand, and its Affiliates, officers or directors on
the other hand, that is required to have been described under applicable
securities laws in its Exchange Act filings and is not so described in such
filings.
     (hh) Listing. Except as Previously Disclosed, (i) the Company is in
compliance with the requirements of the NYSE for continued listing of the Common
Stock thereon and (ii) the Company has taken no action designed to, or, to its
knowledge, likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or the listing of the Common Stock on the
NYSE, nor has the Company received any notification that the SEC or the NYSE is
contemplating terminating such registration or listing. The transactions
contemplated by this Agreement will not contravene the rules and regulations of
the NYSE. The Company will comply with all requirements of the NYSE with respect
to the issuance of the Converted Common Shares and shall cause the Common Stock
and Converted Common Shares to be listed on the NYSE.

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     (ii) Foreign Corrupt Practices. Neither the Company, nor any Subsidiary,
nor, to the knowledge of the Company, any director, officer, agent, employee or
other person acting on behalf of the Company or any Subsidiary has, in the
course of its actions for, or on behalf of, the Company (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
     (jj) U.S. Real Property Holding Corporation Status. The Company is not, nor
has ever been, a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended.
     (kk) Shell Company Status. The Company is not, nor has ever been, an issuer
of the type described in Rule 144(i)(l) under the Securities Act.
     (ll) Solvency. The Company and each of its Subsidiaries does and will after
giving effect to the to the transactions contemplated hereby to occur at the
Closing and the issuance and sale of the Securities (a) own assets the fair
saleable value of which are (i) greater than the total amount of its liabilities
(including known contingent liabilities) and (ii) greater than the amount that
will be required to pay the probable liabilities of its existing debts as they
become absolute and matured considering the financing alternatives reasonably
available to it and (b) not have capital that will be unreasonably small in
relation to its business as presently conducted or any contemplated. The Company
has no knowledge of any facts or circumstances which lead it to believe that it
or any of its Subsidiaries will be required to file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction, and
has no present intent to so file.
     2.3 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Company, as of the date of this Agreement and as
of the Closing Date (except to the extent made only as of a specified date, in
which case as of such date), that:
     (a) Organization and Authority. Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, and Purchaser has the corporate or
other power and authority and governmental authorizations to own its properties
and assets and to carry on its business as it is now being conducted.
     (b) Authorization. (1) Purchaser has the corporate or other power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby have been
duly authorized by

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Purchaser’s board of directors, general partner or managing members, as the case
may be, and no further approval or authorization by any of its partners or other
equity owners, as the case may be, is required. This Agreement has been duly and
validly executed and delivered by Purchaser and assuming due authorization,
execution and delivery by the Company, is a valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms (except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors’ rights or by general equity principles).
     (2) Neither the execution, delivery and performance by Purchaser of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
compliance by Purchaser with any of the provisions hereof, will (A) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of any Lien upon any of the properties or assets of
Purchaser under any of the terms, conditions or provisions of (i) its
certificate of limited partnership or partnership agreement or similar governing
documents or (ii) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Purchaser is a party
or by which it may be bound, or to which Purchaser or any of the properties or
assets of Purchaser may be subject, or (B) subject to compliance with the
statutes and regulations referred to in the next paragraph, violate any law,
statute, ordinance, rule or regulation, permit, concession, grant, franchise or
any judgment, ruling, order, writ, injunction or decree applicable to Purchaser
or any of its properties or assets except in the case of clauses (A)(ii) and
(B) for such violations, conflicts and breaches as would not reasonably be
expected to materially and adversely affect Purchaser’s ability to perform its
respective obligations under this Agreement or consummate the transactions
contemplated hereby on a timely basis.
     (3) Assuming the Company’s representation contained in Section 2.2(f) is
true and correct and other than the securities or blue sky laws of the various
states or as set forth in Schedule 2.3(c)(3) of the Purchaser Disclosure
Schedule, no material notice to, registration, declaration or filing with,
exemption or review by, or authorization, order, consent or approval of, any
Governmental Entity, or expiration or termination of any statutory waiting
period, is necessary for the consummation by the Purchaser of the transactions
contemplated by this Agreement.
     (c) Purchase for Investment. Purchaser acknowledges that the Securities
have not been registered under the Securities Act or under any state securities
laws. Purchaser (1) is acquiring the Securities pursuant to an exemption from
registration under the Securities Act solely for investment with no present
intention to distribute any of the Securities to any person, (2) will not sell
or otherwise dispose of any of the Securities, except in compliance with the
registration requirements or exemption provisions of the

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Securities Act and any other applicable securities laws, (3) has such knowledge
and experience in financial and business matters and in investments of this type
that it is capable of evaluating the merits and risks of its investment in the
Securities and of making an informed investment decision, and (4) is an
“accredited investor” (as that term is defined by Rule 501 of the Securities
Act).
     (d) Financial Capability. At Closing, Purchaser will have available funds
necessary to consummate the Closing on the terms and conditions contemplated by
this Agreement; Purchaser has available to it commitments for the full Purchase
Price to be funded by persons advised by MatlinPatterson. As of the date hereof,
neither MatlinPatterson Global Opportunities Partners III L.P. nor
MatlinPatterson Global Opportunities Partners Cayman III L.P. is the subject of
any pending withdrawals or redemption requests that it does not have the
financial ability to fulfill, nor do either MatlinPatterson Global Opportunities
Partners III L.P. or MatlinPatterson Global Opportunities Partners Cayman III
L.P. have any knowledge of any pending withdrawal or redemption requests that it
will not have the financial ability to fulfill.
     (e) Purchaser’s Operations. Purchaser has not conducted any business other
than that (x) incidental to its formation for the sole purpose of carrying out
the transactions contemplated by this Agreement and (y) in relation to this
Agreement the transactions contemplated hereby.
     (f) Brokers and Finders. Neither Purchaser nor its Affiliates, any of their
respective officers, directors, employees or agents has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder’s fees, and no broker or finder has acted directly
or indirectly for Purchaser, in connection with this Agreement or the
transactions contemplated hereby, in each case, whose fees the Company would be
required to pay (other than pursuant to the reimbursement of expenses provisions
of Section 6.2).
     (g) Knowledge as to Conditions. As of the date of this Agreement, the
Purchaser has not been advised by any Governmental Entity that any regulatory
approvals and, to the extent necessary, any other approvals, authorizations,
filings, registrations, and notices required or otherwise a condition to the
consummation of the transactions contemplated by this Agreement will not be
obtained or that any Required Approval will not be granted without the
imposition of a Burdensome Condition.
     (h) Ownership. As of the date of this Agreement, Purchaser is not the owner
of record or the beneficial owner of shares of Common Stock or securities
convertible into or exchangeable for Common Stock.
     (i) Investment Company Status. The Purchaser is not an “investment company”
nor controlled by an “investment company” as such term is defined in the
Investment Company Act and the rules and regulations of the SEC promulgated
thereunder.

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ARTICLE III
COVENANTS
     3.1 Filings; Other Actions.
     (a) Purchaser, on the one hand, and the Company, on the other hand, will
cooperate and consult with the other and use reasonable best efforts to prepare
and file all necessary documentation, to effect all necessary applications,
notices, petitions, filings and other documents, and to obtain all necessary
permits, consents, orders, approvals and authorizations of, or any exemption by,
all third parties and Governmental Entities, including, without limitation, the
Required Approvals, and the expiration or termination of any applicable waiting
period, necessary or advisable to consummate the transactions contemplated by
this Agreement, and to perform the covenants contemplated by this Agreement.
Each party shall execute and deliver both before and after the Closing such
further certificates, agreements and other documents and take such other actions
as the other party may reasonably request to consummate or implement such
transactions or to evidence such events or matters. In particular, Purchaser
will use its reasonable best efforts to promptly obtain or submit, and the
Company will cooperate as may reasonably be requested by Purchaser to help
Purchaser promptly obtain or submit, as the case may be, as promptly as
practicable, (i) the approvals and authorizations of, filings, applications and
registrations with, and notifications to, or expiration or termination of any
applicable waiting period, under the HOLA (it being understood and agreed that
such application shall reflect and seek approval for the “silo” structure
previously disclosed to the Company (and set forth in the Purchaser’s Disclosure
Schedule) and that no person other than Purchaser and the other Applicants
listed on Schedule F (nor any investors in any fund sponsored or advised by
MatlinPatterson, including investors in MatlinPatterson Global Opportunities
Partners III L.P. or MatlinPatterson Global Opportunities Partners Cayman III
L.P.) shall be required to file or become parties to any such filing or
registration, or in any way become subject to HOLA or restrictions or
requirements thereunder), and, as applicable, any such approvals and
authorizations, filings, applications and registrations shall include
information and documentation to implement the securities trading platform as
described at Schedule 3.1(a) of the Purchaser Disclosure Schedule and otherwise
shall be consistent with the silo structure referred to above and (ii) a written
determination, in form and substance reasonably satisfactory to the relevant
Applicant and notified to Purchaser, of each of the FDIC and the OTS that
neither MatlinPatterson nor any fund sponsored or advised by it or its
Affiliates (other than the Applicants) will control the Company or the Bank or
be an “institution affiliated party” (as defined in 12 USC Section 1813(u)) with
respect thereto. Purchaser and the Company will have the right to review in
advance, and to the extent practicable, each will consult with the other in each
case, subject to applicable laws relating to the exchange of information, all
the information relating to such other party, and any of their respective
Affiliates, which appears in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions to which it will be party contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable. Each party hereto agrees to keep the
other party apprised of the status of matters referred to in this

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Section 3.1(a). Purchaser shall promptly furnish the Company, and the Company
shall promptly furnish Purchaser, to the extent permitted by applicable law,
with copies of written communications received by it or its Subsidiaries from,
or delivered by any of the foregoing to, any Governmental Entity in respect of
the transactions contemplated by this Agreement.
     (b) Unless this Agreement has been terminated pursuant to Section 5.1, the
Company shall call a special meeting of its stockholders, as promptly as
practicable following the Closing but in any event no later than the next annual
stockholder meeting, to vote on proposals (collectively, the “Stockholder
Proposals”) to (A) amend the Certificate of Incorporation to increase the number
of authorized shares of Common Stock to at least such number as shall be
sufficient to permit issuance of all of the Securities and (B) amend the
Certificate of Incorporation and bylaws to opt out of Article 7B of the Michigan
Business Corporation Act and to implement the governance matters contemplated in
Section 4.1 hereof and (C) to amend the Company’s equity compensation plans as
necessary to implement an equity incentive program (the “Management Equity”) as
described at Schedule E hereto. The Board of Directors shall unanimously
recommend to the Company’s stockholders that such stockholders vote in favor of
the Stockholder Proposals (subject to any legally required abstentions) (such
recommendation, the “Company Recommendation”) and the Purchaser shall vote (to
the extent it is entitled to vote) in favor of the Stockholder Proposals,
provided that, Purchaser’s obligation to vote in favor of the Stockholder
Proposal described in clause (C) above shall be conditioned upon the prior
approval by the stockholders of the Stockholder Proposals described in clauses
(A) and (B) above. In connection with such meeting, the Company shall promptly
prepare (and Purchaser will reasonably cooperate with the Company to prepare)
and file with the SEC a preliminary proxy statement, shall use its reasonable
best efforts to respond to any comments of the SEC or its staff and to cause a
definitive proxy statement related to such stockholders’ meeting to be mailed to
the Company’s stockholders not more than five business days after clearance
thereof by the SEC, and shall use its reasonable best efforts to solicit proxies
for such stockholder approval. The Company shall notify Purchaser promptly of
the receipt of any comments from the SEC or its staff with respect to the proxy
statement and of any request by the SEC or its staff for amendments or
supplements to such proxy statement or for additional information and will
supply Purchaser with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to such proxy statement. If at any time prior to such
stockholders’ meeting there shall occur any event that is required to be set
forth in an amendment or supplement to the proxy statement, the Company shall as
promptly as practicable prepare and mail to its stockholders such an amendment
or supplement. Each of Purchaser and the Company agrees promptly to correct any
information provided by it or on its behalf for use in the proxy statement if
and to the extent that such information shall have become false or misleading in
any material respect, and the Company shall, as promptly as practicable, prepare
and mail to its stockholders an amendment or supplement to correct such
information to the extent required by applicable laws and regulations. The
Company shall consult with Purchaser prior to filing any proxy statement, or any
amendment or supplement thereto, and provide Purchaser with a reasonable
opportunity to comment thereon. In the event that the approval of any of the

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Stockholder Proposals is not obtained at such special stockholders meeting, the
Company shall include a proposal to approve (and the Board of Directors shall
unanimously recommend approval of and the Purchaser shall vote in favor of) each
such proposal at a meeting of its stockholders no less than once in each
subsequent six-month period beginning on March 1, 2009 until all such approvals
are obtained or made.
     (c) Purchaser, on the one hand, agrees to furnish the Company, and the
Company, on the other hand, agrees, upon request, to furnish to Purchaser, all
information concerning itself, its Affiliates, directors, officers, partners and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the proxy statement in connection with any such stockholders
meeting and any other statement, filing, notice or application made by or on
behalf of such other party or any of its Subsidiaries to any Governmental Entity
in connection with the Closing and the other transactions contemplated by this
Agreement.
     (d) Unless this Agreement has been terminated pursuant to Section 5.1,
Purchaser hereby agrees that at any meeting of the stockholders of the Company
held to vote on any Stockholder Proposals contemplated herein and not previously
approved by the Company’s stockholders, however called, Purchaser shall vote, or
cause to be voted, all of the Purchased Shares owned by Purchaser and its
Affiliates in favor of such Stockholder Proposals; provided, further that,
Purchaser’s obligation to vote in favor of the Stockholder Proposal described in
clause (C) of Section 3.1(b) above shall be conditioned upon the prior approval
by the stockholders of the Stockholder Proposals described in clauses (A) and
(B) of Section 3.1(b) above.
     3.2 Access, Information and Confidentiality.
     (a) From the date hereof until the date when the Securities purchased
pursuant to this Agreement and held by Purchaser represent less than 5% of the
outstanding Common Stock (counting as shares owned by Purchaser all Converted
Common Shares and assuming that to the extent Purchaser shall purchase any
additional shares of Common Stock, any later sales of Common Stock by Purchaser
shall be deemed to be shares other than Securities to the extent of such
additional purchases) (the “Qualifying Ownership Interest”), the Company will
permit Purchaser to visit and inspect, at Purchaser’s expense, the properties of
the Company and the Subsidiaries, to examine the corporate books and to discuss
the affairs, finances and accounts of the Company and the Subsidiaries with the
principal officers of the Company, all upon reasonable notice and at such
reasonable times and as often as Purchaser may reasonably request. Any
investigation pursuant to this Section 3.2 shall be conducted during normal
business hours and in such manner as not to interfere unreasonably with the
conduct of the business of the Company, and nothing herein shall require the
Company or any Subsidiary to disclose any information to the extent
(i) prohibited by applicable law or regulation, (ii) that the Company reasonably
believes such information to be competitively sensitive proprietary information
(except to the extent Purchaser provides assurances reasonably acceptable to the
Company that such information shall not be used by Purchaser or its Affiliates
to compete with the Company and Subsidiaries), or (iii) that such disclosure
would reasonably be expected to cause a violation of any agreement to

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which the Company or any Subsidiary is a party or would cause a risk of a loss
of privilege to the Company or any Subsidiary (provided that the Company shall
use commercially reasonable efforts to make appropriate substitute disclosure
arrangements under circumstances where the restrictions in this clause
(iii) apply). In the event, and to the extent, that, as a result of any change
in applicable law or regulation or a judicial or administrative interpretation
of applicable law or regulation, it is reasonably determined that the rights
afforded pursuant to this Section 3.2 are not sufficient for purposes of the
Department of Labor’s “plan assets” regulations, to the extent such plan assets
regulation applies to the investment in the Securities, Purchaser and the
Company shall cooperate in good faith to agree upon mutually satisfactory
management access and information rights which satisfy such regulations.
     (b) Each party to this Agreement will hold, and will cause its respective
Affiliates and their directors, officers, employees, agents, consultants and
advisors to hold, in strict confidence, unless disclosure to a regulatory
authority is necessary or appropriate in connection with any necessary
regulatory approval or unless disclosure is required by judicial or
administrative process or, in the written opinion of its counsel, by other
requirement of law or the applicable requirements of any regulatory agency or
relevant stock exchange, all non-public records, books, contracts, instruments,
computer data and other data and information (collectively, “Information”)
concerning the other party hereto furnished to it by such other party, its
representatives or any Board Observer pursuant to this Agreement (except to the
extent that such information can be shown to have been (1) previously known by
such party on a non-confidential basis, (2) in the public domain through no
fault of such party or (3) later lawfully acquired from other sources by the
party to which it was furnished), and neither party hereto shall release or
disclose such Information to any other person, except its auditors, attorneys,
financial advisors, other consultants and advisors and as permitted by
Section 4.1(f).
     3.3 Conduct of the Business.
     (a) The Company agrees that, prior to the earlier of the Closing Date and
the termination of this Agreement pursuant to Section 5.1 (the “Pre-Closing
Period”), except as Previously Disclosed in the comparable subsection of the
Disclosure Schedule with regard to the Company, without the prior written
consent of Purchaser, it will not, and will cause each of the Subsidiaries not
to:
     (1) Ordinary Course. Fail to use commercially reasonable efforts to carry
on its business in the ordinary and usual course of business and consistent with
past practice or fail to use reasonable best efforts to maintain and preserve
its and such Subsidiary’s business (including its organization, assets,
properties, goodwill and insurance coverage) and to preserve its business
relationships with customers, strategic partners, suppliers, distributors and
others having business dealings with it.
     (2) Operations. Enter into any new line of business or materially change
its lending, investment, underwriting, risk and asset liability management,

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and other banking and operating policies, except as required by applicable law
or policies imposed by any Governmental Entity.
     (3) Capital Expenditures. Make any capital expenditures in excess of
$500,000 individually or $2,500,000 in the aggregate, other than as required
pursuant to commitments already entered into.
     (4) Material Contracts. Terminate, enter into, amend, modify (including by
way of interpretation) or renew any material contract, other than in the
ordinary course of business and consistent with past practice, or terminate,
amend or modify (including by way of interpretation) any Investor Waiver.
     (5) Capital Stock. Issue, sell or otherwise permit to become outstanding,
or dispose of or encumber or pledge, or authorize or propose the creation of,
any additional shares of its stock or any additional options or other rights,
grants or awards with respect to the Common Stock, except the TARP Securities,
the Management Purchased Shares, the Investor Warrants and any shares of Common
Stock issued pursuant to the exercise of outstanding stock options or vesting of
restricted stock.
     (6) Dividends, Distributions, Repurchases. Make, declare, pay or set aside
for payment any dividend on or in respect of, or declare or make any
distribution on any shares of its stock (other than (A) dividends from its
wholly owned Subsidiaries to it or another of its wholly owned Subsidiaries or
(B) dividends on trust preferred securities issued by any Subsidiary) or
directly or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its stock or any options or other rights,
grants or awards with respect to the Common Stock.
     (7) Dispositions. Sell, transfer, mortgage, encumber or otherwise dispose
of or discontinue any of its assets, deposits, business or properties, except
for sales, transfers, mortgages, encumbrances or other dispositions or
discontinuances in the ordinary course of business consistent with past practice
and in a transaction that individually or taken together with all other such
transactions is not material to it and the Subsidiaries, taken as a whole.
     (8) Extensions of Credit and Interest Rate Instruments. Make, renew or
amend (except in the ordinary and usual course of business and consistent with
past practice where there has been no material change in the relationship with
the borrower or in an attempt to mitigate loss with respect to the borrower) any
extension of credit in excess of $2,000,000, or enter into, renew or amend any
interest rate swaps, caps, floors and option agreements and other interest rate
risk management arrangements, whether entered into for the account of it or for
the account of a customer of it or one of the Subsidiaries, except in the
ordinary and usual course of business and consistent with past practice.

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     (9) Acquisitions. Acquire (other than by way of foreclosures, acquisitions
of control in a fiduciary or similar capacity, acquisitions of loans or
participation interests, or in satisfaction of debts previously contracted in
good faith, in each case in the ordinary and usual course of business and
consistent with past practice) all or any portion of the assets, business,
deposits or properties of any other person.
     (10) Constituent Documents. Amend its Certificate of Incorporation or
bylaws or similar organizational documents of its Subsidiaries.
     (11) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP or
applicable accounting requirements of a Governmental Entity.
     (12) Tax Matters. Make, change or revoke any Tax election, file any amended
Tax Return (unless to correct an error), enter into any closing agreement,
settle any Tax claim or assessment, or surrender any right to claim a refund of
Taxes.
     (13) Claims. Settle any action, suit, claim or proceeding against it,
except for an action, suit, claim or proceeding that is settled in the ordinary
and usual course of business and consistent with past practice in an amount or
for consideration not in excess of $500,000 and that would not (A) impose any
material restriction on the business of it or the Subsidiaries and, after the
Closing, Purchaser or its Subsidiaries or (B) create precedent for claims that
are reasonably likely to be material to it or its subsidiaries and, after the
Closing, Purchaser or its subsidiaries.
     (14) Compensation. Terminate, enter into, amend, modify (including by way
of interpretation) or renew any employment, officer, consulting, severance,
change in control or similar contract, agreement or arrangement with any
director, officer, employee or consultant, or grant any salary or wage increase
or increase any employee benefit, including incentive or bonus payments (or,
with respect to any of the preceding, communicate any intention to take such
action), except (A) to make changes that are required by applicable law, or
(B) to satisfy Previously Disclosed contractual obligations existing as of the
date hereof, or (C) annual or merit-based salary or wage increases or increases
in benefits, in both cases to employees who are not executive officers or
directors of the Company, undertaken in the ordinary and usual course of
business and consistent with past practice and in any event not to exceed three
percent (3%) of such employees’ annual salaries in the aggregate, or
(D) pursuant to the TARP Transaction.
     (15) Benefit Arrangements. Terminate, enter into, establish, adopt, amend,
modify (including by way of interpretation), make new grants or awards under or
renew any pension, retirement, stock option, stock purchase, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or other

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employee benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, in respect of any
director, officer, employee or consultant, amend the terms of any outstanding
equity-based award, take any action to accelerate the vesting, exercisability or
payment (or fund or secure the payment) of stock options, restricted stock or
other compensation or benefits payable thereunder or add any new participants to
any non-qualified retirement plans (or, with respect to any of the preceding,
communicate any intention to take such action), except (A) as required by
applicable law and (B) to satisfy Previously Disclosed contractual obligations
existing as of the date hereof, or (C) pursuant to the TARP Transaction.
     (16) Intellectual Property. (i) grant, extend, amend (except as required in
the diligent prosecution of the Proprietary Rights owned (beneficially, and of
record where applicable) by or developed for the Company and its Subsidiaries),
waive, or modify any material rights in or to, sell, assign, lease, transfer,
license, let lapse, abandon, cancel, or otherwise dispose of, or extend or
exercise any option to sell, assign, lease, transfer, license, or otherwise
dispose of, any Proprietary Rights, or (ii) fail to exercise a right of renewal
or extension under any material agreement under which the Company or any of its
Subsidiaries is licensed or otherwise permitted by a third party to use any
Proprietary Rights (other than “shrink wrap” or “click through” licenses).
     (17) Communication. Make any written or oral communications to the officers
or employees of the Company or any of the Subsidiaries pertaining to
compensation or benefit matters that are affected by the transactions
contemplated by this Agreement without providing Purchaser with a copy or
written description of the intended communication and a reasonable period of
time to review and comment on such communication; provided, however, that the
foregoing shall not prevent human resources personnel of the Company from orally
answering questions of individual employees pertaining to compensation or
benefit matters with respect to such individual employee that are affected by
the transactions contemplated by this Agreement on an individual basis with such
employee.
     (18) Adverse Actions. Notwithstanding any other provision hereof, knowingly
take, or knowingly omit to take, any action that is reasonably likely to result
in any of the conditions set forth in Section 1.2(c) not being satisfied, or any
action that is reasonably likely to materially impair its ability to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby, except as required by applicable law or this Agreement.
     (19) Commitments. Enter into any contract with respect to, or otherwise
agree or commit to do, any of the foregoing.
Notwithstanding the foregoing, nothing in this Section 3.3(a) shall limit or
require any actions that the Board of Directors may, in good faith, determine to
be inconsistent with their duties or the Company’s obligations under applicable
law or imposed by any Governmental Entity.

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     (b) If applicable, in the event the Company takes any action that would
require any antidilution adjustment to be made under the Preferred Stock
Certificate of Designations as if issued on the date of this Agreement, the
Company shall make appropriate adjustments such that Purchaser will receive the
benefit of such transaction as if the Securities to be purchased by Purchaser at
the Closing had been outstanding as of the date of such action.
     (c) As soon as practicable after the date of this Agreement, the Company
shall develop an operating plan (the “Operating Plan”) and use its best efforts
to cause such plan, in form and substance reasonably satisfactory to Purchaser
(such approval not to be unreasonably withheld), to be approved by the Board of
Directors as soon as reasonably practicable thereafter; provided that, such
approval by the Board of Directors shall occur no later than the Closing. The
Board of Directors may make such changes or modifications to the Operating Plan
that, in the exercise of its fiduciary duties upon advice of counsel, it
determines are necessary or in the best interests of the Company, provided that,
no change or modification shall be made without providing Purchaser with a
reasonable opportunity for consultation prior to any such change or
modification.
     (d) The Company shall cooperate with the Purchaser and use its reasonable
best efforts to take, or cause to be taken, all appropriate action to implement
the securities trading platform contemplated in Schedule 3.1(a) of the Purchaser
Disclosure Schedule and from the date hereof and through the closing of any such
transactions contemplated thereby, shall comply with the terms and obligations
set forth in such Section 3.1(a) (provided that no such transaction shall be
required to be implemented prior to Closing).
     3.4 Acquisition Proposals.
     (a) No Solicitation or Negotiation. The Company agrees that, except for the
TARP Transaction or as expressly permitted by this Section 3.4, neither it nor
any of the Subsidiaries nor any of the officers and directors of it or the
Subsidiaries shall, and that it shall use its best efforts to instruct and cause
its and the Subsidiaries’ employees, investment bankers, attorneys, accountants
and other advisors or representatives (such directors, officers, employees,
investment bankers, attorneys, accountants and other advisors or
representatives, collectively, “Representatives”) not to, directly or
indirectly:
     (1) initiate, solicit or encourage any inquiries or the making of any
proposal or offer that constitutes, or could reasonably be expected to lead to,
any Acquisition Proposal;
     (2) engage in, continue or otherwise participate in any discussions or
negotiations regarding, or provide any non-public information or data to any
person relating to, any Acquisition Proposal; or
     (3) otherwise facilitate knowingly any effort or attempt to make an
Acquisition Proposal.

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Notwithstanding anything in the foregoing to the contrary, the Company may
(A) provide information in response to a request therefor by a person who has
made an unsolicited bona fide written Acquisition Proposal providing for the
acquisition of more than 50% of the assets (on a consolidated basis) or total
voting power of the equity securities of the Company if the Company receives
from the person so requesting such information an executed confidentiality
agreement on terms not less restrictive to the other party than those contained
in the confidentiality agreement entered into by the Company and Purchaser on
November 18, 2008 and promptly discloses (and, if applicable, provides copies
of) any such information to Purchaser to the extent not previously provided to
Purchaser; (B) engage or participate in any discussions or negotiations with any
person who has made such an unsolicited bona fide written Acquisition Proposal;
or (C) after having complied with Section 3.4(c), approve, recommend, or
otherwise declare advisable or propose to approve, recommend or declare
advisable (publicly or otherwise) such an Acquisition Proposal, if and only to
the extent that, (x) prior to taking any action described in clause (A), (B) or
(C) above, the Board of Directors determines in good faith after consultation
with outside legal counsel that such action is necessary in order for such
directors to comply with the directors’ fiduciary duties under applicable law,
(y) in each such case referred to in clause (A) or (B) above, the Board of
Directors has determined in good faith based on the information then available
and after consultation with its financial advisor that such Acquisition Proposal
either constitutes a Superior Proposal or is reasonably likely to result in a
Superior Proposal, and (z) in the case referred to in clause (C) above, the
Board of Directors determines in good faith (after consultation with its
financial advisor and outside legal counsel) that such Acquisition Proposal is a
Superior Proposal.
     (b) Definitions: For purposes of this Agreement:
     “Acquisition Proposal” means (i) any proposal or offer with respect to a
merger, joint venture, partnership, consolidation, dissolution, liquidation,
tender offer, recapitalization, reorganization, rights offering, share exchange,
business combination or similar transaction involving the Company or any of the
Subsidiaries and (ii) any acquisition by any person resulting in, or proposal or
offer, which, if consummated, would result in any person becoming the beneficial
owner, directly or indirectly, in one or a series of related transactions, of
15% or more of the total voting power of any class of equity securities of the
Company or those of any of the Subsidiaries, or 15% or more of the consolidated
total assets (including, without limitation, equity securities of its
Subsidiaries) of the Company, in each case other than the transactions
contemplated by this Agreement, including, but not limited to, the TARP
Transaction.
     “Superior Proposal” means an unsolicited bona fide Acquisition Proposal
that would result in any person becoming the beneficial owner, directly or
indirectly, more than 50% of the assets (on a consolidated basis) or more than
50% of the total voting power of the equity securities of the Company that the
Board of Directors has determined in its good faith judgment is reasonably
likely to be consummated in accordance with its terms, taking into account all
legal, financial and regulatory aspects of the proposal and the person making
the proposal, and, if consummated, would result in a transaction more favorable
to the Company’s stockholders from a financial point of view than the

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transaction contemplated by this Agreement (after taking into account any
revisions to the terms of the transaction contemplated by Section 3.4(c) of this
Agreement pursuant to Section 3.4(c) and the time likely to be required to
consummate such Acquisition Proposal).
     (c) No Change in Recommendation or Alternative Acquisition Agreement. The
Board of Directors and each committee of the Board of Directors shall not:
     (1) withhold, withdraw, qualify or modify (or publicly propose or resolve
to withhold, withdraw, qualify or modify) the Company Recommendation in a manner
adverse to Purchaser; or
     (2) except as expressly permitted by, and after compliance with,
Section 5.1(g) hereof, cause or permit the Company to enter into any letter of
intent, memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement or other agreement (other than a confidentiality
agreement referred to in Section 3.4(a) entered into in compliance with
Section 3.4(a)) (an “Alternative Acquisition Agreement”) relating to any
Acquisition Proposal.
     Notwithstanding anything to the contrary set forth in this Agreement, prior
to the earlier of the time, but not after, the Closing or the date the
Stockholder Proposals are approved, the Board of Directors may withhold,
withdraw, qualify or modify the Company Recommendation or approve, recommend or
otherwise declare advisable any Superior Proposal made after the date of this
Agreement that was not solicited, initiated, encouraged or knowingly facilitated
in breach of this Agreement, if the Board of Directors determines in good faith,
after consultation with outside counsel, that such action is necessary in order
for such directors to comply with the directors’ fiduciary duties under
applicable law (a “Change of Recommendation”); provided, however, that no Change
of Recommendation may be made until after at least three business days following
Purchaser’s receipt of notice from the Company advising that management of the
Company currently intends to recommend to the Board of Directors that it take
such action and the basis therefor, including all necessary information under
Section 3.4(f). In determining whether to make a Change of Recommendation in
response to a Superior Proposal or otherwise, the Board of Directors shall take
into account any changes to the terms of this Agreement proposed by Purchaser
and any other information provided by Purchaser in response to such notice. Any
material amendment to any Acquisition Proposal will be deemed to be a new
Acquisition Proposal for purposes of this Section 3.4(c), including with respect
to the notice period referred to in this Section 3.4(c).
     (d) Certain Permitted Disclosure. Nothing contained in this Section 3.4
shall be deemed to prohibit the Company from complying with its disclosure
obligations under U.S. federal or state law with regard to an Acquisition
Proposal; provided, however, that if such disclosure does not reaffirm the
Company Recommendation or has the substantive effect of withdrawing or adversely
modifying the Company Recommendation, such disclosure shall be deemed to be a
Change in Recommendation and Purchaser shall have the right to terminate this
Agreement as set forth in Section 5.1(h).

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     (e) Existing Discussions. The Company agrees that it will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any Acquisition Proposal.
The Company agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 3.4. The Company also agrees that it will
promptly request each person that has heretofore executed a confidentiality
agreement in connection with its consideration of acquiring it or any of the
Subsidiaries to return or destroy all confidential information heretofore
furnished to such person by or on behalf of it or any of the Subsidiaries.
     (f) Notice. The Company agrees that it will promptly (and, in any event,
within 24 hours) notify Purchaser if any inquiries, proposals or offers with
respect to an Acquisition Proposal are received by, any such information is
requested from, or any such discussions or negotiation are sought to be
initiated or continued with, it or any of its Representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers (including, if applicable, copies of any
written requests, proposals or offers, including proposed agreements) and
thereafter shall keep Purchaser informed, on a current basis, of the status and
terms of any such proposals or offers (including any amendments thereto) and the
status of any such discussions or negotiations, including any change in the
Company’s intentions as previously notified.
ARTICLE IV
ADDITIONAL AGREEMENTS
     4.1 Governance Matters. (a) At and following the Closing, the Company will
cause such number of persons nominated by Purchaser as will represent the
Purchaser’s pro rata share of the total number of members of the Board of
Directors (each a “Board Representative” and collectively, the “Board
Representatives”) to be elected and appointed to the Board of Directors, subject
to satisfaction of all legal and governance requirements regarding service as a
director of the Company and to the reasonable approval of the Company’s
Nominating and Board of Directors Governance Committee (“Governance Committee”)
(such approval not to be unreasonably withheld or delayed). For purposes of this
Section 4.1, “pro rata share” shall mean that fraction where the numerator is
all shares of Common Stock beneficially owned by Purchaser, assuming full
conversion of the Convertible Preferred Stock and assuming sufficient Common
Stock is authorized under the Certificate of Incorporation to allow such
conversion and the denominator is the total number of issued shares of Common
Stock (other than treasury shares) plus the number of shares of Common Stock
into which the Convertible Preferred Stock may be converted. After such
appointment, so long as Purchaser holds at least 10% of the voting power in the
Company (including for this purpose votes in respect of shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock acquired pursuant to
this Agreement) acquired by Purchaser in connection with the transactions
contemplated by this Agreement (as adjusted from time to time for any
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other like changes in the Company’s capitalization), the
Company will be

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required to recommend to its stockholders the election of the Board
Representatives at the Company’s annual meeting, subject to satisfaction of all
legal and governance requirements regarding service as a director of the Company
and to the reasonable approval of the Governance Committee (such approval not to
be unreasonably withheld or delayed), to the Board of Directors. Purchaser shall
also be entitled to appoint two observers to the Board of Directors (the “Board
Observers”), which Board Observers are reasonably acceptable to the Board of
Directors. The Board Observers shall be entitled to participate fully in all
meetings of the Board of Directors, but shall not have the authority to vote
thereat. If Purchaser no longer holds the minimum percentage of voting power
specified in the prior sentence, Purchaser will have no further rights under
Sections 4.1(a) through 4.1(c) and, at the written request of the Board of
Directors, shall use all reasonable best efforts to cause its Board
Representatives to resign from the Board of Directors and the Board Observers to
resign as promptly as possible thereafter. At the option of the Board
Representatives, the Board of Directors shall cause the Board Representatives to
be appointed to the Governance Committee of the Board of Directors (or any
successor committee thereto), so long as the Board Representatives qualify to
serve on such Governance Committee under the applicable rules of the NYSE or any
other nationally recognized securities exchange on which the Common Stock may be
listed and the Company’s corporate governance guidelines and the charter of such
Governance Committee.
     (b) The Board Representatives (including any successor nominee) duly
selected in accordance with Section 4.1(a) shall, subject to applicable law, be
the Company’s and the Governance Committee’s nominees to serve on the Board of
Directors. The Company shall use its reasonable best efforts to have the Board
Representatives elected as a director of the Company and the Company shall
solicit proxies for each such person to the same extent as it does for any of
its other nominees to the Board of Directors. If applicable law or the NYSE
rules and regulations prevent any Board Representative from serving on a
committee, the Purchaser shall be entitled to appoint a Board Observer to such
committee, so long as any such Board Observer meets any applicable independence
rules of the NYSE.
     (c) Subject to Section 4.1(a), Purchaser shall have the power to designate
each Board Representative’s replacement upon the death, resignation, retirement,
disqualification or removal from office of such director, subject to
satisfaction of all legal and governance requirements regarding service as a
director of the Company and to the reasonable approval of the Governance
Committee (such approval not to be unreasonably withheld or delayed). The Board
of Directors will promptly take all action reasonably required to fill the
vacancy resulting therefrom with such person (including such person, subject to
applicable law, being the Company’s and the Governance Committee’s nominee to
serve on the Board of Directors, using all reasonable best efforts to have such
person elected as director of the Company and the Company soliciting proxies for
such person to the same extent as it does for any of its other nominees to the
Board of Directors).
     (d) The Board Representatives shall be entitled to the same compensation
and same indemnification and insurance coverage in connection with his or her
role as a

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director as the other members of the Board of Directors, and each Board
Representative shall be entitled to reimbursement for documented, reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or any committees thereof, to the same extent as the other members of the Board
of Directors. The Company shall notify the Board Representatives of all regular
and special meetings of the Board of Directors and shall notify the Board
Representatives of all regular and special meetings of any committee of the
Board of Directors of which each Board Representative is a member. The Company
shall provide the Board Representatives with copies of all notices, minutes,
consents and other materials provided to all other members of the Board of
Directors concurrently as such materials are provided to the other members.
     (e)    Promptly following the execution of this Agreement, the Company will
take all steps necessary to amend (including recommending and submitting for
stockholder approval in accordance with Section 3.1(a)) its organizational
documents (including, without limitation, the Certificate of Incorporation, its
bylaws, its corporate governance guidelines and the charters
of relevant committees of the Board of Directors) in form and substance
reasonably satisfactory to Purchaser, to effectuate, to the extent required, the
purpose and intent of, and the matters contemplated by, this Section 4.1
(including, without limitation, removal of classified Board of Directors
provisions).
     (f) For so long as Purchaser holds the Securities purchased pursuant to
this Agreement, the Company shall provide or permit the Board Observer to
provide to Purchaser any Information provided to the Board of Directors,
including any materials presented at any ordinary or special meeting of the
Board of Directors or any committee thereof, and Purchaser agrees to hold, and
will cause its respective Affiliates and its and their directors, officers,
employees, agents, consultants and advisors and any prospective participant in a
sale or disposition of the Purchased Shares to hold, such Information in strict
confidence for three years from the receipt of such Information, unless
disclosure to a regulatory authority is necessary or appropriate in connection
with any necessary regulatory approval or unless disclosure is required by
judicial or administrative process or, in the written opinion of its counsel, by
other requirement of law or the applicable requirements of any regulatory agency
or relevant stock exchange and except to the extent that such Information can be
shown to have been (1) previously known by such party on a non-confidential
basis, (2) in the public domain through no fault of such party or (3) later
lawfully acquired from other sources by the party to which it was furnished). In
addition, Purchaser agrees not to release or disclose such Information to any
other person, except its auditors, attorneys, financial advisors, other
consultants and advisors and any prospective participant in a sale or
disposition of the Purchased Shares.
     4.2 Legend. (a) Purchaser agrees that all certificates or other instruments
representing the Securities subject to this Agreement will bear a legend
substantially to the following effect:
     (1) THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT

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WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT OR SUCH LAWS.
     (2) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER
AND OTHER RESTRICTIONS SET FORTH IN AN INVESTMENT AGREEMENT, DATED AS OF
DECEMBER 17, 2008, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER.
     (b) Upon request of Purchaser, upon receipt by the Company of an opinion of
counsel reasonably satisfactory to the Company to the effect that such legend is
no longer required under the Securities Act and applicable state laws, the
Company shall promptly cause clause (1) of the legend to be removed from any
certificate for any Securities to be Transferred in accordance with the terms of
this Agreement and clause (2) of the legend shall be removed upon the expiration
of such transfer and other restrictions set forth in this Agreement.
     4.3 Reservation for Issuance. The Company will reserve that number of
shares of Common Stock sufficient for issuance upon exercise or conversion of
the Securities without regard to any limitation on such conversion; provided
that in the case of the Convertible Preferred Stock, solely to the extent the
Company is unable to reserve such number of shares under its charter the Company
will reserve such sufficient number of shares of Common Stock following the
approval of the Stockholder Proposals pursuant to Section 3.1(b).
     4.4 Certain Transactions. The Company will not merge or consolidate into,
or sell, transfer or lease all or substantially all of its property or assets
to, any other party unless the issuer constituent corporation, successor,
transferee or lessee party, as the case may be (if not the Company), expressly
assumes the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company.
     4.5 Indemnity. (a) Following the Closing, the Company agrees to indemnify
and hold harmless Purchaser and its Affiliates and each of their respective
officers, directors, partners, members and employees, and each person who
controls Purchaser within the meaning of the Exchange Act and the rules and
regulations promulgated thereunder, to the fullest extent lawful, from and
against any and all actions, suits, claims, proceedings, costs, losses,
liabilities, damages, expenses (including reasonable attorneys’ fees and
disbursements), amounts paid in settlement and other costs (in each case
calculated to take into account Purchaser’s ownership interest in the Company as
of the relevant payment date – i.e., increased to take into account Purchaser’s
ownership interest in the capital of the Company as of such date) (collectively,
“Losses”) arising out of or resulting from (1) any inaccuracy in or breach of
the Company’s representations or warranties in this Agreement or (2) the
Company’s breach of agreements or covenants made by the Company in this
Agreement or (3) any action, suit, claim, proceeding or investigation by any
Governmental Entity, stockholder of the Company or any other person (other than
the Company) relating to this Agreement or the transactions contemplated hereby
(other than any Losses attributable to the acts, errors or omissions on the part
of Purchaser, but

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not including the transactions contemplated hereby); and the Company agrees to
indemnify and hold harmless the Purchaser from and against any Losses with
respect to Taxes of the Company for taxable periods or portions thereof ending
on or prior to the Closing Date.
     (b) Following the Closing, Purchaser agrees to indemnify and hold harmless
each of the Company and its Affiliates and each of their officers, directors,
partners, members and employees, and each person who controls the Company within
the meaning of the Exchange Act and the rules and regulations promulgated
thereunder, to the fullest extent lawful, from and against any and all Losses
arising out of or resulting from (1) any inaccuracy in or breach of Purchaser’s
representations or warranties in this Agreement or (2) Purchaser’s breach of
agreements or covenants made by Purchaser in this Agreement.
     (c) A party entitled to indemnification hereunder (each, an “Indemnified
Party”) shall give written notice to the party indemnifying it (the
“Indemnifying Party”) of any claim with respect to which it seeks
indemnification promptly after the discovery by such Indemnified Party of any
matters giving rise to a claim for indemnification; provided that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 4.5 unless and to the
extent that the Indemnifying Party shall have been actually prejudiced by the
failure of such Indemnified Party to so notify such party. Such notice shall
describe in reasonable detail such claim. In case any such action, suit, claim
or proceeding is brought against an Indemnified Party, the Indemnified Party
shall be entitled to hire, at its own expense, separate counsel and participate
in the defense thereof; provided, however, that the Indemnifying Party shall be
entitled to assume and conduct the defense thereof, unless the counsel to the
Indemnified Party advises such Indemnifying Party in writing that such claim
involves a conflict of interest (other than one of a monetary nature) that would
reasonably be expected to make it inappropriate for the same counsel to
represent both the Indemnifying Party and the Indemnified Party, in which case
the Indemnified Party shall be entitled to retain its own counsel at the cost
and expense of the Indemnifying Party (except that the Indemnifying Party shall
only be liable for the legal fees and expenses of one law firm for all
Indemnified Parties, taken together with respect to any single action or group
of related actions). If the Indemnifying Party assumes the defense of any claim,
all Indemnified Parties shall thereafter deliver to the Indemnifying Party
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the claim, and each Indemnified Party shall
cooperate in the defense or prosecution of such claim. Such cooperation shall
include the retention and (upon the Indemnifying Party’s request) the provision
to the Indemnifying Party of records and information that are reasonably
relevant to such claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. The Indemnifying Party shall not be liable for any settlement of any
action, suit, claim or proceeding effected without its written consent;
provided, however, that the Indemnifying Party shall not unreasonably withhold
or delay its consent. The Indemnifying Party further agrees that it will not,
without the Indemnified Party’s prior written consent (which shall not be
unreasonably withheld or delayed), settle or compromise any claim or consent to
entry of any judgment in respect thereof in any pending or threatened action,
suit, claim or proceeding in respect of which indemnification has been sought
hereunder unless such settlement or

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compromise includes an unconditional release of such Indemnified Party from all
liability arising out of such action, suit, claim or proceeding.
     (d) For purposes of the indemnity contained in Section 4.5(a)(1) and
Section 4.5(b)(1), all qualifications and limitations set forth in the parties’
representations and warranties (other than Section 2.2(j)(3)) as to
“materiality” and words of similar import, shall be disregarded in determining
whether there shall have been any inaccuracy in or breach of any representations
and warranties in this Agreement; provided that no inaccuracy in or breach of
the representations and warranties contained in Section 2.2(v) shall be deemed
to occur if such representations and warranties are true and correct in all
material respects.
     (e) The Company shall not be required to indemnify the Indemnified Parties
affiliated with (or whose claims are permitted by virtue of their relationship
with) Purchaser pursuant to Section 4.5(a)(1) unless and until the aggregate
amount of all Losses incurred with respect to all claims pursuant to
Section 4.5(a)(1) exceed $1,500,000 (the “Threshold Amount”), in which event the
Company shall indemnify the Indemnified Parties pursuant to Section 4.5(a)(1)
the full amount of such Losses (not merely the portion of such Losses exceeding
the Threshold Amount). Purchaser shall not be required to indemnify the
Indemnified Parties affiliated with (or whose claims are permitted by virtue of
their relationship with) the Company pursuant to Section 4.5(b)(1) unless and
until the aggregate amount of all Losses incurred with respect to all claims
pursuant to Section 4.5(b)(1) exceed the Threshold Amount, in which event
Purchaser shall indemnify the Company pursuant to Section 4.5(b)(1) the full
amount of such Losses (not merely the portion of such Losses exceeding the
Threshold Amount). The cumulative indemnification obligation of (1) the Company
to Purchaser and all of the Indemnified Parties affiliated with (or whose claims
are permitted by virtue of their relationship with) Purchaser or (2) Purchaser
to the Company and the Indemnified Parties affiliated with (or whose claims are
permitted by virtue of their relationship with) the Company, in each case for
inaccuracies in or breaches of representations and warranties, shall in no event
exceed the Purchase Price. Notwithstanding the foregoing, the indemnification by
the Company of the Purchaser for Losses with respect to Taxes shall not be
subject to the limitations of this Section 4.5(e).
     (f) Any claim for indemnification pursuant to this Section 4.5 for breach
of any representation or warranty can only be brought on or prior to the second
anniversary of the Closing Date; provided that if notice of a claim for
indemnification pursuant to this Section 4.5 for breach of any representation or
warranty is brought prior to the end of such period, then the obligation to
indemnify in respect of such breach shall survive as to such claim, until such
claim has been finally resolved. Any claim for indemnification pursuant to this
Section 4.5 for Losses with respect to Taxes can only be brought on or before
the thirtieth (30) day following the expiration of the applicable statute of
limitations.
     (g) The indemnity provided for in this Section 4.5 shall be the sole and
exclusive monetary remedy of Indemnified Parties after the Closing for any
inaccuracy of any representation or warranty or any other breach of any covenant
or agreement

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contained in this Agreement; provided that nothing herein shall limit in any way
any such party’s remedies in respect of fraud by any other party in connection
with the transactions contemplated hereby. No party to this Agreement (or any of
its Affiliates) shall, in any event, be liable or otherwise responsible to any
other party (or any of its Affiliates) for any consequential or punitive damages
of such other party (or any of its Affiliates) arising out of or relating to
this Agreement or the performance or breach hereof.
     (h) No investigation of the Company by Purchaser, or by the Company of
Purchaser, whether prior to or after the date hereof, shall limit any
Indemnified Party’s exercise of any right hereunder or be deemed to be a waiver
of any such right.
     (i) Any indemnification payments pursuant to this Section 4.5 shall be
treated as an adjustment to the Purchase Price for the Securities for U.S.
federal income and applicable state and local Tax purposes, unless a different
treatment is required by applicable law.
     4.6 Exchange Listing. The Company shall promptly use its reasonable best
efforts to cause the shares of Common Stock reserved for issuance upon the
conversion of the Convertible Preferred Stock to be approved for listing on the
NYSE or such other nationally recognized securities exchange on which the Common
Stock may be listed, subject to official notice of issuance and upon receipt of
the approval by the Company’s stockholders of the Stockholder Proposals, as
promptly as practicable, and in any event before the Closing if permitted by the
rules of the NYSE.
     4.7 Registration Rights.
          (a) Registration.
     (1) Subject to the terms and conditions of this Agreement, the Company
covenants and agrees that no later than the date that is six months after the
Closing Date, the Company shall have prepared and filed with the SEC a Shelf
Registration Statement covering all Registrable Securities (or otherwise
designate an existing Shelf Registration Statement filed with the SEC to cover
the Registrable Securities), and, to the extent the Shelf Registration Statement
has not theretofore been declared effective or is not automatically effective
upon such filing, the Company shall use reasonable best efforts to cause such
Shelf Registration Statement to be declared or become effective and to keep such
Shelf Registration Statement continuously effective and in compliance with the
Securities Act and usable for resale of such Registrable Securities for a period
from the date of its initial effectiveness until such time as there are no
Registrable Securities remaining (including by refiling such Shelf Registration
Statement (or a new Shelf Registration Statement) if the initial Shelf
Registration Statement expires). So long as the Company is a well-known seasoned
issuer (as defined in Rule 405 under the Securities Act) at the time of filing
of the Shelf Registration Statement with the SEC, such Shelf Registration
Statement shall be designated by the Company as an automatic Shelf Registration
Statement.

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     (2) Any registration pursuant to this Section 4.7(a) shall be effected by
means of a shelf registration under the Securities Act (a “Shelf Registration
Statement”) in accordance with the methods and distribution set forth in the
Shelf Registration Statement and Rule 415. If Purchaser or any other holder of
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in compliance with this Agreement intends to
distribute any Registrable Securities by means of an underwritten offering (a
“Registration Demand”) it shall promptly so advise the Company and the Company
shall take all reasonable steps to facilitate such distribution, including the
actions required pursuant to Section 4.7(c), provided that Purchaser and any
other Holder will be entitled to initiate no more than three such Registration
Demands, and the Company will not be obligated to facilitate an underwritten
offering of Registrable Securities unless the expected gross proceeds from such
offering exceed $50,000,000. The lead underwriters in any such distribution
shall be selected by the holders of a majority of the Registrable Securities to
be distributed.
     (3) The Company shall not be required to effect a registration (including a
resale of Registrable Securities from an effective Shelf Registration Statement)
pursuant to this Section 4.7(a): (i) with respect to securities that are not
Registrable Securities; (ii) during any Scheduled Black-out Period or (iii) if
the Company has notified Purchaser that in the good faith judgment of the Board
of Directors, it would be materially detrimental to the Company or its
securityholders for such registration to be effected at such time, in which
event the Company shall have the right to defer such registration for a period
of not more than 90 days after receipt of the request of Purchaser; provided
that such right to delay a registration shall be exercised by the Company
(A) only if the Company has generally exercised (or is concurrently exercising)
similar black-out rights against holders of similar securities that have
registration rights and (B) not more than twice in any 12-month period and not
more than 90 days in the aggregate in any 12-month period.
     (4) Whenever the Company proposes to register any of its securities, other
than a registration pursuant to Section 4.7(a)(1) or a Special Registration, and
the registration form to be filed may be used for the registration or
qualification for distribution of Registrable Securities, the Company will give
prompt written notice to Purchaser and all other Holders of its intention to
effect such a registration (but in no event less than ten days prior to the
anticipated filing date) and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within ten business days after the date of the Company’s
notice (a “Piggyback Registration”). Any such person that has made such a
written request may withdraw its Registrable Securities from such Piggyback
Registration by giving written notice to the Company and the managing
underwriter, if any, on or before the fifth business day prior to the planned
effective date of such Piggyback Registration. The Company may terminate or
withdraw any registration under this Section 4.7(a)(4) prior to the
effectiveness of such registration, whether or not

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Purchaser or any other Holders have elected to include Registrable Securities in
such registration.
     (5) If the registration referred to in Section 4.7(a)(4) is proposed to be
underwritten, the Company will so advise Purchaser and all other Holders as a
part of the written notice given pursuant to Section 4.7(a)(4). In such event,
the right of Purchaser and all other Holders to registration pursuant to this
Section 4.7(a) will be conditioned upon such persons’ participation in such
underwriting and the inclusion of such person’s Registrable Securities in the
underwriting, and each such person will (together with the Company and the other
persons distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. If any participating person
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the managing underwriter and
Purchaser.
     (6) If a Piggyback Registration relates to an underwritten primary offering
on behalf of the Company, and the managing underwriters advise the Company that
in their reasonable opinion the number of securities requested to be included in
such registration exceeds the number which can be sold without adversely
affecting the marketability of such offering (including an adverse effect on the
per share offering price), the Company will include in such registration or
prospectus only such number of securities that in the reasonable opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering (including an adverse effect on the per share offering price), which
securities will be so included in the following order of priority subject to any
conflicting terms of the TARP Documents: (i) first, the securities the Company
proposes to sell, (ii) second, Registrable Securities of Purchaser and all other
Holders who have requested registration of Registrable Securities pursuant to
Section 4.7(a)(4), pro rata on the basis of the aggregate number of such
securities or shares owned by each such person and (iii) third, any other
securities of the Company that have been requested to be so included, subject to
the terms of this Agreement.
     (b) Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance hereunder shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the aggregate offering or sale price of the
securities so registered.
     (c) Obligations of the Company. The Company shall use its reasonable best
efforts for so long as there are Registrable Securities outstanding, to take
such actions as are under its control to not become an ineligible issuer (as
defined in Rule 405 under the Securities Act). In addition, whenever required to
effect the registration of any Registrable Securities or facilitate the
distribution of Registrable Securities pursuant to an effective Registration
Statement, the Company shall, as expeditiously as reasonably practicable:

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     (1) Prepare and file with the SEC a prospectus supplement with respect to a
proposed offering of Registrable Securities pursuant to an effective
registration statement, subject to Section 4.7(c), keep such registration
statement effective or such prospectus supplement current.
     (2) Prepare and file with the SEC such amendments and supplements to the
applicable registration statement and the prospectus or prospectus supplement
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
     (3) Furnish to the Holders and any underwriters such number of copies of
the applicable registration statement and each such amendment and supplement
thereto (including in each case all exhibits) and of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned or to be distributed
by them.
     (4) Use its reasonable best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holders or
any managing underwriter(s), to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and to take
any other action which may be reasonably necessary to enable such seller to
consummate the disposition in such jurisdictions of the securities owned by such
Holder; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
     (5) Notify each Holder of Registrable Securities at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the applicable prospectus, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
     (6) Give written notice to the Holders:
     (A) when any registration statement filed pursuant to Section 4.7(a) or any
amendment thereto has been filed with the SEC and when such registration
statement or any post-effective amendment thereto has become effective;
     (B) of any request by the SEC for amendments or supplements to any
registration statement or the prospectus included therein or for additional
information;

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     (C) of the issuance by the SEC of any stop order suspending the
effectiveness of any registration statement or the initiation of any proceedings
for that purpose;
     (D) of the receipt by the Company or its legal counsel of any notification
with respect to the suspension of the qualification of the Common Stock for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose;
     (E) of the happening of any event that requires the Company to make changes
in any effective registration statement or the prospectus related to the
registration statement in order to make the statements therein not misleading
(which notice shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made); and
     (F) if at any time the representations and warranties of the Company
contained in any underwriting agreement contemplated by Section 4.7(c)(10) cease
to be true and correct.
     (7) Use its reasonable best efforts to prevent the issuance or obtain the
withdrawal of any order suspending the effectiveness of any registration
statement referred to in Section 4.7(c)(6)(C) at the earliest practicable time.
     (8) Upon the occurrence of any event contemplated by Section 4.7(c)(5) or
4.7(c)(6)(E), promptly prepare a post-effective amendment to such registration
statement or a supplement to the related prospectus or file any other required
document so that, as thereafter delivered to the Holders and any underwriters,
the prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the Company
notifies the Holders in accordance with Section 4.7(c)(6)(E) to suspend the use
of the prospectus until the requisite changes to the prospectus have been made,
then the Holders and any underwriters shall suspend use of such prospectus and
use their reasonable best efforts to return to the Company all copies of such
prospectus (at the Company’s expense) other than permanent file copies then in
such Holder’s or underwriter’s possession. The total number of days that any
such suspension may be in effect in any 12-month period shall not exceed
90 days.
     (9) Use reasonable best efforts to procure the cooperation of the Company’s
transfer agent in settling any offering or sale of Registrable Securities,
including with respect to the transfer of physical stock certificates into
book-entry form in accordance with any procedures reasonably requested by the
Holders or any managing underwriter(s).

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     (10) Enter into an underwriting agreement in customary form, scope and
substance and take all such other actions reasonably requested by the Holders of
a majority of the Registrable Securities being sold in connection therewith or
by the managing underwriter(s), if any, to expedite or facilitate the
underwritten disposition of such Registrable Securities, and in connection
therewith in any underwritten offering (including making members of management
and executives of the Company available to participate in “road show”, similar
sales events and other marketing activities), (i) make such representations and
warranties to the Holders that are selling stockholders and the managing
underwriter(s), if any, with respect to the business of the Company and its
Subsidiaries, and the Shelf Registration Statement, prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, in customary form, substance and scope, and, if true, confirm the same if
and when requested, (ii) use its reasonable best efforts to furnish underwriters
opinions of counsel to the Company, addressed to the managing underwriter(s), if
any, covering the matters customarily covered in such opinions requested in
underwritten offerings, (iii) use its reasonable best efforts to obtain “cold
comfort” letters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any business acquired by the Company for which financial statements and
financial data are included in the Registration Statement) who have certified
the financial statements included in such Registration Statement, addressed to
each of the managing underwriter(s), if any, such letters to be in customary
form and covering matters of the type customarily covered in “cold comfort”
letters, (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures customary in underwritten
offerings, and (v) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Securities being sold
in connection therewith, their counsel and the managing underwriter(s), if any,
to evidence the continued validity of the representations and warranties made
pursuant to clause (i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company. Notwithstanding anything contained herein to the contrary,
the Company shall not be required to enter into any underwriting agreement or
permit any underwritten offering absent an agreement by the applicable
underwriter(s) to indemnify the Company in form, scope and substance as is
customary in underwritten offerings by the Company in which an affiliate of the
Company acts as an underwriter.
     (11) Make available for inspection by a representative of Holders that are
selling stockholders, the managing underwriter(s), if any, and any attorneys or
accountants retained by such Holders or managing underwriter(s), at the offices
where normally kept, during reasonable business hours, financial and other
records, pertinent corporate documents and properties of the Company, and cause
the officers, directors and employees of the Company to supply all information
in each case reasonably requested by any such representative, managing
underwriter(s), attorney or accountant in connection with such Registration
Statement.

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     (12) Cause all such Registrable Securities (other than Convertible
Preferred Stock) to be listed on each securities exchange on which similar
securities issued by the Company are then listed or, if no similar securities
issued by the Company are then listed on any securities exchange, use its
reasonable best efforts to cause all such Registrable Securities (other than
Convertible Preferred Stock) to be listed on the NYSE or the NASDAQ Stock
Market, as determined by the Company.
     (13) If requested by Holders of a majority of the Registrable Securities
being registered and/or sold in connection therewith, or the managing
underwriter(s), if any, promptly include in a prospectus supplement or amendment
such information as the Holders of a majority of the Registrable Securities
being registered and/or sold in connection therewith or managing underwriter(s),
if any, may reasonably request in order to permit the intended method of
distribution of such securities and make all required filings of such prospectus
supplement or such amendment as soon as practicable after the Company has
received such request.
     (14) Timely provide to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
     (d) Suspension of Sales. During any Scheduled Black-out Period and upon
receipt of written notice from the Company that a registration statement,
prospectus or prospectus supplement contains or may contain an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
circumstances exist that make inadvisable use of such registration statement,
prospectus or prospectus supplement, Purchaser and each Holder of Registrable
Securities shall forthwith discontinue disposition of Registrable Securities
until termination of such Scheduled Black-Out Period or until Purchaser and/or
Holder has received copies of a supplemented or amended prospectus or prospectus
supplement, or until such Holder is advised in writing by the Company that the
use of the prospectus and, if applicable, prospectus supplement may be resumed,
and, if so directed by the Company, such Holder shall deliver to the Company (at
the Company’s expense) all copies, other than permanent file copies then in such
Holder’s possession, of the prospectus and, if applicable, prospectus supplement
covering such Registrable Securities current at the time of receipt of such
notice. The total number of days that any such suspension may be in effect in
any 12-month period shall not exceed 90 days.
     (e) Termination of Registration Rights. A Holder’s registration rights as
to any securities held by such Holder (and its Affiliates, partners, members and
former members) shall not be available unless such securities are Registrable
Securities.
     (f) Furnishing Information.
     (1) Neither Purchaser nor any Holder shall use any free writing prospectus
(as defined in Rule 405) in connection with the sale of Registrable Securities
without the prior written consent of the Company.

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     (2) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to Section 4.7(c) that Purchaser and/or the selling
Holders and the underwriters, if any, shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them and
the intended method of disposition of such securities as shall be required to
effect the registered offering of their Registrable Securities.
     (g) Indemnification.
     (1) The Company agrees to indemnify each Holder and, if a Holder is a
person other than an individual, such Holder’s officers, directors, employees,
agents, representatives and Affiliates, and each person, if any, that controls a
Holder within the meaning of the Securities Act (each, an “Indemnitee”), against
any and all losses, claims, damages, actions, liabilities, costs and expenses
(including, without limitation, reasonable fees, expenses and disbursements of
attorneys and other professionals incurred in connection with investigating,
defending, settling, compromising or paying any such losses, claims, damages,
actions, liabilities, costs and expenses), joint or several, arising out of or
based upon any untrue statement or alleged untrue statement of material fact
contained in any registration statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto or
any documents incorporated therein by reference or contained in any free writing
prospectus (as such term is defined in Rule 405) prepared by the Company or
authorized by it in writing for use by such Holder (or any amendment or
supplement thereto); or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, that the
Company shall not be liable to such Indemnitee in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon (i) an untrue statement or
omission made in such registration statement, including any such preliminary
prospectus or final prospectus contained therein or any such amendments or
supplements thereto or contained in any free writing prospectus (as such term is
defined in Rule 405) prepared by the Company or authorized by it in writing for
use by such Holder (or any amendment or supplement thereto), in reliance upon
and in conformity with information regarding such Indemnitee or its plan of
distribution or ownership interests which was furnished in writing to the
Company by such Indemnitee for use in connection with such registration
statement, including any such preliminary prospectus or final prospectus
contained therein or any such amendments or supplements thereto, or (ii) offers
or sales effected by or on behalf, such Indemnitee “by means of” (as defined in
Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not
authorized in writing by the Company.
     (2) If the indemnification provided for in Section 4.7(g)(1) is unavailable
to an Indemnitee with respect to any losses, claims, damages, actions,
liabilities, costs or expenses referred to therein or is insufficient to hold
the Indemnitee harmless as contemplated therein, then the Company, in lieu of

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indemnifying such Indemnitee, shall contribute to the amount paid or payable by
such Indemnitee as a result of such losses, claims, damages, actions,
liabilities, costs or expenses in such proportion as is appropriate to reflect
the relative fault of the Indemnitee, on the one hand, and the Company, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, actions, liabilities, costs or expenses as well as
any other relevant equitable considerations. The relative fault of the Company,
on the one hand, and of the Indemnitee, on the other hand, shall be determined
by reference to, among other factors, whether the untrue statement of a material
fact or omission to state a material fact relates to information supplied by the
Company or by the Indemnitee and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission;
the Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 4.7(g)(2) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in this Section 4.7(g)(2). No
Indemnitee guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from the
Company if the Company was not guilty of such fraudulent misrepresentation.
     (h) Assignment of Registration Rights. The rights of Purchaser to
registration of Registrable Securities pursuant to Section 4.7(a) may be
assigned by Purchaser to a transferee or assignee of Registrable Securities to
which (i) there is transferred to such transferee no less than $50,000,000 in
Registrable Securities and (ii) such Transfer is permitted under the terms
hereof; provided, however, the transferor shall, within ten days after such
transfer, furnish to the Company written notice of the name and address of such
transferee or assignee and the number and type of Registrable Securities that
are being assigned.
     (i) “Market Stand-Off” Agreement; Agreement to Furnish Information.
Purchaser and each Holder hereby agrees:
     (1) that Purchaser shall not sell, transfer, make any short sale of, grant
any option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale with respect to any common equity
securities of the Company or any securities convertible into or exchangeable or
exercisable for any common equity securities of the Company held by Purchaser
(other than those included in the registration) for a period specified by the
representatives of the underwriters of the common equity or equity-related
securities not to exceed ten days prior and 90 days following the effective date
of any firm commitment underwritten registered sale of common equity securities
of the Company or any securities convertible into or exchangeable or exercisable
for any common equity securities of the Company by the Company for the Company’s
own account in which the Company gave Purchaser an opportunity to participate in
accordance with Sections 4.7(a)(4) through 4.7(a)(6); provided that all
executive officers and directors of the Company enter into similar agreements
and only if such persons remain subject thereto (and are not released from such

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agreement) for such period; provided that nothing herein will prevent Purchaser
from making any distribution of Registrable Securities to the partners or
stockholders thereof or a transfer to an Affiliate that is otherwise in
compliance with applicable securities laws, so long as such distributees or
transferees agree to be bound by the restrictions set forth in this
Section 4.7(i);
     (2) to execute and deliver such other agreements as may be reasonably
requested by the Company or the representatives of the underwriters which are
consistent with the foregoing obligation in Section 4.7(i)(1) or which are
necessary to give further effect thereto; and
     (3) if requested by the Company or the representative of the underwriters
of Common Stock (or other securities of the Company), Purchaser shall provide,
within ten days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company’s securities pursuant to a registration statement filed
under the Securities Act in which Purchaser participates;
provided, that clauses (1) and (2) of this Section 4.7(i) shall not apply to
Purchaser or any Holder that, together with its affiliates, is the beneficial
owner of less than 5% of the outstanding Common Stock.
     (j) With respect to any underwritten offering of Registrable Securities by
Purchaser or other Holders pursuant to this Section 4.7, the Company agrees not
to effect (other than pursuant to such registration or pursuant to a Special
Registration) any public sale or distribution, or to file any Registration
Statement (other than such registration or a Special Registration) covering any
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the period not to exceed ten days prior
and 90 days following the effective date of such offering, if requested by the
managing underwriter. “Special Registration” means the registration of
(i) equity securities and/or options or other rights in respect thereof solely
registered on Form S-4 or Form S-8 (or successor form) or (ii) shares of equity
securities and/or options or other rights in respect thereof to be offered to
directors, members of management, employees, consultants, customers, lenders or
vendors of the Company or its direct or indirect Subsidiaries or in connection
with dividend reinvestment plans.
     (k) Rule 144; Rule 144A. With a view to making available to Purchaser and
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its reasonable best efforts to:
     (1) make and keep public information available, as those terms are
understood and defined in Rule 144(c)(1) or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
this Agreement;

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     (2) (A) file with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act and (B) if at any time
the Company is not required to file such reports, make available, upon request
of any Holder, such information necessary to permit sales pursuant to Rule 144A
(including the information required by Rule 144A(d)(4) under the Securities
Act);
     (3) so long as Purchaser or a Holder owns any Registrable Securities,
furnish to Purchaser or such Holder forthwith upon request: a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
under the Securities Act, and of the Exchange Act; a copy of the most recent
annual or quarterly report of the Company; and such other reports and documents
as Purchaser or Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing it to sell any such securities without
registration; and
     (4) take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act.
     (l) As used in this Section 4.7, the following terms shall have the
following respective meanings:
     (1) “Holder” means Purchaser and any other holder of Registrable Securities
to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 4.7(h) hereof.
     (2) “Holders’ Counsel” means one counsel for the selling Holders chosen by
Holders holding a majority interest in the Registrable Securities being
registered.
     (3) “Register,” “registered,” and “Shelf Registration” shall refer to a
registration effected by preparing and (a) filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of effectiveness of such
registration statement or (b) filing a prospectus and/or prospectus supplement
in respect of an appropriate effective Shelf Registration Statement.
     (4) “Registrable Securities” means the Purchased Shares (and any shares of
capital stock or other equity interests issued or issuable to any Holder with
respect to such Purchased Shares (including the Converted Common Shares) by way
of stock dividends or stock splits or in connection with a combination of
shares, recapitalization, merger or other reorganization), provided that, once
issued, such Securities will not be Registrable Securities when (i) they are
sold pursuant to an effective registration statement under the Securities Act,
(ii) they may be sold pursuant to Rule 144 without limitation thereunder on
volume or manner of sale, (iii) they shall have ceased to be outstanding or
(iv) they have

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been sold in a private transaction in which the transferor’s rights under this
Agreement are not assigned to the transferee of the securities. No Registrable
Securities may be registered under more than one registration statement at any
one time.
     (5) “Registration Expenses” means all expenses incurred by the Company in
effecting any registration pursuant to this Agreement (whether or not any
registration or prospectus becomes effective or final) or otherwise complying
with its obligations under this Section 4.7, including, without limitation, all
registration, filing and listing fees, printing expenses, fees and disbursements
of counsel for the Company, blue sky fees and expenses, expenses incurred in
connection with any “road show”, the reasonable fees and disbursements of
Holders’ Counsel, and expenses of the Company’s independent accountants in
connection with any regular or special reviews or audits incident to or required
by any such registration, but shall not include Selling Expenses and the
compensation of regular employees of the Company, which shall be paid in any
event by the Company.
     (6) “Rule 144”, “Rule 144A”, “Rule 159A”, “Rule 405” and “Rule 415” mean,
in each case, such rule promulgated under the Securities Act (or any successor
provision), as the same shall be amended from time to time.
     (7) “Scheduled Black-out Period” means the period from and including the
last day of a fiscal quarter of the Company to and including the business day
after the day on which the Company publicly releases its earnings for such
fiscal quarter, provided that the trading window applicable to the Company’s
senior management under the Company’s trading policies then in effect is not
open any time during such period.
     (8) “Selling Expenses” mean all discounts, selling commissions and stock
transfer taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel for any Holder (other than the fees and disbursements
of Holders’ Counsel included in Registration Expenses).
     (m) At any time, any holder of Securities (including any Holder) may elect
to forfeit its rights set forth in this Section 4.7 from that date forward;
provided, that a Holder forfeiting such rights shall nonetheless (i) be
obligated under Section 4.7(i)(1) with respect to any Pending Underwritten
Offering to the same extent that such Holder would have been obligated if the
holder had not withdrawn and (ii) be entitled to participate under
Sections 4.7(a)(4)–(6) in any Pending Underwritten Offering to the same extent
that such Holder would have been entitled to if the holder had not withdrawn;
and provided, further, that no such forfeiture shall terminate a Holder’s rights
or obligations under Section 4.7(f) with respect to any prior registration or
Pending Underwritten Offering. “Pending Underwritten Offering” means, with
respect to any Holder forfeiting its rights pursuant to this Section 4.7(m),
(i) any registered sale described in Section 4.7(i)(1) that has an effective
date prior to the date of such Holder’s forfeiture, and (ii) any other
underwritten offering of Registrable Securities (including an

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underwritten offering pursuant to a Shelf Registration Statement) in which such
Holder has advised the Company of its intent to register its Registrable
Securities either pursuant to Section 4.7(a)(2) or 4.7(a)(4) prior to the date
of such Holder’s forfeiture.
     4.8 Certificate of Designations. The Company shall file the Preferred Stock
Certificate of Designations for the Convertible Preferred Stock in the form
attached to this Agreement as Exhibit A with the Michigan Secretary, and such
Preferred Stock Certificate of Designations shall be in full force and effect as
of the Closing Date.
     4.9 Indemnification. Neither Article XI nor Article XII of the Certificate
of Incorporation shall be amended, repealed or otherwise modified for a period
of six years after the Closing Date in any manner that would adversely affect
the rights thereunder of any individuals covered thereby (the “Covered
Persons”). From and after the Closing Date, any determination to be made
pursuant to Article XI of the Certificate of Incorporation by the Board of
Directors with respect to the advancement of expenses shall be made without the
participation of any Board Representative. If the Board of Directors makes a
determination that the facts then known to the Board of Directors would not
preclude indemnification under the Michigan Business Corporation Act, and the
Covered Person has complied with the requirements of clauses (a) and (b) of the
second sentence of Article XI of the Certificate of Incorporation, then the
Company shall be required to advance such expenses to such Covered Person to the
fullest extent permitted by the Michigan Business Corporations Act. The
provisions of this Section 4.9 shall survive the Closing Date and are intended
to be for the benefit of, and shall be enforceable by, each Covered Person and
his or her heirs and representatives.
ARTICLE V
TERMINATION
     5.1 Termination. This Agreement may be terminated prior to the Closing:
     (a) by mutual written agreement of the Company and Purchaser;
     (b) by the Company or Purchaser, upon written notice to the other party, in
the event that the Closing Date does not occur on or before February 16, 2009 or
such later date, if any, as Purchaser and the Company agree upon in writing (as
such date may be extended, the “Outside Date”); provided, however, that the
right to terminate this Agreement pursuant to this Section 5.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing Date to occur on or prior to the Outside Date;
     (c) by the Company or Purchaser, upon written notice to the other party, in
the event that any Governmental Entity shall have issued any order, decree or
injunction or taken any other action restraining, enjoining or prohibiting any
of the transactions contemplated by this Agreement, and such order, decree,
injunction or other action shall have become final and nonappealable;

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     (d) by Purchaser, if Purchaser or any of its Affiliates receives written
notice from or is otherwise advised by a Governmental Entity that it will not
grant (or intends to rescind or revoke if previously approved) any Required
Approval or receives written notice from such Governmental Entity that it will
not grant such Required Approval on the terms contemplated by this Agreement
without imposing any Burdensome Condition, provided that, prior to terminating
this Agreement, Purchaser shall have used its reasonable best efforts to obtain
such Required Approval without the imposition of such Burdensome Condition;
     (e) by the Company, if the Company is not in material breach of any of the
terms of this Agreement, and there has been a breach of any representation,
warranty, covenant or agreement made by Purchaser in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 1.2(c)(3)(A) or (B) would not be satisfied and such
breach or condition is not curable or, if curable, is not cured within thirty
(30) days after written notice thereof is given by the Company to Purchaser;
     (f) by Purchaser, if the Purchaser is not in material breach of any of the
terms of this Agreement, and there has been a breach of any representation,
warranty, covenant or agreement made by the Company in this Agreement, or any
such representation and warranty shall have become untrue after the date of this
Agreement, such that Section 1.2(c)(2)(A) or (B) would not be satisfied and such
breach or condition is not curable or, if curable, is not cured within thirty
(30) days after written notice thereof is given by Purchaser to the Company;
     (g) by the Company, at any time following the date of this Agreement and
prior to the Closing Date, if (i) the Company is not in material breach of any
of the terms of this Agreement, (ii) the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into an agreement with respect to a Superior Proposal and the Company
notifies Purchaser in writing that it intends to enter into such an agreement,
attaching the most current version of such agreement to such notice,
(iii) Purchaser does not make, within three business days of receipt of the
Company’s written notification of its intention to enter into a binding
agreement for a Superior Proposal, an offer that the Board of Directors
determines, in good faith after consultation with its financial advisors, is at
least as favorable, from a financial point of view, to the stockholders of the
Company as the Superior Proposal and (iv) the Company prior to such termination
pays to Purchaser in immediately available funds any fees required to be paid
pursuant to Section 5.3. The Company agrees (x) that it will not enter into the
binding agreement referred to in clause (ii) above until at least the fourth
business day after it has provided the notice to Purchaser required thereby,
(y) to notify Purchaser promptly if its intention to enter into the written
agreement referred to in its notification changes and (z) during such three
business day period, to negotiate in good faith with Purchaser with respect to
any revisions to the terms of the transaction contemplated by this Agreement
proposed by Purchaser in response to such proposed Superior Proposal, if any;

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     (h) by Purchaser if the Board of Directors shall have made a Change of
Recommendation or the Company shall have breached the covenant contained in
Section 3.4 hereof; or
     (i) by Purchaser (1) if the TARP Approval is not obtained on reasonably
satisfactory terms by January 19, 2009 or (2) if the OTS Required Approvals (as
defined in Schedule 2.2(f) of the Company Disclosure Schedule), on reasonably
satisfactory terms, are not received on or before January 30, 2009.
     5.2 Effects of Termination. In the event of any termination of this
Agreement as provided in Section 5.1, subject to Section 5.3, this Agreement
(other than Section 3.2(b) and Articles V and VI, which shall remain in full
force and effect) shall forthwith become wholly void and of no further force and
effect; provided that nothing herein shall relieve any party from liability for
intentional breach of this Agreement.
     5.3 Fees.
     (a) Subject to Section 5.3(b), if this Agreement is terminated by Purchaser
pursuant to any of the subsections of Section 5.1 (other than Section 5.1(i)),
the Company shall pay to Purchaser the Expense Reimbursement (not to exceed
$5 million) pursuant to Sections 5.3(c) and 6.2.
     (b) In lieu of any Expense Reimbursement payable pursuant to (a) above,
(1) if this Agreement is terminated pursuant to Section 5.1(f) if the Company
breached Section 3.4, or pursuant to Section 5.1 (g) or (h), the Company shall
pay to Purchaser a Termination Fee in accordance with Section 5.3(c) and (2) if
an Acquisition Proposal is made to the Company, any Subsidiary, or its
stockholders generally, or becomes public and thereafter this Agreement is
terminated pursuant to Section 5.1(b), (f), (g), (h) or (i) and within 12 months
after such termination the Company enters into a definitive agreement to effect,
or consummates, an Acquisition Proposal, the Company shall pay to Purchaser a
Termination Fee in accordance with Section 5.3(c).
     (c) “Termination Fee” means an amount in cash equal to 3.99% of the
Purchase Price. Any Termination Fee or Expense Reimbursement payable pursuant to
this Section 5.3 shall be paid by wire transfer of immediately available funds
to the account or accounts designated by Purchaser (i) in the case of
Section 5.3(a) or 5.3(b)(1), contemporaneously with the termination of this
Agreement, (ii) in the case of Section 5.3(b)(2), no later than two business
days after the day on which the obligation to pay such Termination Fee or
Expense Reimbursement arises. To the extent not paid when due, any Termination
Fee shall accrue interest at a rate equal to 18%. In the event the Termination
Fee is paid when due, the Company shall have no obligation to pay any Expense
Reimbursement.
     (d) Each of the Company and Purchaser acknowledges that the agreements
contained in this Section 5.3 are an integral part of the transactions
contemplated by this Agreement. In the event that a party shall fail to pay the
Termination Fee when due, the party obligated to pay such Termination Fee shall
reimburse the party receiving the

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Termination Fee for all reasonable expenses actually incurred or accrued by such
other party (including reasonable expenses of counsel) in connection with the
collection under and enforcement of this Section 5.3. The parties hereto agree
and understand that in no event shall any party be required to pay a Termination
Fee on more than one occasion, and in no event shall the aggregate fees payable
by any such party pursuant to Section 5.3 exceed the maximum amount of the
Termination Fee.
ARTICLE VI
MISCELLANEOUS
     6.1 Survival. Each of the representations and warranties set forth in this
Agreement, shall survive the Closing under this Agreement but only for a period
of two years following the Closing Date (or until final resolution of any claim
or action arising from the breach of any such representation and warranty, if
notice of such breach was provided prior to the end of such period) and
thereafter shall expire and have no further force and effect, including in
respect of Section 4.5 provided that (i) the representations and warranties
contained in Section 2.2(a) (Organization and Authority), Section 2.2(d)
(Authorization), Section 2.2(b) (Capitalization), Section 2.2(c) (Subsidiaries)
each of which shall survive the Closing until the date that is three years from
the Closing Date, and (ii) the representations and warranties contained in
Section 2.2(j) (Taxes) which shall survive the Closing until 60 days after the
expiration of the applicable statute of limitations. Except as otherwise
provided herein, all covenants and agreements contained herein, other than those
which by their terms are to be performed in whole or in part after the Closing
Date, shall terminate as of the Closing Date.
     6.2 Expenses. Each of the parties will bear and pay all other costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated pursuant to this Agreement; except that the Company shall bear and
upon Purchaser’s request in the manner specified below, reimburse Purchaser for
all of its reasonable out-of-pocket expenses incurred in connection with due
diligence, the negotiation and preparation of this Agreement and undertaking of
the transactions contemplated pursuant to this Agreement (including fees and
expenses of attorneys, consultants and accounting and financial advisers
incurred by or on behalf of Purchaser or its Affiliates in connection with the
transactions contemplated pursuant to this Agreement) (the “Expense
Reimbursement”); provided that, if payable at any time other than in connection
with a termination pursuant to Section 5.1, such Expense Reimbursement shall not
exceed $10 million.
     6.3 Amendment; Waiver. No amendment or waiver of any provision of this
Agreement will be effective with respect to any party unless made in writing and
signed by an officer of a duly authorized representative of such party. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The conditions to each party’s
obligation to consummate the Closing are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law. No waiver of any party to this Agreement, as the case may be,
will be effective unless it is in a writing signed by a duly authorized officer
of the waiving party that makes express reference to the provision or provisions
subject to such waiver.

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The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
     6.4 Counterparts and Facsimile. For the convenience of the parties hereto,
this Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
will together constitute the same agreement. Executed signature pages to this
Agreement may be delivered by facsimile and such facsimiles will be deemed as
sufficient as if actual signature pages had been delivered.
     6.5 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State (except to the extent that
mandatory provisions of Michigan law are applicable). The parties hereby
irrevocably and unconditionally consent to submit to the exclusive jurisdiction
of the state and federal courts located in the Borough of Manhattan, State of
New York for any actions, suits or proceedings arising out of or relating to
this Agreement and the transactions contemplated hereby.
     6.6 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
     6.7 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other will be in writing and will be deemed to
have been duly given (a) on the date of delivery if delivered personally or by
telecopy or facsimile, upon confirmation of receipt, (b) on the first business
day following the date of dispatch if delivered by a recognized next-day courier
service, or (c) on the third business day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.
          (a) If to Purchaser to it at:
MP Thrift Investments L.P.
520 Madison Avenue
New York, New York 10022
Attn: Robert H. Weiss, General Counsel
Telephone: 212-651-9525
Fax: 212-651-4014
with a copy to (which copy alone shall not constitute notice):
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
Attn: Mitchell S. Eitel
           George Sampas

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Telephone: (212) 558-4000
Fax: (212) 558-3588
          (b) If to the Company:
Flagstar Bancorp, Inc.
5151 Corporate Drive
Troy, Michigan 48098-2639
Fax No.: (248) 312-6833
Attn: Paul Borja
          with a copy to (which copy alone shall not constitute notice):
Kutak Rock LLP
1101 Connecticut Avenue, N.W.
Suite 1000
Washington, DC 20036-4374
Fax No.: (202) 828-2488
Attn: Jeremy T. Johnson
     6.8 Entire Agreement, Etc. (a) This Agreement (including the Exhibits,
Schedules and Disclosure Schedules hereto) constitutes the entire agreement, and
supersedes all other prior agreements, understandings, representations and
warranties, both written and oral, among the parties, with respect to the
subject matter hereof; and (b) this Agreement will not be assignable by
operation of law or otherwise (any attempted assignment in contravention hereof
being null and void); provided that Purchaser may assign its rights and
obligations under this Agreement (i) to any Affiliate, but only if the
transferee agrees in writing for the benefit of the Company (with a copy thereof
to be furnished to the Company) to be bound by the terms of this Agreement (any
such transferee shall be included in the term “Purchaser”); provided, further,
that no such assignment shall relieve Purchaser of its obligations hereunder and
(ii) for those rights contained in Article IV (subject to applicable law).
     6.9 Interpretation; Other Definitions. Wherever required by the context of
this Agreement, the singular shall include the plural and vice versa, and the
masculine gender shall include the feminine and neuter genders and vice versa,
and references to any agreement, document or instrument shall be deemed to refer
to such agreement, document or instrument as amended, supplemented or modified
from time to time. All article, section, paragraph or clause references not
attributed to a particular document shall be references to such parts of this
Agreement, and all exhibit, annex and schedule references not attributed to a
particular document shall be references to such exhibits, annexes and schedules
to this Agreement. In addition, the following terms are ascribed the following
meanings:
     (a) the term “Affiliate” means, with respect to any person, any person
directly or indirectly controlling, controlled by or under common control with,
such other person. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any person,

60

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means the possession, directly or indirectly, of the power to cause the
direction of management or policies of such person, whether through the
ownership of voting securities by contract or otherwise;
     (b) the word “or” is not exclusive;
     (c) the words “including,” “includes,” “included” and “include” are deemed
to be followed by the words “without limitation”; and
     (d) the terms “herein,” “hereof” and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision;
     (e) “business day” means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York or in the State of Ohio generally are authorized or required by law or
other governmental action to close;
     (f) “person” has the meaning given to it in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act;
     (g) a person shall be deemed to “beneficially own” any securities of which
such person is considered to be a “beneficial owner” under Rule 13d-3 under the
Exchange Act; and
     (h) to the “knowledge of the Company” or “Company’s knowledge” means the
actual knowledge after due inquiry of the “officers” (as such term is defined in
Rule 3b-2 under the Exchange Act, but excluding any Vice President or Secretary)
of the Company.
     6.10 Captions. The article, section, paragraph and clause captions herein
are for convenience of reference only, do not constitute part of this Agreement
and will not be deemed to limit or otherwise affect any of the provisions
hereof.
     6.11 Severability. If any provision of this Agreement or the application
thereof to any person (including the officers and directors the parties hereto)
or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, will remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon a suitable and equitable substitute provision to effect the original intent
of the parties.
     6.12 No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended to confer upon any person other than the
parties hereto, any benefit right or remedies, except that (i) the provisions of
Sections 4.5 shall inure to the benefit of the persons referred to in that
Section, (ii) the provisions of Section 4.9 shall inure to the benefit of the

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Covered Persons and (iii) the provisions of Sections 1.2(c)(1)(C), 3.1(a) and
Section 3.2(b) shall inure to the benefit of MatlinPatterson, and in the case of
clause (iii) MatlinPatterson shall be entitled to seek specific performance of
the terms thereof, in addition to any other remedies to which it is entitled at
law or equity; provided that, it is understood that the rights of
MatlinPatterson pursuant to this Section 6.12 are not intended to create any
obligation for MatlinPatterson under this Agreement nor make MatlinPatterson a
party to this Agreement.
     6.13 Time of Essence. Time is of the essence in the performance of each and
every term of this Agreement.
     6.14 Certain Adjustments. If the representations and warranties set forth
in Section 2.2(b) shall not be true and correct as of the Closing Date, the
number of shares of Common Stock and Convertible Preferred Stock to be purchased
shall be, at Purchaser’s option, proportionately adjusted to provide Purchaser
the same economic effect as contemplated by this Agreement in the absence of
such failure to be true and correct.
     6.15 Public Announcements. Subject to each party’s disclosure obligations
imposed by law or regulation or the rules of any stock exchange upon which its
securities are listed, each of the parties hereto will cooperate with each other
in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement and any of the
transactions contemplated by this Agreement, and neither the Company nor
Purchaser will make any such news release or public disclosure without first
consulting with the other, and, in each case, also receiving the other’s consent
(which shall not be unreasonably withheld or delayed) and each party shall
coordinate with the party whose consent is required with respect to any such
news release or public disclosure.
     6.16 Specific Performance. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to seek specific performance of the terms hereof,
this being in addition to any other remedies to which they are entitled at law
or equity.
* * *

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     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first herein
above written.

                  FLAGSTAR BANCORP, INC.
 
           
 
      By:   /s/ Mark T. Hammond
 
           
 
      Name:   Mark T. Hammond
 
      Title:   President and Chief Executive Officer
 
                MP THRIFT INVESTMENTS L.P.
 
                    By: MP (Thrift) Global Partners III LLC, its General Partner
 
 
      /s/ Robert H. Weiss          
 
      Name:
Title:   Robert H. Weiss
General Counsel

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Schedule A
List of Management Members

  1.   Thomas J. Hammond     2.   Mark T. Hammond     3.   Paul D. Borja     4.
  Kirstin A. Hammond     5.   Matthew I. Roslin     6.   Robert O. Rondeau

Schedule A-1

 

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Schedule B

          State or Other Jurisdiction of Name of Subsidiary  
Incorporation/Organization
Douglas Insurance Agency, Inc.
  Michigan
Flagstar Bank, FSB
  United States of America
Flagstar Commercial Corporation
  Michigan
Flagstar Investment Group, Inc.
  Michigan
Flagstar Reinsurance Company
  Vermont
Flagstar Statutory Trust II
  Connecticut
Flagstar Statutory Trust III
  Delaware
Flagstar Statutory Trust IV
  Delaware
Flagstar Statutory Trust V
  Delaware
Flagstar Statutory Trust VI
  Delaware
Flagstar Statutory Trust VII
  Delaware
Flagstar Statutory Trust VIII
  Delaware
Flagstar Statutory Trust IX
  Delaware
Flagstar Statutory Trust X
  Delaware
Flagstar Title Insurance Agency, Inc.
  Michigan
Paperless Office Solutions, Inc.
  Michigan

Schedule B-1

 

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Schedule C
[Reserved]
Schedule C-1

 

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Schedule D
List of Management Purchasers of Management Purchased Shares

1.   Thomas J. Hammond, who the Company represents is committed to invest $2
million.   2.   Mark T. Hammond, who the Company represents is committed to
invest $2 million.   3.   Such other senior executives of the Company, who may
invest, in the aggregate, an additional $1 million.

Schedule D-1

 

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Schedule E
     The following is a summary Term Sheet of the material terms of the equity
awards that will be applicable to certain senior executives of the Company,
subject to (i) all requisite approvals of the Compensation Committee of the
Company’s Board of Directors, and (ii) the occurrence of the Closing. Following
the date hereof, the parties shall promptly and in good faith negotiate the
definitive terms and documents on customary terms, including with respect to
antidilution, and consistent with the terms below and reasonably acceptable to
the parties.

     
PLAN
  Equity for 14.5% of the total shares of Company common stock will be granted
under the Company’s stockholder-approved Flagstar Bancorp, Inc. 2006 Equity
Incentive Plan (as amended, the “Plan”). The executives to receive grants below
have agreed to waive their current outstanding equity grants, with the exception
of restricted stock grants that have been issued but not yet vested.
 
   
TYPE OF AWARDS
  Stock options and restricted shares will be granted in three tranches.
 
   
 
  The first tranch of awards will be time-vested stock options, which will be
granted to the following executives at the Closing, as further described herein.
The executives receiving the first tranch will be determined prior to Closing.
 
   
 
  The second tranch of awards will be a performance-vested stock option pool,
which will be granted subject to performance criteria and allocation, as further
described herein.
 
   
 
  The third tranch of awards will be restricted shares, which will be granted to
the first tranch executives at the time the Purchaser disposes of a majority of
the aggregate amount of Company shares that it acquired at the Closing (an “MP
Sale”).

              TIME VESTED STOCK OPTIONS TERMS     Time and Amount of Grants:
 
      •   The first tranch will be options to acquire shares of Company common
stock equal to up to 3% of the total shares of Company common stock on the date
of

Schedule E-1

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          grant (the “Time Vested Stock Options”). The Time Vested Stock Options
will have a term that expires 10 years after the date of grant.
 
           
 
      •   The allocation among the executives of the Time Vested Stock Options
will be determined before Closing.
 
           
 
      •   In the event that there is not a sufficient number of shares available
for issuance under the Plan to allow for the award of the full 3% of the Time
Vested Stock Options on the Closing, the proposed amendments to the Plan as part
of the Stockholder Proposals will provide adequate availability to increase the
amount of shares available for issuance under the Plan to accommodate the equity
grants contemplated under this Term Sheet so that, promptly following the
approval, the executives will receive an additional grant of Time Vested Stock
Options equal to the remainder of the Time Vested Stock Option 3% grant that was
not granted at the Closing.
 
                Vesting:
 
           
 
      •   The Time Vested Stock Options will vest and become exercisable as
follows: (1) ratably over three years from the date of grant on each anniversary
of grant, or (2) immediately on the date of an MP Sale. The vesting of the Time
Vested Stock Options will be subject to and conditioned upon the continuous
employment of the grantee through the relevant vesting date. If the grantee’s
employment is terminated for any reason (other than as described below), all
unvested Time Vested Stock Options will be forfeited upon such termination of
employment.
 
           
 
      •   In the event that a grantee is terminated by the Company without Cause
or

Schedule E-2

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          resigns for Good Reason (each, as defined) prior to the vesting date,
he or she will be automatically vested in any unvested Time Vested Stock Options
on the date of such termination. The Time Vested Stock Options will have a
post-termination exercise period equal to the shorter of (i) 1 year following
the date of such termination or (ii) the remainder of the term of the option.
 
                Exercise Price:
 
           
 
      •   The exercise price of the Time Vested Stock Options will be the
greater of (i) the per share Purchase Price, or (ii) the fair market value of
the Company’s common stock on the date of grant (“FMV”).
 
            PERFORMANCE-VESTED STOCK OPTION POOL   Time and Amount of Grant:
 
      •   After the approval of the Stockholder Proposals concerning the amended
Plan, the Company will allocate for options to acquire shares of Company common
stock equal to 4.5% of the total shares of Company common stock on the date of
grant (the “Performance Vested Stock Option Pool”). The Performance Vested Stock
Option Pool will have a term that expires 10 years from the date of grant.
 
           
 
      •   The allocation among the executives, other members of management and
employees of the Performance Vested Stock Option Pool will be established as of
the relevant performance vesting dates as set forth in the grant documentation
approved by the Compensation Committee of the Board. The allocation mechanics
and the structure as options and/or restricted stock and/or SARs will be subject
to further tax review and optimization.

Schedule E-3

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                  Allocation/Vesting:
 
           
 
      •   The Performance Vested Stock Option Pool will be allocated and will
initially vest based upon the attainment of performance criteria to be
established by the Compensation Committee. The subsequent vesting of allocated
portions of the Performance Vested Stock Option Pool will also be subject to and
conditioned upon the continuous employment of the applicable grantee(s), with
ratable vesting of the allocated grants over the three years following the
date(s) of allocation on each anniversary date. If an applicable grantee
terminates employment for any reason (other than as set forth in his or her
specific grant or employment contract), all unvested grants from the Performance
Vested Stock Option Pool will be forfeited upon such termination of employment.
 
           
 
      •   In the event of a Change of Control (as defined) of the Company, all
performance criteria will be measured by the Compensation Committee as of the
Change of Control date and vesting/allocations will be effected accordingly or,
if determined by the Board, the Performance Vested Stock Option Pool will
continue following such event with such modifications to performance criteria as
the Compensation Committee deems appropriate to give effect to the transaction.
 
                Exercise Price:
 
           
 
      •   The “exercise price” of the Performance Vested Stock Option Pool
grants will be the FMV at the initial allocation date for the pool.

Schedule E-4

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              RESTRICTED SHARE TERMS     TIME AND AMOUNT OF GRANT:
 
      •   At the time of an MP Sale, all executives who received the Time Vested
Stock Options and who remain employed with the Company at the time of an MP Sale
will receive a one-time grant of restricted shares under the Plan (the
“Restricted Shares”).
 
           
 
      •   Only one grant of Restricted Shares will be granted to the executives
under this program in the amount described below.
 
           
 
      •   The initial allocation of the Restricted Shares for issuance to the
executives in connection with a MP Sale shall be as set forth below will be
determined before Closing.
 
           
 
      •   The aggregate number of Restricted Shares subject to grant to the
executives on the MP Sale will be such number of shares of Common Stock that
equal the dollar value determined as follows:

(FMV per share of Company common stock determined in MP Sale – the per-share
Purchase Price) x “n” shares of Company common stock.
“n” is determined as follows:
If and to the extent that the Purchaser’s return on the MP Sale (as measured by
the sale price of Company common shares in the MP Sale compared to the per-share
Purchase Price) is equal to the following multiples,1 then “n” shall be set as
follows:
 

1   As a hypothetical example, if at the time of the MP Sale, the FMV per share
of Company stock is $2, and the return to Purchaser on this MP Sale is a 2.0X
return, the Executives as a group would receive a grant of restricted shares in
aggregate value equal to $1 [$2 — $1] multiplied by 1.5% of the total shares    
   

Schedule E-5

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2.0X  = 1.5% of the total shares of Company common stock at the Closing  
3.0X  = + 1.5% of the total shares of Company common stock at the Closing  
4.0X = + 2.0% of the total shares of Company common stock at the Closing  
5.0X = + 2.0% of the total shares of Company common stock at the Closing

                  Vesting:  
 
      •   The Restricted Shares will vest and the restrictions thereon will
lapse based upon the percentage of interest in the Company that is sold by
Purchaser in the MP Sale.
 
           
 
      •   If the MP Sale results in Purchaser disposing of 100% of its interests
in the Company, the Restricted Shares that are issued in connection with the MP
Sale will fully vest in the executives on such date.
 
           
 
      •   If the MP Sale results in Purchaser retaining any portion of its
interest in the Company, the Restricted Shares

 
of Company common stock at the Closing (i.e., the value as if such 1.5% of the
Company common stock had a value of $1 per share).
As another hypothetical example, if at the time of the MP Sale, the FMV per
share of Company is $5 per share, and the return to Purchaser on this MP Sale is
a 5.0X return, the Executives as a group would receive a grant of restricted
shares in aggregate value equal to $4 [$5 - $1] multiplied by 7.0% of the total
shares of Company common stock at the Closing (i.e., the value as if such 7.0%
of the Company common stock had a value of $4 per share).

Schedule E-6

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          that are issued will vest in the executives as follows: (i) the
proportion of Restricted Shares equal to the actual percentage disposed of by
Purchaser in the MP Sale will vest fully in the executives on such date, and
(ii) the remaining Restricted Shares that are issued in connection with the MP
Sale will vest ratably over the two years following the date of grant on each
anniversary date, conditioned on the continued employment of the executive with
the Company during such period, provided, however, that if a Change of Control
occurs after the MP Sale, all unvested Restricted Shares that were issued in
connection with the MP Sale shall vest on such date of the Change of Control.
 
           
 
      •   In the event that an executive is terminated by the Company without
Cause or leaves for Good Reason either prior to an MP Sale or after such an MP
Sale but prior to the relevant vesting date, he or she will retain the rights to
receive the Restricted Shares for up to one year from the date of such
termination, and any Restricted Shares that were or are issued to an executive
in connection with an MP Sale that would remain subject to two-year vesting will
be fully vested.

Schedule E-7

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Schedule F
MP (Thrift) LLC
MP (Thrift) Asset Management  LLC
MP (Thrift) Global Partners III LLC
MP (Thrift) Global Opportunities Partners (Special) III LP
MP (Thrift) Global Opportunities Investments III LP
Schedule F-1

 

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Exhibit A
     Preferred Stock Certificate of Designations