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EXHIBIT 10.16
NET BRANCH AGREEMENT
1.PREAMBLE
AGREEMENT made this 12th day of September, 1995, between University
Bank, a Michigan Banking Corporation, its main offices at 000 Xxxx
Xxxxxxx Xxxxxx, Xxxxx Xxx. Xxxxx, Xxxxxxxx, 00000 hereafter called the Bank or
Employer; Xxxx Xxxxxxxxxx, of 0000 Xxxxxx Xxxxx, Xxxx Xxxxxxxxxx, Xxxxxxxx
00000, and Xxxxxxx Xxxx, of 000 Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000,
hereafter called the Managers.
WHEREAS, The Bank shall engage in any lawful business of which Michigan
banking corporations are authorized to do in the State of Michigan; and
WHEREAS, Managers desire to be employed by the Bank and the Bank
desires to employ Managers on the following terms.
NOW, THEREFORE, it is mutually agreed as follows:
2. EMPLOYMENT DUTIES
The Bank hereby employs Managers, and Managers hereby accept employment
by the Bank as the co-managers of an independent mortgage division of the
Bank, hereinafter called the Net Branch. Employees shall report directly to
the Bank's President, Xx. Xxxxxxx Xxxxx Ranzini, or the individual designated
by the board of directors of the Bank, who shall serve as the Net Branch Liason
Manager. The Managers shall operate the Net Branch on an autonomous basis as a
separate profit center of the Bank in accordance with banking and mortgage
banking laws and regulations, the requirements of investors, and industry
standards, subjet to the requirements and restrictions of paragraphs 3 and 4,
below.
3. OPERATION OF NET BRANCH
A) WORKING CAPITAL The Bank shall provide the Net Branch with $100,000.00
of initial working capital to start-up the operations of the Net Branch. Such
working capital will be funded by the Bank through a separate account held at
the Bank for the Net Branch, hereinafter called the Operating Account. If the
initial Working Capital is exhausted, the Bank may, at its sole discretion,
increase the initial working capital of the Net Branch. If the Bank chooses
not to do so then the Managers at their sole discretion may elect to contribute
additional funds to the Operating Account to maintain the operation. If
neither the Bank nor the Managers elects to contribute additional working
capital then the Net Branch shall be immediately terminated. If the Net Branch
is terminated, the Bank will be responsible for up to $50,000 of the
accumulated losses, and the Managers shall each be responsible for up to
$25,000 of the accumulated losses, such losses to be pro rated on a 50/25/25
basis, respectively. The Bank shall accept from each Manager, a two-year fully
amortizing note at its Commercial Prime Rate in lieu of cash for the amount of
the losses for which the Managers are responsible. The profit, if any, of the
Net Branch, shall be paid monthly after the Net Branch's accounts are finalized
in the following manner: 50% into a separate escrowed Reserve Account which
shall be controlled by the Bank, until the Reserve Account contains an amount
equal to 25% of the expected annual expenses of the Net Branch; and
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50% to be distributed to the Profit Sharing Account, and distributed according
to the terms of the Profit Sharing Account.
If the reserve account is fully funded, then the excess shall be
distributed to the Profit Sharing Account. Funds allocated to the Profit
Sharing Account shall be distributed as follows:
a) 50% of the Profit Sharing Account shall be available for cash
distribution at the sole discretion of the Managers.
b) 50% of the Profit Sharing Account shall be used by the Bank to
purchase shares of common stock of the Bank's holding company, or the Bank, if
the Bank is not owned by a holding company, on the stock market. If shares
are not available for purchase on the stock market, shares will be sold by the
bank holding company or the Bank on a negotiated basis. The allocation to
specific individuals of the shares which are purchased will be at the sole
discretion of the Managers.
If for any reason the Net Branch is terminated, the funds in the Reserve
Account shall be first distributed towards any losses or accounts payable of
the Net Branch with any excess then distributed to the Managers.
By providing the initial Working Capital of the Net Branch, the Bank
shall receive 10% of the Adjusted Gross Revenue of the Net Branch, payable
monthly. This amount shall be recorded as an expense on the profit and loss
statement of the Net Branch. Adjusted Gross Revenue is defined as all revenues
less cost of loan acquisition and a 10% reserve set aside on secondary market
premiums which may be subject to premium recapture. Cost of loan acquisition
shall include premiums and/or discounts paid to originating correspondents and
brokers. The Premium Reserve for premium recapture will initially be set at
10% of all premiums that are subject to recapture. The Premium Reserve balance
and factor for rate of reserve accumulation will be reviewed and updated
semi-annually by the Managers and the Net Branch Liason Manager. Any recapture
of premium that is assessed by any Investors shall be paid out of the Reserve.
The Reserve is to be reflected as an expense on the Net Branch's profit and
loss statement, with the Premium Reserve balance reflected on the Net Branch's
balance sheet. If at any time a portion of the Premium Reserve balance is taken
as income it will be distributed with the Bank receiving 10% and the Managers
receiving 90%, respectively.
The Operating Account held by the Bank shall be the only banking account
maintained by the Net Branch, and neither the Managers nor any other employee
of the Net Branch shall maintain any banking accounts through which revenues or
expenses of the Net Branch flow.
B) ACCOUNTING
The Bank will provide all of the accounting services
for the Net Branch. All checks collected for appraisal fees, credit reports,
origination points, marketing gains, or any other fees collected shall be
deposited per the instructions of the Bank. These checks collected for the
benefit of the Net Branch will be recorded as income on the Net Branch's profit
and loss statement. All bills to be paid shall be approved by a Manager
and forwarded to the Bank. The Bank shall be solely responsible for handling
the checking account of the Net Branch. These bills will be recorded as an
expense on the Net Branch's profit and loss statement.
The accounting department of the Bank will be responsible for
producing a profit and loss statement by the twentieth (20th) of the
following month. The Managers will be responsible for reviewing the
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profit and loss statement on a timely basis for errors and making sure that any
appropriate changes are made.
The Net Branch shall employ personnel including originators and
support staff. The Managers shall have the right to hire and fire employees
as they see fit in accordance with applicable law, and pay such employees as
they see fit, subject to the availability of Working Capital to the Net Branch.
The Managers shall each be employed at a salary of $7,500 per month, increasing
by $300 per month per year.
C) RENT
The Bank will rent space required by the Net Branch and sublet the
space to the Managers individually. The rent expense will be recorded as an
expense on the profit and loss statement of the Net Branch. The Managers
shall be individually financially responsible for the rent expense if the Net
Branch is terminated.
D) TERMINATION
Either party may, upon 180 days written notice, terminate the Net
Branch at its sole discretion.
4. SUPPORT SERVICES PROVIDED BY BANK TO NET BRANCH
A) PAYROLL
The Bank will provide payroll services for the Net Branch. All support
people are paid on the 15th and the last day of the month, based on their
annual or hourly salary, as applicable. Commissioned employees are paid on
closed production 15 days in arrears. Managers are required to submit a
commission (bonus) report to the Bank's payroll department for each pay period
or the commissioned employees will not be paid.
B) INSURANCE
All insurance benefits offered at the Bank will be made available to
the Net Branch. Any cost associated with the benefits will be charged directly
to the Net Branch. This cost will be reviewed and updated annually.
C) ADMINISTRATIVE SUPPORT
A $300.00 monthly charge will be recorded under expenses on the profit
and loss statement of the Net Branch for the administrative support provided by
the Bank. This cost will be reviewed and updated semi-annually to reflect the
actual estimated cost of providing this service.
D) UNDERWRITING
The Net Branch will be charged an Underwriting fee of $175.00 per loan
for each loan that is underwritten by the Bank's support staff and not
underwritten by the Net Branch. The Net Branch will be free to choose where
loans shall be underwritten.
E) CLOSING DOCUMENTS
The Net Branch will be charged a Closing fee of $100.00 per loan that
the closing package is prepared by the Bank's support staff. The Net Branch
will be free to choose where loan closing packages are prepared.
F) TAX SERVICE FEE
The required tax service fee set by the Investor will be recorded as an
expense on the profit and loss statement of the Net
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Branch, and the tax service fee collected per the Settlement Statement will be
recorded as income on the profit and loss statement.
G) FEES TO BANK
A $75.00 fee will be recorded as an expense on the profit and loss
statement of the Net Branch, for all loans sold to the Bank, where the Bank is
not also charging the Net Branch an Underwriting fee, and a $50.00 fee will be
recorded as an expense on the profit and loss statement of the Net Branch, for
all loans sold to the Bank, where the Bank is not also charging the Net Branch
a Closing fee. The Net Branch will receive loan pricing equal to the best
rates provided to a third-party correspondent of the wholesale mortgage
division of the Bank.
H) WAREHOUSE FEES
The Net Branch will be responsible for any expenses incurred when
funding a loan through the Bank. These fees will be recorded as an expense on
the profit and loss statement. The interest rate charged by the Bank on table
funded loans shall equal the interest rate on the mortgages being tabled
funded. This rate will be reviewed and updated semi-annually, so that the Bank
receives a rate no less favorable than that provided to other third-party
correspondents of the wholesale mortgage division of the Bank.
I) INVESTOR EXPENSES
The Net Branch will be responsible for any investor expenses charged
when an investor purchases a loan. These fees will be recorded as an expense
on the profit and loss statement of the Net Branch.
5. SUPPORT SERVICES PROVIDED TO THE BANK BY THE NET BRANCH
Any ancillary revenue generated for the Bank through the efforts of the
Net Branch will be compensated. For such ancillary revenue, the Net Branch
will receive 10% of the net interest income (on interest earning products and
services) or 10% of the gross fee income received by the Bank for other
products and services. Such amounts will be recorded as a separate line item
on the profit and loss statement of the Net Branch, but will not be included as
Adjusted Gross Revenue for purposes of calculating the Bank's 10% share of the
Net Branch's Adjusted Gross Revenues.
6. ASSIGNMENT
The rights and obligations of the Bank under this agreement shall inure
to the benefit of and shall be binding upon the successors and assigns of the
Bank. This agreement shall not be assignable by the Managers.
7. ENTIRE AGREEMENT
This agreement and any employee manual of the Bank embodies the entire
agreement between the parties and may not be changed or terminated orally. No
change, termination, or attempted waiver of any of the provisions hereof shall
be binding unless contained within this document of employment.
8. ARBITRATION
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Any controversy or claim arising out of or related to this Agreement
shall be resolved by binding arbitration in Xxx Arbor or Detroit, Michigan, at
the Bank's option, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon any award may be entered in
any court having jurisdiction thereof. The prevailing party shall be entitled
to recover reasonable attorney's fees and other costs incurred in any
arbitration proceeding. Notwithstanding the provisions of this paragraph, the
Bank shall have the right to apply to any court of competent jurisdiction to
enjoin any violation, threatened or actual, of this Agreement by the Managers
pending the final resolution of the Arbitration procedure of this paragraph.
9. NOTICES
Any notice required to be given under this agreement shall be deemed
sufficiently given if sent by regular mail to the party to be notified at the
address set forth above or to such other address or addresses as either party
may hereafter designate by notice given in the same manner.
10. WAIVER OF BREACH
In the event that any breach of this agreement by the Managers is
waived by the Bank, such waiver shall not constitute a waiver of any subsequent
breach by the Managers. No waiver shall be valid unless in writing and signed
by an authorized officer of the Bank.
11. SEVERABILITY
If one or more of the provisions of this agreement should be found
invalid or otherwise unenforceable, the validity, effectiveness and
enforceability of any and all other provisions hereof shall not be affected.
12. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and understanding
between the Bank and the Managers and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement
may be modified or amended only by a written instrument executed by the Bank
and the Managers each acting through its duly authorized agent.
13. LAW GOVERNING AGREEMENT
This Agreement shall be construed in accordance with and governed by
the laws of the state of Michigan.
14. CAPTIONS
The captions in this Agreement are for convenience only and shall not
be considered a part hereof or affect the construction or interpretation of any
provisions of this Agreement.
15. SIGNATURE, DATE, SEAL, ACKNOWLEDGMENTS
IN WITNESS WHEREOF, THE parties have executed this agreement the day
and year first above mentioned.
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BANK:
Witness: University Bank
___________________ By:/s/Xxxxxxx Xxxxx Ranzini
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Xxxxxxx Xxxxx Xxxxxxx,
President
MANAGER:
Witness:
___________________ By:/s/Xxxx Xxxxxxxxxx
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Witness: Xxxx Xxxxxxxxxx
MANAGER:
Witness:
___________________ By:/s/Xxxxxxx Xxxx
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Witness: Xxxxxxx Xxxx
