Exhibit 10.12
FIRST AMENDMENT TO LETTER AGREEMENT
THIS FIRST AMENDMENT TO LETTER AGREEMENT (the "First Amendment") is made as of
the 29th day of September, 2000, and is by and between United Financial Corp., a
Minnesota corporation (the "Borrower"), and Wells Fargo Bank Minnesota, National
Association, formerly known as Norwest Bank Minnesota, National Association, a
national banking association ("Wells Fargo").
REFERENCE IS HEREBY MADE to that certain letter loan agreement dated November
17, 1999 (the "Agreement"), made between the Borrower and Wells Fargo.
Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to them in the Agreement.
WHEREAS, pursuant to the provisions of the Agreement, Wells Fargo is the holder
of that certain revolving promissory note dated November 18, 1999 in the face
amount of $3,000,000.00, made by the Borrower and payable to Wells Fargo (the
"Note");
WHEREAS, the Borrower has requested Wells Fargo to (1) make certain
modifications respecting the Covenants referenced in the Agreement; (ii) waive
the event of non-compliance under the Agreement relating to the Bank resulting
from conditions causing a breach of the ratio of its allowance for loan and
lease losses to total non-performing loans (the "Event of Non-Compliance"); and
(iii) renew the Line and correspondingly the Note from October 30, 2000 to
October 30, 2001. The Non-Compliance is further described in Section 6 of this
First Amendment.
WHEREAS, Wells Fargo is willing to grant the Borrower's request, subject to the
provisions of this First Amendment;
NOW, THEREFORE, in consideration of the premises and for other valuable
consideration received, it is agreed as follows:
1. The first sentence of Section 1 of the Agreement is hereby amended so
that, when read in its entirety, it provides as follows:
"From time to time until October 30, 2001 (the "Termination Date"
the Borrower may request advances under the Line in an aggregate
principal amount not exceeding $3,000,000.00, at any one time
outstanding."
2. Section 2 of the Agreement is hereby amended so that, when read in its
entirety, it provides as follows:
" Purpose. The proceeds of the advances under the Line shall be
used exclusively to (1) acquire issued and outstanding shares in
the Valley Bank of Arizona, a state chartered commercial bank
located in Phoenix, Arizona (the "Phoenix Bank"; "Acquisition"),
the effect of which Acquisition will provide Borrower with an
ownership interest in Phoenix Bank approximating fifty per cent;
and (ii) purchase from time to time shares of Borrower's common,
voting stock from existing shareholders which Borrower shall then
retire as treasury shares."
3. Section 10 of the Agreement is hereby amended by adding the following
new Subsections C and D immediately following Subsection B:
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United Financial Corp.
First Amendment To Letter Agreement
September 29, 2000
"C. To maintain a Return on Average Assets ("ROAA") of not less
than 0.50% as of the end of each fiscal quarter, commencing
September 30, 2000, calculated on a four quarter moving average
including the current quarter reported plus the three immediately
preceding quarters."
D. To maintain its Leverage Capital Ratio at a level equal to or
greater than seven and one-half percent (7.50%) as of the end of
each fiscal quarter commencing September 30, 2000, or the minimum
ratio required by any regulatory agency having authority over the
Borrower. As used herein, "Leverage Capital Ratio" shall be
computed by dividing the Borrower's Tier 1 (Core) Capital by
Adjusted Total Average Assets. Also as used herein, Leverage
Capital Ratio, "Tier 1 (Core) Capital" and "Adjusted Total
Average Assets" shall be defined and further computed pursuant to
12CFR Part 567 and related, applicable stipulations set forth by
the Office of Thrift Supervision ("OTS") and Fed. The
aforementioned ratios and calculations shall be reflected in the
Bank's Call Reports delivered to the OTS and Fed (as defined in
Section 11B below). "
Furthermore, and as a result of the aforementioned additions enumerated in this
Paragraph 3 of this First Amendment, Subsections C and D of Section 10 of the
Agreement shall be hereafter referenced as Subsections E and F, respectively.
4. Section 10D(iii) of the Agreement, which shall now be referenced as
10F (i) pursuant to Paragraph 3 of this First Amendment, is hereby
amended so that, when read in its entirety, it provides as follows:
"(i) Not to allow the aggregate total of its non-performing
loans (those classified 90 days or more past due and those on
non-accrual as reported in the Bank's quarterly Call Reports and
the Borrower's quarterly FR Y-9C reports) to exceed fifteen
percent (15%) of its Tier 1 (Core) Capital, as of the end of each
fiscal quarter commencing September 30, 2000."
5. Section 10D (iv) of the Agreement shall now be referenced as 10F (ii)
pursuant to Paragraph 3 of this First Amendment. Furthermore, Sections
10D (i) and 10D (ii) of the Agreement shall be deleted in their
entireties and shall not be replaced.
6. Wells Fargo agrees to temporarily waive the Event of Non-Compliance
(and such Event of Non-Compliance will not constitute an event of
default) for the quarterly period ended June 30, 2000 (the "Waiver"),
wherein the Bank posted a ratio of its allowance for loan and lease
losses to non-performing loans of 93% versus a required minimum of
100% under the Agreement, provided, however, that the ratio of
allowance for loan and lease losses to non-performing loans as set for
in paragraph 10F(ii) of the Agreement will become effective herewith
and be enforceable for the quarterly period ending September 30, 2000,
and ensuing quarters as set forth in the Agreement. This Waiver is
valid only with regard to the Covenant recited in this Paragraph 6 of
this First Amendment, and for the Event of Non-Compliance described
above, and for the time specified herein. All other covenants, terms,
and conditions of the Agreement remain in full force and effect.
7. Simultaneously with the execution of this First Amendment, the
Borrower shall execute and deliver to Wells Fargo, in form and content
acceptable to Wells Fargo, a new promissory note (which, for purposes
of this First Amendment only, shall be referred to herein as the "New
Note") in the face amount of $3,000,000.00. Upon the execution and
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United Financial Corp.
First Amendment To Letter Agreement
September 29, 2000
delivery to Wells Fargo of the New Note, the outstanding principal of,
and accrued but unpaid interest on, the Note shall be deemed,
respectively, the outstanding principal balance of, and accrued but
unpaid interest on, the New Note. The New Note shall replace, but
shall not be deemed payment or satisfaction of the Note. All
references in the Loan Agreement to the "Note" shall be deemed to mean
the New Note as modified herein.
8. The Borrower hereby represents and warrants to Wells Fargo as follows:
A. As of the date of this First Amendment, the outstanding principal
balance of the Note is $975,000.00.
B. The Agreement and Note constitute valid, legal and binding
obligations owed by the Borrower to Wells Fargo, subject to no
counterclaim, defense, offset, abatement or recoupment.
C. As of the date of this First Amendment, (1) the representations
and warranties set forth in Subsections A, E and G of the Section
9 of the Agreement are each true, (ii) there exists not Event of
Non-Compliance under this Agreement except as provided above, and
(iii) there exists no Event of Default under the Agreement, nor
does there exist any event which, with the giving of notice or
the passage of time, or both, could become such an Event of
Default.
D. The execution, delivery and performance of this First Amendment
and the New Note by the Borrower are within its corporate powers,
have been duly authorized, and are not in contravention of law or
the terms of the Borrower's Articles of Incorporation or By-laws,
or of any undertaking to which the Borrower is a party or by
which it is bound.
E. All financial statements delivered to Wells Fargo by or on behalf
of the Borrower, including any schedules and notes pertaining
thereto, have been prepared in accordance with Generally Accepted
Accounting Principles consistently applied, and fully and fairly
present the financial condition of the Borrower at the dates
thereof and the results of operations for the periods covered
thereby, and there have been no material adverse changes in the
financial condition or business of the Borrower from December 31,
1999 to the date hereof.
9. Upon request, the Borrower shall deliver to Wells Fargo a Corporate
Certificate of Authority as of the date of this First Amendment, and
in form and content acceptable to Wells Fargo.
10. Except as expressly modified by this First Amendment, the Agreement
remains unchanged and in full force and effect.
IN WITNESS WHEREOF, the Borrower and Wells Fargo have executed this First
Amendment as of the date first written above. Without limiting the generality of
the foregoing, all indebtedness under the Loan shall continue to be secured by
that certain Security Agreement/ Collateral Pledge Agreement executed by the
Borrower and dated November 18, 1999, which has been duly
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United Financial Corp.
First Amendment To Letter Agreement
September 29, 2000
executed by the Borrower for the benefit of Wells Fargo, and which remains
unchanged and in full force and effect.
UNTED FINANCIAL CORP. WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/ Kurt R. Weise By: /s/ Michael Bodeen
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Its: President and CEO Its: Vice President