<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14(a)(6)(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
University Bancorp, Inc.
------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
Page 1 of 18
<PAGE> 2
UNIVERSITY BANCORP, INC.
959 Maiden Lane
Ann Arbor, Michigan 48105
(734) 741-5858
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
June 21, 1999
To the Holders of Common Stock of University Bancorp, Inc.:
The Annual Meeting (the "Meeting") of Stockholders of University Bancorp,
Inc. (the "Company") will be held at the main office of University Bank (the
"Bank"), the Company's bank subsidiary, 959 Maiden Lane, Ann Arbor, Michigan
48105, at 12:00 noon, local time, on Monday, June 21, 1999 for the following
purposes:
1. To elect eight directors to serve until the next Annual Meeting of
Stockholders;
2. To transact such other business as may properly come before the Meeting.
The Board of Directors has set 5:30 p.m. Central Standard Time, on April
23, 1999 as the record date for the determination of the stockholders entitled
to vote at the Meeting. All stockholders as of the record date are entitled to
receive this notice. The Proxy Statement and form of proxy for the Meeting are
being mailed with this notice and the initial mailing including the Proxy
Statement and form of proxy will be sent to stockholders on approximately May
10, 1999.
By order of the Board of
Directors,
Joseph L. Ranzini,
Secretary
April 15, 1999
If you wish to participate in the vote on the matters coming before the Annual
Meeting and do not intend to attend in person, please mark, sign and date the
enclosed form of proxy and return it promptly to the Company, c/o University
Bank, 959 Maiden Lane, Ann Arbor, Michigan 48105.
<PAGE> 3
UNIVERSITY BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 21, 1999
TABLE OF CONTENTS
Page
General Information 3
Election of Directors 5
Security Ownership of Certain Beneficial
Owners and Management 7
Executive Officers 10
Executive Compensation 10
Section 16(a) Beneficial Ownership Reporting Compliance 12
Compensation Plans 12
Certain Relationships and Related Transactions 14
Independent Public Accountants 16
Other Matters 16
<PAGE> 4
GENERAL INFORMATION
By appointing "proxies", stockholders may vote their shares at the Annual
Meeting of Stockholders (the "Meeting") of University Bancorp, Inc. (the
"Company"), which is scheduled to be held on June 21, 1999 and any adjournments
thereof, whether or not they attend. With this Proxy Statement, the Company's
Board of Directors provides information on the items of business scheduled for
the Meeting and asks you to appoint proxies selected by the Board of Directors
to vote your shares. The Company's Board of Directors is soliciting your proxy.
The cost of such solicitation is being paid for by the Company.
The proxies will vote your shares according to your instructions. The Board
of Directors recommends a vote:
1) "FOR" the election of each of the nominees for election as directors of
the Company indicated in the accompanying form of proxy. You may vote "FOR" or
"WITHHOLD" as to all or any one or more nominees for election as directors.
You have one vote for each share of Common Stock, par value $.01 per share,
of the Company ("Common Stock") registered in your name on the Company's books
on April 23, 1999 at 5:30 p.m., Central Standard Time, the record date for the
determination of stockholders entitled to notice of and to vote at the Meeting.
At that time, the Company had 1,989,139 shares of Common Stock outstanding and
entitled to vote.
If you wish to participate in the vote on the matters coming before the
Meeting, please sign, date and promptly return your form of proxy to the
Company, c/o University Bank, 959 Maiden Lane, Ann Arbor, Michigan 48105.
If you return a properly signed and dated form of proxy but do not mark any
choices for the election of directors your shares will be voted in accordance
with the recommendations of the Board of Directors as to such election.
You may revoke the proxy solicited by the Board of Directors before its
exercise by delivering written notice of such revocation to the Company c/o
University Bank, 959 Maiden Lane, Ann Arbor, Michigan 48105, or by submitting a
subsequently dated proxy, or by attending the Meeting and voting by ballot.
Directors will be elected by plurality of the votes of Common Stock cast at
the Meeting. Approval of the proposed amendment to the Certificate of
Incorporation requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of Common Stock as of the record date for the
Meeting. For these purposes, abstentions and broker non-votes are not considered
votes cast.
-3-
<PAGE> 5
PRESENTATION OF
PROPOSALS OF STOCKHOLDERS
It is expected that the next annual meeting of stockholders of the Company
will be held in the 2000 calendar year. Proposals of stockholders to be
presented at such annual meeting must be received by the Company prior to
December 15, 1999 to be included in the Company's proxy statement and form of
proxy for such annual meeting. The notice and any such proposal must comply with
the applicable provisions of Rule 14a-8 under the Securities Exchange Act of
1934, as amended.
CORPORATE GOVERNANCE - ATTENDANCE
AT BOARD OF DIRECTOR MEETINGS
The Board of Directors oversees the management of the business of the
Company. The Board of Directors formed an audit committee during the
fiscal year ended December 31, 1998 consisting of Paul Lange Ranzini, Robert
Goldthorpe and Michael Talley which met once during 1998. The Compensation
Committee of the Board of Directors consists of three members of the board,
presently Messrs. Stephen Lange Ranzini, Joseph L. Ranzini and Michael Talley.
The Compensation Committee met once and all members of this committee attended
each meeting. The board had no nominating committee during the fiscal year ended
December 31, 1998. The Board of Directors held a total of 5 meetings during the
1998 fiscal year. Four directors attended each meeting, and four of the eight
directors missed just 1 of the 5 meetings as a result of conflicting travel
plans.
CORPORATE GOVERNANCE - DISCUSSION OF COMMITTEES
The Audit Committee receives audit reports and management recommendations
from the Company's outside independent auditors and responds to these reports
and recommendations.
The Compensation Committee sets the amount and type of pay for the
employees of the Company. Each subsidiary has its own compensation committee and
independent compensation process. The Company has a policy that executives of
the Company do not draw pay directly from the Company because they spend their
time mainly on the business of the subsidiaries. The Company generally
reimburses the subsidiaries for time spent on Company business during regular
business hours by Company executives at the rate of pay established by the
subsidiaries. The Company's Compensation Committee does establish the level of
ESOP and Stock Option Plan compensation through recommendations to the Company's
board of directors.
Joseph L. Ranzini and Stephen Lange Ranzini as executive officers of the
Company sit on the Compensation Committees of the Company, the Bank and Michigan
BIDCO, Inc.
COMPENSATION OF DIRECTORS
Directors are not compensated for attendance at meetings, although they are
reimbursed for travel expenses.
-4-
<PAGE> 6
ELECTION OF DIRECTORS
The Board of Directors recommends a vote "FOR" the slate of eight directors
named below. Biographical information is included below for each nominee.
Persons elected at the Meeting will hold office until a successor is elected or
until earlier resignation or removal. In the event that any of these director
nominees becomes unavailable to serve, proxies will be voted for the election of
such other person(s) as may be recommended by the Board of Directors.
NOMINEES FOR ELECTION AS DIRECTORS OF THE COMPANY
Stephen Lange Ranzini, age 34, has been President, CEO and a director of
the Company or its Predecessors since July 1988, and served as the Treasurer of
the Company and its Predecessors from July 1988 to December 1995. Since May
1993, Mr. Ranzini has also served as the Treasurer and a Director of Michigan
BIDCO, Inc. (the "BIDCO"), a community development lending organization
described further below. Since December 1995, Mr. Ranzini has been Treasurer and
a Director of Northern Michigan Foundation, a non-profit community development
lending organization which shares common senior management with BIDCO. Since
March 1994 Mr. Ranzini has served as a director of University Bank and has held
various senior management positions with the bank, including that of President
of the Bank between October 1994 and November 1995 and again since November
1997. Between December 1995 and October 1997 he served as the Bank's Senior Vice
President - Mortgage Banking, supervising the Bank's subsidiaries: Arbor Street
LLC, Midwest Loan Services, Inc., Varsity Funding, LLC., and Varsity Mortgage,
LLC. He is the son of Joseph L. and Mildred Ranzini and the brother of Joseph
Lange Ranzini and Paul Lange Ranzini.
Since July 1991, Mr. Ranzini has been a director of CityFed Financial
Corp., a former savings and loan holding company now based in Massachusetts.
Since May 1997 he has been a director of Municipal Bankers Corporation., a
Toronto Stock Exchange listed financial services company based in Toronto,
Canada. Mr. Ranzini has been nominated to serve as a director of China Energy,
an American Stock Exchange listed industrial firm with operations in China
affiliated with the Orient Group, one of China's largest private sector
conglomerates.
Joseph L. Ranzini, Esq., age 70, has been Chairman of the Board, a director
and Secretary of the Company or of predecessor corporations merged into the
Company (the "Predecessors") since July 1988. Mr. Ranzini has been a Director of
University Bank (the Company's subsidiary) since July 1988 and served as
Chairman of the Board from March 1994 to January 1996 and Secretary since
November 1997. Since May 1993, Mr. Ranzini has served as the President and
Chairman of the Board of Michigan BIDCO, Inc. Since December 1995, Mr. Ranzini
has been President and Chairman of the Board of Northern Michigan Foundation.
Mr. Ranzini maintained a private law practice in New Jersey from 1965 until June
1991.
-5-
<PAGE> 7
Keith Brenner, age 54, has served as a director of the Company or its
Predecessors from October 1985, and also as the President and Treasurer of the
Company or its Predecessors (the Company was then known as Fortune 44 Company,
and manufactured and sold fortune cookies) from inception until December 31,
1989. Prior to forming the Company, Mr. Brenner was employed by Celestial
Seasonings, Inc., a tea manufacturer located in Boulder, Colorado, from 1980 to
1985 as Vice President of Marketing and Vice President of Corporate Development.
Since the fourth quarter of 1988, Mr. Brenner has been President and owner of
Brenner & Associates, a strategic planning and marketing consulting firm,
located in Boulder, Colorado.
Robert Goldthorpe, age 62, has served as a director of the Company since
April 1996. Mr. Goldthorpe also served as a Director of University Bank from
September 1992 to January 1996. For more than the past five years, Mr.
Goldthorpe has been President of Goldthorpe Enterprises, a diversified holding
company with operations in the central and eastern portion of the Upper
Peninsula of Michigan, with investments in hotels, restaurants, apartment
buildings, a hardware store, and the construction and contracting business.
Dr. Joseph Lange Ranzini, age 39, has served as a director of the Company
since April 1996. A graduate of Dartmouth College in 1982, he earned his M.D.
from the University of Virginia in 1986, and completed his residency with a
specialty in General Surgery at Mary Imogene Bassett Hospital, an affiliate of
Columbia University in Cooperstown, New York, in 1992. Since that time he has
been in a general surgery private practise at Augusta Medical Center in
Fishersville, Virginia. He is the son of Joseph L. and Mildred Ranzini and the
brother of Stephen Lange Ranzini and Paul Lange Ranzini.
Mildred Lange Ranzini, age 67, has been a director of the Company or its
Predecessors since July 1988, and has served as Assistant Secretary since
January 1990. Mrs. Ranzini holds a M. Div. from Princeton Theological Seminary,
a Masters Degree in Education from Columbia University and a B.A. from Wellesley
College. Mrs. Ranzini has not otherwise held an active business position during
the prior five years.
Prof. Paul Lange Ranzini, age 37, has served as a director of the Company
since April 1996. He is a Musicology Editor at A-R Editions and a Doctoral
Candidate in Music History and Theory at the University of Chicago. He has
attended the University of Chicago since 1989, except in 1994 and 1995, when he
earned a Fulbright Fellowship to Germany for Dissertation Research. At the
University of Chicago, he was also employed part-time as the computer data
center manager at the University's International House. From 1984 to 1988 he was
a graduate student at the University of Michigan in Ann Arbor, Michigan, where
he earned two Masters, an M.A. in Musicology and an M.M. in Organ and Church
Music. From 1979 to 1983 he was a student at the College
-6-
<PAGE> 8
of William and Mary, where he received a B.A. in Philosophy. He is the son of
Joseph L. and Mildred Ranzini and the brother of Stephen Lange Ranzini and
Joseph Lange Ranzini.
Michael Talley, age 48, has served as a director of the Company or its
Predecessors since 1988. Since March 1990, Mr. Talley has served as an Account
Executive at Ladenburg, Thalmann & Co. Inc. in New York, New York. Between
February 1988 and March 1990 Mr. Talley served as an Account Executive at
Oppenheimer & Co., Inc. in New York, New York. For more than five years until
February 1988, he served as an Account Executive at L.F. Rothschild Unterberg
Towbin in New York, New York. Mr. Talley is a native of Detroit, Michigan, and a
graduate of Michigan State University, in East Lansing, Michigan.
There is no family relationship between any current director or executive
officer of the Company and any other current director or executive officer of
the Company, except as indicated above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information with respect to number and percentage of
outstanding shares of the Company beneficially owned by certain persons,
including those known to the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, the directors of the Company individually
and the directors and officers of the Company as a group. The information in the
table is as of March 28, 1999, except as otherwise indicated.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address Title of of Beneficial of
- ---------------- Class Ownership (1) Class
----- ------------------ -------
<S> <C> <C> <C>
Joseph L. Ranzini, Esq. Common 372,412 (4)(10) 18.72%
c/o University Bank Stock
959 Maiden Lane
Ann Arbor, MI 48105
Mildred Ranzini Common 45,000 (5)(9) 2.25%
c/o University Bank Stock
959 Maiden Lane
Ann Arbor, MI 48105
Stephen Lange Ranzini Common 529,951 (3)(6) 26.64%
c/o University Bank Stock (10)(11)
959 Maiden Lane
Ann Arbor, MI 48105
Dr. Joseph Lange Ranzini Common 771,708 (2)(3) 38.80%
675 Cherry Avenue Stock (11)
Waynesboro, VA 22980
[TABLE CONTINUED ON FOLLOWING PAGE]
</TABLE>
-7-
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Prof. Paul Lange Ranzini Common 912,073 (2)(3) 45.85%
1024 Pleasant View Road Stock (11)
Middleton, WI 53562
Keith E. Brenner Common 29,228 (7)(9) 1.46%
135 Green Meadow Lane Stock
Boulder, CO 80302
Robert Goldthorpe Common 42,810 (9) 2.14%
2564 Helmer St. Stock
McMillan, MI 49853
Michael Talley Common 15,000 (9) 0.75%
55 Payson Ave. #4I Stock
New York, NY 10034
Ranzini Family Trust Common 480,000 (2) 24.13%
dated 11/8/90 Stock
c/o University Bank
959 Maiden Lane
Ann Arbor, MI 48105
Ranzini Family Trust Common 199,308 (3) 10.02%
dated 12/20/89 Stock
c/o University Bank
959 Maiden Lane
Ann Arbor, MI 48105
Ranzini Family Trusts Common 232,765 (11) 11.70%
of 1996 Stock
c/o University Bank
959 Maiden Lane
Ann Arbor, MI 48105
All Current Officers Common 1,465,254 (2)(3)(7) 71.51%
and Directors, as a Stock (8)(9)(10)
Group (Eight Persons) (11)(12)
</TABLE>
----------------------
(1) Unless otherwise indicated, the indicated person is believed to
have sole voting and investment power over shares indicated as beneficially
owned by such person.
(2) Includes 480,000 shares of Common Stock held by an irrevocable
trust, the primary beneficiary of which is Mr. Stephen Lange Ranzini. The
trustees of the trust are Dr. Joseph Lange Ranzini and Prof. Paul Lange Ranzini.
(3) Includes 199,308 shares of Common Stock held by an irrevocable
trust, the primary beneficiaries of which are Mr. Joseph L. Ranzini's five adult
children. The trustees of the trust are Mr. Stephen Lange Ranzini, Dr. Joseph
Lange Ranzini and [FOOTNOTES CONTINUED ON FOLLOWING PAGE]
-8-
<PAGE> 10
Prof. Paul Lange Ranzini. Mr. Stephen Lange Ranzini is a primary beneficiary of
one-fifth or 39,862 of the shares of Common Stock held under the terms of the
trust.
(4) Does not include the 480,000 shares of Common Stock referred to in
note 2 above, the 199,308 shares of Common Stock referred to in note 3 above, or
the 232,765 shares of Common Stock referred to in note 11 below, as to which Mr.
Ranzini disclaims beneficial ownership.
(5) Mrs. Ranzini disclaims beneficial ownership of shares of Common
Stock owned by her spouse, Joseph L. Ranzini.
(6) Includes 22,132 shares of Common Stock which represent Mr. Stephen
Lange Ranzini's current accrued allocation of shares of Common Stock under the
University Bancorp, Inc. ESOP. Does not include the shares held in the trust
referred to above in note 2 as to which Mr. Ranzini is the primary beneficiary.
(7) Includes shares of Common Stock owned beneficially by Mr. Brenner's
retirement plan, and also includes 1,062 shares of Common Stock owned by Mr.
Brenner's minor children.
(8) Does not include shares held by the University Bancorp, Inc. ESOP,
other than the accrued allocation of shares thereunder to Stephen Lange Ranzini
referred to in note 6 above.
(9) Currently exercisable options on 15,000 shares of common stock are
held by each of Mr. Brenner, Mr. Goldthorpe, Mrs. Ranzini and Mr. Talley. The
shares subject to such person's respective option are included in such person's
respective holdings and in the total shares held by all current officers and
directors as a group.
(10) Includes 34,500 shares of Common Stock held by Michigan BIDCO,
Inc., as to which each individual disclaims beneficial ownership.
(11) Includes shares held by the thirteen Ranzini Family Trusts of
1996, which collectively hold 232,765 shares of Common Stock. Stephen Lange
Ranzini and Prof. Paul Lange Ranzini as trustees disclaim beneficial ownership
of 232,765 shares of Common Stock each held by Trusts for which they are
trustees, and which are included in the shares above. Dr. Joseph Lange Ranzini
as trustee disclaims beneficial ownership of 125,335 shares of Common Stock held
by Trusts for which he is trustee.
(12) The total number of shares of Common Stock held by the Ranzini
Group (Mr. Joseph L. Ranzini, Mr. Stephen Lange Ranzini, Mrs. Mildred Ranzini,
the various Ranzini Family Trusts) and the shares included in note 6, above, is
1,313,363. In addition, Mrs. Mildred Ranzini holds options on 15,000 shares of
Common Stock.
-9-
<PAGE> 11
EXECUTIVE OFFICERS
Joseph L. Ranzini and Stephen Lange Ranzini hold executive officer
positions with the Company, as indicated above under "Election of Directors".
Officers of the Company serve at the discretion of the Board of Directors
and generally are to be elected annually.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash compensation
paid or accrued for services rendered in all capacities to the Company and
affiliates for the fiscal years ended December 31, 1998, 1997, and 1996, of the
Chief Executive Officer of the Company, and the Chief Executive Officer of the
Bank, who was elected to such position in December 1995 and resigned in November
1997. There were no other individuals whose salary and bonus from the Company or
its affiliates for the latest fiscal year exceeded $100,000:
-10-
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation($) Compensation
----------------------------- ------------
Awards
--------------------
Other Securities
Name and Annual Restricted Underlying
Principal Compen- Stock Options/
Position Year Salary Bonus sation Awards($) SARs (#)
- -------- ---- ------ ----- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Stephen Lange 1998 $110,281 $ - $10,715 $ - -
Ranzini (1) (2)(3)(4)
President &
CEO 1997 $110,080 $ - $13,634 $ - -
(1) (2)(5)
1996 $108,524 $ - $ 2,605 $ - -
(1) (6)
</TABLE>
- ------------------
(1) Salary in 1998, 1997 and 1996 includes $45,500, $45,600 and $44,025,
respectively, from Michigan BIDCO, Inc., for which Mr. Ranzini served as
Treasurer.
(2) Includes SEP IRA pension payment of $6,750 from Michigan BIDCO, Inc. in
1998 and 1997.
(3) At the end of the Company's fiscal year ended December 31, 1998, 22,132
shares of the Company's common stock were allocated to Mr. Ranzini under
the Company's ESOP. Mr. Ranzini's rights in all of all these shares are
vested. Valued at $2.125 per share, the last sale price of the Company's
common stock on December 31, 1998, the aggregate value of such shares was
$47,031.
(4) Allocation under the Company's ESOP of 1,220 shares of the Company's common
stock to Mr. Ranzini in June 1998.
(5) Allocation under the Company's ESOP of 2,118 shares of the Company's common
stock to Mr. Ranzini in August 1997.
(6) Allocation under the Company's ESOP of 782 shares of the Company's common
stock to Mr. Ranzini in June 1996.
No options to purchase shares of Common Stock were granted to the
executive officer named in the above summary compensation table during 1998.
Except as indicated in the above table and as indicated below in the
description of Mr. Ouimet's Employment Agreement, neither Stephen Lange Ranzini
nor Mark Ouimet received during the three fiscal years ended December 31, 1998
or held at December 31, 1998, any stock options, SAR grants or Long Term
Incentive Plan Awards.
The Company does not have a defined benefit or actuarial pension
plan.
-11-
<PAGE> 13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The management of the Company ("we") reviewed the Forms 3 and 4 and
amendments thereto furnished to the Company pursuant to Rule 16a-3(e)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), during its most recent fiscal year. We also reviewed the Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and written representations from executive officers and directors
of the Company that did not file a Form 5 with respect to its most recent fiscal
year, to the effect that no filing of a Form 5 is required with respect to such
person. Based upon our review, no person who, at any time during the Company's
most recent fiscal year, was a director, officer or beneficial owner of more
than 10% of the Company's Common Stock, failed, as disclosed in the above Forms,
to file on a timely basis, any reports required by Section 16(a) of the Exchange
Act.
COMPENSATION PLANS
University Bancorp, Inc. 1995 Stock Plan. The 1995 Stock Plan of the
Company was adopted by the Board of Directors in November 1995 (and amended in
April 1996) and later approved by the Company's stockholders. The purpose of the
1995 Stock Plan is to provide incentives to officers, directors, employees and
consultants of the Company. Under the 1995 Stock Plan, officers and other
employees of the Company and any present or future parent or subsidiary
(collectively "Related Corporations") are provided with the opportunity to
purchase shares of Common Stock as "incentive stock options" ("ISOs"), as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), and directors, officers, employees and consultants of the Corporation
and Related Corporations are provided with the opportunity to purchase shares of
Common Stock of the Company pursuant to options which do not qualify as ISOs
("Non-Qualified Options") and, in addition, such directors, officers, employees
and consultants may be granted awards of stock in the Company ("Awards") and
opportunities to make direct purchases of stock in the Company ("Purchases").
Both ISOs and Non-Qualified Options are referred to hereafter individually as an
"Option" and collectively as "Options". Options, Awards and Purchases are
referred to hereafter as "Stock Rights".
A total of 525,000 shares of Common Stock (as adjusted automatically per
the terms of the Plan as a result of the Company's February 1998 3 for 2 stock
split effected in the form of a 50% stock dividend of Common Stock) are reserved
for issuance upon the exercise of Options or in connection with Awards or
Purchases of stock under the 1995 Stock Plan (subject to adjustment for capital
changes). Shares subject to Options which for any reason expire or are
terminated unexercised may again be available for grant under the 1995 Stock
Plan. Unless sooner terminated, the 1995 Stock Plan will terminate on November
15, 2005.
The 1995 Stock Plan is administered by the Board of Directors of the
Company. The Board has the right, in accordance
-12-
<PAGE> 14
with the Plan, to appoint a Compensation Committee ("Compensation Committee") of
three or more of its members to administer the Plan. The Compensation Committee
of the Board of Directors has been established and provides recommendations to
the Board on the granting of options. The 1995 Stock Plan requires that each
Option shall expire on the date specified by the Compensation Committee, but not
more than ten years from its date of grant in the case of ISOs and not more than
ten years and one day in the case of Non-Qualified Options. However, in the case
of any ISO granted to an employee or officer owning more than 10% of the total
combined voting power of all classes of stock of the Company or any Related
Corporation, the ISO expires no more than five years from its date of grant.
Exercise of any Stock Right, in whole or in part, under the 1995 Stock Plan
is effected by a written notice of exercise delivered to the Company at its
principal office together with payment for the Common Stock in full, or, at the
discretion of the Compensation Committee, by the delivery of shares of Common
Stock of the Company, valued at fair market value, a promissory note, or through
an exercise notice payment procedure, or any combination thereof.
During 1998, options for a total of 67,500 shares of Common Stock were
granted under the 1995 Stock Plan. No options on shares of Common Stock were
exercised in 1998. As of March 31, 1999, options for a total of 135,750 shares
of Common Stock were outstanding under the 1995 Stock Plan and 344,685 shares of
Common Stock were available for grant of Stock Rights under the 1995 Stock Plan.
Director Stock Options. In 1993, the Board of Directors approved the grant
of options to purchase 15,000 shares of common stock to each of the four
non-executive directors, in lieu of compensation. The exercise price was set at
$2.08 per share, which was the then current bid price per share as reported by
NASDAQ. The options are immediately exercisable and expire July 19, 2003. No
options were exercised in 1998. Options granted on 45,000 shares remain
outstanding under this plan at December 31, 1998.
University Bancorp, Inc. Employee Stock Ownership Plan. The Company has had
in effect an employee stock ownership plan (the "ESOP") for eligible employees
of the Company and its subsidiaries. The ESOP is a qualified plan under section
401(a) of the Internal Revenue Code, as amended. The ESOP provides that the
employer may contribute thereto such amounts as it may determine and the
contributions may be in cash or in stock, at the election of the Company.
Contributions are allocated among employees who have reached age 21, have at
least one year of service and are employed more than 500 hours throughout the
year. Contributions are allocated in the proportion that the employee's total
compensation for the year (up to $200,000) bears to the total compensation of
all ESOP participants for the year (up to $200,000 per participant). However,
the sum of contributions and forfeitures allocated to an employee in any year
cannot exceed the lesser of $30,000 or 25 percent of his or her compensation
-13-
<PAGE> 15
for the year, subject to indexing in accordance with Internal Revenue Service
regulations to reflect changes in the cost of living. Employees who retire, die,
become disabled or terminate their employment for any other reason would receive
the value of the vested portion of their accounts, in cash or stock. Employees
vest in their accounts in accordance with a vesting schedule based on years of
credited service. Employees have the right to require the Company to repurchase
shares distributed to them pursuant to the terms of the ESOP. In 1998 and 1997,
the Company contributed to the ESOP 16,445 and 9,906 additional shares of Common
Stock valued at $53,445 and $36,322, respectively, based upon the then current
bid price of the Company's common stock of $3.25, and $3.6667.
University Bank 401(k) Profit Sharing Plan. In 1996 the Bank replaced the
SEP IRA Plan with a new 401(k) Profit Sharing Plan (the "401(k) Plan"),
effective January 1, 1996, which allows an employee of the Company or any of its
subsidiaries who has reached age 18 and has completed one year of service to
elect to reduce their compensation by up to 12% (subject to specified maximum
limitations) and have such amounts contributed on their behalf to the 401(k)
Plan. The 401(k) Plan provides for matching employer contributions for each
employee who elects to reduce his or her compensation. The amount of matching
contribution is up to the sole discretion of the employer. The employer can also
make additional discretionary contributions for participating employees. The sum
of an employee's salary reductions, and the matching and discretionary
contributions and forfeitures allocated to an employee in the year could not
exceed the lesser of $30,000 or 25 percent of his or her compensation for the
year, subject to indexing in accordance with Internal Revenue Service
regulations to reflect changes in the cost of living. Participants in the 401(k)
Plan who retire, die or terminate their employment for any other reason after
having completed at least five years of service would receive the total amount
of their account; others receive their own salary reduction contributions plus
only a portion of any employer matching contributions based on a vesting
schedule. No matching contributions were made by the Bank for the years ended
December 31, 1998 and 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1993, a Rural Business and Industrial Development Company now called
Michigan BIDCO, Inc. was established (the "BIDCO"). The BIDCO is licensed by the
Michigan Financial Institutions Bureau (the "FIB") under the State of Michigan
BIDCO program, and regulated and examined by the Bank & Trust Division of the
FIB. The BIDCO invests in businesses in Michigan with the objective of fostering
job growth and economic development.
In 1995 and 1996, the Company purchased a total of $197,000 principal
amount of 9% convertible debentures of BIDCO for $203,000, convertible into 131
shares of BIDCO's shares,
-14-
<PAGE> 16
representing 4.97% of BIDCO's shares on a fully diluted basis. In order to fund
the Company's working capital needs, during 1998 a total of $136,000 convertible
debentures of BIDCO were sold to various affiliates of Joseph L. Ranzini and
Stephen Lange Ranzini at the then current adjusted book value of BIDCO, for a
total of $157,436.
Joseph L. Ranzini is the President and Chairman of the Board of BIDCO and
Stephen Lange Ranzini is the Treasurer. Stephen Lange Ranzini received $52,250
in salary, SEP IRA and board fee compensation from BIDCO in 1998. Joseph L.
Ranzini received $97,688 in salary, SEP IRA and board fee compensation from
BIDCO in 1998.
When the BIDCO invests in businesses, it generally requires as part of its
lending and/or investing agreement the right to designate one seat on the board
of the companies in which it invests. Staff members of the BIDCO are assigned
the task of sitting on such boards. Remuneration for such board assignments is
paid directly to the BIDCO. In connection with his duties as Treasurer of BIDCO,
Stephen Lange Ranzini, is the President of Arbor Street Corp. (New Jersey), the
General Partner for Austin Trading Partners, LP, an investor in a mixed office
waste deinked pulp mill.
The BIDCO has, by general policy of its board of directors, a loan and
investment in one borrower limit of $500,000. From time to time, the BIDCO
receives loan and/or investment proposals from third parties requesting an
investment by the BIDCO in excess of this $500,000 limit. In such event, the
BIDCO has in certain instances formed single purpose limited liability companies
(the "LLCs") whose members, including Joseph and Stephen Ranzini, are directors,
shareholders and bondholders of the BIDCO to fund amounts over the $500,000
limit. The outside investor groups invest on a pro rata, parri passu (equal)
basis with the BIDCO. During 1998, the following investments were still active
which had been made with investor group participation:
The BIDCO invested $500,000 and an LLC invested $800,000 of a $1,300,000,
5.5 year fully amortizing lease at 24% interest, plus an upfront $100,000
origination fee, secured by railroad boxcars through Northern Federal Leasing
LLC ("Leasing"). The lease was paid off in June 1998 and final liquidating
distributions were made at that time to the members of Leasing. The BIDCO
invested $500,000 and an LLC invested $280,000 of a $780,000 investment in
Northern Federal Pulp and Paper LLC ("Pulp"), which made an equity investment in
Austin Trading Partners, LP (a partner in the Great Lakes Pulp and Fibre
recycled paper pulp mill in Menominee, Michigan). Pulp was liquidated during
1998 and its assets conveyed to BIDCO. In each of these LLCs, Joseph and Stephen
Ranzini each contributed 1/9th of the LLCs' investment.
The BIDCO invested $42,000 and an LLC (in which Joseph and Stephen Ranzini
each contributed 1/10th of the LLCs' investment)
-15-
<PAGE> 17
invested $28,000 for a 40% equity investment in Northern Federal Hotels LLC,
which in turn purchased 50% of Okemos Holdings LLC, which built a Fairfield Inn
by Marriott in Okemos, Michigan.
In 1995, the Bank, through a 98%-owned subsidiary, Arbor Street LLC
(Michigan), purchased $1,000,000 in federal low income housing tax credits
through a partnership investment in Michigan Capital Fund for Housing Limited
Partnership I, a Michigan limited partnership (the "Partnership"). The
investment consisted of a $100,000 equity purchase and the execution by Arbor
Street LLC of a $900,000 promissory note held by the Partnership (the "Note").
In connection with the execution of the Note, the Partnership required Joseph L.
Ranzini and the Ranzini Family Trust dated 12/20/89 to personally guarantee the
Note, because the Bank was prohibited from doing so by state banking
regulations. In exchange for arranging for the guaranty of the Note, Joseph L.
Ranzini and Stephen Lange Ranzini each received a 1% interest in Arbor Street
LLC.
The Company maintains an investment securities account with Ladenburg
Thalmann & Co. Inc. Michael Talley, a director of the Company, receives
commissions on the transactions in this account. The Company pays commissions at
rates which are comparable to those paid in its other investment securities
accounts at other brokerage firms.
Stephen Lange Ranzini, Prof. Paul Lange Ranzini and Dr. Joseph Lange
Ranzini are the sons of Joseph L. Ranzini and Mildred Ranzini.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant selected to be the Company's principal
accountants for the fiscal year ending December 31, 1999 is Crowe, Chizek & Co.
A representative of such accounting firm is expected to be available by speaker
telephone at the Meeting. Such representative will have an opportunity to make a
statement, if he or she desires to do so, or to respond to appropriate
questions.
OTHER MATTERS
The cost of proxy solicitation will be borne by the Company. Banks, brokers
and other nominees will be reimbursed for their customary expenses incurred in
connection with the forwarding of proxy materials. In addition, proxies may be
solicited, without additional compensation, by directors, officers and other
regular employees of the Company and its subsidiaries by telephone, telegraph,
telecopy or in person.
Dated: April 15, 1999
-16-
<PAGE> 18
UNIVERSITY BANCORP, INC.
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting of Stockholders of University Bancorp, Inc. (the "Company") scheduled
for June 21, 1999.
The undersigned hereby appoints Joseph L. Ranzini, Stephen Lange Ranzini
and Paul Lange Ranzini, and each of them individually, proxies, with full power
of substitution, to vote all shares of Common Stock of the undersigned at the
Annual Meeting of Stockholders (the "Meeting") scheduled to be held on June 21,
1999, and at any adjournment(s) thereof, upon all subjects that may properly
come before the Meeting and any adjournments thereof, including the matters
described in the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this proxy. If no directions are given, the
proxies will vote "FOR" the election of all listed nominees for election as
Directors and at their direction on any other matter that may properly come
before the Meeting or any adjournment thereof.
Your vote for the election of directors, described in the proxy statement
may be indicated on the reverse side of this proxy.
The nominees for election as directors are: Keith Brenner, Robert
Goldthorpe, Joseph L. Ranzini, Dr. Joseph Lange Ranzini, Mildred Ranzini, Prof.
Paul Lange Ranzini, Stephen Lange Ranzini and Michael Talley.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all listed
candidates for election as Directors.
- --------------------------------------------------------------------------------
(SEE REVERSE SIDE)
<PAGE> 19
This proxy, when properly executed, will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR the election as
Directors of the nominees listed on the reverse side of this proxy.
ELECTION OF DIRECTORS (see reverse side for list of nominees)
FOR WITHHELD FOR, except vote withheld from the following
nominee(s):
[ ] [ ]
------------------------------------------
------------------------------------------
The signer hereby revokes all proxies
heretofore given by the signer to vote at the
Meeting or any adjournment thereof.
Dated:
----------------------
x
---------------------------
Signature
Stockholder:
---------------------------
Signature (if held jointly)
Please sign above exactly as name appears
hereon. Joint owners should each sign. When
signing as officer, attorney, executor,
administrator, trustee or guardian, please
give full title as such.
